Federal-Aid Highways
FHWA Needs a Comprehensive Approach to Improving Project Oversight Gao ID: GAO-05-173 January 31, 2005The federal-aid highway program provides over $25 billion a year to states for highway and bridge projects, often paying 80 percent of these projects' costs. The federal government provides funding for and oversees this program, while states largely choose and manage the projects. Ensuring that states effectively control the cost and schedule performance of these projects is essential to ensuring that federal funds are used efficiently. We reviewed the Federal Highway Administration's (FHWA) approach to improving its federal-aid highway project oversight efforts since we last reported on it in 2002, including (1) FHWA's oversight-related goals and performance measures, (2) FHWA's oversight improvement activities, (3) challenges FHWA faces in improving project oversight, and (4) best practices for project oversight.
FHWA has made progress in improving its oversight efforts since 2002, but it lacks a comprehensive approach, including goals and measures that guide its activities; workforce plans that support these goals and measures; and data collection and analysis efforts that help identify problems and transfer lessons learned. FHWA's 2004 performance plan established, for the first time, performance goals and outcome measures to limit cost growth and schedule slippage on projects, but these goals and measures have not been effectively implemented because FHWA has not linked its day-to-day activities or the expectations set for its staff to them, nor is FHWA fully using them to identify problems and target its oversight. FHWA undertook activities in response to concerns raised about the adequacy of its oversight efforts that have both promising elements and limitations. For example, while FHWA now assigns a project oversight manager to each major project (generally projects costing $1 billion or more) and identified skills these managers should possess, it has not yet defined the role of these managers or established agencywide performance expectations for them. While FHWA issued guidance to improve cost estimating and began collecting information on cost increases, it still does not have the capability to track and measure cost growth on projects. Finally, although FHWA received direction to develop a more multidisciplinary workforce to conduct oversight, it has not fully incorporated this direction into its recruiting and training efforts. FHWA faces challenges to improving its oversight that are in large part rooted in the structure of the federal-aid highway program and in FHWA's organization and culture. As such, they may be difficult to surmount. For example, because the program does not link funding to states with the accomplishment of performance goals and outcome measures, it may be difficult for FHWA to define the role and purpose of its oversight. Also, FHWA's decentralized organization makes it difficult to achieve a consistent organizational vision. Human capital challenges affecting much of the federal government have affected FHWA, particularly in its need to transform its workforce to meet its evolving oversight mission. FHWA faces an increased oversight workload in the years ahead as the number of major projects grows and if provisions Congress is considering to increase FHWA's responsibilities become law. Questions exist about FHWA's ability to effectively absorb these new responsibilities, overcome underlying challenges, and improve its oversight. We identified selected best practices that could help FHWA develop a framework for a comprehensive approach to project oversight. These include establishing measurable goals to objectively and quantifiably assess progress, making oversight managers accountable for the effective implementation of these goals, providing professional training, and collecting and transferring lessons learned.
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: Team: Phone:GAO-05-173, Federal-Aid Highways: FHWA Needs a Comprehensive Approach to Improving Project Oversight
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Report to the Chairman, Committee on Transportation and Infrastructure,
House of Representatives:
January 2005:
Federal-Aid Highways:
FHWA Needs a Comprehensive Approach to Improving Project Oversight:
GAO-05-173:
GAO Highlights:
Highlights of GAO-05-173, a report to the Chairman, Committee on
Transportation and Infrastructure, House of Representatives:
Why GAO Did This Study:
The federal-aid highway program provides over $25 billion a year to
states for highway and bridge projects, often paying 80 percent of
these projects‘ costs. The federal government provides funding for and
oversees this program, while states largely choose and manage the
projects. Ensuring that states effectively control the cost and
schedule performance of these projects is essential to ensuring that
federal funds are used efficiently.
We reviewed the Federal Highway Administration‘s (FHWA) approach to
improving its federal-aid highway project oversight efforts since we
last reported on it in 2002, including (1) FHWA‘s oversight-related
goals and performance measures, (2) FHWA‘s oversight improvement
activities, (3) challenges FHWA faces in improving project oversight,
and (4) best practices for project oversight.
What GAO Found:
FHWA has made progress in improving its oversight efforts since 2002,
but it lacks a comprehensive approach, including goals and measures
that guide its activities; workforce plans that support these goals and
measures; and data collection and analysis efforts that help identify
problems and transfer lessons learned. FHWA‘s 2004 performance plan
established, for the first time, performance goals and outcome measures
to limit cost growth and schedule slippage on projects, but these goals
and measures have not been effectively implemented because FHWA has not
linked its day-to-day activities or the expectations set for its staff
to them, nor is FHWA fully using them to identify problems and target
its oversight.
FHWA undertook activities in response to concerns raised about the
adequacy of its oversight efforts that have both promising elements and
limitations. For example, while FHWA now assigns a project oversight
manager to each major project (generally projects costing $1 billion or
more) and identified skills these managers should possess, it has not
yet defined the role of these managers or established agencywide
performance expectations for them. While FHWA issued guidance to
improve cost estimating and began collecting information on cost
increases, it still does not have the capability to track and measure
cost growth on projects. Finally, although FHWA received direction to
develop a more multidisciplinary workforce to conduct oversight, it has
not fully incorporated this direction into its recruiting and training
efforts.
FHWA faces challenges to improving its oversight that are in large part
rooted in the structure of the federal-aid highway program and in
FHWA‘s organization and culture. As such, they may be difficult to
surmount. For example, because the program does not link funding to
states with the accomplishment of performance goals and outcome
measures, it may be difficult for FHWA to define the role and purpose
of its oversight. Also, FHWA‘s decentralized organization makes it
difficult to achieve a consistent organizational vision. Human capital
challenges affecting much of the federal government have affected FHWA,
particularly in its need to transform its workforce to meet its
evolving oversight mission. FHWA faces an increased oversight workload
in the years ahead as the number of major projects grows and if
provisions Congress is considering to increase FHWA‘s responsibilities
become law. Questions exist about FHWA‘s ability to effectively absorb
these new responsibilities, overcome underlying challenges, and improve
its oversight.
We identified selected best practices that could help FHWA develop a
framework for a comprehensive approach to project oversight. These
include establishing measurable goals to objectively and quantifiably
assess progress, making oversight managers accountable for the
effective implementation of these goals, providing professional
training, and collecting and transferring lessons learned.
What GAO Recommends:
GAO recommends that FHWA link its activities and staff expectations to
its oversight goals and measures, develop an overall plan for its
oversight activities tied to goals and measures and supported in
workforce plans, define the role of project managers, and develop the
capability to track project costs to identify problems and transfer
lessons learned. DOT generally agreed with this report‘s facts and
conclusions.
www.gao.gov/cgi-bin/getrpt?GAO-05-173.
To view the full product, including the scope and methodology, click on
the link above. For more information, contact Kate Siggerud at (202)
512-6570 or siggerudk@gao.gov.
[End of section]
Contents:
Letter:
Results In Brief:
Background:
FHWA Established Some Oversight Goals and Measures but Has Not
Effectively Implemented Them:
FHWA's Oversight Activities Have Promising Elements and Limitations:
FHWA Faces Challenges to Improving Oversight:
Best Practices Can Help Improve Progress and Address Challenges to
Improving Project Oversight:
Conclusions:
Recommendations:
Agency Comments:
Appendixes:
Appendix I: Scope and Methodology:
Appendix II: FHWA FY 2004 Major Project Team Work Plan Summary:
Appendix III: GAO Contacts and Staff Acknowledgments:
GAO Contacts:
Staff Acknowledgements:
Table:
Table 1: Types of Projects Receiving FHWA Oversight versus State
Oversight:
Figures:
Figure 1: Stages of a Highway or Bridge Project and State and FHWA
Roles and Approval Actions:
Figure 2: Goals and Associated Measures Articulated In FHWA's 2004
Performance Plan:
Abbreviations:
AASHTO: American Association of State Highway and Transportation
Officials:
DOT: Department of Transportation:
FHWA: Federal Highway Administration:
FMIS: Financial Management Information System:
FTA: Federal Transit Association:
GPRA: Government Performance and Results Act of 1993:
ISTEA: Intermodal Surface Transportation Efficiency Act of 1991:
OIG: Office of Inspector General:
OMB: Office of Management and Budget:
PDP: professional development program:
TEA-21: Transportation Equity Act for the 21st Century:
Letter January 31, 2005:
The Honorable Don Young:
Chairman,
Committee on Transportation and Infrastructure:
House of Representatives:
Dear Mr. Chairman:
The federal-aid highway program provides over $25 billion a year to
states for highway and bridge projects, often paying 80 percent of
these projects' costs. The program is federally financed and state
administered; that is, the federal government provides funding and
oversees the program, while the states largely choose and manage the
projects. These projects can take years of planning and environmental
review, as well as the time spent in the design and construction
phases. With highway congestion projected to worsen over the next 20
years and freight traffic expected to double, widespread consensus
exists on the need to maintain and improve the nation's surface
transportation infrastructure. In the longer term, broader fiscal
challenges face the nation, including federal and state budget deficits
and a fiscal crisis looming as the baby boom generation retires,
causing mandatory commitments to Social Security and Medicare to
consume a greater share of the nation's resources, squeezing funding
available for domestic discretionary programs. Thus, ensuring that
states effectively manage and control the cost and schedule performance
of federally-aided projects, and that federal funds are used
efficiently and effectively, is critical in light of these challenges.
The Federal Highway Administration (FHWA), under the Department of
Transportation (DOT), is responsible for overseeing the federal-aid
highway program through its headquarters in Washington, D.C., and
division offices located in every state, the District of Columbia, and
Puerto Rico. To carry out this role, FHWA reviews and approves the
transportation plans and environmental impact assessments that states
periodically prepare, reviews and approves states' property acquisition
activities; and enforces a variety of requirements, such as civil
rights laws, that states accept as a condition of federal aid. FHWA
also oversees the design and construction of federally-aided projects,
but this oversight has evolved over the years and currently focuses on
two broad areas: (1) for selected projects, direct review and approval
of state design plans, contract awards, and construction progress; and
(2) reviews of state management processes, also known as process
reviews, to ensure that the states have adequate controls to
effectively manage federally-assisted projects. FHWA also enforces
requirements for "major projects"--generally those projects estimated
to cost over $1 billion--such as reviewing and approving annual finance
plans required by law for these projects.
We and others have raised concerns regarding FHWA's oversight of the
federal-aid highway program. For example, from 1997 to 2002, we
highlighted several problems, including the lack of a link between
FHWA's oversight activities and its business goals; a lack of emphasis
on FHWA's part to ensuring that containing costs is an integral part of
states' project management; a lack of useful cost estimates, which
typically have not been reliable predictors of the total costs or
financing needs of projects; and a lack of information on the amount of
and reasons for cost increases. In particular, we have highlighted the
challenges that major, multibillion-dollar projects pose. These
projects are very costly and complex--they require large commitments of
public resources that may take several years to garner; can involve
complicated financing arrangements; can be technically challenging to
construct; and involve a wide range of social, environmental, land-use,
and economic challenges before and during construction. To keep the
projects on schedule and within budget, federal and state officials
must carefully oversee their development, planning, and construction.
We also recognized actions Congress, DOT, and FHWA have taken to
improve FHWA's oversight in response to concerns raised about its
efforts. For example, in 1998, Congress required that states submit to
the Secretary of Transportation an annual finance plan for major
projects, which was intended to help provide an advance warning system
for increased costs for large transportation projects receiving federal
funds. In 2001, FHWA took steps to improve its oversight of these major
projects by, among other things, establishing a major projects team to
coordinate and implement oversight policies for major projects and
designating project oversight managers to oversee these projects. In
addition, for its reviews of state management processes, FHWA also
began to conduct more risk assessments to identify and prioritize risk
areas and allocate resources.
