Huge Cost Overrun for FAA's NextGen

December 3, 2010

A year ago I discussed problems that the Federal Aviation Administration was having in trying to implement an overhaul of the nation’s air traffic control system. The “NextGen” overhaul would replace old-fashioned radar technology with modern satellite-based GPS navigation.

In a new letter to Congress, the Government Accountability Office reports that NextGen could ultimately cost four times more than originally estimated:   

According to this analysis, implementing the highest performance levels envisioned in the [Integrated Work Plan] for ground and aircraft capabilities by 2025 could increase NextGen’s costs significantly beyond the initial cost estimate of $40 billion (e.g., in some scenarios that require every aircraft to be equipped with extensive avionics in a shorter time frame, estimated costs can go as high as $160 billion). If the highest performance levels are implemented over a longer period, by 2035, the cost estimates would be lower, but still would be considerably higher than $40 billion.
As a Cato essay on airports and air traffic control points out, the FAA has a poor track record when it comes to implementing new technologies: 
The FAA has been attempting to modernize its system, expand capacity, and increase its productivity for decades. But dozens of reports over the years from the Government Accountability Office and the Office of Inspector General in the Department of Transportation have faulted the FAA for poor management of major projects, which are often delayed and over budget. The Advanced Automation System, Wide Area Augmentation System, and other major projects have had large cost overruns and been years behind schedule or cancelled. 
The essay explains that the solution to the FAA’s constant problems “is to take the ATC system out of the federal budget process and make it a self-supporting entity, funded directly by its customers.” The Clinton administration proposed such a transformation as part of Vice President Al Gore’s “reinventing government” initiative in the 1990s.
Unfortunately, the United States remains woefully behind the times as the essay explains: 
During the past two decades, nearly 50 governments have commercialized their air traffic control systems. That means they have separated their ATC activities from their transport ministries, removed them from the civil service, and made them self-supporting from fees charged to aircraft operators. These new air navigation service providers (ANSPs) are usually regulated at arm’s length by their government’s aviation safety agency. 
We only need to look north of the border to Canada to see that privatizing the nation’s air traffic control system is the right move. Unlike the government-run ATC system in the U.S., Nav Canada is a privately run, not-for-profit corporation. Nav Canada recently received its second “Eagle Award” from the International Air Transport Association. The Eagle Awards “honor air navigation service providers and airports for outstanding performance in customer satisfaction, cost efficiency, and continuous improvement.”



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