Government Executive - Authors - Matthew Weinstock

Postal facility set to open in November

Matthew Weinstock — Thu, 23 Oct 2003 00:00:00 -0400

Just over two years after being contaminated with anthrax, the Joseph Curseen and Thomas Morris Processing and Distribution Center in Washington is scheduled to reopen at the end of November. Administrative staff will return to the facility first, with mail sorting and other craft employees returning shortly thereafter.

Yet, as the agency prepares staff to re-enter the facility, there is ample concern over the Postal Service's response to the October 2001 anthrax attacks as well as any future biohazard attacks.

In a situation eerily similar to the anthrax incident, the Postal Service on Oct. 23 shut down a mail sorting facility in Greenville, S.C., after the Centers for Disease Control and Prevention confirmed that an envelope handled at the facility contained the deadly toxin ricin. A postal worker discovered the suspicious envelope, which had the words "caution ricin poison" typed on the outside, on Oct. 15. Officials did not decide to shut down the facility until receiving test results from the CDC. The facility has been tested and deemed safe for workers.

The letter was not part of a terrorist attack, but rather a protest over recent trucking regulations issued by the Transportation Department.

It's common for the agency to get dozens of hoax letters and packages every day, Thomas Day, the Postal Service's vice president for engineering, told the House Government Reform Committee Thursday. Since the anthrax attacks, the agency has responded to nearly 20,000 incidents involving suspicious substances. It's prudent to wait for advice from public health officials before acting, he said.

During the anthrax attacks, Postal Service officials waited several days after a contaminated letter was opened in a Senate office building before closing the Curseen and Morris plant, formerly known as the Brentwood postal facility. At the time, agency officials relied on the best available information from the CDC. Current and former postal employees are suing the agency, alleging that such action put their lives at risk. They also charge that the agency withheld critical information related to the contamination.

While praising the agency for efforts to open a dialogue with workers during the months following the anthrax attacks, union officials told the committee that communication has faltered recently. For instance, the American Postal Workers Union didn't find out that the facility was cleared for re-entry until a month after final test results were delivered to the agency.

"If this hearing hadn't been scheduled, I doubt we would have the [results] even now," said Mike Reid, assistant legislative director at APWU.

Reid also said that employees have not received adequate training on how to respond to future incidents.

Del. Eleanor Holmes Norton, D-D.C., said the committee will press postal officials to better detail their plans to train employees.

It's not clear how many postal workers will return to the facility. The agency and its major employee unions have agreed to accommodate any worker who wants to be reassigned to a different Washington-area plant.

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Lawmakers aim to curb purchase card abuse

Matthew Weinstock — Thu, 16 Oct 2003 00:00:00 -0400

Legislation intended to crack down on misuse of government purchase and travel cards was introduced Thursday in both the House and Senate.

Sen. Charles Grassley, R-Iowa, and Rep. Joe Wilson, R-S.C. are the primary sponsors of the bills, which would require agencies to improve internal controls of their card programs. Among other things, the legislation would require agencies to periodically review whether an employee actually needs a card. It also calls on each agency inspector general to routinely audit card programs. The lawmakers also want agencies to conduct credit checks on employees before issuing them cards.

The legislation would also require agencies to establish stiff penalties for employees who misuse their cards. These penalties could include docking pay or referring cases to the Justice Department.

Grassley has been on a crusade for the past four years, asking the General Accounting Office to look into card programs at various agencies and departments. GAO has uncovered millions of dollars in inappropriate expenditures.

"Hardworking Americans are paying for government employees' Christmas shopping," Grassley said. "Purchase cards are intended to be used to purchase supplies or other items needed by a government agency. . . . It's hard to justify payments on a sapphire ring, kitchen appliances and gift certificates to department stores as necessary office expenses."

Efforts to improve internal controls of card programs are haphazard, according to Linda Calbom, GAO's director of financial management and assurance. Some agencies are doing a good job, while some are not. Calbom did not comment on specific provisions in the legislation. Nearly all of GAO's reports on card programs during the past couple of years have cited faulty internal controls as the primary culprit for inappropriate expenditures.

The General Services Administration is putting the finishing touches on a best practices manual to help agencies better manage their card programs. The agency expects to publish the manual later this fall. Wilson commended GSA for its efforts, but said Congress cannot wait to see if agencies will adopt the best practices. He said it is necessary for agencies to improve their performance now.

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Career Achievement Safety First

Matthew Weinstock — Wed, 15 Oct 2003 00:00:00 -0400

Whether in space or in the operating room, James Bagian is committed to eliminating deadly mistakes.

r. James Bagian found himself in disturbingly familiar territory in February, when he was called on to help investigate the loss of the space shuttle Columbia. It had been 17 years since Bagian dove 95 feet into the Atlantic Ocean to find the remains of friends and colleagues who perished aboard the shuttle Challenger.

This time around, there were no blue waters to search. But Bagian's mission was the same: View the evidence, analyze the data, figure out what went wrong and, most importantly, help NASA determine how to prevent such a tragedy from ever occurring again.

It's what Bagian does. It's what he has done his entire federal career. From redesigning ejection seats on Navy fighter jets to reduce injuries to his current work of eliminating medical mishaps at Veterans Affairs Department hospitals, Bagian has focused on one thing-creating a culture of safety.

That wasn't always his plan, though. "When I was 8 years old, as a Cub Scout, we had to make a scrapbook about something," Bagian, 51, says. "I did mine on the space program. That was when [Alan] Shepard was the first person to fly into space. I knew I wanted to be an astronaut." But three years later, Bagian relinquished the dream, momentarily. "I was 12. I thought no one actually gets to be an astronaut. Look at how many people are in the U.S. Look at how few astronauts there are."

Instead, Bagian, who grew up in Philadelphia, the son of a World War II fighter pilot, opted to study engineering, because he was attracted to the problem-solving aspect of the field. He earned a degree in mechanical engineering from Drexel University in his hometown. But after apprenticing for various companies during his studies, Bagian was discouraged by the fact that seniority played a large role in how people were promoted.

Bagian looked for a profession where he could become master of his destiny, and settled on medicine. Upon completing his engineering studies in 1973, he enrolled at Thomas Jefferson University, also in Philadelphia, to pursue a medical degree. Before classes started, he spent the summer earning a pilot's license.

Throughout his career in government, Bagian has found ways to put his unusual combination of engineering and medical degrees to use. One of the earliest examples came while he was working as an engineer at the U.S. Naval Test Center in Patuxent River, Md., in 1976. Bagian, who was still in medical school at the time, learned that one-third of pilots who ejected from fighter planes suffered fractured vertebrae. He realized that the problem was the jerk of acceleration pilots experienced when they first ejected. He devised a new system to slow the rate of acceleration while still providing a safe exit. The system is standard in Navy jets and has dramatically reduced injuries.

Yet Bagian couldn't fight the urge for space travel. He applied to become an astronaut in 1976. He didn't hear anything for about a year. Then, while completing rounds one June night in 1977 at Geisinger Medical Center in Danville, Pa., his beeper sounded. It was NASA. He was one of 20 people chosen that year to be astronauts.

Bagian was set to fulfill his childhood dream in 1987, when he was named to serve on the crew of the Challenger to perform a scientific mission. But five months before the scheduled launch, NASA shifted priorities and decided to go with a crew trained to deploy a satellite. As the Challenger lifted off, Bagian sat in the NASA command center, serving as the flight medical officer.

When the shuttle exploded just over a minute after launch, Bagian, a trained diver, was among the group of people sent out to search for survivors.

During the ensuing investigation, Bagian was instrumental in pushing for new safety measures. Most notably, he led the effort to redesign the shuttle's crew cabin to include an escape hatch. Using his engineering skills and knowledge as a physician, he developed pressure suits and parachutes that would allow future astronauts to float to Earth safely from a high altitude.

Unfortunately, Columbia's crew did not have time to use the escape hatch. But Bagian, who served on the Columbia Accident Investigation Board, says he hopes NASA will consider improving the "skin" of the crew cabin in the shuttles, so that the cab could withstand the heat of re-entry to the Earth's atmosphere. That way the crew could use the escape hatch once the module reached a lower altitude.

For all of the publicity and high drama that comes with working on the space shuttle, Bagian says the most important challenge of his career came in 1998, when he agreed to head the National Center for Patient Safety at the Veterans Affairs Department. His assignment was daunting-completely overhaul the culture at VA medical centers to make patient safety the top priority. Minimizing errors in treatment has long been a source of frustration in the medical community, because of a culture that has tended to focus on blame rather than problem-solving. As a result, many health care professionals are loath to point out mistakes or near misses.

The issue reached a critical point in 1999 when the Institute of Medicine released a study estimating that between 44,000 and 98,000 Americans die annually from preventable medical mistakes. The institute recommended that the government and hospitals create a system to report and track errors.

The VA was already looking for ways to improve safety. Under the leadership of Veterans Health Administration chief Kenneth Kizer and, later, Thomas Garthwaite, the agency developed a patient safety program in 1997. But it lacked a point person for more than a year. Finally, Kizer asked Bagian to take the helm and, in 1999, turned the program into a permanent part of the VA, creating the National Center for Patient Safety.

In Bagian, the VA found someone who would become the driving force for patient safety. The center encourages VA health care professionals to report errors and near misses. More importantly, though, it requires them to figure out where and why communication breakdowns result in errors.

The approach is paying dividends. Between January and August of this year, the VA had yet to record an incident of incorrect surgery-in which the wrong patient is operated on or the wrong surgery is performed on a patient. In prior years, the VA's 170-plus hospitals usually would have experienced at least eight incorrect surgeries during that time span. The VA also has led the field in developing new coding systems to ensure that drugs are distributed appropriately.

Garthwaite credits Bagian with the center's success. "James is contagious and infectious," he says. "He is so down to earth. When he talks about the specifics, things just come to life."

Bagian is forging a partnership with private hospitals, hoping to bring them along on his quest for quality. Don Nielsen, senior vice president of quality at the American Hospital Association, says Bagian walked into a difficult situation and immediately put people at ease. He helped the health care community rally around a simple goal: Do no harm to the patient.

"I took this job because it was the right thing to do," Bagian says. "It's been the most satisfying thing I have ever done."

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Business and Commerce Wealth of Information

Matthew Weinstock — Wed, 15 Oct 2003 00:00:00 -0400

Nelson Hernandez is on a mission to help low-income people learn how to manage their money.

oughly 10 percent of American households don't use banks. Instead, the people in those households rely on check-cashing stores and other short-term services, leaving them vulnerable to scams. Worse yet, they don't learn how to manage or save money.

Nelson Hernandez is out to change that-one person at a time, if necessary. "When I see those check-cashing places, I say, 'I have to put them out [of business],'" Hernandez says with a chuckle. But he's only partly joking. This is serious business to Hernandez, who grew up in an impoverished part of Los Angeles during the 1960s. "I want people to know that there is a better way."

That better way is Money Smart, a small yet ambitious program Hernandez runs at the Federal Deposit Insurance Corporation. The program teaches low-income adults how to use basic banking services, such as checking and savings accounts, and instructs them in financial management.

Hernandez and his team of 40 FDIC staffers travel the country promoting the program and looking for partner organizations to help reach out to the poor. Starting with just one national partner-the Labor Department-in July 2001, the FDIC has since signed up 360, including 20 national organizations, four of them federal agencies.

Hernandez keeps the program focused on low-income people between the ages of 20 and 55. "I want that 25-year-old guy who works in the car wash," he says. "I want that 38-year-old woman who comes in here and cleans the building at night."

That focus has made Hernandez a powerful force in promoting Money Smart, says Doug Dylla, national coordinator of NeighborWorks, a division of the Neighborhood Reinvestment Corporation, a nonprofit organization created by Congress to support community-based economic revitalization. NeighborWorks is a Money Smart partner.

"He keeps knocking on doors. And he is continually pushing this program to the next level," says Dylla.

When Hernandez started at the FDIC in June 2001, Money Smart was barely off the ground and the agency had no clear plan for rolling out the program. Training materials were available only in English. Hernandez immediately sought to translate the materials into Spanish. By the end of 2003, training will be available in Korean and Vietnamese, too. There are plans to put the materials on CD-ROM and eventually offer them online.

Between July 2001 and December 2002, the FDIC had sent 85,000 copies of educational materials to its partners. Those groups provide the actual classroom training. At least 100,000 people have completed the course. Of those, an estimated 13,000 have since opened bank accounts.

Hernandez says his dedication to the program "is personal because of where I grew up and my experiences." As a young adult, he worked on community development projects in Los Angeles' most destitute neighborhoods.

As a staffer for a local politician and at the Los Angeles office of the Housing and Urban Development Department, Hernandez has seen the difference that government can make in people's lives.