FHWA will face an increased oversight workload in the years ahead if
provisions Congress is considering become law and as the number of
federal-aid projects grows. In 2003, DOT proposed legislation for the
reauthorization of the Transportation Equity Act for the 21st Century
(TEA-21) that would increase FHWA's oversight responsibilities by
requiring FHWA to annually review states' financial management
processes and to periodically review how states plan and manage
projects. The legislation would also extend certain oversight
requirements that currently pertain only to major projects, to other
large-dollar projects as well. This proposal was largely adopted in
bills that were separately approved by the House and Senate in 2004,
but which were not enacted before the adjournment of the 108TH
Congress. In addition, during the course of our review, the number of
major projects FHWA is responsible for overseeing increased from 15 to
21, and that number is expected to nearly double to 40 in the next
several years.
At your request, we reviewed FHWA's approach to improving its federal-
aid highway project oversight efforts since 2002, including (1) FHWA's
oversight-related performance goals and measures, (2) FHWA's oversight
improvement activities, (3) challenges FHWA faces in improving project
oversight, and (4) best practices for project oversight.
To determine FHWA's approach to improving its oversight efforts since
2002, the last time we reported on this issue, we evaluated the
agency's strategic and performance plans, and supporting documents.
Furthermore, we documented and analyzed the status of FHWA's various
project oversight efforts. We interviewed officials at FHWA
Headquarters and selected FHWA division offices, state departments of
transportation, and others to document oversight implementation efforts
and the challenges FHWA faces in improving its project oversight. We
also reviewed FHWA's use of financial information from its Financial
Management Information System (FMIS) to track and analyze trends in
cost growth on projects. We did not independently assess the
reliability of FMIS data as the Department's Inspector General has
reported on weaknesses in FHWA's financial management and reporting
processes, most recently in November 2004 as part of the annual audit
of DOT's consolidated financial statements. In addition, our work
focused primarily on FHWA's use of FMIS data for oversight purposes,
rather than relying on FMIS data to support our findings and
conclusions.
To provide information on project management best practices we
conducted a literature search to identify best practices related to
project oversight and evaluated their applicability to FHWA's oversight
efforts. We conducted our work from August 2003 through December 2004
in accordance with generally accepted government audit standards.
Appendix I provides the details of our scope and methodology.
Results in Brief:
FHWA has made progress in improving its oversight efforts since 2002,
but it lacks a comprehensive approach to project oversight, including
oversight-focused goals and outcome measures that guide its activities;
an overall plan for its oversight activities that responds to past
concerns and is linked to these goals and measures; workforce planning
efforts that support these goals and measures; and data collection and
analysis efforts that identify problems, help target resources, and
transfer lessons learned. FHWA's 2004 performance plan established, for
the first time, performance goals and outcome measures to limit the
magnitude of cost growth and schedule slippage for major projects, but
these goals and measures have not been effectively implemented because
FHWA has not linked the day-to-day oversight activities of its division
offices or the expectations set for its staff to them. For example,
none of the three division offices we visited that are currently
overseeing major projects had established any link in its unit
performance plan between its activities and FHWA's goal and measure to
limit cost increases and schedule slippage on major projects. FHWA also
established performance goals and measures to contain costs on projects
other than major projects, but it is not yet using these goals to
identify problems on a state-by-state or project-by-project basis in
order to target its oversight activities. FHWA also uses cost and
schedule estimates developed relatively late in a project's
development--at the point at which the project is ready to go to
construction--as a baseline for measuring its progress in limiting cost
growth. However, by the time a project goes to construction, a public
investment decision has effectively been made, as substantial funds
will have been spent on designing the project and acquiring property,
and much of the increases in a project's costs may have already
occurred.
In response to concerns raised about the adequacy of its oversight
efforts, FHWA undertook a series of oversight-related activities that
have both promising elements and limitations. For example, FHWA now
routinely assigns a project oversight manager to each major project. It
established core competencies identifying the skills that project
oversight managers should possess, which are to serve as a guide for
selecting these managers. However, FHWA has not yet defined the role of
project oversight managers or established agency-wide performance
expectations for them. Instead, expectations for this position were
developed locally at division offices, and none of the three division
offices' expectations for oversight managers that we reviewed
specifically tasked the manager with achieving FHWA's goals and
measures to limit cost increases and schedule slippage. Without this
link between performance expectations and goals, it is unclear how the
project oversight managers will improve oversight of major projects and
what training and development are needed to achieve the desired
performance. In another positive step, in June 2004, FHWA issued
guidance to state transportation agencies to assist them in applying
sound cost estimating practices, including guidance on developing more
realistic early cost estimates. However, this guidance is voluntary and
applies only to major projects, and it is too soon to tell whether it
will be effective in improving the quality of estimates. DOT proposed
legislation empowering FHWA to develop national standards for
estimating project costs, which was included in the surface
transportation reauthorization bills separately passed by the House and
the Senate in 2004, but which were not enacted before the adjournment
of the 108TH Congress. FHWA also started tracking information on the
cost growth of major projects, and it recently started developing some
cost information on all federal-aid highway projects over $10 million.
However, FHWA still does not have the capability to track and measure
cost growth on projects it oversees, which limits its ability to
evaluate the reasons why cost growth occurs, identify problems and
solutions, and transfer lessons learned. FHWA has also incorporated
more risk assessments into its process reviews of state transportation
agencies, but we found that some division offices are not using their
risk assessments to guide their reviews. The DOT Inspector General
recently reported that FHWA's risk assessments were voluntary and did
not provide a systematic approach for assessing program risks
throughout the agency. Finally, although FHWA received congressional-
committee direction to restructure its workforce to develop a
multidisciplinary approach to oversight, it has made limited progress
in doing so, as it has not fully incorporated such an approach into its
human capital planning, recruiting, or training efforts.
FHWA faces several challenges to improving its oversight--challenges
rooted in the structure of the federal-aid highway program as well as
FHWA's organization and culture--that may be difficult to surmount. The
federal-aid highway program provides states with broad flexibility in
the use of federal funds. Although DOT has articulated goals for the
program such as improving safety and reducing the growth of traffic
congestion, the program does not have the mechanisms to link funding
levels with the accomplishment of specific performance-related goals
and outcomes. As a result, it may be difficult for FHWA to define its
role and the purpose of its oversight. FHWA's long-standing culture of
partnership with the states also poses challenges; FHWA and state
officials believe this partnership has helped to build trust and
respect between the state agencies and FHWA and has resulted in
projects being planned and built more efficiently and effectively.
However, there is a potential downside--when a project overseer becomes
an active partner in a project, the arms-length, independent
perspective that can be important to effective project oversight can be
lost. Another challenge is FHWA's decentralized organization, which can
make implementing a consistent oversight vision and strategies
throughout FHWA difficult. Human capital challenges that affect much of
the federal government have also affected FHWA's ability to improve its
oversight, particularly in its need to transform its workforce and
culture to support its evolving oversight mission. Finally, FHWA
officials said that a challenge to improving oversight is that
legislation passed in 1991 and 1998 has, in their view, sent mixed
messages regarding FHWA's and states' roles, leading to confusion as to
the extent of FHWA's authority and responsibilities over state-managed
highway projects. Language in reauthorization legislation proposed by
DOT and separately passed by the House and the Senate in 2004 but not
enacted may help clarify FHWA's oversight role if it is reintroduced
and enacted by the 109TH Congress.
We identified selected best practices that are relevant to FHWA's
efforts to improve project oversight through analyzing our past work on
effectively managing and overseeing projects, as well as reports by the
National Research Council, the Office of Management and Budget (OMB),
and others. While some of these best practices are beginning to be
reflected in FHWA's activities, as a whole, they could provide a
framework for moving to a comprehensive approach to project oversight.
The best practices we identified include (1) establishing measurable
project oversight goals and communicating these goals down through all
levels of the agency; (2) establishing project oversight manager roles,
responsibilities, and accountability measures based on oversight goals;
(3) providing professional training and a career path in oversight
management; and (4) identifying and transferring lessons learned.
Establishing measurable project oversight goals and communicating these
goals down through all levels of an agency illustrates how an agency
will execute its oversight mission and establishes what its oversight
is designed to accomplish. Establishing oversight manager roles,
responsibilities, and accountability measures based on oversight goals
links efforts to goals and makes managers accountable for proper
project oversight. Providing professional training in oversight
management could ensure that managers develop the skills necessary for
conducting their oversight activities. Providing a career path would
allow project managers to develop their abilities as they progress
through increasingly challenging assignments. Identifying lessons
learned from the successes and setbacks that occur on projects--and
transferring those lessons to other projects--can prevent mistakes from
being repeated and promote improved oversight.
FHWA will face an increased oversight workload in the years ahead if
provisions Congress is considering become law and as the number of
federal-aid projects grows. Given the limitations present in FHWA's
oversight approach today, questions exist about its ability to
effectively absorb new responsibilities and to improve its oversight
efforts over federal-aid highway projects in the years ahead. Moreover,
absent a comprehensive approach, FHWA is unlikely to overcome the
structural, organizational, and cultural challenges it faces and to
fully address the concerns raised about the adequacy of its oversight
efforts. To address these limitations, we are recommending that FHWA
link its day-to-day activities and the expectations set for its staff
to its goals and outcome measures; develop an overall plan for its
oversight initiatives that is tied to its oversight-related goals and
measures; improve the use and performance of project oversight managers
by centrally defining their role and responsibilities; and develop the
capability to track and measure costs over the lives of projects to
identify problems, help target resources, and transfer lessons learned.
We provided a draft of this report to DOT and met with FHWA officials,
including the Deputy Administrator, to obtain their comments on the
draft. FHWA generally agreed with the facts and conclusions in the
report and our characterization of the challenges FHWA faces in
improving its project oversight. FHWA officials emphasized that
although we highlighted potential drawbacks associated with both its
culture of partnership with the states and its decentralized
organization, this partnership and organization are also major
strengths of the federal-aid highway program that will allow the agency
to absorb potential new responsibilities, help overcome challenges, and
improve program oversight in the future through a more comprehensive
approach. FHWA officials did not take a position on our
recommendations, but they stated that they would be taking them under
advisement. They also suggested some technical and clarifying comments
that we incorporated into the report as appropriate.
Background:
Federal funding for highways is provided to the states mostly through a
series of formula grant programs collectively known as the federal-aid
highway program. Periodically, Congress enacts multiyear legislation
that authorizes the nation's surface transportation programs, including
highways, transit, highway safety, research, and motor carrier
programs. In 1998 Congress enacted TEA-21, which authorized $172.4
billion for the federal-aid highway program from fiscal years 1998
through 2003. The program expired on September 30, 2003, and it has
been extended by six short-term extensions, the most recent extending
the program until May 31, 2005. During the 108TH Congress, both the
House and Senate approved separate legislation to reauthorize the
federal-aid highway program; however, the reauthorization legislation
was not been enacted before the adjournment of the 108THCongress. The
bill approved by the House authorized $226.3 billion for the federal-
aid highway program for fiscal years 2004 through 2009, an increase of
about 31 percent over TEA-21, while the bill approved by the Senate
authorized $256.4 billion, an increase of about 49 percent.[Footnote 1]
Because both bills contained funding increases, it is likely that the
number of federal-aid highway projects will rise in the next several
years.
FHWA administers the federal-aid highway program and distributes most
highway funds to the states through annual apportionments established
by statutory formulas contained in law. Once FHWA apportions these
funds, they are available to be obligated for construction,
reconstruction, and improvement of highways and bridges on eligible
federal-aid highway routes and for other purposes authorized in law.
About 1 million of the nation's 4 million miles of roads are eligible
for federal aid; including the 161,000 mile National Highway System, of
which the 47,000 mile Interstate Highway System is a part.[Footnote 2]
While FHWA administers the program, the responsibility for choosing
projects generally rests with state departments of transportation and
local planning organizations. The states have considerable discretion
in selecting specific highway projects and in determining how to
allocate available federal funds among the various projects they have
selected. For example, section 145 of title 23 of the United States
Code describes the federal-aid highway program as a federally-assisted
state program and provides that the federal authorization of funds, as
well as the availability of federal funds for expenditure, shall not
infringe on the states' sovereign right to determine the projects to be
federally financed.
