NYTimes.com Article: Private vs. Public at Airports

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Private vs. Public at Airports

June 24, 2004
 By ALAN B. KRUEGER





IN remarkably short order, the federal government hired
45,000 workers and took over passenger screening at
virtually all airports in response to Sept. 11. Would the
private sector do a better job?

This question is not just academic: on Nov. 19, the
Transportation Security Administration will permit airports
to apply to opt out of using federal screeners in lieu of
private screeners operating under federal supervision.
Initial guidelines for the application and selection
process are due this week.

The Aviation and Transportation Security Act, which set up
the system, required the new agency to select up to five
airports representing different security risks to use
private screeners. This pilot program, known as PP5, was
intended to provide evidence on whether privately
contracted screeners could achieve the efficacy and
cost-effectiveness of federal screeners.

In truth, the private screeners are part of a hybrid system
because they are overseen by federal employees and highly
regulated. For example, private screeners are required to
be paid at least as much as federal ones, and to undergo
the same training. Still, the PP5 program is the only
available evidence on how well private screeners perform
compared with federal ones in the current system.

Results of three studies - by the General Accounting
Office, by the inspector general of the Homeland Security
Department, and by BearingPoint, a consulting firm hired by
the Transportation Security Administration - comparing
performance at privately and federally screened airports
were announced at a Congressional hearing in April.
Although the detailed results are classified, it is clear
that the studies reached the same conclusion: there was no
statistical evidence of different performance at federally
and privately screened airports.

For example, in its summary report, BearingPoint describes
four separate security checks, including covert tests in
which inspectors tried to sneak banned items past
checkpoints, and computerized Threat Image Projection
tests, which superimposed images of threatening objects on
X-rays of passengers' luggage. Of the five privately
screened airports, only Kansas City performed better than
federally screened ones in its class - and that difference
could easily have occurred by chance.

The cost of operating the privately screened airports was
about $1.3 million less, on average, than what the cost was
estimated to have been under federal screeners based on
traffic flows and other factors, but this figure does not
do justice to the uncertainty underlying the calculation.
We can be 95 percent confident that the true difference
from using private screeners falls between it being $3
million more costly to $5.6 million cheaper, a huge range.

There is simply not enough evidence to conclude with any
reasonable degree of certainty whether, as a group, private
or federal screeners performed better or cost less.

Each study suffered from two unavoidable flaws because of
the design of the Pilot Program.

The first flaw is what the econometrician Arthur Goldberger
calls "micronumerosity," meaning the sample size is very
small. Five privately screened airports are not enough to
yield results worth placing much confidence in. If you flip
a coin five times, it will be hard, from the results, to
tell whether the coin is balanced. More than five airports
are required to distinguish consequential differences
between federal and private screeners from random patterns
in the data.

This problem was compounded because BearingPoint examined
performance of each airport against the others in its
class, but did not average the results across the five
airports. Averaging would have yielded a more precise
estimate of the private-public difference.

The second flaw is equally serious. The five privately
screened airports were not selected at random. Instead, the
agency used 11 criteria - including the availability of law
enforcement officials to the airport and the screening
company's resources - to choose them from among the 19
airports that applied to use private screeners. It is
likely that this process yielded airports that gave the
private screeners an advantage over the remaining 424
federally screened airports for reasons having nothing to
do with whether the screeners were federal or private. This
problem is known as selection bias, as the selection and
application process stacked the comparison in a particular
direction.

Indeed, micronumerosity is probably the only reason that
selection bias did not cause the studies to find that
private screeners outperformed federal ones, irrespective
of the true state of affairs.

Random assignment of some airports to use private screeners
and others to a control group with federal screeners would
solve the selection problem.

A recent memorandum by the Office of Management and Budget
explains the benefit of random assignment: it "ensures, to
a high degree of confidence, that there are no systematic
differences between the groups in any characteristics
(observed and unobserved) except one - namely, the
intervention," which in this case means the intervention to
allow airports to opt out of federal screening.

In a noteworthy break from past practices, the budget
office advised agencies in its revised Program Assessment
Rating Tool, "The most definitive data supporting a
program's overall effectiveness would be from a randomized
controlled trial, when appropriate and feasible."

The acting administrator of the Transportation Security
Administration, David M. Stone, testified that he planned
to continue evaluating the effectiveness of private and
federal screeners after the opt-out program took effect. So
here is a proposal. Suppose 70 airports apply to opt out of
federal screening and are deemed eligible. Rather than
grant all 70 authority to use private screeners at once,
randomly select half of them to opt out and half to
continue with federal screeners. This sample is large
enough to estimate the cost difference to within $1 million
or so.

Allowing all the applicants to opt out at once could strain
the agency's capacity to supervise and monitor the program.
Random assignment is not only feasible, it is the fairest
way to select the eligible applicants. Airports that are
not selected could be phased in later, and serve as a
control group in the meantime.

With random assignment of enough airports, there would be
no reason to suspect that differences in outcomes between
federally and privately screened airports resulted from
anything other than whether screening was done by the
government or the private sector. Without it, we will be
right back where Clark Kent Ervin, the inspector general of
Homeland Security, said we are now: without "a sufficient
basis at this time to determine conclusively whether the
pilot airport screeners performed at a level equal to or
greater than that of the federal screeners."

Alan B. Krueger is the Bendheim professor of economics and
public affairs at Princeton University.

E-mail: akrueger@xxxxxxxxxxxxxx


http://www.nytimes.com/2004/06/24/business/24scene.html?ex=1089084377&ei=1&en=c8df5f8d992c59a2


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