Donna Gambrell, Hernandez's boss at the FDIC, says his local experience is invaluable. "He has tremendous credibility because he has worked in communities," she says. "People can tell a bureaucrat from a regular person. He can relate to people and knows how to pinpoint their needs."

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Postal Service wants to build mail irradiation center

Matthew Weinstock — Wed, 15 Oct 2003 00:00:00 -0400

The Postal Service next week will begin assessing the merits of building a mail irradiation facility in Washington to scan all mail addressed to the area's federal offices.

Currently, all mail addressed to Washington-area agencies is collected at a postal facility in Northeast Washington, then shipped to Bridgeport, N.J., where a contractor irradiates it. Upon return to Washington, the mail must sit in isolation for 12 hours. The entire process, in place since the October 2001 anthrax attacks, takes 3 to 4 days.

By building a local facility, Postal Service officials believe they can get mail to federal agencies more quickly. Doing so would also save the agency money, although exactly how much has not been determined. The current contract with IBA-Worldwide costs the agency about $10 million a year. That includes transportation and irradiation.

The agency's preference is to build a facility on land it owns next to the Curseen-Morris Processing and Distribution Center in Northeast Washington, the site of the anthrax attacks, according to agency spokesman Robert Anderson.

Next week, the agency will start an environmental impact assessment to determine whether the site is suitable for such a facility. A host of city and federal agencies are involved in that process, which could take several months. Assuming the site is approved, the Postal Board of Governors must grant funding for the project. From the time funding is approved, it could take two years to get the facility built, said Anderson. The agency hasn't determined if it would hire a contractor to run the facility or train postal employees.

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Postal workers sue over anthrax exposure

Matthew Weinstock — Tue, 14 Oct 2003 00:00:00 -0400

Brentwood Exposed, a group professing to represent hundreds of current and former postal workers, allege that Postmaster General John Potter and other agency leaders violated the employees' Fifth Amendment rights by withholding information relating to contamination at the Joseph Curseen Jr. and Thomas Morris Jr. Processing and Distribution Center, formerly known as the Brentwood Mail Processing and Distribution Center. The facility was renamed to honor two workers who died as a result of the anthrax attacks.

The group's organizers declined to comment for this story, but have scheduled a news conference for Wednesday at the National Press Club in downtown Washington. Lawyers from Judicial Watch, a Washington-based government watchdog organization representing Brentwood Exposed, did not return phone calls.

Sources familiar with the litigation, however, said the group would rely on copies of a personal log kept by Timothy Haney, manager of the plant, that it obtained through the 1974 Freedom of Information Act. One entry, they said, suggests that Haney and other postal executives knew the Brentwood facility was contaminated several days before they decided to close it down.

Postal executives have said they took their cues from the Centers for Disease Control and Prevention. It wasn't until the CDC confirmed contamination that the facility was shut down. Postal Service officials did not return calls for this story.

Members of Brentwood Exposed note that Senate office buildings were closed immediately after an anthrax-tainted letter was opened in the office of Sen. Tom Daschle, D-S.D. The suit is similar to one filed by former Brentwood worker Leroy Richmond. Along with Curseen and Morris, Richmond was among the first employees to show signs of anthrax exposure, including a high fever, headaches and tightness in the chest. Richmond's health problems persist. He hasn't been back to work since October 2001.

"He's losing the experience of being able to be active with his [9-year old] son," said Gregory Lattimer, Richmond's attorney. Lattimer charges that the agency acted with"deliberate indifference" by not moving quickly to safeguard employees. Richmond is seeking millions in damages. A trial date has not yet been set.

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Postal Service seeks to fully fund retiree health benefits

Matthew Weinstock — Wed, 01 Oct 2003 00:00:00 -0400

The Postal Service could become the first federal agency to fully fund retiree health benefits, if lawmakers act on a proposal sent to Congress Tuesday. But at least one significant roadblock stands in the way-a conflicting set of recommendations from the Treasury Department.

Both agencies, along with the Office of Personnel Management, were required to submit the proposals to Congress as part of a law that adjusted Postal Service payments to the Civil Service Retirement System. OPM's recommendation was not available and agency officials did not respond to calls for this story.

The adjustment was made earlier this year after it was discovered that the Postal Service could end up overpaying its CSRS obligations by more than $70 billion. By lowering contributions, the law saved the Postal Service $2.9 billion in fiscal 2003 and $2.6 billion in fiscal 2004. As a result, the agency pledged to keep postal rates flat until calendar year 2006.

But starting in fiscal 2006, savings generated by the law must be placed in an escrow account, unless Congress decides otherwise. The agency would have to transfer $3.2 billion into the escrow account by Oct.1, 2005. The Postal Service is also on the hook for paying $27 billion for employees' military service.

In its recommendation to Congress, the Postal Service recommended abolishing the escrow account and transferring the military portion to the Treasury Department, similar to other federal agencies. Doing so would generate $10 billion in savings, or overpayments to the CSRS, according to the agency's chief financial officer, Richard Strasser. The agency would then use that money to fully fund retiree health benefits for all its employees.

If Congress approves the proposal, the Postal Service will have addressed one of the biggest financial liabilities on its books, Strasser said during a briefing with reporters. The agency has nearly $92 billion in unfunded debt and obligations; about $48 billion is related to retiree health benefits. How the Postal Service pays for health benefits has long been a concern of the General Accounting Office, as well a presidential commission which recently concluded a six-month review of postal operations.

Requiring the agency to pick up the tab for military service "is not justified because the majority of this cost relates to military service performed before the creation of the Postal Service," the Postal Service argued in its recommendation.

Treasury, however, took a different view. In its proposal, the department noted that the Postal Service is required to pay for all employee benefits through postage rates. "The benefits attributable to military service are a retirement benefit that postal employees receive just like other benefits," Treasury noted.

The department recommended that the Postal Service pay a pro-rated share of military benefits for employees hired before July 1, 1971, the date that the Postal Service became an independent agency.

Postal Service officials declined to comment on Treasury's proposal, but said they were studying it. However, in its submission to Congress, the Postal Service included an alternative plan, which assumed the escrow remained and that the agency would still be responsible for the military portion of retiree benefits. Under that scenario, the agency would use some of the money in escrow to prefund benefits for retirees hired after 2002. The remaining portion of the account would be used to help pay for general agency operations.

To pay into the escrow, however, the Postal Service would have to raise rates by 5.4 percent in fiscal 2004. That does not include the need to cover operational costs or take into account declining mail volumes. The escrow requirement would cause bi-annual rate increases between 1 percent and 1.5 percent for the next 15 years, according to the agency.

All the proposals on the CSRS funding were sent to the General Accounting Office, which has 60 days to review them and submit a recommendation to Congress.

Strasser urged lawmakers to act quickly. Any delay could impact the agency's ability to calculate the size and timing of its next rate increase. The changes will have no impact on the level of health benefits offered to retirees.

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Too Much

Matthew Weinstock — Wed, 01 Oct 2003 00:00:00 -0400

It's nearly impossible to secure air travel, let alone the rest of transportation.

ust 2 years old, the Transportation Security Administration is besieged. To be sure, the agency has been under the microscope from Day One. It had to meet nearly impossible legislative deadlines to ensure full screening of airline passengers and baggage for explosives and other deadly devices. While winning kudos for hitting those marks, the agency increasingly finds itself in a defensive posture, facing a number of equally difficult challenges and harsh critics.

Having focused almost exclusively on aviation security during the past two years, the agency now turns its attention to the rest of the nation's vast transportation network, including 3.9 million miles of roads, 600,000 bridges, more than 100,000 miles of rail track, 300 seaports, 2.2 million miles of pipelines, and 500 train stations. And, it has to continue building an organization that heretofore has not had much time for such seemingly mundane tasks as strategic planning and vigorous contract management.

As if that weren't enough, TSA must perform its missions while facing an unforgiving and demanding group of constituents. Critics on Capitol Hill say the agency has a bloated workforce. Prodded by lobbyists, lawmakers also forced the agency to make customer service as high a priority as security. TSA is being investigated for mismanagement of a contract to recruit screeners. Disgruntled workers want to unionize. Stakeholder groups chastise the agency for being too insular and wonder how TSA will interact with other regulatory entities. There's concern that it is moving too slowly to develop a risk-based approach for allocating resources. What's more, TSA is scrabbling to get a foothold within its new home, the Homeland Security Department. Even there, the agency has challenges. Most notably fighting through a multi-layered bureaucracy in order to accomplish its agenda.

Many of these issues are playing themselves out piecemeal during congressional hearings and in the news media. Individually, they create interesting mini-dramas. Taken together, they have left the young agency struggling to find its way.

CLIPPING ITS WINGS

TSA's most visible function also happens to be the subject of heated debate. When the agency was formed in the wake of the Sept. 11 attacks, preliminary estimates suggested it could perform passenger and baggage screening with about 30,000 workers. The estimates were based on data from the private screening companies that handled the work before the attacks, according to former TSA Administrator John Magaw. The agency hoped to cross-train screeners to do both types of screening, but that plan never materialized due to the pressures to meet congressional deadlines. Instead, TSA's screener workforce grew to more than 56,000 by the end of 2002.

Congressional appropriators were irate over the vigorous pace at which TSA was spending and hiring. Legislators' irritation mounted when they saw TSA screeners standing around airports during slow travel periods. On Capitol Hill and elsewhere, TSA was said to stand for "Thousands Standing Around." In 2002 and 2003 appropriations bills, Congress capped the number of screeners at 45,000. TSA slashed some 6,000 people from its workforce this summer, from 55,600 to 49,600. TSA says staff cuts came via attrition and reductions in force based on job performance. The fiscal 2004 appropriation moving through Congress would force further cuts, bringing the workforce closer to 45,000.

TSA field officials say the reductions have had a dramatic impact on operations. Standing in a secure windowless room in the bowels of Boston's Logan International Airport, George Naccara, TSA's security director at the airport, points to six computer terminals that are used in the screening process. "We should have two people per each machine," he says. "We only have three people here."

The three screeners view images from explosive detection equipment installed along the airport's luggage conveyer belts. The in-line system at Logan is state-of-the-art. Instead of having the SUV-sized scanners in terminal lobbies, the Massachusetts Port Authority (Massport) spent millions of dollars to build the equipment into its baggage handling system. This allows luggage to move more rapidly from check-in to airplanes. Screeners have roughly 42 seconds to decide whether a bag is safe or should be diverted for hand inspection. Having too few screeners means there are fewer opportunities to get second opinions. As a result, more luggage is being hand checked than necessary, Naccara says. This is an inefficient use of screeners' time and causes delays in loading baggage onto airplanes. Passenger security checkpoints aren't fully staffed either. At one point, Logan had more than 1,300 screeners. As of mid-August, there were around 915, according to Naccara.

Staff losses have angered screeners. "We went from 320 workers in baggage to about 250," says Dennis Cullity, a screener at Logan and member of the American Federation of Government Employees who is trying unionize his colleagues. "Morale is pretty low." Claiming that the reductions in staffing weren't legal, AFGE is suing TSA. The union alleges that the criteria used to determine who got laid off did not follow established reduction-in-force procedures, which protect veterans, longtime federal employees, and employees with good performance evaluations. AFGE wants the agency to redo the staff reductions and rehire some screeners. TSA officials declined to comment on the pending litigation. But in its legal brief, TSA notes that the 2001 law creating the agency gives the administrator broad discretion to hire and fire screeners.

To help alleviate staffing shortages at some airports, TSA is turning to part-time employees. Aviation experts say TSA should have considered this from the outset. Given the ebb and flow of air travel, it doesn't make sense to have screeners standing around during parts of their eight-hour shifts. Rather, the agency needs to match staffing levels with peak travel times during the day. Peter Winch, national organizer for AFGE, opposes the concept. He says the agency should assign full-time workers to other duties or provide training during slow periods. Cullity says promises of cross-training never have come to fruition. It's a source of frustration expressed by screeners at Logan and other airports interviewed for this story. Acknowledging that training is a point of contention, Naccara says screeners mainly get refresher training. He'd like to put his own program in place, but is bound by a national contract requiring Lockheed Martin to run training courses.

AFGE uses the lack of training as a rallying cry for its organizing effort. Earlier this year, the union launched a national campaign to sign up screeners. Winch argues that workers are not being fairly treated when it comes to schedules and assignments. As of September, more than 6,000 screeners had expressed interest in joining AFGE, according to Winch, and 500 had begun paying dues. Because screeners can't collectively bargain, some see little value in paying union dues. The law creating TSA gives Administrator

James Loy the discretion to prohibit collective bargaining. He made such a decree in January, saying that it "is not compatible with the flexibility required to wage the war against terrorism." AFGE sued the agency in hopes of removing that restriction. A federal district court in September dismissed the case. At press time, AFGE was expected to appeal.

