Highway Contracting

State highway agencies are required to steer at least 10 percent of their federal highway funds to firms participating in the Disadvantaged Business Enterprise Program. Since 1988, state agencies have received thousands of new applications for participation in that program. For each application, state agencies must decide whether firms meet the eligibility standards found in federal laws and regulations. Ineffective guidance has hindered states from consistently applying the eligibility criteria for the program. This situation has arisen because the Department of Transportation (DOT) and the Federal Highway Administration (FHWA) have issued confusing and conflicting guidance on eligibility. As a result, states have interpreted key eligibility criteria differently. Despite varying state interpretations, DOT has yet to clarify its guidance. Although revisions have been under way since 1988 and DOT told Congress that it planned to publish a draft regulation by early 1991, that deadline went unmet. DOT now estimates that it will publish a final regulation by August 1993. FHWA, which is responsible for overseeing states' implementation of the program for federal highways, has not developed a system to evaluate whether the eligibility criteria are being correctly and uniformly applied.

GAO found that: (1) ineffective federal guidance has hindered state ability to consistently apply the eligibility criteria for the program; (2) DOT and the Federal Highway Administration (FHwA) have issued confusing and conflicting eligibility guidance; (3) DOT does not use a systematic approach for providing guidance; (4) there is no clearly designated lead office, uniform order or instruction, or procedure to develop, update, and coordinate the distribution of eligibility guidance to the states; (5) DOT and FHwA offices do not effectively coordinate their efforts to provide eligibility guidance and as a result the same firm could be certified as eligible in one state but denied eligibility in another; (6) DOT is revising the regulation governing the program to clarify eligibility guidance, but the revisions have been under way since 1988 and DOT did not meet a 1991 deadline; (7) FHwA is responsible for overseeing states' interpretation of the program, but it has not established a system to evaluate whether states correctly and uniformly apply eligibility criteria; and (8) FHwA requires its field offices to oversee state agencies' eligibility criteria, but the offices examined eligibility decisions in only 22 state agencies between 1988 and 1991.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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