A highway or bridge construction or repair project usually has four
stages: (1) planning, (2) environmental review, (3) design and property
acquisition, and (4) construction. FHWA reviews and approves long-term
and short-term state transportation plans and programs, environmental
documents,
and the acquisition of property for all highway projects.[Footnote 3]
However, its role in overseeing the design and construction of projects
varies. On selected projects, FHWA exercises what is often considered
"full" oversight, meaning that FHWA (1) prescribes design and
construction standards, (2) approves design plans and estimates, (3)
approves the selection of the contract award, (4) periodically inspects
the progress of construction, and (5) renders final acceptance on
projects when they are completed. However, relatively few projects are
subject to this full FHWA oversight. The last two authorizations, the
Intermodal Surface Transportation Efficiency Act of 1991 (ISTEA) and
TEA-21, devolved an increasing amount of responsibility to the states.
Under current law FHWA exercises full oversight of certain high-cost
interstate system projects, while states oversee design and
construction on other federal-aid projects.
The stages of a highway or bridge project and the corresponding state
role and FHWA approval actions are shown in figure 1.
Figure 1: Stages of a Highway or Bridge Project and State and FHWA
Roles and Approval Actions:
[See PDF for image]
[End of figure]
The types of projects for which FHWA exercises full oversight as
compared with state oversight are shown in table 1.
Table 1: Types of Projects Receiving FHWA Oversight versus State
Oversight:
Type of project: Interstate System;
Mileage: 47,000;
Percent of federal highway funds obligated in 2002: 12;
Design and construction oversight: FHWA oversight;
Exceptions: Certain types of projects, or projects below a dollar
threshold, where FHWA and state determine state oversight is
appropriate.
Type of project: National Highway System, non-Interstate routes;
Mileage: 115,000;
Percent of federal highway funds obligated in 2002: 45;
Design and construction oversight: State may assume oversight;
Exceptions: State or FHWA determines state oversight is not
appropriate.
Type of project: Federal-aid highways off the National Highway System;
Mileage: 798,000;
Percent of federal highway funds obligated in 2002: 42;
Design and construction oversight: State shall assume oversight;
Exceptions: State determines state oversight is not appropriate.
Source: GAO analysis.
[End of table]
According to FHWA, the agency retains the responsibility to oversee all
federally-aided highway and bridge projects, including projects for
which FHWA does not exercise oversight over the design and construction
phases. FHWA conducts oversight of state transportation programs
through a variety of means, including process reviews--reviews of state
management processes to ensure that states have adequate controls to
effectively manage federally-assisted projects. States and FHWA execute
stewardship and oversight agreements to define their respective
oversight responsibilities.
TEA-21 contains an additional oversight requirement for so-called
"major projects"--generally those estimated to cost at least $1
billion. Since TEA-21 was enacted in 1998, states must submit finance
plans to DOT annually for such projects, based on detailed estimates of
the costs to complete the project and on reasonable assumptions about
future increases in such costs. FHWA developed guidance that requires
states to include in these finance plans a total cost estimate for the
project, adjusted for inflation and annually updated; estimates about
future cost increases; a schedule for completing the project; a
description of construction financing sources and revenues; a cash flow
analysis; and a discussion of other factors, such as how the project
will affect the rest of the state's highway program. FHWA approves
these plans as a condition of federal aid. As of November 2004, 11 of
the 21 current major projects had finance plans. Approved finance plans
will be required for the other projects prior to FHWA authorizing
federal funds for construction.[Footnote 4] FHWA forecasts that another
19 major projects, estimated to cost from $34 billion to $60 billion,
will be starting over the next several years and will also require
finance plans.
Over the past several years, we and others have identified problems
with FHWA's oversight of major projects and other large highway and
bridge projects. For example, in 1997, we reported that the overall
amount of and reasons for cost increases on highway and bridge projects
could not be determined because data were not readily available from
FHWA or the states.[Footnote 5] We found, however, on many of the
projects for which we could obtain information, that costs had
increased, sometimes significantly, and that several factors accounted
for the increases. In addition, initial cost estimates were not
reliable predictors of a project's total cost or financing needs
because they were developed at the environmental review stage, and
their purpose was to compare project alternatives, not to develop
reliable cost estimates. We further reported that cost containment was
not an explicit statutory or regulatory goal of FHWA's oversight;
therefore, the agency had done little to ensure that cost containment
was an integral part of the states' project management. In our May 2002
testimony before the Highways, Transit, and Pipelines Subcommittee of
your Committee, we reported that FHWA had begun to improve its
oversight by implementing Congress' finance plan requirements for major
projects and introducing risk-based decision making into its oversight
of states' processes on other projects.[Footnote 6] However, we also
reported that FHWA had not yet developed performance goals or
measurable outcomes linking its oversight activities to its business
goals, and that goals and strategies for containing costs could improve
accountability and make cost containment an integral part of how states
manage projects over time. Furthermore, we stated that opportunities
existed for improving the quality of cost estimating and developing
reliable and accurate information on the extent and nature of projects'
cost performance to help direct federal oversight efforts. Our work
identified several options for enhancing the oversight of major
projects. Reports by DOT's Office of Inspector General, as well as
reviews by state audit and evaluation agencies, have also shown that
the escalating costs and management of major projects continue to be a
problem. For example, the Inspector General has issued several reports
on FHWA's oversight and stewardship of major projects, such as the
Central Artery/Tunnel project in Massachusetts and the Woodrow Wilson
Bridge in Virginia and Maryland. More recently, the Inspector General
reported signs of improvement in FHWA's stewardship over major projects
but identified improvements needed in eight areas, including developing
more reliable cost estimates, managing project schedules better,
strengthening efforts to prevent and detect fraud, and refocusing
FHWA's efforts on project management and financial oversight.[Footnote
7]
Partly in response to concerns that we and others have raised, in
addition to the provisions Congress enacted in TEA-21, DOT also took
further action. In 2000 the Secretary of Transportation established a
task force to review oversight mechanisms and processes for major
transportation projects across DOT. Among other things, the task force
recommended that DOT improve the skills and qualifications of staff
overseeing major projects and conduct more rigorous financial reviews
of such projects. Although DOT did not formally implement the task
force's recommendations, FHWA responded to the task force report by
establishing a major projects team in Washington, D.C., to assist
FHWA's division offices in reviewing financial plans and overseeing
major projects and by assigning project oversight managers to each of
the major projects. In addition, in 2003, DOT proposed new legislation
as part of its TEA-21 reauthorization proposal requiring that (1)
states submit a project management plan as well as an annual financial
plan for any project with an estimated total cost of $1 billion or more
or any other project at the discretion of the Secretary; (2) states
develop financial plans for any project receiving over $100 million in
federal funds; (3) FHWA perform annual reviews of state transportation
programs' financial management and periodic reviews of state project
delivery systems for planning and managing projects; and (4) DOT
develop minimum standards for estimating project costs and perform
periodic reviews of state practices for estimating costs and awarding
contracts. This proposal was largely adopted in bills that were
separately approved by the House and the Senate in 2004 but that were
not enacted before the adjournment of the 108TH Congress.
To meet the requirements of the Government Performance and Results Act
of 1993 (GPRA), DOT establishes goals and outcome measures for the
programs under its jurisdiction, including the federal-aid highway
program, through its strategic and performance plans. GPRA requires
agencies to complete strategic plans in which they define their
missions, establish outcome-oriented goals, and identify the strategies
that will be needed to achieve those goals. GPRA also requires agencies
to prepare annual performance plans to articulate goals for the
upcoming fiscal year that are aligned with their long-term strategic
goals. The establishment of goals and measures is a valuable tool for
guiding an agency's strategies and resource allocations and for
establishing accountability for the outcomes of its day-to-day
activities. As our prior work has shown, measuring performance allows
organizations to track the progress they are making toward their goals
and gives managers crucial information on which to base their
organizational and management decisions. When an agency's day-to-day
activities are linked to outcome measures, these measures can create
powerful incentives to influence organizational and individual
behavior. In prior work, we found that leading agencies that
successfully link their activities and resources also seek to establish
clear hierarchies of performance goals and measures. Under these
hierarchies, an agency links the goals and outcome measures for each
organizational level to successive levels and ultimately to the
agency's strategic goals. Without this link, managers and staff
throughout the organization will lack straightforward roadmaps showing
how their daily activities can contribute to attaining organization
wide strategic goals.[Footnote 8]
FHWA Established Some Oversight Goals and Measures but Has Not
Effectively Implemented Them:
FHWA established measurable, outcome-oriented goals and measures
related to cost and schedule performance for the first time in its 2004
performance plan, but FHWA has not effectively implemented these goals
and measures in order to improve oversight. Specifically, FHWA has not
linked its day-to-day oversight activities to its goals for major
projects, and it has not yet used its goals and measures for nonmajor
projects to examine the performance of states or particular projects.
FHWA also uses estimates developed relatively late in a project's
development as its baseline for measuring its performance on achieving
cost and schedule goals; thus, it does not task itself with controlling
cost and schedule slippage during the early stages of a project's
development.
FHWA Recently Established Goals and Measures:
In December 2000, DOT issued a task force report concluding that a
significant effort was needed to improve the oversight of major
projects and recommending that DOT incorporate goals for its oversight
efforts into its performance plans as well as into the plans of
FHWA.[Footnote 9] In 2002, we reported that FHWA had not yet developed
performance goals or measurable outcomes linking its oversight
activities to its business goals and that goals and strategies for
containing costs could improve accountability and make cost containment
an integral part of how states manage projects over time.[Footnote 10]
FHWA has made some improvements over the past several years in
developing goals and performance measures related to cost and schedule
performance of federal-aid highway projects. In its fiscal year 2002
performance plan, FHWA included a strategic goal of organizational
excellence that had among its many strategic objectives the aim to
improve organizational performance. Since that time, from fiscal year
2003 to fiscal year 2005, FHWA's performance plans have specifically
identified under the organizational excellence heading a general
oversight goal to improve project oversight and stewardship so as to
realize more cost efficient federal-aid funds administration and
project management and more effective use of funds in terms of return
on investment. In its fiscal year 2004 performance plan, DOT for the
first time established goals and outcome measures specifically related
to achieving cost and schedule targets for its transportation
projects.[Footnote 11] FHWA incorporated these goals and measures into
its performance plan for highway projects, establishing, for the first
time, goals and measures for major projects that are outcome oriented
and measurable and clearly define containing project costs and
schedules as an integral part of FHWA's oversight mission. Figure 2
shows the goals and associated measures articulated in FHWA's fiscal
year 2004 performance plan.[Footnote 12]
Figure 2: Goals and Associated Measures Articulated In FHWA's 2004
Performance Plan:
[See PDF for image]
[End of figure]
FHWA Has Not Effectively Implemented its Goals and Measures:
While linking day-to-day activities to goals and measures is an
important element of implementing goals and measures by ensuring that
they are being used as a framework to guide the activities, we found no
evidence that FHWA has linked the day-to-day activities of its division
offices to its goal and measure for major projects. In our visits to
the three division offices that were overseeing a major project, we
found a lack of documented goals, strategies, or measures showing how
the division offices' activities supported and furthered the goals and
measures articulated in FHWA's 2004 performance plan. While each
division office had developed its own individual unit fiscal year 2004
performance plan, there was no link in these plans between the division
offices' activities and FHWA's goal and measure for major projects:
that is, to meet 95 percent of schedule milestones and cost estimates
for major projects or to miss them by less than 10 percent.[Footnote
13] Furthermore, in these three division offices, the project oversight
managers were not specifically tasked, as part of their duties and
responsibilities, with implementing or furthering the articulated cost
and schedule performance goals for major projects.
This absence of a link between activities and goals and measures was in
noticeable contrast to the link that the division offices had
established between their activities and the three areas of work that
FHWA has designated as its "vital few" priorities. FHWA's vital few
priorities, which consist of safety, congestion mitigation, and
environmental stewardship and streamlining, are areas that FHWA has
determined are key priorities and that it accordingly highlights in its
performance plans as areas where the agency has identified performance
gaps that must be addressed if FHWA is to be successful. Perhaps in
line with this emphasis, FHWA has developed a better link between its
division offices' activities related to these vital few priorities and
its goals related to these vital few priorities. For example, all seven
of the division offices we visited had unit plans that linked their
activities to all three of FHWA's vital few priorities. This link was
established through listing specific unit-level activities and measures
that were designed to meet unit goals that mirrored the national
performance plan's goals for its vital few priorities. For example, for
the vital few priority of safety, FHWA's fiscal year 2004 performance
plan set a performance goal of reducing highway fatalities to no more
than 1.38 per 100 million vehicle miles traveled. The fiscal year 2004
performance plan for one division office tasked itself with five
performance objectives to address this national goal, including such
objectives as improving accident rates involving roadway departures,
increasing the capability of FHWA and state engineers in highway safety
design, and reducing pedestrian fatalities.[Footnote 14] One or more
division-level performance measures and several specific activities
were identified for each of these five division objectives, and
performance expectations set for key division staff identified which of
these activities they were responsible for performing.