BUDGET BATTLES

TSA also is wrestling with White House budgeters. The agency's fiscal 2004 budget request does not include funding for purchase or installation of explosive detection equipment. Aviation industry experts, as well as TSA officials, are eager to copy Logan by incorporating the machines into the baggage handling system. But few airports are willing to move forward with construction until they receive financial help from the federal government. The costs are too high. Massport, which was willing to cover the costs upfront in the hope that federal aid would eventually come, spent $146 million to install 38 explosive detection machines.

Loy has promised to help airports by providing 75 percent of the funding for construction of in-line systems, but as of early September, only six airports had received commitments of funding from TSA. At least 30 requests are pending, according to industry officials. Hundreds more airports are waiting to see whether the money will actually be made available before moving forward with plans to reconfigure their facilities. Logan officials didn't learn they would be reimbursed $87 million until July, nearly a year after they had committed to embark on construction.

Despite the administration's failure to request explosive detection equipment funding, House and Senate appropriators included it in their fiscal 2004 bills. The House committee lashed out at the administration in its report, saying it is "very disappointed in the unrealistic nature of the fiscal year 2004 budget and urges TSA not to overlook these critical needs in the future." TSA sources say the White House budget office exerted pressure to zero out funding for certain programs, thus forcing Congress to take action.

While frustrated by the budget battles, Loy says he is somewhat forgiving. "As I look back on the history of our country, there is often a sequence of events that occurs: There is a tragedy, followed by an emotional plea for legislation, followed by a year or two of budget turmoil while the Congress and the administration and the new agency try to sort out the job description on one hand and resources on the other," he says. "I think we are in the middle of that turmoil period. My guess is that 2005 will be the first time we have a normal budget cycle." Still, he says the agency is functioning like a "$7 billion organization in a $6 billion suit. . . . Things that we thought we would be further down the road on have been frustrated by being left at the alter of the budget process."

CHANGING COURSE

External forces also are causing the agency to reevaluate its priorities. When TSA was first formed in November 2001, it was to provide law enforcement officers to patrol the nation's airports. Airport lobbying groups felt TSA overemphasized law enforcement to the detriment of customer service and voiced their concerns to Congress members and Bush administration officials. In July 2002, Magaw, who had come to personify TSA's free-spending ways and law enforcement focus, was forced out of office and replaced by Loy. One of Loy's first tasks was to ensure that customer service-that is, attention to the needs of airports and convenience of airline customers-received as much attention as security. He felt the pendulum had swung too far toward security.

Some security directors are discouraged by the increased emphasis on customer service under Loy. One director for a large airport on the East Coast, speaking on the condition of anonymity, says that the drive to appease aviation industry groups has turned security directors into paper tigers. "The intention to make TSA a law enforcement agency never materialized," says William Pickle, former security director at Denver International Airport. Pickle is now the Senate sergeant-at-arms. "We came to a 'Y' in the road and took the wrong path. At least that is what a lot of us thought."

"After a while, we just started calling ourselves federal screening directors, not federal security directors," says Anthony Zotto, former security director at Ronald Reagan Washington National Airport. Zotto was one of the first eight security directors hired. With 26 years of federal service, 22 in the Secret Service, he was eager help TSA fulfill its mission. But very quickly he realized the agency was being pulled in different directions. When he was brought on board, Zotto was told he would have direct control over law enforcement activities at National. "When I said that to the airport people, they looked at me like I had two heads," he says. Zotto is one of 12 security directors who have left the agency as of early September. There are 158 such positions within TSA.

Loy says he can understand the former security directors' dissatisfaction. "Their perspective at the beginning was that they would be powerful mini-security czars with the idea that what happened at their airports would pretty much be theirs to determine," he says. He suspects that some of the frustration likely stems from the fact that budget shortfalls have prevented security directors from getting all the tools they need, including a full contingent of screeners and more explosive detection equipment.

There are other concerns. Zotto says communications with headquarters were not very good. Responses to questions were not always forthcoming or timely, he says. While Logan's Naccara is not as critical, he, too, has some frustrations. Primarily, that the agency has yet to issue a final strategic plan. That has hampered his ability to move forward with a plan for Logan. He has created metrics and goals for his workforce, but it's not clear whether they are in sync with what will be forthcoming from Washington. He's also interested in exploring new initiatives, such as coordinating security checks with cruise ships that send passengers to Logan. Although he is exploring such a pilot program, lacking clear guidance from headquarters, it is difficult to move ahead.

Still, Logan is considered TSA's standard-bearer. Officials from Massport, TSA and local law enforcement agencies have made considerable strides in coordinating activity and sharing intelligence. To a large degree, Logan's success stems from the close-knit relationship forged between Naccara and Thomas Kinton, aviation director for Massport. "It is very clear that the leadership at Massport has the same focus on security as TSA," says Naccara. "My personal feeling is that when you are directly affected, as we were, you have a different perspective," adds Kinton. "We viewed this as a team effort from Day One."

During daily briefings every morning, representatives from all airport stakeholders-airlines, vendors, local police-are present to hear about new developments or policies. They share concerns about existing rules as well. If there is a security breach, Naccara and Kinton coordinate the response. They work with local law enforcement experts to better train screeners to identify suspicious passengers and objects. Experts who worked with El-Al, the Israeli airline, were brought in to conduct training as well.

THE BUILDUP

As TSA tries to sort out budget and staffing, the agency also must build its organization. A significant challenge is putting in place strong contractor oversight. TSA contracts out a vast number of functions, including installation of explosive detection equipment and screener training and recruitment. In fact, the original contract to recruit screeners is the subject of an inspector general investigation. In March 2002, the agency signed on NCS Pearson Government Solutions of Eden Prairie, Minn., with a $103 million contract to hire the screeners. By December 2002, costs soared to $600 million for hiring and $200 million for training. Accusations abound about Pearson's spending and TSA's weak safeguards. Magaw, who was administrator when the Pearson contract was negotiated, admits that the agency made some mistakes. He says there should have been more checks on Pearson's spending patterns. But he is quick to point out that the agency had few program managers or contracting officers at the time. Instead, the focus was on accomplishing the mission to deploy tens of thousands of screeners in a year's time.

Along with the inspector general investigation, TSA has asked the Defense Contract Audit Agency to review the situation. Loy wants a "thorough scrub" so the agency can institute better controls on future contracts. Last January, TSA re-bid the Pearson contract. It was awarded to CPS Human Resource Services, a government agency that is jointly run by the California State Personnel Board and several local governments in and outside California. New York-based consulting firm Accenture, won a contract to handle TSA's day-to-day human resources administration.

STANDING STILL

Last year, TSA won praise for its efforts to become a performance-based organization. Even as it was trying to meet tight congressional deadlines, the agency was starting work on a results-oriented strategic plan, according to Gerald Dillingham, a member of the General Accounting Office's physical infrastructure team. But a year later, TSA has not moved off the mark. "It's understandable given all of the pressure they have been under," he says. "But there are big challenges ahead, and they need to move further."

Loy doesn't disagree, but he says much of the problem stems from TSA's mid-year move from the Transportation Department to the Homeland Security Department. Homeland Security has yet to finalize its strategic plan. "We must stay in alignment with things going on at the department," he says. "It's hard to line up with something that isn't in existence . . . . There is frustration on my part, but I can say that we are not abrogating our commitment to that work."

Developing a strategic plan will provide guidance to federal security directors as they try to manage operations at their airports. It also will aid the agency as it builds a risk-based approach to addressing transportation security, says Dillingham. By analyzing intelligence, vulnerabilities and threats, a risk-based method enables the agency to prioritize resource allocation. Such a method is instrumental in the development of a national transportation security plan. That document, which was said to be nearly finished in May, has yet to be finalized. During an interview in late August, Loy said it was on the verge of being done. But, he is reluctant to push forward until the department issues broader security documents.

"We want very much to align our game plan with the game plan that is articulated by the secretary and the broader national homeland security plan," he says. "Those are sort of biblical documents that you want to be in coordination with. . . . Am I frustrated that it wasn't done six months ago? I suppose. But the department wasn't around six months ago. I'm a combination of frustrated on one hand and understanding on the other."

BEYOND AVIATION

Agency insiders also say the heavy focus on aviation security has slowed efforts to address other modes of transportation. Loy says that will change, but how much is unclear. Even by the most elementary measure-funding-aviation is still king of the hill. Of TSA's $4.82 billion budget request for fiscal 2004, $4.2 billion is slated for aviation security. Sixty percent of TSA's $75 million for research and development goes to aviation. The remainder is split among maritime transport, railways, highways, pipelines and public transit.

The lag in attention to non-aviation modes of transportation has left federal regulatory agencies and trade associations wondering how they'll relate to TSA. Originally, TSA planned to sign memorandums of agreement with regulatory agencies, delineating lines of authority. Only one has been signed-with the Federal Aviation Administration. Loy expects to revive the concept. Still, officials at regulatory agencies question how much influence TSA will exert over the rule-making process or safety inspections. The Federal Railway Administration is pressing Congress to clarify roles. Officials have proposed language in the FRA reauthorization bill making it clear that the agency can issue orders pertaining to safety and security. The proposal goes on to say that Homeland Security must consult FRA before issuing any security directives. FRA spokesman Warren Flatau says the agency is "thoroughly in the loop" with TSA. The legislative language is a safeguard, needed to ensure that the "proper mechanisms are in place to enable joint action," he says.

Industry representatives are more skittish about TSA's foray into regulation. For starters, there is fear of duplication and overlap between TSA and other regulatory agencies. Industry groups are unclear about who will be taking the lead. Benjamin Cooper, executive director of the Association of Oil Pipe Lines says it is especially troublesome for his industry. Both the Transportation and Energy departments regulate pipelines. To understand what is expected of it, the industry needs a coherent message from the government. Like other trade associations, AOPL developed a set of security guidelines for its members. The association did so in close coordination with longtime regulators at the Transportation and Energy departments, as well as the FBI. "Now comes along Homeland Security and TSA," Cooper says. "We're trying to manage the transition of them being in charge."

Whether for pipelines, railways or maritime transport, TSA likely will use the existing regulatory structure to enforce security mandates. Loy says there will not be an army of TSA inspectors. What remains to be seen, however, is how other agencies embrace added security enforcement responsibilities TSA imposes.

GAO noted in a June 2003 report (GAO-03-843) that Transportation Department agencies historically have focused on "maintaining operations and improving safety, not regulating security." For that reason, Transportation Department "administrators may be reluctant to assume [the new security] role, because it could alter their relationships with the industry."

If the aviation industry is any indication, TSA is bound to have an uneven relationship with industries and customers of other modes of transportation. In some cases, such as with Logan, relations are in good shape. Not so at others. It can take upwards of eight hours for new security directives to make their way from TSA headquarters to Bangor International Airport in Maine, according to Bangor director Rebecca Hupp. It's frustrating, she says, especially when members of the news media call to ask how the airport will handle the new mandates and Hupp hasn't even seen them yet.

From his perspective, Loy says these growing pains are natural for a start-up agency still trying to sort things out with those it regulates and serves. He expects improvements over the next year, especially as budget debates settle down. "I remain very positive about our efforts," he says.

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TSA screeners lack training, supervision

Matthew Weinstock — Thu, 25 Sep 2003 00:00:00 -0400

Airport screeners are not getting all of the training they need, nor is their performance monitored on a regular basis, according to a new General Accounting Office report.

In a preliminary review of the federalized screener workforce, GAO found that the Transportation Security Administration has not deployed a "recurrent or supervisory training program to ensure that screeners are effectively trained and supervised." The report (GAO-03-1173) goes on to say that TSA "collects little information to measure screener performance in detecting threat objects."

GAO, however, gives the agency credit for taking some steps to address these areas, such as designing an annual retraining program and forging a partnership with the Agriculture Department Graduate School to develop a training course for supervisors.

"GAO says that we need to come up with more training programs. We are doing that," said TSA spokesman Nico Melendez. The agency is also deploying a three-part evaluation system for its screener workforce, according to spokesman Brian Turmail. About 28,000 screeners have completed two phases of the evaluation. Roughly 3 percent of the 50,000 screeners in the agency have been fired for failing to pass different portions of the test, Turmail said.

At the time of its review, GAO was not aware of the evaluation process, according to Cathleen Berrick, GAO's acting director of homeland security and justice issues. She said GAO will continue to monitor the situation as its investigation continues. The agency is scheduled to issue a more comprehensive report on airport screening in April.

Screeners in Boston, Washington, and Norfolk interviewed by Government Executive earlier this month said they have not received refresher training. They were also unclear about what system of measurement would be used to gauge their performance. GAO found similar results in its investigation.

