Comparison of States' Highway Construction Costs
Gao ID: GAO-04-113R November 3, 2003We are reporting to Congress on whether Federal Highway Administration (FHWA) data can help transportation stakeholders understand how states' costs to build, reconstruct, and maintain federally financed highways, roads, and bridges (termed "constructing highways" for this report) compare. Durig our review, we became aware of significant issues regarding the quality of the data that FHWA collects and reports, a topic also discussed in this report.
FHWA's database allows for comparisons of an individual state's costs over time but does not allow for comparisons between states. In addition, FHWA has concerns, which have not been formally disclosed to users, about the quality of the data. FHWA's database containing its bid price data allows for comparisons of an individual state's costs over time but does not allow for comparisons between states. Costs are tracked by state, according to an index value that is assigned quarterly. Each state received an index value of 100 for the base year (1987). If one state's costs in the base year were twice those of another state, both would have an index value of 100 for that year, and the difference in those costs would not be shown, thus preventing a comparison. In addition, FHWA officials told us that the bid price data do not contain details to determine why costs appear to differ either between states or within a state. They told us that the installed cost of materials could vary significantly, for example, because the quality of the materials or the installation specification (e.g., smoothness of the surface) could be very different. FHWA's bid price data do not contain this information. FHWA is considering whether to discontinue collecting bid price data because of the (1) apparent limited use of the data, and (2) level of effort to collect data that apparently is not extensively used. In commenting on a draft of this report, FHWA noted that it hired a consultant to evaluate the usefulness of the data to stakeholders and to explore potential alternative approaches to gathering information that could be used within FHWA. FHWA also commented that it recently partnered with the American Association of State Highway Transportation Officials to survey all state departments of transportation on the extent of use of the published price trend data and alternative ways that FHWA could gather these data (such as using data that are being collected by states for their internal use). We contacted 12 states, the Bureau of Transportation Statistics, and several industry associations about the usefulness of the bid price data. Generally, they told us they do not use the data. For example, a few states told us that they maintain more complete data, and FHWA's data are not compatible with their own. FHWA estimated that it takes states, in total, about 975 hours annually to report the bid price data (based on reporting by 37 states), or an average of about 6.5 hours per state per quarterly report.
RecommendationsOur 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.
Director: Katherine A. Siggerud Team: Government Accountability Office: Physical Infrastructure Phone: (202) 512-4907GAO-04-113R, Comparison of States' Highway Construction Costs
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November 3, 2003:
The Honorable Peter G. Fitzgerald:
Chairman:
The Honorable Daniel K. Akaka:
Ranking Member:
Subcommittee on Financial Management, the Budget, and International
Security:
Committee on Governmental Affairs:
United States Senate:
Subject: Comparison of States' Highway Construction Costs:
In your recent letter to us concerning the impending reauthorization of
the Transportation Equity Act for the 21st Century, you stated that the
return on federal investment could be increased through effective cost
competition for states' highway construction contracts. In this
context, you asked that we report on how states compare in terms of the
cost of highway construction. As agreed with your offices, we are
reporting to you on whether Federal Highway Administration (FHWA) data
can help transportation stakeholders understand how states' costs to
build, reconstruct, and maintain federally financed highways, roads,
and bridges (termed "constructing highways" for this report) compare.
During our review, we became aware of significant issues regarding the
quality of the data that FHWA collects and reports, a topic also
discussed in this report. On September 11, 2003, we briefed the
Chairman on the results of our work, and on September 22 we provided
the Ranking Member's office with the briefing slides we prepared. This
report summarizes the briefing. The slides that formed the basis for
the briefing are enclosed.
Background:
States, with support from localities, are primarily responsible for
building and maintaining the nation's highways, roads, and bridges,
with significant financial support from the federal government. From
1998 through 2001 (the latest years for which data are available), all
levels of government spent more than $80 billion each year for capital
construction and maintenance of their highways, roads, and bridges. Of
this amount, the federal government supplied about $30 billion
annually.
