Federal-Aid Highways
Increased Reliance on Contractors Can Pose Oversight Challenges for Federal and State Officials Gao ID: GAO-08-198 January 8, 2008Pressure on state and local governments to deliver highway projects and services, and limits on the ability of state departments of transportation (state DOT) to increase staff levels have led those departments to contract out a variety of highway activities to the private sector. As requested, this report addresses (1) recent trends in the contracting of state highway activities, (2) factors that influence state highway departments' contracting decisions, (3) how state highway departments ensure the protection of the public interest when work is contracted out, and (4) the Federal Highway Administrations' (FHWA) role in ensuring that states protect the public interest. To complete this work, GAO reviewed federal guidelines, state auditor reports, and other relevant literature; conducted a 50-state survey; and interviewed officials from 10 selected state highway departments, industry officials, and FHWA officials.
State DOTs have increased the amount and type of highway activities they contract out to consultants and contractors. State DOTs are also giving consultants and contractors more responsibility for ensuring quality in highway projects, including using consultants to perform construction engineering and inspection activities as well as quality assurance activities. Many state officials reported that they expect the amount of contracted highway activities to level off over the next 5 years, due to factors such as uncertain highway program funding levels. State DOTs indicated that the most important factor in their decision to contract out highway activities is the need to access the manpower and expertise necessary to ensure the timely delivery of their highway program, given in-house resource constraints. Officials said that they must contract out work to keep up with their highway programs. Of the 50 departments that completed GAO's survey, 38 indicated that they have experienced constant or declining staffing levels over the past 5 years. While state DOTs consider cost issues when making contracting decisions, cost savings are rarely the deciding factor in contracting decisions, and none of the 10 departments that GAO interviewed had a formal process in place for systematically assessing costs and benefits before entering into contracts. State DOT officials that GAO interviewed believe that they have sufficient tools and procedures in place to select, monitor, and oversee contractors to ensure that the public interest is protected. However, implementation of these mechanisms is not consistent across states, and state auditors reported weaknesses in several states. State DOTs also face additional challenges in conducting adequate oversight and monitoring, given current trends in the use of consultants and contractors. For example, while state employees are always ultimately responsible for highway project acceptance, they are increasingly further removed from the day-to-day project oversight. Officials from all 10 state DOTs that GAO interviewed said that current trends may lead to an erosion of in-house expertise that could affect the state DOTs' ability to adequately oversee the work of contractors and consultants in the long term. Because states have broad latitude in implementing the federal-aid highway program, FHWA has a limited role in states' use of consultants and contractors. Typically, FHWA's focus is on ensuring that state DOTs are in compliance with federal regulations when contracting out, such as ensuring that federal bidding requirements are met. FHWA has conducted both local and national reviews that have also identified various risks related to the increased use of consultants, including weaknesses in state quality assurance programs and an increased potential for conflicts of interest. While FHWA has identified these risks, it has not comprehensively assessed how, if at all, it needs to adjust its oversight efforts to protect the public interest, given current trends in the use of consultants and contractors.
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Director: Team: Phone:GAO-08-198, Federal-Aid Highways: Increased Reliance on Contractors Can Pose Oversight Challenges for Federal and State Officials
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Report to the Chairman, Committee on Transportation and Infrastructure,
House of Representatives:
United States Government Accountability Office:
GAO:
January 2008:
Federal-Aid Highways:
Increased Reliance on Contractors Can Pose Oversight Challenges for
Federal and State Officials:
GAO-08-198:
GAO Highlights:
Highlights of GAO-08-198, a report to the Chairman, Committee on
Transportation and Infrastructure, House of Representatives.
Why GAO Did This Study:
Pressure on state and local governments to deliver highway projects and
services, and limits on the ability of state departments of
transportation (state DOT) to increase staff levels have led those
departments to contract out a variety of highway activities to the
private sector. As requested, this report addresses (1) recent trends
in the contracting of state highway activities, (2) factors that
influence state highway departments‘ contracting decisions, (3) how
state highway departments ensure the protection of the public interest
when work is contracted out, and (4) the Federal Highway
Administrations‘ (FHWA) role in ensuring that states protect the public
interest. To complete this work, GAO reviewed federal guidelines, state
auditor reports, and other relevant literature; conducted a 50-state
survey; and interviewed officials from 10 selected state highway
departments, industry officials, and FHWA officials.