GAO reported that TSA plans to deploy the first of six modules for recurring training in October. The remaining five are expected to be introduced next year.

To monitor performance, TSA sends out covert teams that try to sneak objects past passenger screeners. But the agency conducts far fewer such tests than the Federal Aviation Administration did when it was responsible for overseeing airport security, according to GAO. TSA officials said its tests are more rigorous.

Test results do not measure an individual screener's overall performance, but provide a "snapshot" of a screener's ability to detect a weapon at a specific time, TSA officials told GAO.

Classified portions of GAO's analysis suggest that weapons are still making their way past screeners, according to Gary Burns, a spokesman for Rep. John Mica, R-Fla., chairman of the House Transportation and Infrastructure Aviation Subcommittee. Mica requested the investigation.

Some of the security breaches are the result of inadequate technology, Burns added. "The report illustrates that we need to be making better use of our resources," said Burns. "Do we want TSA to spend time managing a workforce or getting better technology?"

Mica had opposed federalizing the screener workforce in the first place. He helped win passage of a provision in the law creating TSA that permits airports to opt out of the federal program and hire private screeners starting in November 2004. TSA is required to develop a program describing how airports can exercise that flexibility.

"We want them to have the program ready soon, so airports can move quickly to the new system," said Burns. "The reality is that TSA has moved along like a lumbering bureaucracy and has been slow to adapt. We are concerned that TSA will not be ready to work with airports when the time comes."

Before developing the opt-out program, TSA wants to evaluate five airports involved in a pilot program allowing them to use private screeners. The airports were initially required to follow the same training and staffing models as federalized airports, but some of those restrictions have been lifted recently. TSA expects to hire a contractor in the next week to review performance at the five airports.

"I want to hear what [officials at airports in the pilot program] are thinking. What would they vary?" TSA Administrator James Loy said during a recent interview with Government Executive. "I want to be honest and objective about putting the data on the table so they can make good decisions."

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Maximum Protection

Matthew Weinstock — Mon, 15 Sep 2003 00:00:00 -0400

With new rules protecting contractors from massive lawsuits, the government hopes to see a surge of anti-terrorism technology.

homas Day can't bear the thought of it-what if the U.S. mail were hit with another attack using anthrax, or some other biological agent? And what if the Postal Service didn't do anything to prevent, or at least mitigate, the risks? Worse yet, what if agency officials knew there was technology available that could detect biohazards, but they did not purchase and deploy it?

It's a scenario that Day, vice president of engineering for the Postal Service, and other top agency officials have grappled with for the past couple of years. After the anthrax attacks of October 2001, Postal Service officials knew they were entering a new world order. No longer could their security concerns be focused solely on workplace violence and explosives hidden in large packages. Now, they had to worry about lethal microbes stuffed inside an everyday 3-by-5 mailing envelope. Something had to be done.

"Could you imagine the moral dilemma we would be in if, in a year or two, there's another attack and we didn't do a thing?" says Day.

Almost immediately, Postal Service officials began inquiring about technologies to safeguard the mail. For a couple of months, the agency experimented with irradiating all mail sent to Washington. But doing that on a national basis was deemed impractical and unnecessary. Only mail sent to Washington-area federal offices is irradiated now. Other options started to emerge, including new ventilation systems for mail-processing plants and equipment to detect biohazards.

In March, the Postal Service signed a $175 million contract with Northrop Grumman to install biohazard detection equipment in 283 mail processing centers. The technology is being tested at 15 facilities across the nation. If it proves successful, another 100 facilities will get the equipment in early 2004, with the remaining plants ready to go by spring or summer.

But getting to this point was no easy task. At first, Northrop Grumman was unwilling to sign a contract to provide the technology. Top company executives worried about being sued should a biohazard slip through the system. Injured parties would undoubtedly file massive class action claims against the agency and the company, arguing that the technology failed to adequately protect the public.

Northrop Grumman officials were prepared to walk away from the table-and the money-unless the Postal Service could guarantee some level of legal protection. After months of tough negotiations, the organizations reached a compromise last spring. The Postal Service agreed to pay the costs of liability insurance for Northrop Grumman, to the tune of $10 million to $15 million over seven years. The costs were absorbed into the contract.

The Postal Service's situation is not unique. Public and private sector organizations are desperate to deploy anti-terrorism products and services. But no one wants to assume the tremendous financial burden that could result from massive lawsuits should new technologies fail to function properly during a terrorist attack. "You just can't put the company at risk. That is the bottom line," says Steve Carrier, vice president of business development and strategic planning at Northrop Grumman. Carrier also heads the company's homeland security division. At the same time, few federal agencies could afford to absorb the costs of insuring contractors, as the Postal Service has done.

The specter of what could happen has caused some firms to delay coming to market with anti-terrorism technology. For example, insiders at Raytheon Corp. say the company has been researching technology to scan cargo for explosives, but is reluctant to even talk about potential uses for the scanners because of liability concerns. Carrier says his company has passed on large procurements, mainly at the state level, because of the liability issue.

All that could change. In fact, many industry and government officials breathed a sigh of relief in mid-July when the Homeland Security Department issued a proposed rule providing liability protection to both sellers and buyers of anti-terrorism technology. The rule stems from the law that created the department last year.

Companies now can apply to have their products and services deemed "qualified anti-terrorism technologies." Once classified as such by Homeland Security, the firms will be legally protected in the event that their technology fails before or during a terrorist attack-assuming the failure was not based on negligence.The protection extends to technologies used by federal, state and local governments, as well as the private sector. It essentially limits the amount of money injured parties could get from companies. The rule also prohibits lawsuits against buyers of anti-terror technology.

But vendors and buyers wonder exactly how the department will implement the rule. And it's still not clear how the department will evaluate technology or how the insurance industry will respond to provisions requiring manufacturers to get coverage for their products. Homeland Security officials are plowing through comments they have received on the proposal. An interim final regulation should be published in the fall. Officials expect the rule to evolve over time. Nonetheless, they are charging ahead with reviewing applications and implementing the regulation.

"This is a brand new program," says John Mitnick, an attorney in the department's office of science and technology. "We are constantly learning as we go."

LIMITING LIABILITY

Demand for anti-terrorism technology grew rapidly in the days after the Sept. 11 attacks. But as the Postal Service found in its quest for biohazard detection equipment, companies were hesitant to come forward. "The problem is, we were not protected," says Carrier. "It's not only a problem at [the federal level] but in the states, too. We are being asked to bid on things, and there is unlimited liability."

The demand for anti-terrorism technology was high, but companies found it extremely difficult to get insurance covering such products. Insurance companies were jittery for several reasons. First, the potential cost of terrorism-related payouts is enough to hamstring the industry. Indeed, estimated insurance payouts related to the Sept. 11 attacks are expected to reach $40.2 billion, according to P.J. Crowley, vice president of the Insurance Information Institute. Other estimates, including those from the General Accounting Office, put the total as high as $50 billion.

Fearing another attack, insurance firms got nervous about even higher payments, especially if their clients were subject to class action suits. "We don't have a good deal of history for terrorism as the trigger for losses or a lawsuit," Crowley says.

In addition, the companies that provide behind-the-scenes financial support for insurance firms-known as reinsurers-became skittish about terrorism-related policies. Reinsurers take on some of the financial risk of providing insurance in return for a share of premiums paid by companies. Nearly 50 percent of losses from Sept. 11 are being borne by the reinsurance industry, according to Crowley. Without access to capital from nervous reinsurers, primary insurers can ill afford to issue policies to technology manufacturers, property owners or others.

At the state level, insurance firms were seeking permission from agencies to waive coverage for damages resulting from terrorist attacks. In states where they were denied such waivers, terrorism insurance became prohibitively expensive.

Congress responded to the situation with two pieces of legislation. Last November, lawmakers passed the 2002 Terrorism Risk Insurance Act. The law mandates that insurance companies provide customers with the option of buying terrorism coverage for their property and casualty lines. Should losses from a terrorist act exceed a certain amount-a prescribed percentage of the insurer's total business-the federal government will help pick up the tab. The law expires in three years. It's intended to provide primary insurers with financial stability until reinsurers come back into the market.

The other action has a more direct effect on contractors and federal agencies. In the legislation creating the Homeland Security Department, also passed last November, lawmakers included the 2002 Support Anti-Terrorism by Fostering Effective Technology Act, more commonly referred to as the Safety Act. Its intention is to promote the development of anti-terrorism technology by shielding vendors from massive lawsuits. The law is the basis for the rules issued by the Homeland Security Department in July.

GETTING TO SAFETY

Even before the Safety Act was passed, several agencies, including NASA and the Defense and Health and Human Services departments, had the ability under Public Law 85-804 to indemnify contractors working in unusually hazardous situations in which commercial insurance is not available. NASA has extended such coverage to contractors working on the space shuttle program. Doing so means the government would pay any claims against the manufacturer. Industry pushed to make broader use of that protection after the attacks.

"As it turns out, the federal government was very hesitant to provide that coverage" after Sept. 11, says Raymond Biagini, a partner with the Washington law firm McKenna Long & Aldridge, who helped write portions of the Safety Act. "Government officials started seeing that they could be putting the Treasury on the hook for potential liabilities with extraordinary risks."

Lawmakers opted for capping liability under the Safety Act. Still, the president can extend indemnification authority under Public Law 85-804 to any agency through executive order. But the administration is loath to do so.

Indeed, the Postal Service ran into this very situation. The agency tried to get authority to indemnify Northrop Grumman. The Bush administration, however, had decided not to extend Public Law 85-804 to other agencies. Just the opposite, in fact. In February, President Bush issued an executive order directing agencies to pursue Safety Act coverage for their procurements as a first option. The order suggests that the administration will only extend indemnification in extreme cases, says Biagini.

Under the Safety Act, manufacturers can submit products, such as bomb detection equipment, smart cards or chemical weapons sensors, to the Homeland Security Department for approval as anti-terrorism technologies. The rule also applies to service companies, although department officials are still working on exactly what types of services would qualify. Companies applying for the seal of approval are required to get a basic level of insurance coverage. In the proposed rule, the department does not specify the amount or type of such insurance.

Department officials are working with the insurance industry to figure out what types of policies are available and how to determine the right price, says Mitnick. It's an important point, because a company's liability is capped at the level of insurance it receives. Additionally, the law prohibits suits for punitive damages in cases involving anti-terrorism technology and directs all cases involving such technology to federal court. State courts tend to be more favorable to plaintiffs in product liability suits.

Under the rule, companies can apply for two levels of protection. The most basic level, and likely to be the most widely approved, caps liability. The next level allows firms to seek outright dismissal of any charges brought against them by injured parties. This is akin to the "government contractor defense," established by the Supreme Court in 1988, which protects contractors from lawsuits as long as their products meet government design specifications. "Building in the government contractor defense was a must," Biagini says, especially since it extends to products sold to state and local governments, as well as private entities. "We wanted to make sure that contractors were protected in the commercial sector as well as the public."

The rule allows companies to apply for both designations simultaneously, and Biagini is advising his clients to do exactly that. Gaining the higher level of protection will require a more thorough review of product design and performance by Homeland Security, though.

TIMING IS EVERYTHING

How the Homeland Security Department will conduct these reviews is still an open question. Already, the department has tapped the Technical Support Working Group, an interagency organization run out of the Defense Department, to help process applications from firms. Industry and agency sources say the department will have to seek more technical expertise to actually conduct product reviews, especially for companies seeking the higher level of protection.

The Postal Service's Day says it is critical that Homeland Security gets good analyses on the front end. "Evaluating technology is going to be a big task. I have a huge stack of portfolios from companies promoting their products. But the scientific validity remains to be seen," he says. "Trying to figure out which technology holds the most promise is the tough part."

Another challenge, he adds, is balancing the desire of scientists and researchers to conduct test after test with the need to deploy the technology quickly. In the case of biohazard detection equipment, "We had to keep pushing people to get the test results," Day says. "Scientists are used to studying things for years. You need to find a middle ground. You can't rush into it, but you can't wait three to five years."

Homeland Security will have its hands full trying to educate other agencies on the ins and outs of the Safety Act. The new rules note that most often other federal agencies will be the purchasers of anti-terrorism technology. Companies might not be willing to bid on contracts from such agencies unless they have Safety Act coverage. Homeland Security officials plan to work closely with other agencies to ensure that procurements are not stymied. In fact, the department plans to host a series of workshops across the country starting this fall to educate agency officials on the new regulations, according to Homeland Security spokeswoman Michelle Petrovich.

"Contractors can now feel confident that they can protect America and not do so by risking the company's well-being," says Biagini.

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Transportation security effort called fragmented, underfunded

Matthew Weinstock — Tue, 09 Sep 2003 00:00:00 -0400

Senators from both sides of the aisle Tuesday criticized the Bush administration for not adequately funding transportation security initiatives and for not having a coordinated strategy to protect the country's transportation infrastructure from attack.