Highway project costs can differ for a number of reasons.[Footnote 1]
For example, highways are more expensive to build in mountainous areas
than in flat areas. Projects in urban areas are more expensive than
those in rural areas. Projects with bridges cost more than similar
projects that do not require bridges. Compared with smaller projects,
large projects may result in lower unit costs because of economies of
scale. More complicated projects, such as those with a large number of
interchanges or complicated engineering problems, can cost more than
less complicated projects. Other factors that may affect cost are the
degree of competition for contracts and different state design
standards.
For each contract exceeding $500,000, FHWA requires that each state,
the District of Columbia, and Puerto Rico (collectively called
"states") provide the agency with data (called bid price data) on the
quantity of materials used and the installed price of the materials
(representing materials, labor, overhead, and profit) from contracts to
construct and maintain roads on the National Highway System.[Footnote
2] States are required to provide FHWA with this data for seven
materials (common and unclassified roadway excavation, structural
reinforcement and structural steels, bituminous and Portland cement
concrete surfaces, and structural concrete), as well as provide the
total contract costs for road and bridge aspects of the contract, and
the location of the project. According to FHWA, the bid price data are
limited to seven materials because the materials are common to all
states; therefore, they act as good indicators for changes in principal
work items. FHWA makes summaries of its bid price data, including a
national composite index of all materials on which data are collected,
available to the public in its quarterly Price Trends for Federal-Aid
Highway Construction and in its annual Highway Statistics.[Footnote 3]
According to FHWA officials, the bid price data are the only data they
collect from states involving price and quantity, both of which are
needed to compare state highway construction costs. FHWA collects bid
price data so that it can use the national composite index to help (1)
monitor changes in the purchasing power of the federal-aid highway
construction dollar, and (2) develop, as one factor, projections of
future highway funding needs.
Summary:
FHWA's database allows for comparisons of an individual state's costs
over time but does not allow for comparisons between states. In
addition, FHWA has concerns, which have not been formally disclosed to
users, about the quality of the data.
Comparing States' Construction Costs:
FHWA's database containing its bid price data allows for comparisons of
an individual state's costs over time but does not allow for
comparisons between states.[Footnote 4] Costs are tracked by state,
according to an index value that is assigned quarterly. Each state
received an index value of 100 for the base year (1987). If one state's
costs in the base year were twice those of another state, both would
have an index value of 100 for that year, and the difference in those
costs would not be shown, thus preventing a comparison.
In addition, FHWA officials told us that the bid price data do not
contain details to determine why costs appear to differ either between
states or within a state. They told us that the installed cost of
materials could vary significantly, for example, because the quality of
the materials or the installation specification (e.g., smoothness of
the surface) could be very different. FHWA's bid price data do not
contain this information.
FHWA is considering whether to discontinue collecting bid price data
because of the (1) apparent limited use of the data, and (2) level of
effort to collect data that apparently is not extensively used. In
commenting on a draft of this report, FHWA noted that it hired a
consultant to evaluate the usefulness of the data to stakeholders and
to explore potential alternative approaches to gathering information
that could be used within FHWA. FHWA also commented that it recently
partnered with the American Association of State Highway Transportation
Officials to survey all state departments of transportation on the
extent of use of the published price trend data and alternative ways
that FHWA could gather these data (such as using data that are being
collected by states for their internal use).
We contacted 12 states, the Bureau of Transportation Statistics, and
several industry associations about the usefulness of the bid price
data. Generally, they told us they do not use the data. For example, a
few states told us that they maintain more complete data, and FHWA's
data are not compatible with their own. FHWA estimated that it takes
states, in total, about 975 hours annually to report the bid price
data (based on reporting by 37 states), or an average of about 6.5
hours per state per quarterly report.
Quality of FHWA's Bid Price Data:
FHWA's quality control procedures on its bid price data are limited. It
receives the bid price data either electronically or on paper from the
states, and FHWA officials then input the data into their database.
