Excising Coziness Among Regulators Requires Persistence

Fri, May 28, 2010 — David Evans


At a Congressional hearing 25 May into the government’s role in providing oversight of the oil industry, the word “cozy” was uttered by one senator. With oil giant BP appearing more inept in the face of a worsening spill in the Gulf, and with federal oversight both lagging and lax, the term is belatedly appropriate. It’s also symptomatic of a general government breakdown. The word is exactly that used by members of the House Transportation Committee some months ago to describe the relationship between the Federal Aviation Administration (FAA) and the manufacturers and operators. The FAA is ostensibly charged with performing safety oversight, but rooting out coziness is proving a challenge. (See Air Safety Journal, ‘The Associate Administrator’s Leaky Legacy’ and ‘FAA Whistleblowers Demand Safety Reform’ and ‘Agency’s Oversight of Airline Safety Under Scrutiny’)

From preventing air crashes to oil spills, to assuring the safety of the nation’s food supply and the efficacy of its pharmaceuticals, the word “cozy” seems more and more appropriate. Accommodating corporate interests has taken precedence over assuring the public interest.

This is very apparent in the Gulf oil spill. While BP is trying “top kill” to choke the flow of oil, lawmakers on Capitol Hill were wrestling with how to contain the flow of corruption over in the Interior Department, more specifically the Minerals Management Service (MMS). It is supposed to regulate oil drilling but has the attributes of a wholly owned subsidiary to the oil industry. The acronym, said Rep. Ed Markey (D-MA) “now stands for Misconduct, Mismanagement and Spills.”

BP has amassed a record of 760 accidents with safety issues. The Gulf spill marks 761. It appears that many safety devices were either not working or not available, but they drilled anyway. One is reminded of the waivers, deviations and exemptions provided by the FAA to the Minimum Equipment List (MEL) on airliners; allowing items like weather radar to be not operational for 10 days erodes margins of safety. The FAA does not limit the number of excused MEL items, so the built in redundancy could be reduced to nil.

In the BP case, a dead battery was one of many items excused as not critical to the safety of the operation. Unfortunately, the dead battery prevented automatic shutoff at the well head.

Interior Secretary Ken Salazar, vowing change, invoked the “c” word: “There was a coziness with industry where industry was running the show.”

Elizabeth Birnbaum, chief of MMS, will retire, or was forced to retire, it was announced 27 May. For being too cozy, she’s out in the cold.

There is a more formal, academic term used to describe the dilution of oversight into collusive partnership between government regulatory agencies and industry: regulatory capture. This occurs when a government entity created to act in the public interest acts in favor of the commercial interest that dominate an industry.

In a 2002 Law Review article, “On the Hijacking of Agencies (and Airplanes): The FAA, ‘Agency Capture’ and ‘Airline Security’,” Mark Niles brought the reality of the regulatory capture of the FAA into focus:

“Capture occurs when a regulatory entity – like a large corporation, or more likely an association of corporate interests – succeed, through lobbying or other influential devices, in replacing what would otherwise be the public-policy agenda of the agency with its own private and self-serving agenda. In other words, when a regulated entity succeeds at winning ‘the hearts and minds of the regulators.’ Regulation becomes ‘a method of subsidizing private interests at the expense of the public good.’ ”

One recent example of the regulatory capture in the FAA is the “Customer Service Initiative” (CSI) policy that was put in place and enforced by the previous Associate Administrator for Aviation Safety, Nicholas Sabatini. This policy was actually camouflage for allowing the regulated entities (airlines, manufacturers) to challenge and intimidate FAA field inspectors that attempted to enforce the regulations. When Congress examined this policy and its implementation during House Aviation Subcommittee hearings, Sabatini and his two FAA headquarters colleagues, James Ballough and Thomas Stuckey, were caught giving misleading testimony under oath. The case was a rare public exposure of regulatory capture in action.