What GAO Found:
State DOTs have increased the amount and type of highway activities
they contract out to consultants and contractors. State DOTs are also
giving consultants and contractors more responsibility for ensuring
quality in highway projects, including using consultants to perform
construction engineering and inspection activities as well as quality
assurance activities. Many state officials reported that they expect
the amount of contracted highway activities to level off over the next
5 years, due to factors such as uncertain highway program funding
levels.
State DOTs indicated that the most important factor in their decision
to contract out highway activities is the need to access the manpower
and expertise necessary to ensure the timely delivery of their highway
program, given in-house resource constraints. Officials said that they
must contract out work to keep up with their highway programs. Of the
50 departments that completed GAO‘s survey, 38 indicated that they have
experienced constant or declining staffing levels over the past 5
years. While state DOTs consider cost issues when making contracting
decisions, cost savings are rarely the deciding factor in contracting
decisions, and none of the 10 departments that GAO interviewed had a
formal process in place for systematically assessing costs and benefits
before entering into contracts.
State DOT officials that GAO interviewed believe that they have
sufficient tools and procedures in place to select, monitor, and
oversee contractors to ensure that the public interest is protected.
However, implementation of these mechanisms is not consistent across
states, and state auditors reported weaknesses in several states. State
DOTs also face additional challenges in conducting adequate oversight
and monitoring, given current trends in the use of consultants and
contractors. For example, while state employees are always ultimately
responsible for highway project acceptance, they are increasingly
further removed from the day-to-day project oversight. Officials from
all 10 state DOTs that GAO interviewed said that current trends may
lead to an erosion of in-house expertise that could affect the state
DOTs‘ ability to adequately oversee the work of contractors and
consultants in the long term.
Because states have broad latitude in implementing the federal-aid
highway program, FHWA has a limited role in states‘ use of consultants
and contractors. Typically, FHWA‘s focus is on ensuring that state DOTs
are in compliance with federal regulations when contracting out, such
as ensuring that federal bidding requirements are met. FHWA has
conducted both local and national reviews that have also identified
various risks related to the increased use of consultants, including
weaknesses in state quality assurance programs and an increased
potential for conflicts of interest. While FHWA has identified these
risks, it has not comprehensively assessed how, if at all, it needs to
adjust its oversight efforts to protect the public interest, given
current trends in the use of consultants and contractors.
What GAO Recommends:
GAO recommends that the Secretary of Transportation work with FHWA
division offices in targeting their oversight activities to give
appropriate consideration to identified areas of risk related to the
increased use of consultants and to develop performance measures to
help evaluate the effectiveness of state controls. The Department of
Transportation did not comment on GAO‘s recommendation but provided
technical clarifications, which GAO incorporated as appropriate.
