Summary

To meet the mandate to screen all checked baggage for explosives by December 31, 2003, the Transportation Security Administration (TSA) placed minivan-sized explosive detection systems (EDS) and other screening equipment in airport lobbies. However, these interim lobby solutions have caused operational inefficiencies, in part because they require a large number of screeners. According to TSA, in-line baggage screening--where EDS machines are integrated with an airport's baggage conveyor system--can be a more cost-effective and efficient alternative to lobby-based, stand-alone equipment. For example, in-line systems can increase the efficiency of airport, airline, and TSA operations, and lower costs by reducing the number of screeners. Moreover, in-line explosive detection systems can enhance security because they reduce congestion in airport lobbies, thus removing a potential target for terrorists. However, installing in-line systems can have large up-front costs, related to the need for airport modifications. To help defray these costs, in 2003, Congress authorized TSA to reimburse airports up to 75 percent of the cost to install these systems by entering "letter of intent" (LOI) agreements. An LOI, though not a binding commitment of federal funding, represents TSA's intent to provide the agreed-upon funds in future years if the agency receives sufficient appropriations to cover the agreement. TSA has issued eight letters of intent to help defray the costs of installing in-line systems at nine airports as of February 2007, but none since February 2004. In September 2003, TSA and the City of Los Angeles signed an LOI and an attached memorandum of agreement (LOI/MOA) in which TSA agreed to pay an amount not to exceed 75 percent of the agreed upon estimated total project cost of $341 million (about $256 million) to install in-line checked baggage screening systems at both Los Angeles (LAX) and Ontario (ONT) International Airports. However, in December 2003, officials from the City of Los Angeles' airport authority--Los Angeles World Airports (LAWA)--informed TSA that aspects of the design concept were infeasible and that additional construction modifications would be needed. LAWA subsequently submitted a revised cost estimate to TSA in April 2005 and requested that TSA amend the LOI/MOA to increase the federal reimbursement by about $122 million. TSA has not amended the LOI to provide for additional reimbursements; however, as of February 2007, TSA had obligated the $256 million for the City of Los Angeles LOI/MOA in accordance with the schedule agreed to in the LOI and had reimbursed LAWA for about $26 million in expenses. Senate Report 109-273 directs us to review the reasons for the differences between the original 2003 cost estimate and the revised 2005 cost estimate submitted by LAWA. In response and as agreed with committee offices, we identified the key factors that contributed to the differences between the two cost estimates. On January 23, 2007, we briefed staff of the Senate Subcommittee on Homeland Security, Committee on Appropriations, on the results of our work.

A key reason for the difference between the 2003 total project cost estimate and the revised 2005 estimate to install in-line baggage screening systems at LAX and ONT was that the 2003 estimate was developed at an early stage in the design process and was therefore based on preliminary data and assumptions that were subject to change. Consequently, the estimate did not adequately foresee some of the costs of retrofitting new systems into existing buildings or allow for sufficient space for the EDS machines, baggage inspection rooms, and conveyor belts. LAWA officials stated that they were under a tight timeframe to apply for the LOI because TSA had told them that federal funding was limited and that 17 other airports were competing for the funding. The 2003 total project cost estimate used concepts and construction estimates developed in about 12 weeks by Boeing, TSA's contractor. According to TSA and LAWA officials, both TSA and Los Angeles signed the LOI/MOA knowing the preliminary nature of the cost estimate. According to construction industry guidance, an estimate's accuracy depends on the quality of information known about the project at the time the estimate is prepared. The 2003 estimate was made at the "concept development" stage where the final project cost can be expected to range from 50 percent under to 100 percent over the estimated cost, according to this guidance. The 2005 revised estimate was made at the "design development" stage where the range of the final project cost estimate can be expected to be more accurate--from 20 percent under to 30 percent over the estimated cost. In December 2003, LAWA presented TSA with a summary of inadequacies it had found in the original Boeing concept and the associated potential cost and scheduling impacts. LAWA then began an engineering study to update the in-line system concepts at LAX and ONT, the results of which it presented to TSA in September 2004. TSA reviewed these updated concepts and determined that they would meet its performance requirements; however, TSA's review did not address cost issues. LAWA used these updated concepts to develop its 2005 estimate, which was based on more definitive information about terminal design requirements than the 2003 estimate. According to LAWA, new construction and excavation included in the 2005 designs increased the estimated costs. Among the design changes, LAWA determined that the placement of EDS machines in the 2003 concepts was infeasible in five of nine of the LAX terminals and both ONT terminals. In addition, the 2005 estimate included 20 additional baggage inspection rooms, 9 rooms for on-screen resolution of EDS alarms, and 10 computer rooms at LAX and ONT terminals. The 2005 estimate also included over $11 million in computer networking costs and costs associated with on-screen resolution of EDS alarms, which the 2003 estimate did not foresee. TSA also highlighted two additional factors that caused differences between the two estimates--cost increases due to the delay in beginning construction of the project and the escalation of construction costs between 2003 and 2005. LAWA also determined that TSA's contractor and subcontractor made a mathematical error in the 2003 concept development estimate: construction costs were only included for one of the two baggage screening facilities and neither of the connected tunnels at ONT. TSA officials told us in January 2007 they were not able to substantiate this error.