In addition to not linking its activities to its goal for major
projects, FHWA has also not yet used its goals and outcome measures to
help it identify and correct problems on the vast majority of projects
that are not considered major projects. In 2004, FHWA did not develop
numerical goals or outcome measures related to nonmajor projects, nor
did it assess the cost and schedule performance of projects on a state-
by-state or project-by-project basis in order to gain a clear picture
of whether certain states or projects have more cost or schedule
overruns than others in order to target its oversight activities.
Instead, FHWA officials told us that while FHWA's major projects team
recently started developing this state-by-state information, FHWA
relies on the division offices to monitor costs of individual contracts
and take action as appropriate. However, these officials could not say
with certainty whether their division offices were carrying out this
monitoring function, or what kinds of corrective measures were being
applied. FHWA officials also said that the agency relies on FHWA's
division offices to execute formal oversight agreements with the states
to ensure that they are working to control costs. However, none of the
oversight agreements of the seven division offices we visited reflected
an agreement between FHWA and the states to do this. As we concluded
our review, FHWA officials stated that in response to issues we raised,
FHWA would begin sharing information with its division offices and
begin discussing appropriate solutions or actions the divisions can
take to address incidences of cost growth.
For fiscal year 2005, FHWA made its cost-related goal for nonmajor
projects more specific by adding the outcome measure that the total
percentage of cost growth for all construction projects over $10
million will be less than 10 percent above the estimated cost when the
project went to construction. FHWA's preliminary information indicates
that the agency is, in the aggregate, meeting its goal; however,
sharing information with its division offices about variations in state
contract costs could help FHWA target its oversight efforts. For
example, FHWA's information also shows that about 1 in 5 of the 492
contracts approved for construction in fiscal year 2003 exceeded the 10
percent threshold in fiscal year 2004. One contract exceeded the
threshold by 160 percent. Our analysis of FHWA's information also shows
that some states may be more effectively controlling the costs of
federal-aid highway contracts than others. For example, in one state, 6
of 9 contacts over $10 million had exceeded the threshold, while in
another state, all of the contracts were under the threshold. While
opportunities exist for FHWA to use this information to better target
its oversight efforts, it faces challenges in doing so in light of
weaknesses recently reported by the DOT Inspector General's Office in
its financial management and reporting processes.[Footnote 15]
FHWA Does Not Measure its Performance over the Full Life of Projects:
FHWA uses cost and schedule estimates developed relatively late in a
project's development--at the point at which the project is ready to go
to construction--as a baseline for measuring its performance. We have
discussed our concerns with FHWA's use of later estimates as its
baseline measure in earlier work.[Footnote 16] We have recognized that
developing early estimates is difficult; however, we have pointed out
that using this late estimate as a baseline for measuring cost growth
provides a misleading picture of actual cost growth. This is because
cost estimates developed much earlier in the project--for example, at
the environmental review stage--are used to make the public investment
decision regarding the project. By the time the project goes to
construction, a public investment decision effectively has been made,
as substantial funds will have been spent on designing the project and
acquiring property, commitments will have already been made to the
public, and much of the increases in a project's costs may have already
occurred.
Moreover, by measuring its performance only after construction begins,
FHWA is not tasking itself with or establishing any accountability for
controlling cost growth during the part of the process where it
exercises direct oversight responsibility. Rather, it has focused its
goals on the phases of the project where it exercises less oversight.
This is because while FHWA is responsible for reviewing and approving
certain state transportation plans, environmental impact assessments,
and the acquisition of property for all projects, its role in approving
the design and construction of projects varies.
FHWA's Oversight Activities Have Promising Elements and Limitations:
FHWA and its major projects team undertook a number of activities to
improve its oversight efforts, which the major projects team documented
in its workplan summary (see app. II). Activities undertaken in
response to prior concerns included increasing the use of project
oversight managers, issuing guidance to states for improving cost
estimates throughout the life of projects, developing some information
on cost growth of major and other large projects, incorporating more
risk assessments into its reviews of state management processes, and
attempting to address congressional-committee direction to develop a
multidisciplinary approach to its oversight. FHWA's activities in these
areas have promising elements and limitations.
FHWA Established Competencies for Project Oversight Managers but Did
Not Establish Roles or Consistent Performance Expectations:
FHWA has taken some positive steps in its use of project oversight
managers for major projects, but it has not yet defined the role of
project oversight managers or established agency wide performance
expectations for them. Currently, FHWA has assigned project oversight
managers to 14 of the 21 active major projects, compared with 7 project
oversight managers and 14 major projects in 2002. An FHWA official said
that 6 project oversight manager positions would be advertised soon for
the other projects and would be filled within 6 months.[Footnote 17] In
August 2002, it issued a core competency framework to identify the
technical, professional, and business skills that project oversight
managers should possess and to serve as a guide for selecting and
developing these managers. This core competency framework defines the
skills and supporting behaviors of project oversight managers in areas
such as project and financial management, contract administration, and
program laws, and it specifies the desired proficiency level for each
competency at each grade level.
FHWA has also taken steps to provide guidance and tools for project
oversight managers, including an online resource manual and other
guidance on reviewing project management plans and finance plans. It
also made major projects team staff available to assist the project
oversight managers in completing their reviews of such plans, and it
sponsored annual meetings for project oversight managers to share
experiences. Additionally, FHWA identified external training
opportunities to help managers reach or improve their core competency
skills. FHWA sent a listing of these opportunities to project oversight
managers via email and invited these staff to enlist in courses that
interested them. For the future, FHWA's 2004 major projects team work
plan summary envisions a variety of additional activities to improve
the effectiveness of project oversight managers, including working with
universities and training vendors to establish a skill set development
and certification program to ensure that all project oversight managers
acquire the same critical skills and to establish a career path for
them. According to FHWA, having a career path would make the position
of project oversight manager a more attractive career option because it
would provide opportunities to work with more challenging projects and
provide promotion opportunities so that managers could advance within
FHWA while staying in the project management track.
However, there are limitations with FHWA's efforts so far. While the
core competencies define the skills that project oversight managers are
expected to possess, they do not define what the managers should do to
oversee a major project. FHWA has not yet articulated the role of
project oversight managers or established agency wide performance
expectations for them. In prior work, we established that setting
performance expectations that are linked to goals is important, as a
specific alignment between performance expectations and organizational
goals helps individuals see the connection between their daily
activities and organizational goals.[Footnote 18]
According to FHWA officials, project oversight managers are assigned to
the division offices, and each division office defines what its project
oversight manager does. At the three division offices we visited that
had major projects and project oversight managers, none had set
performance expectations for the project oversight manager that
specifically tasked the project oversight manager with achieving the
goals and outcome measures for the major projects. Project oversight
managers and division officials stressed the project oversight
managers' close, hands-on involvement with the state transportation
agencies in the project, on an almost daily basis. For example, project
oversight managers and other division office staff help state
transportation agencies prepare finance and project management plans,
get involved in design, participate in community outreach, and brief
local political leaders on major projects. However, the extent to which
the activity of the project oversight managers supported DOT's cost and
schedule goals was not clear.
Finally, without clear roles, responsibilities, and performance
expectations for project oversight managers that are clearly linked to
FHWA's goals, it is unclear what training is most needed to enable
project oversight managers to improve their performance and meet the
agency's goals. Our guidance for assessing training efforts cites the
need for training efforts to be an integral part of the strategic and
performance planning process and to focus on reaching the agency's
goals, rather than being implemented ad hoc.[Footnote 19]Currently, the
training opportunities FHWA offers to project oversight managers are
identified by the major projects team and are voluntary. There is no
program of required courses--staff can choose which courses they would
like to take, or take no courses at all. In March 2004, the head of
FHWA's major projects team sent an e-mail to the oversight managers
advising them of available training. To date, three project oversight
managers and one other division office engineer have each volunteered
to take one or two courses.
FHWA officials told us they eventually plan to establish a
certification program for project oversight managers and to introduce a
project oversight manager skills-set or career path to make project
management a more attractive career option by setting out opportunities
for more challenging projects, and providing promotion opportunities.
However, as of December 2004, FHWA does not have a time frame for
implementing its plans, and officials told us these activities would
not be implemented without additional resources.
FHWA Provided Guidance to States on Developing Cost Estimates but this
Guidance is Voluntary and Covers Only Major Projects:
In another positive step since 2002, FHWA has provided guidance to
state transportation agencies to assist them in applying sound cost
estimating practices, including guidance in developing more realistic
early cost estimates. However, this guidance is voluntary and covers
only major projects, and we found evidence that there is some
resistance by FHWA officials to focusing on developing earlier cost
estimates. In past work, we have identified problems related to FHWA's
lack of accurate cost estimates for projects. For example, in 1997, we
found that cost increases occurred on projects, in part, because the
initial cost estimates were not reliable predictors of the total costs
or financing needs. Rather, these estimates were developed for the
environmental review--the purpose of which is to compare project
alternatives, not to develop reliable cost estimates. In addition, each
state used its own methods and included different types of costs in
developing its estimates, since FHWA had no standard requirements for
preparing cost estimates. Since that time, in 2003, FHWA surveyed its
division offices on cost estimating practices in their states and found
a variety of approaches to developing cost estimates, including
manually compiling estimates from historical data, using estimated
quantity or cost per mile calculations, or utilizing various externally
or internally developed software; one state reportedly lacked any
formal process. Similarly, the American Association of State Highway
and Transportation Officials (AASHTO) reported widely varying practices
among the states in developing cost estimates.
In June 2004, FHWA issued guidance that articulated the importance of
developing realistic early cost estimates that would be more stable as
a project progresses. Specifically, FHWA's guidance stated that it is
important that care be taken to present an achievable estimate even in
the early stages of project development, because logical and reasonable
cost estimates are necessary to maintain public confidence and trust
throughout the life of a major project. Moreover, the guidance
recognized that cost increases over and above the early planning and
environmental estimates for major transportation projects have become
of increasing concern to congressional and political leaders, federal
and state top managers, and auditing agencies. In addition to
recognizing the difficulty of developing more accurate cost estimates
early in the project, this guidance includes such components as what
should be included in an estimate, how it should be approved, factors
to include in contingencies, and other information. This guidance may
help states move towards more consistent and reliable cost estimates
during the earlier planning phases when decisions are being made about
whether or not to go forward with the project, as well as the project's
potential design and construction.
FHWA also established help teams that travel to states that ask for
assistance in creating better estimates. For example, in March 2003
FHWA was asked by the Kentucky and Indiana transportation departments
for help in reviewing the accuracy and reasonableness of the initial
cost estimate to complete the Ohio River Bridges project. This project
includes two new bridges over the Ohio River that would link eastern
Louisville, Kentucky, and Clark County, Indiana, with additional
interchange improvements. FHWA staff helped state officials identify
the need for revised cost estimates and more realistic completion dates
based on such factors as more realistic right-of-way costs, needed
environmental mitigation, revised contingencies, and updated inflation
rates. A team of federal and state staff working with consultants
recommended that the total cost estimate of the project be revised from
$1.6 billion to $2.5 billion and that its expected completion date be
revised from 2017 to 2020. State officials accepted these
recommendations.