To view the full product, including the scope and methodology, click on
[hyperlink, http://www.GAO-08-198]. For more information, contact
JayEtta Z. Hecker at (202) 512-2834 or heckerj@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
States Have Increased the Contracting Out of Highway Activities, and
Consultants and Contractors Increasingly Have Substantial
Responsibility for Ensuring Quality and Delivery of Highway Projects:
State DOTs Indicate That Lack of In-house Staff and Expertise Are the
Most Important Drivers in States' Contracting Decisions:
State DOTs Use Various Controls to Protect the Public Interest, but
They Face Additional Challenges Arising from Current Contracting
Trends:
FHWA Focuses Much of Its Oversight Efforts on Ensuring That State DOTs
Comply with Laws and Regulations:
Conclusions:
Recommendations for Executive Action:
Agency Comments:
Appendix I: Objectives, Scope, and Methodology:
Appendix II: Summary of the Cost Comparison Studies That We Reviewed:
Appendix III: Summary Tables of Our Survey Results:
Appendix IV: GAO Contact and Staff Acknowledgments:
Tables:
Table 1: Rules and Regulations That Pertain to States' Contracting
Practices:
Table 2: Number of State DOTs That Reported Factors as "Important" or
"Very Important" in Decisions to Contract Out Activities:
Table 3: Number of State DOTs That Reported Changes in Professional
Staff over the past 5 Years:
Table 4: Number of State DOTs Reporting Factors as "Of Little
Importance" or "Of No Importance" in Decisions to Contract Out
Activities:
Table 5: Number of State DOTs Reporting Factors as "Important" or "Very
important" in Decisions to Use Department Staff to Perform an Activity:
Table 6: Correlation Coefficients:
Table 7: Number of State DOTs That Reported Changes in Professional
Staff over the past 5 Years:
Table 8: Number of State DOTs That Reported Contracting Out Highway
Activities in the Most Recently Completed Fiscal Year (Percentage of
Total Expenditures for That Activity):
Table 9: Number of State DOTs Reporting the Importance of Various
Factors in Their Decision to Contract Out Some or All Preliminary
Engineering Activities:
Table 10: Number of State DOTs Reporting the Importance of Various
Factors in Their Decision to Use Department Staff to Perform Some or
All Preliminary Engineering Activities:
Table 11: Number of State DOTs Reporting the Importance of Various
Factors in Their Decision to Contract Out Some or All Design
Activities:
Table 12: Number of State DOTs Reporting the Importance of Various
Factors in Their Decision to Use Department Staff to Perform Some or
All Design Activities:
Table 13: Number of State DOTs Reporting the Importance of Various
Factors in Their Decision to Contract Out Some or All Construction
Engineering and Inspection:
Table 14: Number of State DOTs Reporting the Importance of Various
Factors in Their Decision to Use Department Staff to Perform Some or
All Construction Engineering and Inspection Activities:
Table 15: Number of State DOTs Reporting the Importance of Various
Factors in Their Decision to Contract Out Some or All Federal-Aid
Eligible Preventive Maintenance Activities:
Table 16: Number of State DOTs Reporting the Importance of Various
Factors in Their Decision to Use Department Staff to Perform Some or
All Federal-Aid Eligible Preventive Maintenance Activities:
Table 17: Number of State DOTs Reporting the Importance of Various
Factors in Their Decision to Contract Out Some or All Routine
Maintenance Activities:
Table 18: Number of State DOTs Reporting the Importance of Various
Factors in Their Decision to Use Department Staff to Perform Some or
All Routine Maintenance Activities:
Table 19: Number of State DOTs Reporting the Importance of Various
Factors in Their Decision to Contract Out Some or All Ongoing
Operations Activities:
Table 20: Number of State DOTs Reporting the Importance of Various
Factors in Their Decision to Use Department Staff to Perform Some or
All Ongoing Operations Activities:
Table 21: Number of State DOTs Reporting the Importance of Various
Factors in Their Decision to Contract Out Some or All Right-of-Way
Activities:
Table 22: Number of State DOTs Reporting the Importance of Various
Factors in Their Decision to Use Department Staff to Perform Some or
All Right-of-Way Activities:
Table 23: Number of State DOTs Reporting Increasing, Decreasing, or
Maintaining the Same Level of Contracting Out for Highway Activities
over the past 5 Years:
Table 24: Number of State DOTs Anticipating Increasing, Decreasing, or
Maintaining the Same Level of Contracting Out over the Next 5 Years:
Table 25: Number of State DOTs Using Broader Types of Contracting over
the past 5 Years:
Table 26: Number of State DOTs Using Alternative Bid Types and
Techniques over the past 5 Years:
Figures:
Figure 1: Total Capital Spending on Highways, by Level of Government,
Fiscal Year 2005 2:
Figure 2: Number of State DOTs That Reported Increasing, Decreasing, or
Maintaining the Same Level of Contracting Out over the past 5 Years:
Figure 3: Number of State DOTs at Various Levels of Contracting Out:
Figure 4: Number of State DOTs Using Different Types of Contracts over
the past 5 Years:
Figure 5: States' Use of Various Contracting Techniques:
Figure 6: Number of States Anticipating Increasing, Decreasing, or
Maintaining the Same Level of Contracting Out over the Next 5 Years:
Abbreviations:
AASHTO: American Association of State Highway and Transportation
Officials:
C.F.R.: Code of Federal Regulations:
FHWA: Federal Highway Administration:
state DOT: state department of transportation:
U.S.C.: United States Code:
United States Government Accountability Office:
Washington, DC 20548:
January 8, 2008:
The Honorable James L. Oberstar:
Chairman:
Committee on Transportation and Infrastructure:
House of Representatives:
Dear Mr. Chairman:
The nation's economic vitality and the quality of life of its citizens
depend significantly on an efficient transportation network. For the
past several decades, population, income levels, and economic activity
have risen considerably, and with the increases in these areas have
come considerable increases in travel demand. Transportation
infrastructure has not kept pace with these increases. According to the
Department of Transportation, investment by all levels of government
remains well below the estimated amount needed to maintain the
condition of the nation's transportation infrastructure, and to fund
improvements to the performance of the network. In 2005, of the over
$75 billion expended for capital outlays and maintenance for highways,
the federal government accounted for about 40 percent and state and
local governments accounted for about 60 percent (see fig. 1).
As demands on the transportation system grow, states and localities are
looking for alternatives to direct government provision of
transportation infrastructure and services. Consistent with longer-
term trends in privatization of public services, states and localities
have looked to increased private sector participation in delivering
highway infrastructure and services. A 2003 survey by the National
Cooperative Highway Research Program found that the use of contractors
and consultants had continued to increase and had also expanded into
activities previously done principally by public agencies, such as
activities related to inspection and quality assurance of highway
facilities and activities related to obtaining right-of-way for highway
infrastructure projects.[Footnote 1]
Figure 1: Total Capital Spending on Highways, by Level of Government,
Fiscal Year 2005:
This figure is a pie chart showing total capital spending on highways,
by level of government during fiscal year 2005.
41.6%: $31.3: Federal government;
32.1%: $24.1: State governments;
26.3%: $19.8: Local governments.
[See PDF for image]
Source: Federal Highway Administration.
[End of figure]
Proponents of privatization have long suggested that using private
sector, market-based incentives offers the potential advantages of
obtaining infrastructure or services faster than if provided solely by
the public sector, at a potentially lower cost. However, some critics
have raised concerns that the increased use of consultants and
contractors contributes to a loss of accountability, a decline in the
skill levels and experience of public sector staff, lower quality
projects, and the inefficient use of public funds.
To assist Congress as it assesses the future of the federal surface
transportation and highway programs, we studied the extent of
contracting by state departments of transportation (state DOT). This
report addresses (1) the recent trends in the contracting of state
highway activities; (2) the factors that influence state DOTs in
deciding whether to contract out activities and the extent to which
state DOTs assess costs and benefits when making such decisions; (3)
how state DOTs protect the public interest when work is contracted out,
particularly when consultants and contractors are given substantial
responsibility for project and service quality and delivery; and (4)
the Federal Highway Administration's (FHWA) role in ensuring that
states protect the public interest.