With the second anniversary of the Sept. 11 attacks approaching, the Senate Commerce, Science, and Transportation Committee peered into efforts by the administration to protect the nation's vast transportation network. Most members of the committee commended the Transportation Security Administration for its efforts to improve aviation security. But there was substantial concern that TSA and its partner agencies are not in sync when it comes to other modes of transportation.

One of the biggest problems, according to Peter Guerrero, director of physical infrastructure issues at the General Accounting Office, is that agencies are still struggling to sort out areas of overlapping jurisdiction. That is causing confusion for regulated industries and state and local governments.

"Transportation security is far too important to be placed in limbo due to needless agency turf battles," said Committee Chairman John McCain, R-Ariz.

Jeffrey Shane, undersecretary for policy at the Transportation Department, said that federal agencies are improving their coordination. He noted that Transportation's Maritime Administration has worked closely with the Coast Guard and TSA in the Homeland Security Department to evaluate security at the nation's ports and to issue grants to those most vulnerable.

Additionally, the Transportation Department has designated its Office of Intelligence and Security to act as the primary liaison with the Homeland Security Department.

Still, lawmakers expressed concern that agencies are not better aligning their resources. Sen. Fritz Hollings, D-S.C., questioned why TSA, the Coast Guard and Customs are all establishing intelligence divisions, rather than coordinating their activities.

Some of the lack of coordination stems from the fact that the agencies have differing missions, said TSA Administrator James Loy. He added that the agencies are trying to figure out how best to coordinate and share intelligence.

Democrats on the committee also blasted the administration for what they called low funding levels for homeland security. Sen. John Breaux, D-La., questioned how the administration could request $87 billion to rebuild Iraq and Afghanistan, but zero out funding for port security grants.

"This will create a huge burden on local officials," he said. Breaux urged Loy, Coast Guard Commandant Thomas Collins and Robert Bonner, chief of Homeland Security's Bureau of Customs and Border Protection, to return to their bosses and to the Office of Management and Budget and press for more money.

Guerrero agreed that Congress and the administration must take a hard look at funding levels, saying that it is the "most pressing issue" in improving security. The total cost of improving transportation security-which includes aviation, maritime transportation, rail, pipelines, and highways-are unknown, according to Guerrero. Yet every time the administration raises the security threat level, the private sector and local governments are forced to divert resources from such things as maintenance and safety, Guerrero added.

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Air marshals depart TSA, join law enforcement bureau

Matthew Weinstock and Jason Peckenpaugh — Tue, 02 Sep 2003 00:00:00 -0400

More than 5,000 law enforcement officials will soon be trained to serve as federal air marshals under a major reorganization at the Homeland Security Department.

Homeland Security Secretary Tom Ridge announced Tuesday that the federal air marshals program will move from the Transportation Security Administration to the Bureau of Immigration and Customs Enforcement (ICE).

"ICE offers the air marshal service multiple investigative resources, such as additional access to intelligence, better coordination with other law enforcement agencies, and broader training opportunities," said Michael Garcia, acting assistant secretary for the bureau.

The move had been anticipated for several weeks. Ridge wanted to consolidate law enforcement and investigative agencies into one unit. Some agency insiders also see it as a way to save the air marshals from an uncertain future at the budget-strapped TSA. Earlier this summer, reports leaked that TSA was considering scaling back the air marshals program because of budget constraints. That news caused an outcry on Capitol Hill and elsewhere within the department.

Sources within the department said that the air marshals themselves were pushing to be transferred. One principal reason is professional development. Many marshals want the opportunity to cross-train with other law enforcement agencies. They want the flexibility to be detailed to other missions, not just fly on planes. TSA will not reveal how many marshals are currently in the program.

On Tuesday, Ridge said ICE personnel would be trained as air marshals, adding more than 5,000 new officers to the marshal's ranks. "With this single move, we will be able to deploy more than 5,000 additional armed federal law enforcement agents to the skies when needed," he said in a speech to the American Enterprise Institute, a Washington think-tank.

The reorganization gives TSA the ability to add air marshals during peak travel times or as security intelligence dictates, according to agency spokesman Brian Turmail.

The air marshals will become another branch in ICE, according to Garrison Courtney, an agency spokesman. Officials have not decided which ICE personnel will undergo air marshal training, he said. Courtney minimized the training differences between marshals and ICE agents, noting that many marshals came from Customs and the Immigration and Naturalization Service, and that some ICE agents served as marshals after Sept. 11. The air marshal program was part of the Customs Service in the 1970's.

"We do have a significant number of ICE agents who could act as air marshals if they need to," he said.

The reorganization means ICE now has three law enforcement corps, each with their own training background and pay system. Customs agents are typically paid at the GS-13 level, while INS investigators are classified at the GS-12 level. Air marshals are paid under three broad pay bands, and can earn up to $80,800 in base pay, roughly equivalent to a GS-13, but about $11,000 more than an INS agent typically can make.

"We have to look at pay equality for all the parties," said Courtney. "That's one of the things they're already looking at it in DHS."

Some veteran INS agents were less than thrilled about the reorganization. "Nobody here is too happy about it because it means basically everybody will be a GS-13 except us," said one INS investigator. Agents also wondered how the agency would juggle air marshal deployments with its current investigative work.

TSA Administrator James Loy had fought to keep the marshals within the agency.

"I believe that they are [an] integral part of the system we have built for aviation security," Loy said in an interview with Government Executive last week, before the final decision was made. "I believe we optimize the efficiency and effectiveness of that system by holding onto all of the parts."

Nonetheless, Loy said he understands and appreciates the secretary's desire to consolidate like entities under one roof. He said TSA will become a "demanding customer" of the bureau.

"I want the ability to shift air marshals from flight A to flight B, if that is the right thing to do," Loy said. "I want the ability to influence their schedule."

Most of those details are still being worked out, according to TSA's Turmail. Courtney, the ICE spokesman, said the marshals would report directly to Garcia. The transfer will take place in October, at the beginning of the fiscal year.

In his speech, Ridge also announced that the Bureau of Customs and Border Protection will cross-train its inspection corps, so lead inspectors at ports of entry can handle the basic tasks of INS and Customs inspectors. The agency will still have inspectors who specialize in agriculture inspection, according to William Anthony, a spokesman for Customs and Border Protection. "If there is an agriculture issue, it'll be sent to them," he said.

Ridge said the department would work to present a "single face at the border" in January. But Colleen Kelley, president of the National Treasury Employees Union, questioned whether the move improves border operations. "It's unclear to me how having one person perform the jobs of three increases their abilities," she said Tuesday.

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Senator expands probe into TSP contract

Matthew Weinstock — Fri, 29 Aug 2003 00:00:00 -0400

Hoping for a complete picture of a failed contract to upgrade the Thrift Savings Plan's computer system, Sen. Susan Collins, R-Maine, Thursday expanded an inquiry into the matter to include the fired company, asking executives to turn over all internal documents relating to the project.

In a letter to Alfred Mockett, chairman and CEO of American Management Systems Inc., Collins requested a number of documents, including records detailing the qualifications of AMS staff assigned to the project; all communications between AMS staff and the former executive director of the Federal Retirement Thrift Investment Board; and records discussing project delays.

Collins, chair of the Senate Governmental Affairs Committee, sent a similar request to the TSP board on Aug. 20. The board is complying with the request and has arranged a meeting with committee staff for next week.

"There were some questions that we felt could be better answered by AMS," said committee spokeswoman Andrea Hofelich.

Collins' goal with the probe is to figure out what went wrong with the contract and determine if there are ways to avoid similar failures in the future, Hofelich added. The senator wants the AMS documents by Sept. 5. There's been no decision yet as to whether the committee will hold a hearing or publish a final report on its findings.

AMS was hired in 1997 to modernize the TSP computer system and give federal employees greater flexibility in managing their retirement accounts. The $30 million project was supposed to take three years to complete. Deadlines were continually missed, however, and the work ran on for four years. Finally, in July 2001, the board fired AMS and sued the company for $350 million in damages. AMS filed a breach of contract suit. The two sides recently reached an out-of-court settlement in which TSP participants paid $36 million for the failed contract. That's in addition to the $33 million paid to the contractor that took over after AMS was fired.

AMS officials declined to comment for this story saying they had not yet reviewed Collins' letter.

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TSA, pilots wage war of words over gun program

Matthew Weinstock — Tue, 26 Aug 2003 00:00:00 -0400

TSA's week-long training classes are currently booked through September, according to John Moran, deputy assistant administrator for law enforcement and security training at the agency. Each class contains almost 50 pilots. The agency is now filling out rosters for October. Moran said the agency may increase the number of classes starting in January.

The program has a $25 million budget for fiscal 2004. That's up from $8 million for the second half of this fiscal year. A test class was trained in April and the program officially launched July 20.

"The great majority of those who have volunteered will be trained within a year," Moran said during a Tuesday news conference at Ronald Reagan Washington National Airport. He predicted that there will be "thousands" of armed pilots by this time next year.

Although TSA won't reveal how many pilots have been trained to date, the number would be close to 200 if the agency has been training approximately 48 pilots per week since mid-July. Pilots organizations say the number should be much higher and accuse TSA of poorly designing the program.

About 40,000 pilots are interested in being trained to carry firearms, according to Capt. Bob Lambert, president of the Airline Pilots Security Alliance. But TSA has discouraged pilots from entering the program by requiring detailed psychological examinations and conducting extensive background checks, Lambert said during a separate news conference, also held at National Airport.

"We need to end the harassment of these pilots," Lambert said, noting that pilots already go through psychological exams as a routine part of their jobs.

Moran, however, said the psychological examination to become a so-called "flight deck officer" is similar to one given to other law enforcement officers. The additional level of review is necessary because of the enhanced responsibility that goes along with carrying a gun in a cockpit, he said.

About 6 percent of pilots who apply for the program don't get in, according to Moran. Two percent don't meet the qualifications spelled out in the law that established the program; 3 percent fail the psychological examination; and 1 percent have problems with the background check.

Moran also questioned the validity of the Airline Pilots Security Alliance's claim that 40,000 pilots are ready to volunteer. TSA data suggests a much lower level of response, he said.

A flight deck officer appearing with Moran said part of the problem is that the program is only a few months old. (The pilot, who TSA requested remain anonymous for security reasons, went through the initial training in April.) Pilots are still figuring out if they want to volunteer, and interested pilots must coordinate the training with their flying schedules. The flight deck officer said that after signing up for the class, he received his flight schedule and found there was a conflict. He was forced to miss two trips-and give up his pay for those days-to complete the training.

APSA and other pilot organizations argue that TSA has been opposed to the guns-in-cockpit program from the beginning. Former TSA Administrator John Magaw recently told Government Executive, "I researched it and said there shouldn't be firearms in the cockpit. If you are going to make a judgment with that gun, you have to carry it with you all the time so it becomes part of you."

TSA requires that pilots carry their guns in a lockbox.

"We are taking time to do the training and they are treating us like children," Lambert said.

The pilot groups also called on Congress to quickly pass legislation allowing pilots of cargo planes to carry guns. Such a provision was stripped out of the original legislation allowing armed pilots.

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Navy cancels purchase cards amid hacker attack

Matthew Weinstock — Thu, 21 Aug 2003 00:00:00 -0400

The Navy cancelled all of its purchase cards Thursday after learning that hackers broke into its system, gaining access to 13,000 accounts, according to a news release issued by the Defense Department Purchase Card Program Management Office. As a result, the Navy put a stop on all 22,000 card accounts.

"A DoD team is on site to determine how this happened and what needs to be done to fix the breach," the release stated. "A Defense Criminal Investigative team is also on site to pursue the investigation."

Navy officials are working with its card issuer, Citibank, to open new accounts as quickly as possible. It's not clear yet if any cards have been used for fraudulent purchases.

"Vendors who accept the purchase card and do business with the Navy should be aware that all card accounts have been cancelled and that Citibank is working quickly to re-establish new accounts and cards. In the meantime, emergency purchases are being handled on a case-by-case basis to fully support Navy requirements," DoD said in the statement.

Vulnerabilities in the Navy's purchase card program are not new. Last year, the General Accounting Office found that "a weak overall control environment and breakdowns in key internal controls leave the Navy vulnerable to potentially fraudulent, improper, and abusive purchases" (GAO-02-1041).

GAO noted, however, that the Navy took some steps to improve the situation, including reducing the number of cards issued from 59,000 in 2001 to roughly 22,000 today. Still, GAO found that some Navy personnel were making personal purchases with their cards. GAO urged the service to more closely scrutinize how and to whom cards are issued. The agency watchdog also suggested that the Navy improve training for purchase cardholders.