While these cost estimating guidance and assistance efforts represent a
positive step, it is too early to tell whether they will actually
improve cost estimating efforts in most states. Furthermore, there are
indications that there is some resistance among FHWA officials and
states to emphasizing the importance of more accurate early estimates
in practice. For example, some FHWA officials with whom we spoke said
that costs cannot be accurately estimated early because issues such as
public opposition to a project or unforeseen environmental mitigation
procedures that are determined necessary are likely to drive up the
cost of a project. They said early estimates should not be used as a
basis for monitoring project costs. Other FHWA officials believed that
the estimate developed at the conclusion of the design phase, as the
project is ready for construction, is the only realistic estimate to be
used as a baseline. Some FHWA officials told us that resolving concerns
about cost estimates is more a matter of managing public expectations,
so that the public understands that early estimates are not reliable
and cannot be counted on, and that the actual cost will exceed early
estimates. AASHTO also believes that accurately estimating costs at the
early stages of a project can be a challenge. According to a May 2004
AASHTO report, property acquisition needs and environmental and
regulatory requirements may not be fully known early on, becoming clear
only as the project progresses. Public input can contribute to
additional features being added to projects, known as "scope creep,"
and litigation can delay a project, adding to costs because of
inflation.
We recognize that many challenges exist to developing more realistic
early estimates that more accurately reflect the expected cost of a
project. However, as we have also reported, relying on estimates
prepared as a project is ready to move to construction is too late in
the process, as substantial funds may have already been spent on
designing the project and acquiring property, and a public investment
decision may, in effect, already have been made. FHWA's guidance
recognizes that steps can be taken to take uncertainties into account
when developing early cost estimates through such means as developing
contingencies. Some states have begun taking action to improve the
reliability of early cost estimates. For example, Washington State's
Cost Estimate Validation Process uses project teams to identify risk
factors, along with costs and mitigation strategies for each factor.
These results are then entered into a computer-based modeling program
that produces a range and a project cost estimate at the 90 percent
confidence level, rather than a single dollar cost estimate.
DOT's proposed legislation for the reauthorization of TEA-21 in 2003
included provisions empowering the Secretary to develop minimum
standards for estimating project costs and to perform periodic reviews
of state practices for estimating project costs. These provisions were
adopted in bills that were separately approved by the House and the
Senate in 2004 but that were not enacted before the adjournment of the
108TH Congress. According to FHWA officials, if these provisions are
adopted, the provisions may require them to move beyond voluntary
guidance and issue regulations covering states' practices for
estimating costs.
FHWA Has Started to Collect Some Cost Information, but it still Lacks
the Capability to Determine the Extent of and Reasons for Cost Growth
on Projects:
FHWA has started to collect some cost information on some projects, but
it still lacks the capability to determine the extent of and reasons
for cost growth on projects so that it can better focus its oversight
efforts. In 1997 we reported that cost growth occurred on projects, but
the extent could not be determined because FHWA's information system
for highway projects could not track total costs over the life of a
project.[Footnote 20] In 2002, we testified that this information was
still not available and noted that recent congressional attempts to
gather complete and accurate information about the extent of and the
reasons for cost growth had met with limited success.[Footnote 21] In
response to these concerns and requests from Congress for data, FHWA
has begun to collect project cost data, but it has not substantially
improved its ability to monitor total costs on projects.
FHWA has undertaken two efforts to collect information on the cost
performance of federally financed projects. First, it has started
tracking information on cost growth of major projects. The small number
of these projects allows the tracking to be done manually on a table
containing cost and schedule information for key aspects of each major
project. Second, FHWA has developed aggregated cost information on
construction contracts over $10 million on a state-by-state basis. FHWA
has done this by comparing the current estimated costs of all contracts
over $10 million in each state with the engineering estimate developed
before the contract was awarded. However, as mentioned earlier, the
state-by-state information FHWA has developed has not yet been used to
measure performance or target its oversight efforts.
In spite of this progress, FHWA still does not have the capability to
measure the extent of and reasons for cost growth on projects. FHWA's
principal vehicle for tracking project costs is its financial
management system. This system is an accounting system, not a project
information system, and it tracks federal reimbursements by contract
rather than by project. Because one project can include many contracts
over many years, and the system does not automatically link contracts
to projects, FHWA has little easily accessible information to help it
determine the total overall costs of each project, other than the major
projects it tracks individually outside of its financial management
system. In one case, FHWA division staff told us that because FHWA's
financial management system does not track costs by project, the
division developed its own spreadsheet to track project costs.
Our recent work confirmed FHWA's continued difficulty with tracking
cost growth on projects. We randomly selected 14 contracts from 7
division offices and asked FHWA's division offices to identify the
project related to each contract. We then requested consolidated cost
information on the 14 projects. FHWA took an average of more than 3
months--and up to 6 months--to provide us this information for 12 of
the 14 projects, and it was unable to provide us complete cost
information on the other 2 projects. (See app. I for more details.) The
primary reason for FHWA's difficulty in providing us with this
information was that FHWA and state staff could not easily or
electronically compile information on a project-by-project basis. For
example, one division office said it had to develop and run special
transaction reports and manually extract the information we wanted
because the support files for the information were at different
locations, including a state district office, state transportation
agency offices, and comptroller offices. Another told us it had to take
the extra step of either combining or separating contracts in order to
compile information by project, which resulted in more "hand work."
Another said that files on contracts for one project were kept in
different locations depending on the stage of the project that the
contract was related to. As a result, quite a bit of staff time was
tied up as they attempted to get information from multiple departments
of the state transportation agency. FHWA's continued difficulties in
maintaining accurate and complete data to determine the extent of cost
growth on projects limit its ability to evaluate why cost growth
occurs, identify problems and solutions, target its oversight efforts,
and transfer lessons learned.
FHWA Has Established Risk Assessments, but These Risk Assessments Are
Not Always Used:
FHWA expects its division offices to use some form of risk assessment
to help guide its reviews of state management processes, also known as
process reviews. However, risk assessments are not always being used
consistently or effectively. As we reported in 2002, FHWA issued a
policy in June 2001 encouraging its division offices to prioritize the
risks in the transportation programs in their states and to direct
their oversight efforts based on these results. The policy did not
require a specific risk assessment approach but allowed division
offices flexibility in developing an approach with their state
agencies. FHWA considered its establishment of risk assessment
practices at the division offices to be the first of a two-phased
approach that would lead to an overall risk management program for
FHWA, which was still under consideration within FHWA's leadership as
of November 2004.
Each of the seven division offices we visited had developed a risk
assessment approach, and five out of seven of the offices were using
these risk assessments to guide their process reviews. However, at two
division offices, the results had not been used to direct their process
reviews. Staff at one division office we visited reported that although
they had been doing risk assessments for a few years, they did not use
the results to target state activities for review. Instead, they
targeted state activities for review by meeting with state officials to
draw up an intuitive list of state operations for process reviews.
Similarly, another division office had drafted a risk assessment
approach, but it had not yet tried to use it. Division office staff
were skeptical that it would yield better results than their own more
intuitive approach to identifying which state program operations
warranted a process review.
In addition, in November 2004 the DOT Inspector General reported that
FHWA's risk assessments were voluntary and did not provide a systematic
approach for assessing program risks throughout the agency. The Office
of Inspector General (OIG) reported that risks assessments varied
significantly in the scope and methodology used and how the assessment
results were rated and classified. As a result, some major programs
were not reviewed, and risk assessment results were not reliable or
comparable across states. To improve FHWA's process for managing risk,
the OIG recommended that FHWA require all division offices to conduct
risk assessments and that it issue guidance to division offices to
ensure risk assessments are conducted more strategically and with a
disciplined methodology. The OIG further recommended that FHWA analyze
trends within individual risk assessments to identify agency wide
issues and problems and establish a systematic follow-up process to
ensure that oversight attention is given to high-risk areas.[Footnote
22] FHWA was in the process of reviewing and responding to the OIG's
recommendations when we concluded our review.
FHWA Has Begun to Take Steps to Develop a Multidisciplinary Approach to
Oversight, but its Efforts so Far Have Been Limited:
In February 2003, in the Conference Committee Report for the DOT fiscal
year 2003 continuing appropriations, the conferees expressed continuing
concern about FHWA's management of major projects, and in particular, a
concern that FHWA's traditional engineering focus had inhibited
oversight in such areas as financing, cost control, and schedule
performance.[Footnote 23] Accordingly, FHWA was directed to evaluate
the range of disciplines and skills within its staff and to develop a
strategy for achieving a more multidisciplinary approach towards its
oversight activities, including identifying staff with such skills as
financing and cost estimation.
However, FHWA's human capital plan does not incorporate strategies for
developing a workforce to support a more multidisciplinary oversight
approach. In prior work, we noted that the process of strategic
workforce planning addresses two critical needs: (1) aligning an
organization's human capital program with its current mission and
programmatic goals; and (2) developing long-term strategies for
acquiring, developing, and retaining staff to achieve programmatic
goals.[Footnote 24] To some extent, FHWA's human capital plan does this
for the agency's current vital few priorities of safety, congestion
mitigation, and environmental stewardship. But the agency's oversight
mission is not truly incorporated into the plan. FHWA's human capital
plan acknowledges the congressional-committee direction FHWA received
to develop a more multidisciplinary approach to oversight. The plan
states that this approach will require the development or acquisition
of new skills, specifically in the areas of financing, funds
accountability, project-level cost control, schedule performance,
process management, and transportation planning. However, FHWA's human
capital plan does not relate these needed skills to the skills
possessed by its present workforce, nor does it address how these
skills will be developed or acquired. Instead, FHWA's human capital
plan is essentially a plan for replacing individuals in its current key
occupations whom it expects to lose through attrition over a 5-year
period.[Footnote 25]
Additionally, strategies for developing a multidisciplinary approach
were not reflected in FHWA's guidance to its division offices for
developing their workforce plans. This year, FHWA required its division
offices and other units to prepare a workforce plan for the upcoming 3-
to-5 year period identifying anticipated skill gaps in their workforce.
However, the guidance FHWA provided did not mention the
multidisciplinary skills that FHWA had identified in its human capital
plan. As we have pointed out in prior work, when planning for the
future, leading organizations go beyond simply replacing individuals
and engage in broad, integrated planning and management efforts that
focus on strengthening both current and future organizational
capacity.[Footnote 26] This is particularly important for FHWA, as its
traditional engineering focus has drawn congressional committee concern
that has led to direction to develop a multidisciplinary approach
towards its oversight activities.
Similarly, FHWA's recruiting efforts do not incorporate strategies for
developing a more multidisciplinary approach to project oversight. Like
its human capital plan, FHWA's recruitment plan for 2003 through 2005
is primarily a plan for hiring to fill the agency's traditional
occupations. The recruitment plan does not set any specific goals or
objectives for acquiring needed multidisciplinary skills that FHWA
articulated in its human capital plan, such as project level cost
control, schedule performance, process management, and transportation
planning. Under the recruiting plan, the development of a
multidisciplinary approach is addressed through FHWA's professional
development program (PDP). FHWA's PDP, which historically focused on
engineers, is a 2-year program that provides developmental assignments
and on-the-job and classroom training for entry-level staff. Officials
told us that PDP staff are now being given assignments allowing them to
develop a broader range of skills at the start of their careers,
including assignments to division offices with major projects. They
also note that over recent years FHWA has been hiring fewer engineers
for its PDP programs and more staff from other backgrounds.
The other principal component of FHWA's response to congressional
committee direction to develop a multidisciplinary approach to project
oversight is training, but the agency has made limited progress in
developing new courses to bring new skills to its workforce. Only two
new training courses were being developed specifically to address
needed skills--a course on project cost estimation and a course on
project management for managers in division offices. As of November
2004, both courses were being pilot tested.[Footnote 27] As we noted
earlier, it is important for training to be an integral part of an
agency's performance planning process to ensure that it contributes to
reaching agency goals. However, in its fiscal year 2005 performance
plan, FHWA allows divisions the discretion to decide whether or not to
participate in multidisciplinary training for its project oversight
managers and professional development program staff. In addition, as
noted earlier, FHWA has identified and offered external training
courses to project oversight managers, but to date only a few managers
and other key division staff have expressed an interest. Even so, FHWA
human resources officials we spoke to told us they believed that the
congressional committee's direction to develop a multidisciplinary
approach to project oversight has been largely met through their
already existing training efforts. These efforts include making courses
available on risk assessment techniques, conducting process reviews,
and implementing financial management improvements.