To address these issues, we reviewed relevant literature and survey
data to identify general trends in contracting and to establish a
general baseline for comparison with current levels of contracting. We
also reviewed the literature to identify available information
regarding the costs and benefits of contracting out highway activities
versus performing them with in-house staff. We sent an inquiry to state
auditing agencies and received and reviewed state auditor reports from
11 states that addressed issues relating to state DOTs' use of
consultants and contractors. We also conducted a Web-based survey of
all 50 state DOTs to determine the extent to which state DOTs contract
for services across 7 categories of highway activities.[Footnote 2] We
surveyed state DOTs to determine (1) the factors they say are leading
them to contract out activities or to keep work in-house and (2)
information about potential future trends in contracting. The survey
also gathered data on state DOTs' use of a variety of different
contract types and techniques, such as design-build contracts.[Footnote
3] We received a 100 percent response to our survey. Appendix III
contains tables summarizing the state DOTs' responses. We conducted a
correlation analysis to identify factors--such as state economic and
demographic measures--that may be associated with the level of
contracting reported in the survey. We also interviewed state DOT
officials in 10 different states to gather information on their
perceptions of the costs and benefits of contracting, on the ways in
which state DOTs define and seek to protect the public interest, and on
how state DOTs' use of consultants and contractors is evolving. In
selecting state DOTs to interview, we used a nongeneralizable sample,
rather than performing random sampling. We chose this approach to
ensure that the sample set included state DOTs with a range of
outsourcing experiences and practices. We interviewed industry
stakeholders from 6 different organizations knowledgeable about the
outsourcing of highway activities to obtain additional perspectives on
the costs and benefits of contracting and on how state DOTs seek to
protect the public interest. Finally, we interviewed FHWA officials at
the national level, as well as at 10 division offices[Footnote 4]
corresponding to the state DOTs selected for interviews, to obtain
information on FHWA's policies, guidance, and oversight of state
contracting practices and on the role FHWA plays in ensuring that
states protect the public interest. We reviewed program and process
reviews from FHWA's national and division offices to identify key areas
of oversight focus and key findings that have been reached in such
reviews regarding states' contracting and quality assurance procedures.
For this report, we limited the scope of our review to contracts where
consultants or contractors are paid to provide a service related to
highway infrastructure. Although essentially contractual relationships,
we did not include public-private partnerships--where a private firm
takes effective ownership of a facility and assumes control over it,
usually for an extended period of time--in the scope of our work.
Another GAO review focusing specifically on public-private partnerships
related to highway infrastructure was under way concurrently with this
review, and a final report will be issued later in January
2008.[Footnote 5] We conducted this performance audit from November
2006 through January 2008 in accordance with generally accepted
government auditing standards. Those standards require that we plan and
perform the audit to obtain sufficient, appropriate evidence to provide
a reasonable basis for our findings and conclusions based on our audit
objectives. We believe that the evidence obtained provides a reasonable
basis for our findings and conclusions based on our audit objectives.
Appendix I contains more information on our objectives, scope, and
methodology.
Results in Brief:
State DOTs have increased the amount of highway activities they
contract out to consultants and contractors. More than half of the 50
departments we surveyed reported that they had increased the amount of
preliminary engineering, design, right-of-way, and construction
engineering and inspection activities they had contracted out over the
past 5 years. Fewer departments responded that they had increased the
contracting out of operations and maintenance activities in this
period. We also found from our survey and interviews that many
departments are increasingly giving consultants and contractors more
responsibility in ensuring the quality and delivery of highway
infrastructure and services. For example, departments have increased
the use of consultants to perform inspection activities, and the use of
consultants as project managers to oversee and manage day-to-day
activities on highway projects. Our survey also indicated that some
states have broadened the types of contracts and contracting techniques
they use, such as using design-build or lane rental contracts,[Footnote
6] although the use of these techniques does not appear to be
widespread across the states. The majority of departments reported in
our survey that they expect the amount of contracted highway activities
to level off over the next 5 years for all of the activities included
in our study. State highway department officials attributed this
leveling off to uncertainty about whether funding and staffing levels
would change in the near future.