The situation was flagrant enough to cause the chairman of the full committee, Rep. James Oberstar (D–MN), subcommittee chairman Rep. Jerry Costello (D-IL) and Rep. Peter DeFazio (D-OR), chairman of the highway and transit subcommittee, to write a letter to the three miscreants. The congressmen were smart enough to copy Mary Peters, the Secretary of Transportation at the time, and Robert Sturgell, the acting head of the FAA. The letter was a stinging rebuke; not the sort of correspondence the recipient would want to be sent to one’s superiors. Under the full imprimatur of the House of Representatives letterhead, here’s the letter:

Dear Mr. Sabatini, Mr. Ballough, and Mr. Stuckey:

We are deeply disturbed about statements that you made, under oath, to the Committee at our recent hearing on April 3, 2008, on “Critical Lapses in FAA Safety Oversight” on issues involving the so called Customer Service Initiative (CSI). We believe your testimony conveyed inaccurate and misleading information [emphasis added] about whether Aviation Safety Inspectors and Managers in the Flight Standards Service (which Mr. Ballough directs) were orders to conduct special meetings with all airlines, repair stations and other regulated entities to deliver and discuss the CSI.

According to documents provided to the Committee, the CSI was announced by then Administrator [Marion] Blakey in December 2002, affirmed by Mr. Sabatini in February 2003, and formally unveiled by Flight Standards in February 2004. The documents spelled out a series of new procedures for appeals by airlines and other regulated entities who were dissatisfied with the actions of FAA safety inspectors. At the hearing, a number of Members of the Committee and witnesses criticized the CSI on the grounds that treating the regulated entities as “customers” undercuts the ability of FAA inspectors to enforce safety regulations, and conveys to the regulated agencies that their satisfaction is a higher goal than enforcement. The Members and witnesses believe that the only “customer” of the FAA’s safety offices are the persons who travel on aircraft.

In the panel which preceded yours at our hearing, Mr. Mills, who is the Assistant Manager of the Dallas Fort Worth Flight Standards District Office, testified that in 2004 he had been “mandated” to promptly visit “every single operator” to deliver a copy of the new procedures.

Following Mr. Mills’ testimony, you three officials, the officials to whom Mr. Mills reported, testified in the second panel. Congressman DeFazio asked you whether Mr. Mills was accurate in believing that he had been directed to hand-deliver the CSI. Mr. Sabatini replied, “I was surprised to hear Mr. Mills say he had been instructed to hand deliver that. That certainly is not in the guidelines.” Mr. Ballough responded, “Mr. DeFazio, from what I know it was supposed to have been delivered by routine carrier visits and repair station visits.” Mr. Ballough added that these visits would take place “at least once a year.”

Mr. Sabatini added in response to further questions that he would not agree “that it was widespread” that people were sent to hand-deliver the CSI and Mr. Stuckey said that it would not have been “his expectation” that one individual would spend three months delivering the CSI.

In sum, these answers convey that managers and inspectors had up to one year to deliver the customer service initiative and that it could be done during routine visits.

This relaxed approach is radically different from that directed by the attached memorandum, dated February 12, 2004, which was sent to “All Flight Standards Managers, Supervisors and Employees,” under the signature of Mr. Ballough. This memorandum states that after the CSI had been developed to carry out policies nnounced by Mr. Sabatini in 2003, all field offices had been directed to contact their operators, to provide them CSI literature and discuss CSI with them. Mr. Ballough’s memorandum stated that “few of these meetings have occurred and the purpose of this memorandum is to rectify that.” The memorandum directed that “within 60 days of receipt of this memorandum FSDOs (Flight Stndards District Offices) and CMOs (Certificate Management Offices) should conduct meetings with “at a minimum their Title 14 Code of Federal Regulations (14 CFR) Parts 121, 135, 141, 142, and 145 operators to discuss CSI.” The meetings were to be conducted with a representative of the operators’ management, the FSDO or CMO management and the principal inspectors assigned to that operator. Further, it was a requirement that the record of these meetings was to be entered into the FAA’s Performance Tracking Reporting System (PTRS), which underscored the mandatory nature of this requirement placed upon FAA Flight Standards Managers.

This is a very different picture from that created by your testimony. It was inaccurate for you to state that the CSI packages could be delivered during routine visits over the next year. Rather, they were required to be delivered and discussed within 60 days of the memorandum. Certainly, this program, which required meetings with almost 8,000 regulated entities would require a “widespread effort” by inspectors and managers.

