Contracting problems could slow the government’s planned launch a new kind of air traffic control system. The plan is for NextGen to eventually replace radars with satellites that track planes. But the Federal Aviation Administration inspector general says the agency isn’t doing what it should to award and oversee project-related contracts.

Bloomberg Government transportation policy expert Matt Zisman has taken a close look at the IG audit. He spoke to The Federal Drive with Tom Temin and Emily Kopp and offered his take on what the report could do to the $40 billion NextGen project.

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Written by Matthew Zisman/BGov

The Federal Aviation Administration’s Next Generation Air Transportation System program to overhaul the nation’s air traffic control system will result in an estimated $40 billion in spending by government and businesses on technology and equipment – much of it still in the development phase.

The FAA, which had already committed $1.56 billion to the program, in 2010 awarded six additional contracts worth as much as $6.4 billion over 10 years to companies including Boeing Co. of Chicago, General Dynamics Corp. of Falls Church, Virginia, ITT Corp. of White Plains, New York, and Booz Allen Hamilton Holding Corp. of McLean, Virginia.

The set of contracts is the biggest the agency has ever awarded and NextGen, as the program is known, will be the one of the costliest in its history. It will provide opportunities for industries ranging from information technology to aircraft manufacturers. The government anticipates paying for the systems development, software installation and ground-based equipment, while airlines are expected to cover the cost of adapting their aircraft.

The FAA estimates it will cost $40 billion to make the necessary technology upgrades and associated work process improvements for the system to become fully operational in 2025. The agency has not released a breakdown of the projected spending by government and business. It has, however, estimated the cost of upgrading all planes with just the navigational equipment at between $2.5 billion and $6.2 billion.

Once operational, NextGen should result in a more efficient use of airspace and an increase in capacity necessary to meet projected growth in passenger traffic. The FAA estimates that more than 1 billion passengers will be flying annually by 2021. The U.S. aviation system handled 791.2 million passengers and 65.9 billion revenue ton-miles of freight on nearly 10 million flights in the 12 months through March 2011.

NextGen navigation will replace ground and airplane-based radar with a global positioning system that relies on satellites. Plans call for eventually replacing thousands of radar and equipment sites around the country with about 700 ground stations, upgrading information displays in air traffic control towers, re-equipping tens of thousands of planes, and writing guidelines about how to use the new system at 137 major airports.

The technology is designed to allow controllers and pilots to track planes more accurately so they can fly closer together and have a greater choice of routes on approach, departure and en-route. The result is meant to be more planes, more flights and more passengers in the aviation system. Airlines should have lower operating costs per flight.

NextGen’s success depends not only on the installation of hardware and software. The FAA must also adopt the underlying flight operations procedures that will allow controllers and pilots to take advantage of the technology. The improved routing allowed by NextGen has shortened flight times and reduced fuel consumption in operational tests by airlines that adopted the technology early, including United Parcel Service Inc. of Atlanta and United Continental Holdings Inc. of Chicago.

The FAA’s challenge is to make sure benefits identified on a handful of flights can be extended to the 50,000 flights it manages daily. The agency’s problematic history with introducing major systems, seen most recently with its En-Route Automation Modernization, leaves airlines reluctant to invest heavily in equipment until they are confident of its benefits.

(Read the full Bloomberg Government study, “FAA’s Low Marks Cast More Doubt on ‘NextGen’: BGOV Insight”. BGov.com is a paid site and requires a subscription for access.)

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