State DOT officials indicated that the most important factor in their
decision to contract out highway activities is the need to access the
manpower and expertise necessary to ensure the timely delivery of
highway infrastructure and services, given in-house resource
constraints. In our survey, state DOTs listed "lack of in-house staff"
as "very important" or "important" in their decision to contract out
work more than any other factor for all 7 of the highway activities
included in the study. Over the last several years, demand for highway
infrastructure and services has continued to grow, while at the same
time, the majority of the departments have experienced constant or
declining staffing levels. In our survey, 38 of the 50 departments
indicated that they employ either the same or fewer staff than they did
5 years ago. While officials we interviewed said that costs are
considered in contracting decisions, our survey results show that for
almost all of the state DOTs, "to obtain cost savings" was not a key
driver in the trend toward the increased use of contracting. In fact,
our interviews with state DOT officials indicated that contracting out
work is perceived to be somewhat more expensive than performing work in-
house, particularly for engineering services. Several studies have
tried to formally compare the costs of in-house performed work with
consultant and contractor performed work. Methodological issues and
other limitations make it difficult to conclude that the use of
consultants and contractors is more or less expensive than using public
employees over the long term. In addition to staffing and cost issues,
other considerations, such as the desire to maintain in-house
expertise, can play a role in a state DOT's decision of whether to
contract out highway activities or perform the work with in-house
staff.
In general, the state DOT officials we interviewed believe that they
have sufficient tools and procedures to select, monitor, and oversee
contractors to ensure that the public interest is protected, but that
they face additional challenges in protecting the public interest,
given current contracting trends. These officials highlighted various
controls they employ throughout the consultant and contractor
procurement process, including such things as prequalifying
consultants, regularly monitoring the work of consultants and
contractors, and including assessments of consultants and contractors
in determinations for future contracts. States also have highway design
standards, materials standards, and quality control and assurance
guidelines that are applicable on all projects, regardless of who
performs the work. However, implementation of these mechanisms is not
consistent across states. Several state auditor reports we reviewed
found weaknesses in state DOTs' procurement and oversight practices,
such as the absence of aggressive price negotiations, failure to
consistently assess the quality of consultant and contractor work, and
failure to fully comply with quality assurance procedures. Such
weaknesses can lead to lower-quality highway construction and the
inefficient use of public funds. Other trends in contracting pose
additional challenges to state DOTs in conducting adequate oversight
and monitoring. While state employees are always ultimately responsible
for highway project acceptance, they are increasingly further removed
from the day-to-day oversight of the project and are more frequently
overseeing a number of highway projects simultaneously, instead of just
one project. Also, while officials from state DOTs we interviewed
believe that their departments were equipped to adequately oversee
consultants and contractors, all of the officials indicated that the
decreasing number of experienced staff, combined with their
departments' increased reliance on contractors and consultants, may
erode in-house expertise at their departments, which could affect their
ability to adequately oversee the work of contractors and consultants
over the long term. Finally, with consultants and contractors involved
in almost all highway activities, from design to final inspection, FHWA
has found that more potential exists for conflicts of interest and for
independence issues to arise.
Given that state DOTs are primarily responsible for delivering highway
infrastructure and services, FHWA has a limited role in determining how
consultants and contractors should be used on highway projects.
Generally, FHWA's role is to ensure that state DOTs have used
consultants and contractors in compliance with applicable federal laws
and regulations. FHWA primarily performs oversight of states' use of
consultants through direct oversight over a limited number of projects
and through its risk assessment process in which division offices work
with their state DOTs to identify and address systematic
vulnerabilities in the DOTs' processes and programs. Through such risk
assessments, several division offices have identified issues related to
the use of consultants and contractors and conducted process reviews in
response. In addition to these reviews of individual states, FHWA has
also conducted national reviews that involve issues related to the use
of consultants and contractors that have also found areas of risk to
the federal-aid highway program. In particular, one review found that
the trend toward using more consultants in quality assurance creates
additional possibilities for conflicts of interest, and that state
DOTs' quality assurance programs are often not in full compliance with
federal regulations. FHWA is developing a plan to address the issues
found in this review. While FHWA has identified risks associated with
the use of consultants and contractors, the agency has not
comprehensively assessed how, if at all, it needs to adjust its
oversight efforts to protect the public interest, given current trends
in the use of consultants and contractors.
