Friday, April 6, 2018

TVA Report Says Aircraft Purchases Not Justified

Posted By on Fri, Apr 6, 2018 at 1:38 PM

click to enlarge FAA
  • FAA

Decisions for Tennessee Valley Authority (TVA) management to recently spend $17.7 million on two airplanes were not justified, according to a recent report by TVA’s Office of Inspector General (OIG).

In May 2015, TVA management bought two aircraft — an $11.2 million Citation jet and a $6.5 million King Air turboprop — primarily citing safety concerns for flight crew and TVA staffers.

Internal investigators found that management failed to perform cost comparisons, provide adequate business justifications, or get proper authorizations for the purchases. The purchase may also have broken federal law, the report said.

All of it prevented the agency from accurately proving the need for the planes. Personal use of the planes by TVA CEO Bill Johnson “may cause reputational risks for TVA with regard to misuse (or perceived misuse) of the aircraft,” according to the OIG’s report.
TVA management said they disagreed with several of the findings in the report. The audit, managers said, focused largely on cost effectiveness, not safety. Also, they disagreed that a buying another turboprop (instead of a jet) were more appropriate for TVA needs.

“When purchasing the jet, the acquisition of an additional margin of safety was a primary factor,” reads a letter to the OIG’s office from Jacinda Woodward, TVA senior vice president of resources and river management, and William Cronin, director of safety and aviation services. “TVA was aware of additional costs associated with a jet at the time of purchase and these costs were deemed acceptable to improve the margin of safety for our pilots and passengers.”
Using the jet adds 7 percent to the cost of TVA flights, the two said in the letter. OIG investigators found it cost $4,542 per flight hour to operate the jet and $2,249 per flight hours to operate the turboprop. The jet uses 228 gallons of fuel per hour and the turboprop uses 122, according to the report.

The report also found that time savings for using the jet were “negligible.” For a 700-mile trip to West Palm Beach, Fla. (the longest recent flight by TVA officials), using the jet saved TVA less than 30 minutes when compared to the turboprop.

TVA flights are typically less than 300 miles, according to the report. On those flights, using the more-expensive jet usually saved about 10 minutes. For 129 flights between Chattanooga and Knoxville, using the jet versus driving saved 26 minutes.

“In summary, the turboprop is more cost efficient and capable of meeting TVA’s flight needs due to its lower purchase price, lower operating costs, and the fact that more than 95 percent of TVA’s flights were less than 600 miles,” reads the report.
click to enlarge CEO Bill Johnson - TVA
  • TVA
  • CEO Bill Johnson
TVA management also built a case for new planes on the fact that they needed aircraft that could seat at least nine passengers. The OIG report found that out of 1,389 flight legs, only two of them (.01 percent of all flight legs in the study) had nine passengers. Majority of flight legs carried two passengers. One passenger flew alone on 277 flight legs, a total of about 20 percent of all TVA flights.

In a section of the report titled, “Some Aircraft Usage Appeared to Be for the Personal Preference and Convenience of TVA’s CEO,” investigators said they found 13 days where the agency’s aircraft were used by Johnson for personal reasons.

OIG found flights to and from Raleigh, N.C., where Johnson has a second home, other flights stopped in Raleigh to either pick Johnson up or drop him off to and from other locations, and more. Johnson’s wife accompanied him on three of these dates, the report said.

“None of the other reasons given for diverting the aircraft from the most direct route to the final destination to pick up or drop off the CEO were for official government reasons,” the report says. “Rather, they appeared to be for the convenience of the CEO who was either already at his second, personal residence in Raleigh, N.C., rather than his his official duty station or was being dropped off at the location of his second residence or elsewhere for personal reasons rather than continuing to his official duty station.”
TVA told investigators that all but one of those flights had a business purpose. The other, “personal” flight occurred when the CEO’s spouse had a medical issue at their second, personal residence in Raleigh, N.C. and the CEO was in Memphis, Tenn. on TVA business.”

That flight was approved by the TVA board chair, the report says, “however, we were unable to identify any board practice or other document that gave the chair the authority to approve this use…”

OIG officials issued a number of recommendations for management, including new processes for purchasing aircraft, tracking flight information, and more.

Management said in the future, it will follow federal analysis guidelines for such purposes, “as appropriate.” TVA management also admitted its flight record keeping and reporting “has been inadequate” and is evaluating new software to improve documentation.
click to enlarge FAA
  • FAA

The investigator’s report focused on a window of time from July 2015 to February 2017. Since then, TVA bought another jet at around $10 million and a luxury helicopter (once owned by Dallas Cowboys owner Jerry Jones) for about about $7 million.

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