In addition to FHWA's limited progress in developing strategies for
meeting this congressional-committee direction, FHWA has not fully
embraced the need to develop a more multidisciplinary approach to
oversight. FHWA human resources officials we spoke to believed the
concern that FHWA's workforce is centered on engineering at the expense
of other project oversight skills is based on a misperception--that is,
not recognizing that FHWA engineers take on many other tasks not
strictly related to engineering. Furthermore, two division office
officials we spoke to in the course of our work questioned the need for
FHWA to focus on multidisciplinary skills. One division administrator
commented that "multidisciplinary" means that a person can do many
things, and therefore that division's staff was already
multidisciplinary. The deputy administrator in another division
questioned what was meant by multidisciplinary skills, believing there
was no guidance from headquarters on this.
FHWA Faces Challenges to Improving Oversight:
FHWA's efforts to improve oversight face several challenges. These
challenges stem from the structure of the federal-aid highway program
and the culture of partnership that has resulted between FHWA and the
states. These challenges also stem from FHWA's decentralized
organization, human capital challenges that mirror those faced
throughout government, and FHWA's perception that it has received
conflicting signals on its oversight role over the years. Because these
challenges are in large part rooted in FHWA's organization and culture,
and in the structure of the program it administers, they may be
difficult to surmount.
Structure of the Federal-Aid Highway Program:
Because the federal-aid highway program is a state-administered,
federally assisted program, it provides states broad flexibility in
deciding how to use their funds, which projects to pick, and how to
implement them. Furthermore, states are exempt from FHWA oversight on
design and construction of many projects. Although DOT has articulated
goals and outcome measures for the federal-aid highway program, such as
improving safety and reducing the growth of traffic congestion, FHWA
must implement and achieve these goals through a program over which it
exercises limited control. Our past work across government programs has
shown that in programs that have limited federal control, agencies face
challenges to ensure that federal funds are efficiently and effectively
used.[Footnote 28] We have also found that these challenges can be
successfully overcome, in some cases, by ensuring that the program has
clear goals and strong analytical data to measure program results.
However, as stated earlier, FHWA's efforts both to implement its goals
and to collect and analyze data on project costs have fallen short.
Exacerbating this challenge is the fact that, as our August 2004 report
highlighted, the federal-aid highway program does not have the
mechanisms to link funding levels with the accomplishment of goals and
outcome measures that DOT has articulated.[Footnote 29] We have also
reported that although a variety of tools are available to help measure
the potential performance outcomes, such as those that measure the
costs and benefits of transportation projects, such potential outcomes
often do not drive investment decisions, as many political and other
factors influence project selections.[Footnote 30] For example, the law
in one state requires that most highway funds, including federal funds,
be distributed equally across all of the state's congressional
districts. Consequently, the structure of the federal-aid highway
program provides no way to measure how funding provided to the states
is being used to accomplish particular outcomes, such as reducing
congestion or improving safety, and little assurance that projects most
likely to accomplish goals and outcome measures articulated by DOT will
be funded. The absence of such a link may make it more difficult for
FHWA to define its role, the purpose of its oversight, and what its
oversight is designed to accomplish.
In August 2004, we reported that policy makers may wish to consider
realigning the federal-aid highway program's design, structure, and
funding formulas to take into account the program's goals and to
include greater performance and outcome oriented features. We also said
that such consideration could include the appropriate roles of the
federal and state governments, including what type of administrative
structure for overseeing the federal-aid highway program would best
ensure that the performance goals are measured and accomplished. Our
report provided Congress with a matter for congressional consideration
and said that the proposed National Commission to assess future revenue
sources to support the Highway Trust Fund might be an appropriate
vehicle through which to examine these options.[Footnote 31]
Culture of Partnership:
Consistent with the structure of a state administered, federally
assisted program, FHWA has developed a culture of partnership with the
states. This culture of partnership dates back to the Federal-Aid Road
Act of 1916, when the program was funded through a 50 percent federal
and 50 percent state matching share. This partnership approach
recognizes that states select, plan, and build projects, while FHWA
ensures that federal laws and other requirements are followed by
maintaining a close, hands-on involvement with state transportation
agencies in delivering projects. FHWA and state officials believe that
over the years this partnership has helped to build trust and respect
between state transportation agencies and FHWA and ensure that
priorities such as safety and the environment are addressed, and has
resulted in projects being built more economically and efficiently.
However, there is a potential down side to this partnership approach.
When a project overseer becomes an active partner in a project, an
arms-length, independent perspective can be lost. In fact, FHWA's
partnership approach to project oversight has failed in the past. FHWA
had an oversight manager on the Central Artery/Tunnel Project in
Boston, Massachusetts, a project that experienced widely-reported cost
increases, growing from around $2.3 billion in the mid-1980s to almost
$15 billion by 2004. In March 2000, an FHWA task force charged with
reviewing FHWA's oversight of the project found that FHWA had been
caught unaware earlier that year when the state revealed an estimated
$1.4 billion cost increase. The task force attributed this to FHWA's
over reliance on trust between itself and the state, reporting that
FHWA's partnership approach failed to achieve independent and critical
oversight of the project.
FHWA officials acknowledged that independence is critical to effective
oversight and also acknowledged the need to closely monitor the
performance and independence of their project oversight managers on an
ongoing basis. However balancing the role of overseer and partner can
be difficult. In one state we visited, the division's oversight manager
for a major project had business cards that identified him as a member
of the state's project team--with the project's logo, Website, and e-
mail address printed on the card--rather than as a federal employee.
Only his position title on the card, "FHWA Project Administrator,"
identified him as an FHWA employee, rather than as a state employee.
Ensuring that FHWA oversight personnel maintain an independent
perspective is especially critical given the current lack of linkage
between FHWA's performance goals and the roles and expectations of its
project managers.
Another potential challenge presented by FHWA's culture of partnership
with the states is that it may have prevented FHWA from considering
other models for project oversight--including some models in use within
DOT. For example, the Federal Transit Administration (FTA) uses
competitively selected engineering firms as oversight contractors to
monitor major mass transit projects costing over $100 million. During
the project's design, the contractor reviews the grantee's plan for
managing the project and determines whether the grantee has the
technical capability to complete the project. Once FTA approves the
plan, the contractor monitors the project to determine whether it is
progressing on time, within budget, and according to plan. In prior
work, we noted that FTA's project management oversight program
benefited both the agency and the grantees carrying out the
projects.[Footnote 32] As another example, DOT established a Joint
Program Office to help carry out the Transportation Infrastructure
Finance and Innovation Act Program, which provides credit assistance to
states and other project sponsors for surface transportation projects.
This office reviews and evaluates proposed projects for participation
in the program, reviews financial plans and progress reports during
project construction, monitors the project sponsor's credit, and
coordinates site visits and other oversight activities with DOT field
offices.
FHWA's Organization:
FHWA administers the federal-aid highway program through a
decentralized division office structure and delegates much of FHWA's
decisionmaking and program implementation to those offices. Therefore,
FHWA's division administrators enjoy wide latitude to implement their
programs. FHWA has had a field office in every state since 1944, and,
according to FHWA and state officials, this arrangement gives maximum
flexibility to the people closest to the customer and to the issues to
make decisions best suited to particular needs and situations.
According to FHWA officials, this decentralization of decisionmaking
and program implementation to the division offices increased after 1998
and the passage of TEA-21, which eliminated FHWA's nine regional
offices.
While this flexibility may have benefits, decentralization presents
challenges for the implementation of a consistent national leadership
vision and strategies. These long-standing organizational arrangements
may have contributed to such conditions as the lack of uniform
performance expectations for project oversight managers, widely varying
methods used to develop cost estimates for projects, and different
approaches to doing risk assessments. Some limitations are by design.
For example, while FHWA's fiscal year 2005 performance plan discusses
multidisciplinary skill training for its oversight managers and
professional development program staff, it also specifically grants
division administrators the discretion about whether to participate.
FHWA officials acknowledged the challenges of consistently implementing
national level goals and programs among the many division offices.
Human Capital:
Our 2003 update to our High-Risk Series of reports recognizes that
strategic management of human capital continues to be a high-risk area
government wide.[Footnote 33] Although considerable progress has been
made since we first designated human capital a government wide high-
risk area in 2001, federal human capital strategies are not yet
appropriately constituted to drive the transformation that is needed
across the federal government. Among the challenges agencies face are
the need to improve their ability to acquire, develop, and retain
talent, and the need to better and more fully integrate these and other
human capital efforts with agencies' missions and program goals.
For FHWA, this government wide challenge manifests itself in a number
of ways, including the need to transform its workforce and culture to
meet its evolving mission. FHWA's workforce partnered with the states
to build the Interstate Highway System from 1956 into the 1990s. FHWA
needed engineering skills to perform tasks, such as detailed reviews of
design plans and inspections of construction progress to ensure that
national uniformity in terms of design and safety was established
throughout the interstate system. These skills were especially
important because, according to FHWA and state officials, state
transportation agencies did not have the equivalent capability to do
the job at that time. In recent years Congress has recognized the
increased capacity of state transportation agencies and increasingly
delegated approval authorities to the states, including the authority
over design and construction decisions for most projects. As a
consequence, FHWA's oversight role and mission have evolved to include,
for example, greater reliance on broad reviews of state management
processes.
As FHWA's oversight role and mission evolves, FHWA faces the challenge
of transforming its workforce and culture to evolve with this role and
mission. In our discussions with FHWA field staff, we noted reluctance
among some FHWA staff to focus on these broader reviews that FHWA
increasingly relies on because they see these as less important than
the traditional tasks of reviewing design plans and inspecting the
progress of construction. Division office officials in two states we
visited told us that change has been an issue for its more tenured
staff. For example, the Administrator at one office had begun to hire
staff with a variety of skills, while officials at the other office saw
a need for more specialists, including staff with financial expertise.
Officials also said some staff have resisted doing process reviews
because they see it as functioning as auditors rather than as partners
with the state in delivering projects, which is how they prefer to be
seen. Overcoming these challenges will become even more important in
the years ahead should proposed legislation increasing FHWA's oversight
responsibilities be enacted.
FHWA's Perception of Conflicting Legislative Direction on Oversight
Role and Responsibilities:
In 2001, a FHWA task force concluded that changes in the agency' s
oversight role mandated by highway program authorizations enacted in
1991 and 1998 had resulted in internal confusion and wide variation in
interpretations by FHWA personnel covering the agency's roles and
responsibilities in overseeing projects.[Footnote 34] In 2002, we
reported that FHWA could not say whether it had resolved the internal
confusion and variations in interpretations of the agency's oversight
role identified by the task force.[Footnote 35]
During our review we found that some confusion continues, as some of
the FHWA personnel we spoke to expressed the view that Congress has
sent mixed messages about the extent to which it would like to see FHWA
oversee projects. According to some division and headquarters FHWA
officials, federal laws over the years have required FHWA to withdraw
from direct oversight of most projects, while at the same time,
legislation has increased the oversight requirements for major
projects, resulting in mixed signals. Changes that were proposed by DOT
and passed by the House and the Senate in 2004 but not enacted before
the adjournment of the 108TH Congress could, if reintroduced and
enacted by the 109TH Congress, help clarify FHWA staff's perception of
their oversight role by, for example, mandating reviews of state
financial system, developing cost estimating standards, and cascading
requirements for major projects to other projects. Enactment of these
provisions would also provide Congress the opportunity to provide a
more detailed explanation of and purposes for these provisions
regarding FHWA's role versus the states' role in overseeing cost and
schedule performance of federal-aid highway projects in the legislative
history accompanying the reauthorization bill. As we stated in our 2002
testimony, such clarification would be helpful.
Best Practices Can Help Improve Progress and Address Challenges to
Improving Project Oversight:
Reports and analyses published by us, OMB, and the National Research
Council suggest a set of best practices that agencies can benefit from
in conducting effective oversight of large infrastructure projects such
as those in the federal-aid highway program overseen by FHWA. While
these reports and analyses tend to focus more on overall project
management, there are elements in each of them that relate specifically
to improving project oversight. From our review of these reports and
analyses, we identified four best practices that are particularly
applicable to FHWA's oversight efforts and that FHWA officials and
decision makers can consider to help effectively oversee large
infrastructure projects and states' financial and management processes.