To address the risk factors and oversight challenges associated with
the increasing use of consultants and contractors, we are recommending
that the Secretary of Transportation direct the Administrator of the
Federal Highway Administration, in the context of its ongoing
activities related to quality assurance programs and risk management,
to work with the division offices to (1) give appropriate consideration
to the identified areas of risk related to the increased use of
consultants and contractors as division offices work to target their
oversight activities and (2) develop and implement performance measures
to better assess the effectiveness of state DOTs' controls related to
the use of consultants and contractors to better ensure that the public
interest is protected.
We provided the Department of Transportation, including FHWA, with a
draft of this report. DOT officials provided technical clarifications,
which we incorporated as appropriate.
Background:
FHWA assists states' efforts in building and maintaining highways
through the federal-aid highway program. The agency distributes highway
funds to the states through annual apportionments established by
statutory formulas and by allocating discretionary grants. The states
may obligate funds for construction, reconstruction, and improvement of
highways and bridges on eligible federal-aid highway routes and for
other purposes authorized in law once FHWA has apportioned the funds to
the states. About 1 million of the nation's 4 million miles of roads
are eligible for federal aid.
As a condition of receiving federal funds, states must adhere to
federal laws and regulations. In particular, states must ensure that
their highway program activities comply with title 23 of the United
States Code (U.S.C.) and title 23 of the Code of Federal Regulations
(C.F.R.), which contain provisions relating to the federal-aid highway
program. FHWA has issued a number of regulations to implement and carry
out these provisions. These provisions in title 23 relate specifically
to states' use of consultants and contractors. For example, states must
comply with the Disadvantaged Business Enterprise Program requirements
of 49 C.F.R. Part 26, which requires that a certain percentage of
contracts be awarded to small businesses owned and controlled by
socially and economically disadvantaged individuals, including minority
and women-owned businesses. Contracts for engineering and design
services that are directly related to a construction project and use
federal-aid highway funding must be awarded in the same manner as a
contract for engineering and design services under certain provisions
of the Brooks Architect-Engineers Act,[Footnote 7] which establishes a
qualifications-based selection process in which contracts for
architects and engineers are negotiated on the basis of demonstrated
competence and qualification for the type of professional services
required at a fair and reasonable price. While state DOTs are subject
to many federal laws and regulations regarding contracting, they are
not required to follow the Federal Acquisition Regulation when
contracting for federally funded highway activities, except for the
cost principles in 48 C.F.R. Part 31. Other specific federal provisions
relating to state DOTs' contracting practices are summarized in table
1.
Table 1: Rules and Regulations That Pertain to States' Contracting
Practices:
Provision: Bidding requirements for letting of contracts;
Source: 23 U.S.C. § 112;
Detail: In all cases where the construction is to be performed by the
state transportation department or under its supervision, a request for
submission of bids shall be made by advertisement unless some other
method is approved by the Secretary. The Secretary shall require such
plans and specifications and such methods of bidding as shall be
effective in securing competition. Construction of each project shall
be performed by contract awarded by competitive bidding, unless the
State transportation department demonstrates, to the satisfaction of
the Secretary, that some other method is more cost effective or that an
emergency exists. Contracts for the construction of each project shall
be awarded only on the basis of the lowest responsive bid submitted by
a bidder meeting established criteria of responsibility. Each contract
for program management, construction management, feasibility studies,
preliminary engineering, design, engineering, surveying, mapping, or
architectural related services shall be awarded in the same manner as a
contract for architectural and engineering services is negotiated under
chapter 11 of title 40; or equivalent State qualifications-based
requirements.
Provision: Suitably equipped and organized transportation department;
Source: 23 U.S.C. § 302(a);
Detail: Any State desiring to avail itself of the provisions of title
23 U.S.C. shall have a State transportation department which shall have
adequate powers, and be suitably equipped and organized to discharge to
the satisfaction of the Secretary the duties required by this title. In
meeting the provisions of this subsection, a State may engage to the
extent necessary or desirable, the services of private engineering
firms. FHWA expects the State to provide full-time State
representatives to be in responsible charge of "core functions" or
"inherently governmental functions" of the State government that
directly relate to the Title 23 duties for administering a Federal-aid
project or program.