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Senator launches probe into TSP contract

Matthew Weinstock — Wed, 20 Aug 2003 00:00:00 -0400

Concerned that millions of taxpayer and federal employee dollars were wasted, Sen. Susan Collins, R-Maine, Wednesday launched an inquiry into a failed contract to modernize the Thrift Savings Plan's computer system.

Collins, who chairs the Senate Governmental Affairs Committee, requested that the Federal Retirement Thrift Investment Board, which oversees the 401k-style plan, turn over all documents pertaining to a contract with Fairfax, Va.-based American Management Systems Inc. The senator asked for the documents by Aug. 29. Committee staff will wait to review those documents before determining if they will approach AMS with a similar request.

There's been no decision about whether the committee will hold a hearing on the matter. Collins is most interested in finding out what exactly caused the contract to drag on for four years, grow to three times the original cost and produce zero results, according to committee spokeswoman Andrea Hofelich.

"It is outrageous that a federal agency spent tens of millions of dollars in retirement savings on a system that it couldn't even use," said Collins. "That's an example of wasteful spending that should never be repeated."

"We will respond to the committee's request," said board spokesman Tom Trabucco.

AMS was hired in 1997 to modernize the TSP computer system and give federal employees greater flexibility in managing their retirement accounts. The $30 million project was supposed to be completed by May 2000. Deadlines were continually missed, however, and the work ran on for four years. Finally, in July 2001, the board fired AMS and sued the company for $350 million in damages. AMS filed a breach of contract suit. The two sides recently reached an out-of-court settlement in which TSP participants paid $36 million for the failed contract. That's in addition to the $33 million paid to the contractor that took over after AMS was fired.

Both sides blame the other for the failed contract. AMS officials claim that the board repeatedly changed the parameters of the contract. In its court filing two years ago, the company argued, "The board's failure to come to closure on its requirements and the resulting design created a 'moving target,' which in turn caused project schedule delays."

For its part, the board claimed that AMS misrepresented itself during the bidding process. Board officials were confident that AMS would be able to finish the job in the time allotted and on budget.

When he terminated the contract, the executive director of the board at the time, Roger Mehle, said, "It has become evident … that AMS is incapable of fulfilling its commitments. This appears to be a very different company from the one with which we contracted in 1997."

Collins' inquiry comes on the heels of a July House Government Reform Committee hearing which looked into problems employees are having accessing the new computer system. During the hearing, TSP Board Chairman Andrew Saul pledged to quickly iron out the wrinkles and get the system on track.

On Monday, TSP Board officials said they had made significant progress over the past several weeks in getting the system running.

Collins' inquiry will focus specifically on the contracting problems that plagued the AMS contract.

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Knocking at the Door

Matthew Weinstock — Fri, 15 Aug 2003 00:00:00 -0400

Small businesses take aim at agency efforts to bundle federal contracts into mega-deals.

t's not easy being green. At least that's what several small business owners would have you believe. They are complaining about a solicitation for office supplies working its way through the Environmental Protection Agency. The blanket purchase agreement would require vendors to guarantee two-day delivery of supplies to nearly 2,000 purchase card holders at 70 EPA offices nationwide. It emphasizes the use of environmentally friendly products-not a big surprise given EPA's mission.

The size of the contract is daunting to some small firms. They'd much prefer a series of regional contracts. There is also considerable concern about some of the finer details. For instance, the solicitation calls on the vendor to institute a toner cartridge and battery recycling program at every delivery location. The company would have to educate EPA employees about the recycling program as well.

Such requirements are beyond what most small office supply firms generally provide, according to several small business advocates. Jack Adgate, vice president of sales for Miller's Office Products in Springfield, Va., cited the contract during a recent Capitol Hill press conference as an example of how agencies are locking small companies out of the federal marketplace. By bundling multiple requirements into one mega-package, agencies are limiting the contractor base to large firms, small businesses say. Adgate and his peers argue that some of the requirements are linked unnecessarily. For instance, they say, EPA could issue a separate contract for the recycling program. It would be easier for firms such as Miller's to make a competitive bid on a simple office supply deal.

EPA officials declined to comment on the details of the solicitation. However, an official says that the agency is looking at the requirements to try to figure out whether there is a way to address some of companies' concerns.

Small technology vendors also are unhappy with the current business climate, claiming that they too are being unfairly shunted from the lucrative federal marketplace. Jorge Lozano, CEO and president of Condortech Services, says his 18-person firm is often on the outside looking in. Specializing in facility security technology, the company offers an array of services and products, not the least of which is integrating security systems-everything from card access keys to surveillance cameras and security alarms-into one network. Despite doing more than half of his business with government agencies, Lozano says doors are starting to close.

In particular, he notes a May 2000 contract from the General Services Administration for smart cards. Resembling credit cards, smart cards carry small chips that can hold personal identification data. They can be used to limit access to buildings and computers, or to store vital information. The GSA contract to develop smart cards for agencies went to five large vendors, including KPMG Consulting, Electronic Data Systems and Litton/PRC Inc. Agencies are now integrating smart card technology into their overall security efforts. Lozano argues that some of the behind-the-scenes technical work, such as networking various systems, could be handled by small firms with special expertise. Instead, the big companies won the work.

"As integrators, we could have provided the infrastructure," Lozano says from his cramped office in Northern Virginia. "We could have built the physical security component into the system. But we weren't chosen to do that. The contract bundled those requirements off to the large firms."

GSA officials declined to comment on the bundling issue.

The anecdotes and complaints are endless; the refrain is always the same-contract bundling is driving small businesses out of the federal marketplace. Firms can't be expected to compete to be prime contractors on mega-packages. Small firms don't like being relegated to subcontractor status when they are perfectly capable of performing the work agencies are putting out for bid.

But bundled contracts also have benefits for the government. Combining product purchases into one big contract helps leverage the buying power of an agency or group of agencies, which can lead to better prices. Merging multiple service awards into a single contract is also more efficient and easier for a shrinking acquisition workforce to manage.

Parties on both sides of the debate are armed with data to back up their positions. Small business advocates are quick to point out that the government continues to miss its mark of awarding 23 percent of prime contract dollars to small businesses-albeit by only a fraction of a percent in fiscal 2002. At the same time, they note that the number of bundled contracts is on the rise.

On the other hand, medium and large businesses, as well as some procurement officials at various agencies, say that the total dollar awards going to small businesses remained fairly stable during the past dec-ade. Awards to small businesses increased by 12 percent from fiscal 2001 to fiscal 2002, points out Steven Schooner, a professor at The George Washington University Law School and a skeptic of the anti-bundling movement.

All of the players in the debate are using the same data-information agencies report to the Federal Procurement Data Center. The problem is, the data is inconsistent and incomplete. Trying to get a finger on exactly how big of a problem contract bundling poses is difficult, to say the least.

Yet even without reliable data, the Bush administration is pushing an agenda that will force greater scrutiny of contract bundling.

"You have to tread carefully with the use of statistics in this area," says Angela Styles, head of procurement policy for the Bush administration. "That is what we are trying to get a handle on.

"We know some things for sure," Styles continues. "We know that there is a fair amount of concern in the small business community. We know that we have pushed agencies to consolidate contracts. We know that we have cut our acquisition workforce. It's clear that there are larger contracts that are bundled and that small business can't bid on them."

CRUNCHING NUMBERS

The most comprehensive study on contract bundling to date was produced last October by Eagle Eye Publishing Inc., a Va.-based company that tracks procurement trends. Looking at government data from fiscal 1992 to 2001, Eagle Eye found that the total number of bundled contracts grew by nearly 20 percent. In fiscal 2001, bundled contracts accounted for 16.4 percent of prime contracts and 51 percent of dollars awarded.

"The number and size of bundled contracts issued by federal agencies has reached record levels, and small businesses are receiving disproportionately small shares of the work on bundled contracts," the report concludes.

During the nine-year period, Eagle Eye, which also produces the data for the contracting charts in this issue of Government Executive, found that small firms received 61 percent of all federal prime contracts, compared with 27 percent for large companies. But in the area of bundled contracts, the percentage won by small firms was only 47 percent, compared with 37 percent for large companies. And the bundled contracts won by small businesses typically are less lucrative. Small firms garnered 13 percent of total dollars awarded under bundled contracts, while large companies won 37 percent.

Eagle Eye performed the study under a contract with the Small Business Administration's Office of Advocacy, whose role is to advance the interests of small firms. Additionally, the analysis goes beyond the statutory definition of contract bundling. The 1997 Small Business Reauthorization Act defines bundling as consolidating two or more procurement requirements, previously provided under small contracts, into a single contract "that is likely to be unsuitable for award to a small business" due to:

The diversity, size or specialized nature of the requirements.
The aggregate dollar value of the award.
The geographic dispersion of the contract sites.
Any combination of the three.

Eagle Eye expanded the definition to include what Paul Murphy, president of the firm, calls "accretive bundling." It's the practice of adding dissimilar tasks to exist-ing contracts and is largely seen in Govern- mentwide Acquisition Contracts (GWACs). But one procurement official, speaking on condition of anonymity, says some agencies also allow deals with small businesses to expire and then add those requirements to existing contracts with larger firms.

Using Eagle Eye's definition, 54 percent of procurement dollars in fiscal 2002 were awarded on bundled contracts. Under the official classification, less than 1 percent of prime contracting dollars were bundled.

Most procurement experts agree that the report comes closer to capturing the current state of affairs than anything else in the field. The General Accounting Office has not taken a stab at synthesizing the data. And Styles acknowledges that the Office of Federal Procurement Policy lacks sufficient data to present an accurate picture.

She says better information is on the way. Last October, the Bush administration issued a policy directive on contract bundling. Among other things, it requires agencies to file quarterly reports with OFPP on the number of bundled contracts reviewed and actions taken to ensure small businesses are getting their fair share of the business.

The first reports, submitted in January, were largely informational, discussing the types of policies and guidance agencies have issued, says Styles. OFPP is starting to demand more quantitative analysis. She expects reports in the coming months to be more detailed and provide a comprehensive view of what agencies are doing in the contracting arena.

WHAT'S THE PROBLEM?

Bundling is not a new phenomenon. It's been occurring across federal agencies for years. The issue has percolated to high levels of public policy due to successful lobbying by small business groups. It's also been on President Bush's radar screen for some time. As a candidate in 2000, Bush made reference to contract bundling and said his administration would seek to limit the practice.

For now, agencies are getting a mixed message on bundling. During the last round of acquisition reform in the 1990s, agencies were encouraged to consolidate contracts and were told to use governmentwide contracts. At the same time, the size of the federal acquisition workforce was cut by 5 percent from 1997 to 2001, according to GAO. Managing numerous small contracts is more labor-intensive than dealing with a few bundled ones.

Not surprisingly, the Defense Department is the biggest bundler. According to the Eagle Eye data, Defense accounted for 65 percent of all bundling during the nine-year period studied. That's about 80 percent of all bundled dollars.

Defense officials admit that they are combining more contracts, but they don't think their actions have been as detrimental to small business as has been reported. In fact, the number of small businesses contracting with the department has grown more rapidly than the number of large firms during the past decade, according to Tim Foreman, assistant director for small business prime contracting policy at Defense.

In 1991, 20,781 small companies worked as Defense contractors. By 2002, the number had grown to almost 34,000-an increase of 63 percent. During the same period, the number of large companies working with the department went from 4,899 to 7,137-a jump of 46 percent. Dollar awards to small firms have also climbed during the past 10 years, from $25 billion in fiscal 1991 to $33 billion in fiscal 2002. Of course, overall spending at the department increased during that same period. Defense has consistently awarded about 21 percent of prime contract dollars to small companies during the past decade.

"Have we done a perfect job? No," says Foreman. "Do we have a problem? Yes. Is it as bad as everyone is saying it is? No."

Foreman acknowledges that Defense does not track orders placed against GWACs or multiagency contracts. The administration is now keenly interested in that data.

Last January, the SBA proposed rules to increase the review of contract bundling. It essentially adopts many of the principles spelled out in the president's October 2002 initiative. Included in that is a requirement that orders on GWACs and other multiple award contracts be reviewed for bundling. Currently, they are not subject to such reviews. It's a loophole that needs to be addressed because of the continued growth of such acquisition vehicles, says SBA Associate Administrator Linda Williams. In 1990, agency orders against governmentwide contracts totaled roughly $21 billion. By fiscal 2001, they had jumped to $72 billion.

"We believe bundling is occurring there," Williams says. "There are a lot of tasks being placed under one order. We don't have large amounts of data on it yet. But what we do see is a significant decline in the number of new contracts coming out and a rise in GWAC orders."