While some of these best practices are beginning to be reflected in
FHWA's activities, as a whole, they could provide a framework for
moving to a comprehensive approach to project oversight. These best
practices are 1) establishing measurable project oversight goals and
communicating these goals down through all levels of the agency, 2)
establishing project oversight manager role and accountability based on
oversight goals, 3) providing professional training and a career path,
and 4) learning lessons and transferring them.
Establishing Measurable Project Oversight Goals and Communicating These
Goals through All Agency Levels:
As we discussed earlier, agencies seeking to make oversight a priority
should establish measurable project oversight goals that help it carry
out its mission and define what its oversight is designed to
accomplish--and should communicate these goals down through all levels
of the agency. Having measurable goals gives managers the means to
objectively and quantifiably assess progress toward achieving certain
outcomes. If an agency relies only on general goals to guide its
efforts, the agency will not have any way of determining whether it
achieves those goals since it has not first identified a way to
quantify or measure the outcome. Once these goals are established,
agencies should communicate these goals down to all levels of the
agency. One way to ensure that the goals are communicated effectively
is to link the agency's day-to-day activities to these goals. Our 1998
report on leading practices in capital decision-making added that clear
communication of an organization's vision and goals is a prerequisite
for success. Top-level officials develop the organization's priorities
and communicate them downward to subunits within the organization.
Based on these goals, managers at all levels work to produce plans and
activities that outline their individual strategies for achieving top-
level goals.[Footnote 36]
Establishing Project Oversight Manager Role and Accountability Based on
Oversight Goals:
Once an agency establishes its oversight goals, it should incorporate
those goals into its strategies and activities by making oversight
managers accountable for the effective implementation of the goals. We
recently recommended that Amtrak adopt policies and procedures for
managing infrastructure projects that, among other things, include
mechanisms to ensure accountability for a project's success. We stated
that such mechanisms should clearly indicate the individuals
responsible for implementing the project, the expectations for their
performance, the ways their performance will be measured, and the
potential consequences for failing to meet expectations.[Footnote 37]
In this report, we noted that some of the railroads we had contacted
tied pay and personnel decisions to performance, holding project
managers directly responsible for the project's success and failure.
In other previous work, we have also noted that how such pay for
performance efforts are done, when they are done, and the basis on
which they are done can make all the difference in whether such efforts
are successful.[Footnote 38] In addition, in other prior work, in 2000,
we found a number of emerging benefits from the use of results-oriented
performance agreements for executives, including, among other things,
providing results-oriented performance information to serve as the
basis for executive performance evaluations.[Footnote 39]
Providing Professional Training and a Career path:
Professional training enables oversight staff to understand their
expected roles in achieving the agency's oversight goals. Having a view
of a future career is also desirable for the development of oversight
staff. In 1999 the National Research Council reported that the
Department of Energy could improve its project performance by
developing skills, training opportunities, and a career path in project
management. The report added that the agency needed to establish
criteria and standards for selecting and assigning project managers,
including documentation of training, and should require that all
project managers be trained and certified.[Footnote 40] In prior work,
we have found that an agency's training program should be linked to
achieving the agency's strategic goals, while specific training for
each individual should be based on his or her developmental
needs.[Footnote 41]
Lessons Learned and Transferred:
Effective oversight also requires a proactive approach to establishing
evaluation mechanisms, collecting information, and transfering lessons
learned on an ongoing basis. Learning from past successes and mistakes
and sharing that information with decision makers, agency officials,
and project managers is a critical element for effective oversight. Our
1996 executive guide to help agencies implement GPRA reported that
agencies analyzing the gap between where they are and where they need
to be to achieve desired outcomes can target those processes that are
in most need of improvement, set realistic improvement goals, and
select an appropriate process improvement technique such as
benchmarking. Benchmarking compares an internal agency process with
those of private and public organizations that are thought to be the
best in their fields.[Footnote 42] In addition, our 1998 report on
leading practices in capital decision making also found that agencies
could evaluate and compare results with goals by using financial and
non-financial criteria that link its overall goals and objectives. In
2000, we reported that agencies conducting program evaluations improved
their measurement of program performance or understanding of
performance and how it might be improved.[Footnote 43] In addition, our
Executive Guide on Capital Decision-Making identified practices federal
agencies can implement to enhance their evaluation processes.[Footnote
44] In 1997, OMB stated in its Capital Programming Guide[Footnote 45]
that agencies should be able to document and support the accomplishment
of the respective agency goals. Agencies can also evaluate the planning
and procurement process to determine whether a project accurately
predicted the desired benefits 3 to 12 months after it has become
operational. The Guide added that conducting a project post-
implementation review that evaluates the success or failure of projects
serves as an assessment. The review compares actual results against
planned cost, returns, and risk. The results are used to calculate a
final return on investment, determine whether any additional project
modifications may be necessary, and provide lessons learned for changes
to the agency's capital programming processes and strategy. Finally,
the National Research Council's 1999 report stated that agencies such
as the Department of Energy should transfer knowledge gained about cost
estimating techniques, project review processes, change control
mechanisms, and performance metrics from one project to another.
Conclusions:
FHWA has made progress since 2002 in improving its oversight efforts,
including its direct oversight of major projects and its broader
reviews of state management processes that are used to oversee states'
management of most other projects. For example, FHWA's actions to
enhance the capabilities of project oversight managers overseeing major
projects and to incorporate risk assessments into its reviews of state
management processes are both positive steps towards improving
oversight. Most significantly, FHWA has established, for the first
time, goals and measures that clearly make containing project costs and
schedules an integral part of how FHWA conducts its oversight.
However, despite promising results, FHWA's efforts have also had
limitations. FHWA still lacks a comprehensive approach to ensuring that
its oversight of federal-aid highway projects supports the efficient
and effective use of federal funds. A comprehensive approach would
avail itself of best practices and would include (1) goals and outcome
measures with activities and performance expectations set for its staff
that are linked to these goals and measures; (2) an overall plan for
FHWA's oversight initiatives and activities that responds to past
concerns raised about its program and is tied to its goals and
measures; (3) workforce planning efforts that support the goals,
measures, and overall plan; (4) centrally defined roles and
responsibilities for key staff, such as oversight managers for major
projects; and (5) the capability to track and measure costs over the
life of projects in order to identify problems, help target resources,
and transfer lessons learned. Without such a comprehensive approach,
FHWA cannot ensure that its varied activities are resulting in tangible
improvements in the quality of its oversight and in the performance of
federal-aid projects. Furthermore, without a comprehensive approach,
FHWA is not able to articulate what it wants its oversight to
accomplish, the composition of its workforce to accomplish it, and how
it will measure whether its efforts have or have not been successful.
Thus, it is limited in its ability to ensure that its oversight efforts
are meeting its organizational goals, that these efforts address
concerns that have been raised, and that they result in more effective
and efficient use of federal funds.
Although broader questions exist about the structure of the federal-aid
highway program and the role of FHWA, the agency will face considerable
increases in its oversight responsibilities in the years ahead,
particularly if the proposals made by DOT and considered by Congress
become law. Given the limitations present today, questions exist about
the ability of FHWA to effectively absorb these new responsibilities
and to improve its oversight of the federal-aid highway program in the
years ahead. Moreover, absent a comprehensive approach, FHWA is
unlikely to be able to overcome the structural, organizational, and
cultural challenges it faces in effectively overseeing the federal-aid
highway program.
Recommendations:
In order to establish a comprehensive approach to project oversight, we
recommend that the Secretary of Transportation direct the
Administrator, FHWA, to take the following four actions:
* link FHWA's day-to-day activities and the performance expectations
set for its staff to its goals and outcome measures;
* develop an overall plan for its oversight initiatives that is tied to
its goals and measures, along with priorities and time frames, and that
includes workforce planning efforts that support these goals and
measures;
* improve the use and performance of project oversight managers by
centrally defining their role and responsibilities; and:
* develop the capability to track and measure costs over the life of
projects to help identify the extent of and reasons for problems,
target resources, and transfer lessons learned.
Agency Comments:
We provided a draft of this report to DOT and met with FHWA officials,
including the Deputy Administrator, to obtain their comments on the
draft. FHWA officials generally agreed with the facts and conclusions
in the report and our characterization of the challenges FHWA faces in
improving its project oversight. FHWA officials emphasized that
although we highlighted potential drawbacks associated with both its
culture of partnership with the states and its decentralized
organization, this partnership and organization are also major
strengths of the federal-aid program that will allow the agency to
absorb potential new responsibilities, help overcome challenges, and
improve program oversight in the future through a more comprehensive
approach. FHWA officials did not take a position on our
recommendations, but they stated that they would be taking them under
advisement. They also suggested some technical and clarifying comments
that we incorporated into the report as appropriate.
We are sending copies of this report to the Honorable Norman Mineta,
Secretary of Transportation. We will also make copies available to
others upon request. In addition, the report will be available at no
charge on the GAO Web site at [Hyperlink, http://www.gao.gov].
If you have any questions about this report, please contact me at
[Hyperlink, siggerudk@gao.gov], or (202) 512-6570 or contact Steve
Cohen at [Hyperlink, cohens@gao.gov] or (202) 512-4864. GAO contacts
and acknowledgments are listed in appendix III.
Sincerely yours,
Signed by:
Katherine Siggerud:
Director, Physical Infrastructure:
[End of section]
Appendixes:
Appendix I: Scope and Methodology:
We reviewed the Federal Highway Administration's (FHWA) approach to
improving its federal-aid highway project oversight efforts since 2002,
including (1) FHWA's oversight-related performance goals and measures,
(2) FHWA's oversight improvement activities, (3) challenges FHWA faces
in improving project oversight, and (4) best practices for project
oversight.
We reviewed FHWA's oversight-related goals and measures by evaluating
Department of Transportation (DOT) and FHWA strategic and performance
plans, and supporting documents, from 2001 through 2004. We also
reviewed FHWA's annual performance reports from 2002 and 2003 and
current OMB President's Management agenda documents. We also reviewed
FHWA and DOT fiscal year 2005 budgets. As criteria in reviewing this
information we used GAO published guidelines and prior reports,
including GAO's 2001 Performance Guide and GAO's 2003 Results Oriented
Culture and GAO's 2003 Human Capital reports.
To review FHWA's oversight improvement activities we documented and
analyzed the status of FHWA's various project oversight efforts since
2002 using FHWA's FY 2004 Work Plan Summary from the major projects
team (see app. II). We also reviewed FHWA's use of financial
information from its Financial Management Information System (FMIS) to
track and analyze trends in cost growth on projects. We did not
independently assess the reliability of FMIS data as the Department's
Inspector General has reported on weaknesses in FHWA's financial
management and reporting processes, most recently in November 2004 as
part of the annual audit of DOT's consolidated financial statements. In
addition, our work focused primarily on FHWA's use of FMIS data for
oversight purposes, rather than relying on FMIS data to support our
findings and conclusions. In addition, to document continued difficulty
in tracking cost growth on projects, we randomly selected 14 contracts
from seven division offices, each of which had an estimated total cost
of between $25 million and $50 million. We then asked FHWA's division
offices to identify the project related to each contract (each contract
was part of a different project, so there were 14 projects), and
requested consolidated cost information on the 14 projects. FHWA took
an average of more than 3 months--and up to 6 months--to provide us
this information for 12 of the 14 projects, and it was unable to
provide us complete cost information on the other 2 projects. Finally,
we also interviewed officials at FHWA Headquarters, selected FHWA
division offices, state departments of transportation, and other
officials to document oversight implementation efforts.
We performed work at seven FHWA division offices and states located in
Colorado, Georgia, Missouri, Nevada, Pennsylvania, Washington, and
Wisconsin. We selected these 7 FHWA division offices and corresponding
states by selecting states that had a current or planned major project
and some that did not; states with large as well as relatively small
federal-aid highway programs in terms of funding; large and small FHWA
division offices as measured by the number of staff; and division
offices and states that FHWA and the American Association of State
Highway and Transportation Officials (AASHTO) officials had recommended
because of ongoing initiatives related to project oversight and
management.