FHWA officials told us that they intermittently review submitted data
for obvious errors and completeness and follow up with states for
correction. However, they said they do not follow standard error-
checking procedures, such as those contained in departmental
guidelines, for reviewing state submitted reports.[Footnote 5] They
also told us that they have no procedures for verifying the keypunching
of data made by their data entry staff. An FHWA official told us that
FHWA is reluctant to invest time and money into improving the quality
of its data until it decides whether it will continue to collect the
data. While we agree that any substantial investments in time and money
may not be warranted if FHWA ultimately decides to discontinue
collecting bid price data, following standard error-checking routines
would increase FHWA's knowledge about the quality of its data and the
extent to which its concerns should be communicated to data users.
FHWA recognizes that it has problems with the quality of its bid price
data. According to FHWA officials, underreporting and, to a lesser
degree, inconsistent reporting are the biggest problems affecting data
quality. Regarding underreporting, we examined data in the database for
3 years, 2000 through 2002. We found that the database did not contain
data for seven states for 1, 2, or all 3 years.[Footnote 6] In
addition, we found instances in which states that received relatively
more highway funds from FHWA reported far fewer contracts (and contract
amounts) than states that received significantly fewer funds from FHWA,
suggesting that states that received more funds may be underreporting.
We also found data inconsistencies. For example, about 19 percent of
the data for 2000 through 2002 were for a year other than the one being
reported on. Most often these incorrect data were for the previous
year. FHWA officials told us that, for the most part, states submitted
these data late.[Footnote 7] Instead of omitting the data, FHWA
officials told us they included the previous year's data to add
robustness to the data reported for the reporting year and because the
information for the prior years had already been disseminated. Among
other problems, we found a $7 million contract erroneously included in
the database as a $7 billion contract, thus potentially skewing some
information (but not the unit costs for the six materials reported) for
that state. With the exception of the erroneous $7 billion contract
amount, we did not attempt to trace the data back to the states.
Therefore, we cannot say whether the state
incorrectly reported the data for the problems we found or whether the
data were entered incorrectly at FHWA.[Footnote 8]
FHWA has not formally disclosed its concerns with the quality of the
bid price data when it reported these data in its Price Trends for
Federal-Aid Highway Construction or Highway Statistics. An FHWA
official told us that he believes that most state departments of
transportation and other users are aware of the bid price data flaws
because this information has been provided informally to many
stakeholders over the years and state departments of transportation use
the published summaries primarily to cross-check other state highway
construction cost data. After we raised this concern, an FHWA official
said that FHWA is considering how to advise states and other users
about the quality of the data that it is reporting.
Conclusions:
As we were examining the use of FHWA's bid price data to determine
whether it could be used to compare states' highway construction costs,
FHWA officials alerted us to their concerns about the quality and
usefulness of its bid price data. We agree with FHWA that it is
wasteful to collect and disseminate data that is not used. However,
there may be other state construction data that FHWA could collect that
would be useful to stakeholders. Until FHWA decides whether it will
discontinue, supplement, or supplant bid price data collection, the
quality of the bid price data that FHWA reports to the public could be
improved through use of more systematic quality control procedures,
such as through standard error-checking routines and keypunching
verification required by departmental guidelines.
Recommendations for Executive Action:
In order to determine whether continued federal and state efforts to
provide and analyze state construction cost data are warranted, we
recommend that the Secretary of Transportation direct the Federal
Highway Administrator to determine whether the bid price data collected
by FHWA is useful to transportation stakeholders and, if not, to
discontinue collecting the data. Further, we recommend that the
Secretary direct the Federal Highway Administrator to determine whether
it would be useful and feasible to collect and disseminate other state
construction cost data that could supplement or supplant FHWA's bid
price data.
While FHWA continues to collect and disseminate bid price data, we
recommend that the Secretary direct the Federal Highway Administrator
follow departmental guidelines for systematic quality control
procedures, such as standard error-checking routines and keypunching
verification, to improve the accuracy of the data reported.