The other problem with governmentwide contracts is that they allow large firms to masquerade as small businesses. A company's size is set once it makes an initial offer, but many of the contracts extend 20 years. During that time, a small firm can grow into a large company.

To resolve the dilemma, the Office of Management and Budget last February instructed the four executive agents for GWAC contracts-GSA, the Commerce Department, NASA and the National Institutes of Health-to require annual certifications of small businesses. Another SBA proposed rule would formalize annual certification. Businesses, however, have complained that such a requirement would be burdensome. Styles says that OMB is fielding suggestions on how to improve the process.

NO GOING BACK

The SBA's proposed rule on contract bundling would place a host of other mandates on agencies. Among the more significant is a requirement that when bundled packages are put in place, agencies take measures to ensure that there is sufficient opportunity for small businesses to participate as subcontractors.

That is not enough for some members of Congress. Rep. Nydia Velazquez, D-N.Y., ranking member of the House Small Business Committee and a staunch opponent of contract consolidation, wants to give the SBA authority to review all bundled contracts and break them apart if necessary. Her proposal does not specify whether the review would take place on contracts above a certain dollar threshold, or would apply only to specific types of contracts. The SBA suggests that reviews take place for contracts exceeding $7 million at Defense; $5 million at NASA, the Energy Department and the General Services Administration; and $2 million for all other agencies.

Styles says that some level of additional review of contracts is on the way, but says OFPP will not ask agencies to break apart old prime contracts to provide opportunities for small firms.

"A lot of small businesses don't want to be prime contractors," she says. "It's not politically correct to say, but subcontracting is money too, and it's good for small businesses."

Ultimately, the government has to come up with a better set of goals and measures for small business contracting, Styles adds. To that end, she has pulled together a task force of federal procurement officers to explore how else agencies can measure success.

"We have this whole socioeconomic program built around a percentage of dollars going to small business," Styles says. "That is really not a results-oriented look. It is not about dollars going to small businesses. What are we trying to achieve? Are we trying to help the economy? What's the measure there? Are we trying to create jobs? What's the metric there? Are we trying to help small businesses get larger? What's the metric there? We have gone on too long looking at dollars going to small business."

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Winning Acquisition

Matthew Weinstock — Fri, 15 Aug 2003 00:00:00 -0400

The creative acquisition strategies by the winners of this year's Business Solutions in the Public Interest Awards were essential to the war in Iraq and the fight against terrorism.

t. Col. Christopher Jella's surveillance flights were instrumental in the U.S. military's swift and decisive victory in Iraq earlier this year. The images he captured provided critical targeting information for his Air Force colleagues. Yet Jella never once saw the deserts of Iraq or buildings in Baghdad with his own eyes. He flew all of his missions from California.

Jella piloted a Global Hawk, one of the unmanned aerial vehicles that quickly became a key success story of Operation Iraqi Freedom. Although the remote-controlled aircraft were used for only 3 percent of surveillance sorties and 5 percent of high-altitude missions, they collected information for nearly 55 percent of air offensive targets.

But if not for an innovative acquisition strategy, Global Hawk would most likely still be grounded, waiting for the red tape to be cut before it could even get into production. By abandoning its ordinary procurement philosophy, the Air Force reduced acquisition time from the normal 10-plus years to roughly three years.

"What they were able to do in terms of speed, getting the product to market so quickly, that is pretty good," says Stephen Busch, senior executive program analyst at Kepler Research Inc. of McLean, Va. "It's one thing to have a product that is flying [during tests]. It's another to have it operational."

Inventive thinking garnered the Global Hawk team one of this year's Business Solutions in the Public Interest awards. The other recipients are In-Q-Tel, a venture capital fund at the Central Intelligence Agency; and the Joint Air Force Defense Systems Integrator, a Defense Department project to acquire information technology.

This is the fourth year for the awards, which are sponsored by Government Executive, the Council for Excellence in Government and the Office of Federal Procurement Policy. This year, after more than 70 applications were narrowed down to 15 finalists, a panel of procurement experts from government and the private sector selected the three winners. While vastly different, they have one element in common-the use of a creative acquisition strategy to help achieve a critical agency mission.

SWIFT AND VERSATILE

Global Hawk, Air Force

Recognizing that it can take several years to get a weapons system from development to deployment, the Air Force's Global Hawk team looked for a way to speed up the acquisition process. Defense first awarded Teledyne Ryan Aeronautical the Global Hawk contract in May 1995. Northrop Grumman acquired Teledyne in 1999 and took over as the prime contractor. The aircraft took its first test flights in February 1998. Despite some technological glitches, the Air Force was determined to develop an arsenal of unmanned aerial surveillance vehicles.

Air Force officials were aware, however, that it might take years to get the vehicle equipped with 100 percent of their desired features. So they opted for a highly flexible approach, using a "spiral development technique." Under this approach, warfighters would get a stripped-down version of the aircraft as soon as it was ready. As the program moved forward, and more funding became available, new capabilities would be added. The goal was twofold: make the plane as versatile as possible and get it to the Air Force quickly.

"Buying technology still in development can be taboo, but it's one of the only ways to get technology to the warfighter," Lt. Dawson Oslund, chief of the Global Hawk product team, told the Business Solutions in the Public Interest judges in June.

As a pilot, Jella told the judges he would like to see more capabilities on the plane, but he'll take what he can get for now. Spiral development allows the pilots to provide feedback on the current aircraft and have an impact on future changes. Still, there is a danger with the approach, says Busch, one of this year's judges. "If I'm a budget person looking for money and I see that someone on the operational side says they are making do with 70 percent of the product or service, how committed will the department be to getting it up to 100 percent?"

INVESTING IN INTELLIGENCE

In-Q-Tel, CIA

Having the CIA knock on your door probably does not rank high on most people's wish lists. Unless, of course, the agents are armed with a briefcase full of cash and an offer to invest in your fledgling technology company.

That's just what the agency's In-Q-Tel outfit does. It seeks out commercial technologies that could be applicable to the agency's mission. Functioning like a venture capital fund, In-Q-Tel puts money into firms that have innovative product ideas.

The idea for the organization emerged in the mid-1990s, when the CIA, having paved the way for a number of technological innovations, suddenly found itself being outspent by the private sector on research and development. "The CIA needed a way to leverage its buying power," Peter Poulos, outreach and business development officer at In-Q-Tel, told the judging panel. "We wanted to access new technology before it was on the shelf. Otherwise, we would be competing with banks and other industries."

When looking at companies to invest in, In-Q-Tel, which has offices in Arlington, Va., and Menlo Park, Calif., focuses on technologies that could be used both by the private sector and government agencies. That approach allows In-Q-Tel to come in as a minor investor, while the private sector bears most of the financial burden.

The organization is particularly interested in data collection, knowledge management, and security and privacy. It does not limit investments to startup companies. Compared with most venture capital firms, In-Q-Tel's investments are fairly modest, ranging from $500,000 to $3 million. And, unlike other firms, the organization does not equate success with return on investment. Rather, an investment is deemed successful if the CIA can actually use the technology, according to Poulos.

Since its creation in 1999, In-Q-Tel has reviewed the business plans of more than 3,000 technology companies. Roughly 75 percent of them have never done business with the federal government. The organization has invested in 40-plus firms, says Poulos. Some of the technology In-Q-Tel has been able to foster includes software that helps track the movement and work of people and organizations, and programs that collect and analyze information in various languages.

"It's a neat idea to have the government function like a venture capitalist," says Allan Burman, former administrator of the Office of Federal Procurement Policy and one of this year's judges. "[The Defense Advanced Research Projects Agency] has been doing this for years, but they are looking at basic research that may in the long run have some application. The CIA is looking at applied research, with a much closer and tighter focus."

AIDING AIR ASSESSMENTS

Air Defense System Integrator, Air Force

Look through the Defense Department's budget documents and you won't find a reference to the Air Defense System Integrator Joint Working Group. You won't find a program description. You won't even find a line item. For all intents and purposes, the program doesn't exist. Actually, as recently as 1999, the initiative was scheduled for termination.

"Back in the day, ADSI was the redheaded stepchild," Lt. John McAfee, the Air Force manager in charge of ADSI, bluntly told the judges.

At the most fundamental level, ADSI is an information-sharing system. It captures and processes data from radars, satellites and other intelligence systems to give users a real-time assessment of air operations. That means users can see how many planes are in the air and where they are or where certain satellites are. In a battle, ADSI is vital to keeping planes from being shot down by friendly fire.

For years, each of the military services managed their own ADSI systems, which were developed by Austin, Texas-based Advanced Programming Concepts Inc. "The Army would say it needed an ADSI to tie into its radar," McAfee explains. "So, they would contact APC, and the company would develop it and put it into the Army's system."

That system proved extremely inefficient. It resulted in multiple software solutions that were unable to communicate with each other. These and other headaches led Defense officials to put ADSI on the chopping block. But Air Force officials still believed in the system. They teamed up with colleagues from the Army, Navy and Joint Chiefs of Staff to draft an agreement, which put the ADSI under control of a joint working group. No single service would have the lead or be forced to carry the program's continued development on its budget. Rather, they would work as a team to continually upgrade their ADSI capabilities.

Although the Air Force, through McAfee, generally takes the lead on managing ADSI, all the partners share in its development. For instance, during the war in Iraq, the Marines needed to add a function to the software that linked with their radars. Once the program was developed, tested and implemented, it was shared with the other services. In the old days, the Army and Air Force would have been forced to request and pay for their own software upgrades.

"We then got a firm fixed price from the contractor, and it was done," McAfee explains. "The taxpayer is only being charged once."

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Postal Service advances pay-for-performance program

Matthew Weinstock — Thu, 14 Aug 2003 00:00:00 -0400

After four months of negotiations, the Postal Service and the organizations that represent its managers agreed in late July on a new pay-for-performance structure for postmasters and supervisors. Now the hard part begins-putting it in place.

Under the plan, raises for supervisors and managers will be based on three levels of criteria-corporate performance goals, facility goals and individual goals. The national and facility goals count for 35 percent of a person's raise; individual goals account for 30 percent.

The program will be launched in October, but the first round of bonuses won't come until January 2005, as first reported in the Federal Times. Raises under the program will likely range from 2.5 percent to 12 percent. Vincent Palladino, president of the National Association of Postal Supervisors, expects that most supervisors will see increases of between 4 percent and 6 percent. Nearly 80,000 managers and supervisors are covered by the plan. It does not cover craft employees.

The organizations representing managers, while optimistic about the new plan, are also closely watching how the measurement system is put in place.

"It's not going to be an easy task," said Palladino. "But I think we can get some agreement and get it put in place by October."

The intent is to ensure that each layer of goals is linked to the other, according to Paul Weatherhead, manager of pay programs at the Postal Service. Some of the measures at the corporate level include on-time delivery, productivity, consumer survey scores, reducing worker injury and illness rates and improving scores on employee satisfaction surveys. At the facility level, some of the measures include revenue for retail operations, reducing workers' compensation costs, and reducing grievances. Individual goals are still being negotiated with the management organizations.

But one of the difficulties the Postal Service faces is that some of the areas, particularly operational tasks at the facility level, have never been measured before, said Weatherhead. That has caused some concern that measures will not be totally accurate. Weatherhead said the agency will try to address those kinks as they surface. What's most important, he added, is to look at the overall intent of the program, get valid measures and improve performance.

The new system replaces the highly controversial Economic Value Added program, which the Postal Service ended last July. Created in 1996, the EVA program was designed to reward managers for increasing "economic value" and achieving certain strategic goals. Few understood how the program really worked, though, and it was often criticized for paying out bonuses at a time when the agency was losing money and raising rates.

The new plan-dubbed the National Performance Assessment-is a major improvement, said Palladino.

"This gives us a chance to make more money if we do things right, but it also ensures that we are all on the same page," he said. "We hope it will result in less micromanagement too."

Eventually, the agency hopes to create an online system where managers can track their performance on a regular basis, Weatherhead said.

The plan is consistent with recommendations made last month by the President's Commission on U.S. Postal Service. The nine-member panel suggested that the agency adopt a pay-for-performance plan for all employees. Union organizations, however, oppose such an idea. In fact, William Burrus, president of the American Postal Workers Union, the largest employee organization, recently told GovExec.com that he would fight to make sure such a proposal never sees "the light of day."

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TSA prepares to test revamped passenger identification system

Matthew Weinstock — Thu, 31 Jul 2003 00:00:00 -0400

But significant hurdles remain. Privacy advocates say the system is too invasive and could potentially threaten civil liberties. Some members of Congress have hinted they may try to hold up funding for the effort.

The highly controversial Computer Assisted Passenger Prescreening System, commonly referred to as CAPPS II, is designed to flag suspected terrorists or other dangerous passengers before they board a plane. CAPPS II, announced in January, is intended to replace an existing program that airlines created in 1996.