To document and review the challenges FHWA faces in improving its
project oversight we used our past work and interviewed FHWA
headquarters, division office and state transportation program
officials. We also interviewed AASHTO officials and state audit and
evaluation organizations across the country.
To address the use of best practices as a framework for the oversight
of large highway infrastructure projects, we conducted a literature
search in 2004 to identify best practices related to oversight
management. The literature included our previous reports and guidelines
on best practices related to project management. It also included
publications from the Office of Management and Budget (OMB) that
provided detailed guidance to federal agencies on planning, budgeting,
acquisition, and management of capital assets and from the National
Research Council addressing methods the Department of Energy could
implement to improve its project management, including oversight of
environmental restoration, waste management, and construction
projects. From this literature search, we compiled the list of best
practices that can provide FHWA with a comprehensive approach and basic
framework for effectively overseeing highway projects. For the first
practice of establishing measurable project oversight goals we used
information from two of our reports related to the Government
Performance and Results Act and another report related to leading
practices in capital decision-making. For the second practice of
establishing project oversight manager role and accountability based on
oversight goals, we used our report related to improving project
management for Amtrak and another of our reports on performance
agreements. For the third practice of providing professional training
and a career path, we used a National Research Council report on
improving project management at the Department of Energy. For the
fourth practice of learning lessons and transferring them, we used
information from the National Research Council report mentioned above,
the GAO report on leading practices in capital decision-making, another
GAO report on program evaluations, and OMB guidance in Circular A-11
and its Capital Programming Guide.
[End of section]
Appendix II: FHWA FY 2004 Major Project Team Work Plan Summary:
Activity: Issue final project management plan guidance;
Status: Completed.
Activity: Develop cost estimating guidance;
Status: Completed.
Activity: Issue major project delivery template;
Status: Under Development.
Activity: Establish independent cost estimating review program;
Status: Under Development.
Activity: Establish major project cost and schedule measures;
Status: No Work Started.
Activity: Monitor project cost growth;
Status: Ongoing.
Activity: Coordinate with other transportation programs;
Status: Ongoing.
Activity: Reevaluate major project finance plan guidance;
Status: Under Development.
Activity: Develop finance plan guidance for projects over $100m;
Status: No Work Started.
Activity: Identify trends in finance plans;
Status: Under Development.
Activity: Host new FHWA hires;
Status: Ongoing.
Activity: Manage project oversight manager positions;
Status: Ongoing.
Activity: Develop clear statement of team objectives;
Status: Completed.
Activity: Implement major project team marketing plan;
Status: Ongoing.
Activity: Develop working relationships with other DOT agencies;
Status: Ongoing.
Activity: Develop executive level major projects training;
Status: Under Development.
Activity: Develop risk-based conflict management model;
Status: No Work Started.
Activity: Facilitate organizational career track for oversight
managers;
Status: No Work Started.
Activity: Monitor selected projects;
Status: Ongoing.
Activity: Review project finance plans and annual updates;
Status: Ongoing.
Activity: Conduct training and outreach;
Status: Ongoing.
Activity: Establish risk management program;
Status: Under Development.
Activity: Promote oversight best practices;
Status: Ongoing.
Activity: Restructure oversight group website;
Status: Under Development.
Activity: Establish and lead oversight working group;
Status: Under Development.
Activity: Establish cross-functional oversight website;
Status: Under Development.
Activity: Identify risk assessment training opportunities;
Status: Under Development.
Activity: Identify national trends in process reviews;
Status: No Work Started.
Activity: Establish oversight agreement repository;
Status: Completed.
Activity: Develop new generation of oversight performance measures;
Status: No Work Started.
Activity: Develop performance pilot measures;
Status: No Work Started.
Activity: Facilitate the development of cost growth countermeasures;
Status: No Work Started.
Activity: Prepare major project team report to Congress;
Status: Ongoing.
Activity: Conduct monthly project tracking activities;
Status: Ongoing.
Activity: Develop major project continuum model;
Status: Under Development.
Activity: Establish skill sets development program for oversight
managers;
Status: Under Development.
Activity: Monitor large projects in preconstruction stage;
Status: No Work Started.
Activity: Identify preconstruction project milestones;
Status: No Work Started.
Activity: Establish major project speakers' bureau;
Status: No Work Started.
Activity: Establish major project briefing repository;
Status: No Work Started.
Activity: Establish training and development opportunities for new
staff;
Status: No Work Started.
Activity: Organize annual project oversight managers meeting;
Status: Ongoing.
Activity: Participate in National Engineer's Week;
Status: Ongoing.
Activity: Serve as structural liaison;
Status: Ongoing.
Activity: Conduct security vulnerability assessments;
Status: Ongoing.
Activity: Establish national best practice and lessons learned program;
Status: Under Development.
Activity: Post best practices and lessons learned material on website;
Status: Under Development.
Activity: Produce best practices and lessons learned bulletins;
Status: No Work Started.
Source: GAO.
[End of table]
[End of section]
Appendix III: GAO Contacts and Staff Acknowledgments:
GAO Contacts:
Kate Siggerud (202) 512-2834:
Steve Cohen (202) 512-4864:
Staff Acknowledgements:
In addition to those named above, Sam Abbas, Catherine Colwell, Pat
Dalton, Don Kittler, Alex Lawrence, Sara Ann Moessbauer, John Rose,
Stacey Thompson, and Alwynne Wilbur made key contributions to this
report.
(544076):
FOOTNOTES
[1] S. 1072, 108TH Cong.§1101 (2004); and H.R. 3550, 108TH Cong.,§1101
(2004).
[2] The 1 million miles of roads eligible for federal aid accounted for
about 85 percent of the vehicle miles traveled on the nation's roadways
in 2002. The 3 million miles of roads that are generally ineligible are
functionally classified as local roads or rural minor collectors.
[3] Specifically, FHWA approves state short-term transportation plans
and reviews state and metropolitan planning processes.
[4] A finance plan has not been prepared for one major project that is
nearing completion, because it predates the requirement for these
plans.
[5] GAO, Transportation Infrastructure: Managing the Costs of Large-
Dollar Highway Projects, GAO/RCED-97-47 (Washington, D.C.: Feb. 27,
1997).
[6] GAO, Transportation Infrastructure: Cost and Oversight Issues on
Major Highway and Bridge Projects, GAO-02-702T (Washington, D.C.: May
1, 2002).
[7] Management of Cost Drivers on Federal-aid Highway Projects,
Statement of the Honorable Kenneth H. Mead, Inspector General, U.S.
Department of Transportation, May 8, 2003.
[8] GAO. Executive Guide: Effectively Implementing the Government
Performance and Results Act, GAO/GGD-96-118 (Washington, D.C.: June 1,
1996).
[9] Report of the ONE DOT Task Force on Oversight of Large
Transportation Infrastructure Projects; December 2000.
[10] GAO-02-702T.
[11] Between fiscal years 2001 and 2003 FHWA did have an outcome
measure under the organizational excellence goal to reduce unexpended
balances. However, this measure did not specifically relate to cost and
schedule targets on transportation projects. Unexpended balances are
the annual amount of federal-aid funds obligated but not expended on
projects of $1 million or more and with no billing activity for more
than a year.
[12] For FY 2005, FHWA made its measure to prevent high growth in
project costs more specific by adding that the total percentage of cost
growth for construction projects will be less than 10 percent above the
original estimate on construction projects over $10 million.
[13] Four of the division offices we visited were not at the time
overseeing a major project; therefore, the major project goal and
measure did not apply to their responsibilities at that time.
[14] The other two objectives were to increase the number of high-
accident intersection improvement projects and to support the state's
safety plan.
[15] We did not independently assess the reliability of FMIS data as
the Department's Inspector General has recently reported on weaknesses
in FHWA's financial management and reporting processes as part of the
annual audit of DOT's consolidated financial statements. In addition,
our work focused primarily on FHWA's use of FMIS data for oversight
purposes, rather than relying on FMIS data to support our findings and
conclusions.
[16] GAO/RCED-97-47 and GAO-02-702T.
[17] One major project, which is nearing completion, predates the major
project requirements, and a project oversight manager was not assigned
to it.
[18] GAO, Results-Oriented Culture: Creating a Clear Linkage between
Individual Performance and Organizational Success, GAO-03-488
(Washington, D.C.: Mar. 14, 2003).
[19] GAO, Human Capital: A Guide for Assessing Strategic Training and
Development Efforts in the Federal Government, GAO-04-546G (Washington,
D.C.: Mar. 24, 2004).
[20] GAO/RCED-97-47.
[21] GAO-02-702T.
[22] DOT Office of Inspector General, Managing Risk in the Federal-Aid
Highway Program, MH-2005-012 (Washington, D.C.: Nov. 19, 2004).
[23] U.S. House of Representatives Conference Report 108-10, Making
Further Continuing Appropriations for the Fiscal Year 2003, and Other
Purposes (Feb. 12, 2003). p. 1263.
[24] GAO, Human Capital: Key Principles for Effective Strategic
Workforce Planning, GAO-04-39 (Washington, D.C.: Dec. 11, 2003).
[25] The plan focuses on what FHWA has identified as its mission
critical occupations: civil engineers, planners, environmental
specialists, financial management, engineering technicians, realty
specialists, and transportation specialists.
[26] GAO, Human Capital: Succession Planning and Management is Critical
Driver of Organizational Transformation, GAO-04-127T (Washington,
D.C.: Nov. 1, 2003).
[27] FHWA officials told us the project management course is targeted
to about 100 FHWA officials, and project cost estimating will be
provided to about 450 staff, both over the next 2 years.
[28] GAO, Managing for Results: Measuring Program Results That Are
Under Limited Federal Control, GAO/GGD-99-16 (Washington, D.C.: Dec.
11, 1998).
[29] GAO-04-802.
[30] GAO, Surface Transportation: Many Factors Affect Investment
Decisions, GAO-04-744 (Washington, D.C.: June 30, 2004).
[31] This commission, proposed by the administration and included in
both the Senate and House reauthorization bills approved during 2004
but not enacted before the adjournment of the 108TH Congress, is to
consider how the program is financed and the role of other stakeholders
in financing it. As we reported, the appropriate program structure and
mechanisms for delivering that funding are important components of
making these decisions.
[32] GAO, Mass Transit: Project Management Oversight Benefits and
Future Funding Requirements, GAO/RCED-00-221 (Washington, D.C.: Sept.
15, 2000).
[33] GAO, High-Risk Series: Strategic Human Capital Management, GAO-03-
120, (Washington, D.C.: Jan. 1, 2003).
[34] FHWA Stewardship/Oversight Task Force Final Report, March 20,
2001.
[35] GAO-02-702T.
[36] GAO. Executive Guide: Leading Practices in Capital Decision-
Making, GAO-AIMD-99-32. (Washington D.C.: Dec. 14, 1999).
[37] GAO. Intercity Passenger Rail: Amtrak's Management of Northeast
Corridor Improvements Demonstrates Need for Applying Best Practices,
GAO-04-94 (Washington, D.C.: Feb. 27, 2004).
[38] GAO, Human Capital: Implementing Pay for Performance at Selected
Personnel Demonstration Projects, GAO-04-83. (Washington, D.C.: Jan.
23, 2004).
[39] GAO, Managing for Results: Emerging Benefits From Selected
Agencies' Use of Performance Agreements, GAO-01-115 (Washington D.C.:
Oct. 30, 2000).
[40] National Research Council, "Improving Project Management in the
Department of Energy," National Academy Press, 1999.
[41] GAO-04-546G.
[42] GAO, Executive Guide: Effectively Implementing the Government
Performance and Results Act, GAO/GGD-96-118. (Washington D.C.: June
1996).
[43] GAO, Program Evaluation: Studies Helped Agencies Measure or
Explain Program Performance. GAO/GGD-00-204. (Washington D.C.: Sept.
29, 2000).
[44] GAO, Executive Guide: Leading Practices in Capital Decision-
Making, GAO-AIMD-99-32. (Washington D.C.: Dec. 14, 1998).
[45] Capital Programming Guide, Office of Management and Budget. July
1997. The Guide is a supplement to Circular A-11, which the Office of
Management and Budget issued to help agencies integrate and implement
GPRA requirements.
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