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Implementation of the Communications Assistance
For Law Enforcement Act
by the Federal Bureau of Investigation
Report No. 02-14
March 2002
Office of the Inspector General
The FBI has made progress toward its goal of ensuring that law enforcement agencies have the ability to conduct lawfully authorized electronic surveillance. The FBI entered into several additional RTU license agreements to reimburse the carriers for the purchase of RTU software licenses from certain manufacturers. (See Appendix I.) To date the FBI had received approximately $457 million in appropriations and $43 million from other sources for a total of about $500 million. As of December 2001, the FBI has paid over $275 million and obligated an additional $122 million for reimbursement to carriers for the purchases of the RTU software licenses from:
| Lucent Technologies Nortel Networks Motorola Siemens AG AG Communications |
- - - - - |
$170 million $102 million $ 55 million $ 40 million $ 30 million |
These manufacturers account for more than 90 percent of telecommunications equipment lines in the United States. The RTU license agreements specified that the software must pass inspection by the FBI before being disseminated to carriers. In this regard, the payments and obligations mentioned above include more than $500,000 for carrier assistance in testing the manufacturer's software. The FBI did not anticipate any additional RTU software license agreements.
The FBI reported in its Seventh Annual Report to Congress that the manufacturers were making available to carriers the software necessary for carriers to meet the minimum industry CALEA capability features. The FBI expected the remaining software to be delivered by June 30, 2002. The FCC was reviewing this deadline in accordance with its CALEA responsibilities but had not ruled on it as of our audit cutoff date. The remaining software is to include the additional CALEA capability features mandated by the FBI in accordance with various FCC and court decisions.
As previously stated, the RTU software license agreements did not include costs for deployment of the carriers' capability and capacity solutions. The FBI had not yet entered into any agreements with carriers to deploy their solutions. The FBI initiated a flexible deployment initiative to allow the carriers to complete deployment of their capability solutions within normal business cycles in order to minimize carrier costs. The carriers have the option under the CALEA to petition the FCC to permit deployment of their capability solutions beyond the FCC-mandated deadlines. The FBI stated that it would support such petitions before the FCC for those carriers who have approved flexible deployment plans.
Reasonableness of Payments to Carriers
The FBI entered into no agreements and made no payments to carriers for system modifications. Further, no carriers made system modifications that were eligible for reimbursement under the CALEA. However, the FBI continued to negotiate RTU software license agreements during this reporting period.
Each of the manufacturers previously mentioned entered into one or more RTU software license agreements with one or more carriers to permit all carriers that use a particular line of equipment to have available for activation the CALEA-compliant software. According to the CALEA, the FBI may reimburse carriers only, thus the specific carrier participation in the RTU software license agreements.
The FBI continued to use the D&F prior to entering into the RTU software license agreements. The FBI did so to present its case for the reasonableness of the RTU software license costs, which the FBI was unable to determine through traditional cost or price analysis means. The information given to us by the FBI did not provide a basis to determine the reasonableness of these costs. Accordingly, we offer no opinion on the reasonableness of the cost incurred for the RTU software licenses. 4
Modifications to Equipment, Facilities, and Services
The FBI, at the time of our audit, had not entered into any agreements with carriers to complete deployment of their technical solutions. 5 However, at the time of our review, QWest Communications (QWest) was implementing its capability solutions in the Salt Lake City area at the request of the FBI. The FBI and QWest determined that compliance with the CALEA capability requirements was necessary for adequate security during the winter Olympics in light of the recent domestic terrorist attacks. No agreement had been finalized or payments made to reimburse QWest as of our audit cutoff date.
Future Funding Needs
The FBI has determined that the $500 million authorized under the CALEA is not sufficient to fund implementation of the carriers' technical solutions. The additional amount necessary has not been determined yet due to incomplete negotiations with the industry and ongoing technical innovations in the telecommunications field.
Regarding deployment of the carriers' capability and capacity technical solutions, the FBI's Office of General Counsel issued a legal opinion, which stated in part:
[E]ntering into these [RTU software license] agreements does not guarantee that CALEA-compliant solutions will be operable and available for use by law enforcement. These agreements only ensure that right-to-use licenses for the CALEA software will be made available to carriers at no additional charge . . . Additional monies will need to be authorized and appropriated by Congress to deploy the solutions fully. Although how much it will cost to install or deploy the solutions by carriers remains uncertain . . . .
The carriers can deploy their technical solutions once the manufacturers have made their software available. We determined that the FBI has identified and prioritized approximately 6,000 carrier locations for implementation of the capability requirements. The FBI estimated that carrier capability solutions can be implemented at approximately 25 percent or approximately 1,500 of these locations for every $100 million of funding made available to the FBI for this purpose. Approximately $102 million in unobligated funds remain for implementation of carrier technical solutions as a result of the funds received, paid, and obligated.
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The FBI had not estimated the costs to meet the CALEA capacity requirements. In this regard, according to the FBI report entitled, Status of Reimbursement for Capability and Capacity:
The precise delineation of the modifications needed and the costs, which must be incurred to attain capacity for simultaneous intercepts, has not been established because the variety of technical solutions inhibits a single interpretation.
Conclusion
The FBI has paid or obligated about $400 million for carrier purchases of the RTU software licenses. The FBI determined that RTU license agreements were the most cost effective vehicles to reimburse the carriers for the use of the manufacturers' software. The FBI prepared D&Fs to support this approach because it was unable to obtain adequate cost or price data. However, the information given to us by the FBI did not provide a basis to determine the reasonableness of the cost incurred for the RTU software licenses. Accordingly, we offer no opinion on the reasonableness of these costs.
At the time of our audit, the FBI had not entered into any agreements to reimburse carriers for deployment of their technical solutions. The FBI estimated that for each additional $100 million in funding, capability solutions could be deployed in at least 25 percent of locations prioritized by the FBI. The FBI had not estimated the additional funds necessary to implement the CALEA capacity requirements.
Views of Responsible Officials
We discussed this report with FBI officials of the CALEA implementation office. These officials stated that they were of the opinion that the content of the report portrays that the FBI exhibited due diligence in pursuit of determining price reasonableness and have effectively spent the funds currently available for CALEA implementation.
The officials also advised us that QWest had completed the implementation of its CALEA solution in the Salt Lake City area in time for the winter Olympics. Subsequent to our audit, the FBI entered into a $6.2 million agreement with QWest on February 28, 2002: $2.2 million from funds made available for the CALEA implementation, and $4 million from counter-terrorism funds made available subsequent to the events of September 11, 2001. The FBI used the counter-terrorism funds to reimburse QWest for modifications to equipment that was installed or deployed after January 1, 1995.