Finally, until the quality of the bid price data is improved, we
recommend that the Secretary of Transportation direct the Federal
Highway Administrator to disclose its limitations in any published
distribution of the data.
Agency Comments and Our Evaluation:
We obtained oral comments on a draft of this report from the Department
of Transportation. The department did not provide an overall opinion
about our draft report or directly comment on our proposed
recommendations. The department commented that in situations where data
is provided by nondepartmental sources such as states, the department's
options for ensuring the accuracy of the original source data are
limited. In these situations, departmental guidelines emphasize
disseminating information to users about data quality, the department's
processing methods, and analysis methods. Exploring ways to ensure the
accuracy of data submitted by others, such as states, was beyond the
scope of our effort. Therefore, we cannot comment on whether the
department's options are limited or whether cost-effective means and
incentives exist to better ensure data accuracy and completeness.
However, the department's comment that its guidelines emphasize
communicating to users about data quality suggests that it agrees with
the proposed recommendation in our draft report (and included in this
final report) that it disclose the limitations of its bid price data in
any published distribution of the data.
The department also suggested that the report recognize FHWA's recent
efforts to determine if collecting bid price data should continue. We
added this information to this final report. The department also
provided a number of technical and clarifying comments, which we
incorporated where appropriate.
Scope and Methodology:
To identify whether FHWA collects information on states' highway
construction costs that could help it and other stakeholders in
overseeing federal-aid highway programs, we contacted officials in FHWA
and the Bureau of Transportation Statistics in the Department of
Transportation. They identified FHWA's bid price data as the only data
set that included both quantity and cost information.[Footnote 9] To
understand the nature of the bid price data and their uses, we
interviewed officials in FHWA's Office of Program Administration;
reviewed data collection forms and instructions; reviewed FHWA
documentation on how bid price data are compiled into reports; and
reviewed the primary public summary of the data in Price Trends for
Federal-Aid Highway Construction.
As part of our work to determine how FHWA's bid price data help it and
other stakeholders understand how states' costs to build federally
financed highways compare, we (1) examined how FHWA ensures the quality
of its bid price data, (2) tested the quality and reliability of the
data, and (3) asked selected stakeholders
about their perceptions of the data's usefulness. Regarding how FHWA
ensures the quality of its bid price data, we discussed with FHWA
officials in its Office of Program Administration how the data are
submitted to FHWA and how the data are entered and maintained in the
database. We also discussed quality control procedures, such as
ensuring accuracy and completeness of data submissions and ensuring
accuracy of data entered into the database. We also contacted four
states for which FHWA's database did not contain any contract
information for 2000, 2001, or 2002, to ask if they had submitted data.
These states were the District of Columbia, Kentucky, Minnesota, and
New Hampshire. Finally, we reviewed departmental guidelines for
processing statistical data: The Department of Transportation's
Information Dissemination of Quality Guidelines and Guide to Good
Statistical Practices in the Transportation Field.
Regarding testing the quality and reliability of FHWA's bid price data,
we obtained electronic files from FHWA for 2000, 2001, and 2002. Our
tests focused primarily on checking
contract award dates, to make sure they fell within the year in which
they were being reported (e.g., that all contracts in the 2000 database
had a start date within 2000);
contract award amounts for apparent extreme (high or low) amounts; and:
the number of contracts reported by each state in each year, to see if
they were relatively consistent from year to year and to see if some
states had not reported any contracts for at least 1 year.
We then discussed the results of our tests with FHWA officials. When we
found examples of incomplete data or inaccurate data, we did not
attempt to determine whether states submitted incorrect data or whether
FHWA incorrectly entered the data into its database.