Following your testimony, we received testimony supporting Mr. Mills, from Mr. McNease a retired inspector in the Southern Region:

“One other thing to Mr. DeFazio – I wanted to hold this – you questioned a number of times about Mr. Mills’ hand-delivering everything. The answers you got from Mr. Sabatini, Mr. Ballough, and Mr. Stuckey seemed to think that – they seemed to tell you that wasn’t the way things happened. That’s incorrect. It was the way things happened.”

“I was in the Southern Region, not the Southwest Region. In the Southern Region, my manager had to go out there and deliver every one of those to everybody. It took him … probably a month and a half or at least that long. He had other duties. But it happened throughout the FAA, and it’s not localized.”

I hope you see that the testimony from all of us that this is, I believe, a systemic problem with the FAA. It’s happening in other parts of the country, not just in the Southwest Region.”

In conclusion, you should understand that these a very serious issues to our Committee. We cannot condone misleading testimony in our hearings, and in last week’s hearing you were sworn under oath to tell the truth. The hearings are the basis for carrying out our legislative and oversight responsibilities. We cannot decide whether reforms or different policies are needed unless we have an accurate picture of all relevant agency actions.


James Oberstar                   Jerry Costello                              Peter DeFazio

Chairman                             Chairman                                    Chairman

                                            Subcommittee on Aviation        Subcommittee on

                                                                                              Highways & Transit

Put bluntly, lying to Congress is unseemly for a senior government official. Needless to say, it is a sad day when Congressional committees have to swear in witnesses in an effort to glean the whole, unmitigated truth of a matter.

This letter caused early retirements of all three from the FAA.

What happened to the much-criticized Customer Service Initiative? In its FAA Reauthorization Act, yet to be enacted, Congress directed the FAA to modify its CSI:

“(1) To remove any reference to air carriers or other entities regulated by the agency as ‘customers’;

(2) To clarify that in regulating safety the only customers of the Agency are individuals travelling in aircraft …”

To get ahead of the legislation, the FAA has scrapped the Customer Service Initiative (Administrator Randy Babbitt said the action was in response to “public safety complaints and whistleblower contributions”).

The CSI has been replaced with a new acronym, also known as the CSI. The FAA said:

“The FAA will no longer refer to airlines as the agency’s ‘customer.’ Instead, through the Consistency and Standardization Initiative [CSI], the FAA is now providing managers and supervisors in safety offices around the nation with guidance to ensure that FAA decisions are consistent with rules and policies and are communicated in a standard, consistent manner.”

Note how the CSI acronym remains unchanged. The former description of the CSI has been removed from the FAA’s website. Particulars of the new “Consistency and Standardization Initiative” will be transmitted directly to the agency’s field offices. No danger here of the nosy public questioning contents of the FAA’s website.

In the new CSI there’s no mention of the flying public as the FAA’s “customers.” The former customers – the airlines and manufacturers – are now called “stakeholders.” The FAA assures the stakeholders that the partnership remains unchanged:

“When someone (the ‘stakeholder’) disagrees with a decision from an FAA inspector or engineer, the employee’s manager reviews that decision. The stakeholder and the FAA employees may have face-to-face meetings, telephone conversations or e-mail exchanges to try and resolve the issue at the local level …

“If a stakeholder doesn’t accept the proposed resolution at the field level, they can appeal to the appropriate FAA regional office … If the stakeholder is [not] satisfied … the appeal may be addressed to … Flight Standards or Aircraft Certification at FAA headquarters in Washington.”

There is no mention of the agency standing behind the original FAA employee’s decision. Rather, the employee can look forward to endless reviews all the way up the chain of command, with no assurance that he or she will be protected or that the original decision, however sound, will stand. The process is one of giving airlines and manufacturers every opportunity to air grievances and to go-around, subvert or gain relief from a decision with which they disagree. (See Aviation Safety Journal, “ ‘Stakeholders’ Substituted for ‘Customers’ in Dubious Agency Safety Changes”)

Congress is going to have to take much stronger action to excise the ingrained and endemic “regulatory capture.”

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