Transportation Infrastructure

On federally funded highway projects, unanticipated equipment costs can result from work that was unforeseen at the time that a highway construction contract was awarded. Data on the actual equipment costs for such unanticipated work are usually unavailable, so states and contractors often turn to one of several rental rate guides to determine costs. This report examines the equipment rental rates that states use to reimburse contractors for unanticipated work on federally funded highway projects. GAO (1) identifies the basis on which the states establish equipment rental rates, (2) assesses whether the states are setting rental rates that properly approximate the contractors' actual equipment costs, and (3) determines whether the Federal Highway Administration is adequately overseeing the way that states use the guides to establish their rental rates.

GAO found that: (1) of the 52 departments of transportation that use a standard rate guide to determine equipment rental rates, 47 use national standard rate guidelines, 3 use published guidelines from external sources, and 2 have developed their own rate guides; (2) although the California Department of Transportation (Caltrans) has taken steps to lower its rates, its rates remain 10 percent higher than national standards because its equipment rental rate guidelines are not based on national standard rates and include unallowable costs; (3) 28 of 52 departments of transportation improperly established their equipment rental rates because they failed to follow FHwA guidelines, adhere to required methodologies, or fully account for duplicative overhead cost factors; (4) FHwA has allowed duplicative overhead costs to be paid by federal funds because its staff is not familiar with standard rate guidelines; (5) FHwA oversight of states' use of rental rates is inadequate because its rental rate guidance is not incorporated into highway program and policy manuals, guidance on contractor discounts is insufficient, review of rental rates is not systematic and consistent, and its field offices are not told of potential problems; and (6) FHwA inattention to rental rate policy guidance and rate-setting methodologies has resulted in higher costs and inequitable treatment of contractors.

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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