Regarding understanding the usefulness of FHWA bid price data to
transportation stakeholders, we contacted private associations, state
highway officials, and federal agencies. We discussed the practical
applications, if any, of the FHWA bid price data. The private
associations we contacted were the Association for the Advancement of
Cost Engineering International, American Road and Transportation
Builders Association, and American Association of State Highway
Transportation Officials. We contacted the state departments of
transportation in California, the District of Columbia, Hawaii,
Illinois, Kentucky, Louisiana, Minnesota, Nevada, New Hampshire, North
Dakota, Ohio, and Wyoming. We selected these states because (1) they
represented states with either a large, medium, or small number of
contracts in the database, or (2) we were contacting them anyway about
whether they had submitted bid price data from 2000 through 2002. The
federal agencies were the Bureau of Transportation Statistics and the
Congressional Research Service.
Finally, we reviewed recent reports by the Department of
Transportation's Office of Inspector General and by us on FHWA cost
oversight issues.[Footnote 10] We conducted our work from July through
October 2003 in accordance with generally accepted government auditing
standards.
As arranged with your offices, unless you publicly announce its
contents earlier, we plan no further distribution of this report until
30 days after the date of this letter. At that time, we will send
copies of this report to congressional committees with responsibilities
for highway issues; the Secretary of Transportation; the Federal
Highway Administrator; and the Director, Office of Management and
Budget. We will also make copies available to others upon request. This
report will be available at no charge on GAO's Web site at http://
www.gao.gov.
If you or your staff have any questions about this report, please
contact either James Ratzenberger at ratzenbergerj@gao.gov or me at
guerrerop@gao.gov. Alternatively, we may be reached at (202) 512-2834.
Key contributors to this report were Jay Cherlow, Hiroshi Ishikawa,
Jennifer Popovic, Robert Parker, and James Ratzenberger.
Peter Guerrero:
Director, Physical Infrastructure Issues:
Signed by Peter Guerrero:
Enclosure:
[See PDF for images]
[End of figure]
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FOOTNOTES
[1] Most federal funds that states receive to fund their highway
projects are apportioned to the states based on formulas and procedures
prescribed by law. With few exceptions, state decisions to undertake
higher-or lower-cost projects do not affect the level of funding they
receive. However, to the extent that states can avoid excessive costs
on ongoing projects, they will be able to undertake additional
projects.
[2] The National Highway System consists of completed interstate
highways, urban and rural principal arterials, other strategic
highways, and intermodal connectors. The system comprises about 161,000
miles of highway. Although the system represents about 4 percent of
total highway miles, it carries about 43 percent of the traffic (as
measured by vehicle miles traveled).
[3] In these publications, FHWA combines the two excavation items and
reports on six materials.
[4] In 2002, the Washington State Department of Transportation surveyed
states on the costs to build a 1.02-mile interchange whose design the
department believed was universal to all states. Reported costs ranged
from $4 million to $26.7 million, based on 25 states reporting. See the
enclosure to this report.
[5] Guidelines for processing statistical data are available in The
Department of Transportation's Information Dissemination of Quality
Guidelines and the Bureau of Transportation Statistics' Guide to Good
Statistical Practices in the Transportation Field.
[6] The one state that did not report data for all 3 years told us that
it was too much trouble. Three other states we contacted told us that
they made data available to FHWA's field office, which compiled it for
reporting purposes. We did not attempt to verify whether the states
reported the data or how FHWA processed submitted data.
[7] We did not attempt to determine when these data were submitted.
[8] In commenting on a draft of this report, FHWA told us that the
state reported the $7 million contract amount as $7 billion. The state
did not respond to our requests for information.
[9] FHWA also requires that contractors provide it with certain labor
cost information. However, an FHWA official believes that few
contractors submit this information.
[10] See, for example, our recent reports: Transportation Programs:
Opportunities for Oversight and Improved Use of Taxpayer Funds, GAO-03-
1040T (Washington, D.C.: July 22, 2003); Federal-Aid Highways: Cost and
Oversight of Major Highway and Bridge Projects--Issues and Options,
GAO-03-764T (Washington, D.C.: May 8, 2003); and Transportation
Infrastructure: Cost and Oversight Issues on Major Highway and Bridge
Projects, GAO-02-702T (Washington, D.C.: May 1, 2002).