After receiving more than 200 comments about its initial CAPPS II proposal, TSA released an interim final rule on the program Thursday. The revised proposal makes significant modifications to the original, including limiting the amount of time the agency will keep files on passengers. Originally, TSA planned to keep such information for 50 years. Under the interim rule, the data will only be held for a few days after a flight.

Additionally, TSA appears to have backed off a proposal to tap into a broad array of databases-including commercial sources, such as banks and credit reporting services-for information about travelers. The new rule says the agency will limit its data collection to the passenger's name, address, telephone number and date of birth. TSA says it will not ask commercial data providers for anything other than an "authentication score and code indicating a confidence level in that passenger's identity."

Still, under the rule, TSA will not divulge exactly where the information it gathers on passengers comes from. That raises red flags for privacy advocates such as David Sobel, general counsel at the Electronic Privacy Information Center in Washington.

"We think this system should be as transparent as possible," he said. "Public oversight and accountability is very important. This program can't be shrouded."

Sobel also raised concerns that the rule allows TSA to extend its reach into general police work. Under the rule, TSA will notify law enforcement authorities of any passenger with an "outstanding state or federal arrest warrant for a crime of violence."

TSA officials did not respond to calls for comment.

Reflecting the growing tension in the agency between its security mission and maintaining customer service for travelers, TSA Administrator James Loy said in a statement that CAPPS II will not only help identify potentially dangerous passengers, but also "be a valuable tool in holding down passenger wait times by reducing the number of people who undergo secondary screening or who are misidentified as potential terrorists." Lockheed Martin won the $12.8 million contract to build CAPPS II earlier this year.

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Terrorism alert issued to airlines

Matthew Weinstock — Tue, 29 Jul 2003 00:00:00 -0400

Fearing that al Qaeda may soon strike again, the Homeland Security Department has warned commercial airlines carriers to be on alert for potential hijackings. The department has not, however, increased the national threat level which remains at yellow, indicating an "elevated level" of risk.

"The U.S. intelligence community has received information that al Qaeda continues to be interested in using the commercial aviation system in the United States and abroad to further their cause," department spokesman Gordon Johndroe said in a statement. "We continue to investigate the credibility of this intelligence. The advisory was provided so that security personnel can be informed, review their procedures and take any additional steps that may be necessary."

The advisory was issued to airlines, as well as state and local authorities, but not to the nation's airport directors. Alerts to the aviation industry are sometimes split between the two segments. In contacting the airlines, the department is asking that carriers review their security procedures and increase scrutiny of passenger lists, according to industry sources. Beyond that, officials did not divulge what increased steps they are taking.

Homeland Security officials did not comment beyond Johndroe's written statement.

The advisory comes at a time when the Transportation Security Administration is in the midst of revamping its baggage and passenger screener workforce. Facing budget cuts, the agency was forced earlier this year to announce that they would lay off 6,000 full-time screeners in 2003. To fill in some security gaps, the agency plans to hire about 1,300 part-time screeners across the country.

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SEC to return part of its 2003 appropriations

Matthew Weinstock — Thu, 24 Jul 2003 00:00:00 -0400

Unable to hire hundreds of new accountants and investigators, the Securities and Exchange Commission won't spend $103 million of its fiscal 2003 budget, and will return the money to the general Treasury fund.

The SEC received a 45 percent increase in its funding in 2003-the largest increase in agency history-and most of that money was intended to hire 842 new employees. But the agency faced several hurdles in making use of the money. For starters, the budget wasn't approved until February 2003. That meant the agency spent the first five months of the fiscal year operating on its fiscal 2002 budget and couldn't develop a massive hiring strategy.

Additionally, Congress was slow to act on legislation making it easier for the agency to hire accountants, economists and investigators. President Bush signed the bill into law earlier this month. Finally, with increased scrutiny on financial reports, there is stiff competition from the private sector for top-flight accountants and economists.

Nonetheless, the agency could have found ways to utilize the funds, said Michael Clampitt, a lawyer and accountant in the agency's corporate finance division.

"How do you not spend $103 million? They could have paid existing staff for overtime to review more company filings," said Clampitt, who is also president of the National Treasury Employees Union local that represents SEC employees.

Even if it were able to bring new staff on board, the agency lacks a clear vision of how to make the best use of their talents, according to Richard Hillman, director of financial markets and community investment at the General Accounting Office.

"The SEC has embarked on an effort to allocate resources and determine its needs without the benefit of an updated strategic plan," Hillman told the House Government Reform Subcommittee on Efficiency and Financial Management at a Wednesday hearing. Rather, he said, the agency has relied on input from managers and an organizational study commissioned by former SEC Chairman Harvey Pitt.

"SEC's budget increase has heightened the need for strategic planning and the significance of the process, as SEC's spending plan will have to withstand considerable scrutiny," Hillman said, adding that the agency was unable to provide GAO with an analysis justifying budget allocations across each program area.

Strategic planning has rarely been a priority for SEC managers, according to agency sources. Rather, the four divisions operate as independent entities and budgets are based on the previous year's appropriation.

But Peter Derby, who was recently appointed to the newly created post of managing executive for operations at the agency, said that is about to change. He told the committee that the agency's next strategic plan, due out in September, will focus on improving coordination among its four divisions and better align resources with workload.

Rep. Todd Platts, R-Pa., chairman of the subcommittee, urged Derby to include GAO and industry officials in the process. He said it is critical to get input as early as possible so that all stakeholders agree on the direction in which the agency is moving.

Even without an updated strategic plan in place, Derby said changes are happening. For instance, he announced the creation of an Office of Risk Assessment to identify emerging issues and help managers reallocate resources as necessary. The office will include new staff, as well as staff from the other divisions.

Reflecting the disconnect between management and staff, Clampitt said, "That is the first I've heard of the office [the Office of Risk Assessment]. They haven't told us word one about it."

The idea for the Office of Risk Assessment comes directly from the report commissioned by Pitt. Despite being used as the foundation for other reforms taking place within the agency, Derby said there is no plan to finalize the report or to share it with the investment community, public, or members of Congress. Clampitt said neither he nor any other union officials have seen a copy of the report, which was prepared by the consulting firm McKinsey & Co.

Another recommendation being acted upon requires division directors to submit quarterly reports to Chairman William Donaldson showing how well they are meeting certain performance objectives. Derby said the intention is to hold managers more accountable.

Derby also said training opportunities for current and existing staff will be improved. Two months ago, the agency launched the SEC University, which consolidates training from the four divisions into one area and includes an array of online programs.

But Clampitt said the university won't do anything to improve agency operations.

"I've been here since 1990 and despite all of the corporate scandals, I've never once been informed of classes that would help me do my job better," he said. Rather, the classes, especially the online offerings, focus on using new software. Instead, he said the agency should send staff to seminars with industry officials and analysts to hear about trends.

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Postal Service consolidates administrative operations

Matthew Weinstock — Fri, 11 Jul 2003 00:00:00 -0400

In its ongoing effort to streamline operations, the Postal Service Friday announced plans to consolidate administrative functions in five districts. Roughly 650 employees, mainly managers, will be affected, as well as about 125 unionized workers.

The plan is to merge similar office jobs in the areas of human resources, clerical support and financial management.

"We think a lot of these functions can be absorbed into neighboring districts," said agency spokesman Gerald McKiernan.

Through the consolidation, the Long Beach, Calif., office will merge into the Los Angeles and Santa Ana office. The San Jose District will become part of the Oakland, Sacramento and Van Nuys district. In the Northeast area, Springfield, Mass., will merge with the New Hampshire office. And, in the Eastern area, Akron will be folded into operations for Cincinnati and Cleveland; while the Lancaster, Pa., office will become part of the Philadelphia and Harrisburg district.

The affected union employees will be reassigned based on their collective bargaining agreements. The supervisors can apply-and compete against each other-for positions in other districts. The Postal Service also has asked the Office of Personnel Management for authority to offer the managers early retirement. OPM recently granted such authority for employees represented by the American Postal Workers Union.

"This is just the beginning of things to come," said Vincent Palladino, president of the National Association of Postal Supervisors. "They are going to continue with these consolidations, but try to do it in a way so they can maintain operations. They'll look for ways to absorb functions into other districts."

While concerned that supervisor positions are being eliminated-largely through attrition-Palladino acknowledged that the moves are necessary.

"The Postal Service is in deep trouble," he said. "We are going to be smaller, but it is better than not being around at all."

How aggressively the Postal Service continues its consolidation campaign may depend on pending recommendations from a presidential commission charged with studying ways to reform the agency. Having studied the agency for the past six months, the commission will reveal some of its thinking at a July 16 meeting. Four commission subcommittees will share their recommendations for retooling everything from labor-management relations to closing postal facilities. A final report is due to President Bush July 31.

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Rule provides liability protection for anti-terror technologies

Matthew Weinstock — Thu, 10 Jul 2003 00:00:00 -0400

The Homeland Security Department Friday will publish a proposed rule designed to accelerate the development of anti-terrorism technologies. Mandated by the law that created the department, the rule will protect companies from massive lawsuits in the event such technologies fail to prevent another terrorist attack.

A copy of the rule began circulating around Washington on Thursday. In it, the department notes twin aims: to produce "as much certainty as possible regarding the application of the liability protections," and "provide the department with sufficient program flexibility" to address individual cases that may arise.

Under the rule, companies can apply to have certain products and services qualified as anti-terrorism technologies. Once given that stamp of approval by the Homeland Security Department, firms will have liability protection in the event that their technology fails before or during a terrorist attack-assuming the failure was not based on negligent behavior. The liability protection extends to technologies used by federal, state or local governments, as well as the private sector.

The legislation creating the department bars suits for punitive damages. Firms applying for liability protection are required to get a basic level of insurance coverage. In the draft rule, the department does not specify the amount or type of such insurance.

"The secretary does not intend to set a 'one-size-fits-all' numerical requirement regarding required insurance coverage for all technologies," the proposal states. "The secretary will not require insurance beyond the point at which the cost of coverage would 'unreasonably distort' the price of the technology."

Several sources contacted by Government Executive did not comment on the proposed rule, because they had not yet read the 54-page document. However, in interviews earlier this week many company officials said they have been waiting for months for the regulations. They were leery of bringing new products, or even existing products, to the homeland security marketplace without liability protection.

"The problem is, we are not protected," said Steve Carrier, vice president of business development and strategic planning at Northrop Grumman. "It's not only a problem at [the federal level] but in the states, too. We are being asked to bid on things and there is unlimited liability. You can't put the company at risk. That is the bottom line. "

The department said it plans to implement the rule as quickly as possible. For federal acquisitions, Homeland Security will begin taking applications immediately. For products developed for other levels of government, companies can submit applications after Sept. 1.

There is a 30-day comment period on the proposed rule. The department may issue an interim final rule after that and continue to refine the regulation.

One area that is bound to gain significant attention during the comment period is how the rule treats services. The legislation-and regulation-clearly stipulate that such items as support services are covered, in addition to products. However, the proposal is fairly ambiguous in defining "services," making it difficult for firms to know if they are eligible for coverage.

"Everybody is pleased that the rules have finally come out and the 30-day comment period shows that the department is committed to moving forward quickly," said Stan Soloway, president of the Professional Services Council, an Arlington, Va.-based contractors association. "But on the services side, they are clearly not ready to implement the rule. "

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Companies seek financial relief for increased security costs

Matthew Weinstock — Wed, 09 Jul 2003 00:00:00 -0400

In particular, firms are getting behind legislation introduced in the spring by Rep. Jerry Weller, R-Ill. The bill, H.R. 2970, would provide tax relief for companies as they make improvements to both physical and information technology security.

Companies aren't necessarily seeing costs rise in terms of new products or new spending, but rather for insurance and risk assessments. The median increase in property insurance was 28 percent from 2001 to 2002, according to a report released Wednesday by the Conference Board and ASIS International. For critical industries, such as energy and telecommunications, the increase was 37 percent. Liability insurance jumped 40 percent for critical industries during the same period.

Tax relief is the kind of short-term fix firms need until insurance premiums come under control, said Don Walker, chairman of Security Services, USA Inc.

According to the study, which polled more than 330 firms nationwide, corporations have modestly increased spending on overall security since Sept. 11, 2001. The median increase was 4 percent. The seemingly small jump could be the result of increased funding for security during the past decade, said Marene Allison, director of security for Avaya Inc., a Basking Ridge, N.J.-based communications firm. She noted that several firms boosted spending after the first attack on the World Trade Center in 1993.

Additionally, there are substantial regional differences in spending. For instance, firms in the Northeast-mainly from Boston to Washington, D.C.-increased security spending by 9 percent, compared to 3 percent in the rest of the country, the report said.

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