Provision: Conflict of interest;
Source: 23 C.F.R. § 1.33;
Detail: No official or employee of a State or any other governmental
instrumentality who is authorized in his official capacity to
negotiate, make, accept or approve, or to take part in negotiating,
making, accepting or approving any contract or subcontract in
connection with a project shall have, directly or indirectly, any
financial or other personal interest in any such contract or
subcontract. No engineer, attorney, appraiser, inspector or other
person performing services for a State or a governmental
instrumentality in connection with a project shall have, directly or
indirectly, a financial or other personal interest, other than his
employment or retention by a State or other governmental
instrumentality, in any contract or subcontract in connection with such
project. No officer or employee of such person retained by a State or
other governmental instrumentality shall have, directly or indirectly,
any financial or other personal interest in any real property acquired
for a project unless such interest is openly disclosed upon the public
records of the State DOT and of such other governmental
instrumentality, and such officer, employee or person has not
participated in such acquisition for and in behalf of the State. It
shall be the responsibility of the State to enforce the requirements of
this section.
Provision: Administration of design and engineering services contracts
related to highway construction;
Source: 23 C.F.R. Part 172;
Detail: This part prescribes policies and procedures for the
administration of engineering and design related service contracts
intended to ensure that a qualified consultant is obtained through an
equitable selection process, that prescribed work is properly
accomplished in a timely manner, and at fair and reasonable cost.
Recipients of federal funds shall ensure that their subrecipients
comply with this part. Also contains provision that state DOTs must
receive permission from FHWA before hiring a consultant to act in a
management capacity on behalf of the department.
Provision: State oversight of highway construction;
Source: 23 C.F.R. 635.105(b);
Detail: Although the state may employ a consultant to provide
construction engineering services, such as inspection or survey work on
a project, the state shall provide a full-time employed state engineer
to be in responsible charge of the project.
Provision: Design-build contracting;
Source: 23 C.F.R. Part 636;
Detail: This part covers FHWA's policies and procedures for approving
design-build projects financed with federal-aid highway funds.
Provision: Quality assurance procedures for construction;
Source: 23 C.F.R. Part 637;
Detail: This part prescribes policies, procedures, and guidelines to
assure the quality of materials and construction in all Federal-aid
highway projects on the National Highway System. Contractor test
results are allowed to be used in the project acceptance decision of
the state; independent verification testing is required to ensure that
contractor testing conforms to applicable standards.
Sources: United States Code and Code of Federal Regulations.
[End of table]
For projects using federal-aid funding, FHWA has also promulgated
regulations that establish design, construction, and materials
standards for highway projects that are on the National Highway
System.[Footnote 8] In general, states' laws, regulations, directives,
safety standards, design standards, and construction standards apply to
highway projects that are off of the National Highway System.
FHWA has authority to oversee any project that receives federal-aid
highway funds. However, the agency has increasingly delegated
responsibility for oversight to state DOTs since the passage of the
Intermodal Surface Transportation Equity Act in 1991. Oversight roles
and responsibilities are outlined in stewardship agreements that each
FHWA division office executes with its respective state DOT. These
stewardship agreements outline when FHWA will have project-level
oversight, or what is known as "full oversight" over a project, and
when that responsibility will be delegated to states. Stewardship
agreements vary in how full oversight is determined. A stewardship
agreement may indicate that full oversight occurs on only "high-
profile" projects, which will be agreed upon by the state and the
division office, or there may be a specific dollar threshold, such as
all interstate projects that are over $1 million. Generally speaking,
FHWA has project-level oversight for a relatively limited number of
federal-aid projects. Recently, FHWA developed guidance on the
development of stewardship agreements and encouraged its division
offices to revise their agreements on the basis of this guidance to
achieve more consistency throughout the agency. Among other things, the
guidance encourages the division offices to use risk management
principles to determine where to focus their stewardship activities.
The guidance also recommends that division offices develop performance
measures to better track the health of the federal-aid highway program
in their states. However, the guidance gives state DOTs and division
offices broad flexibility in determining how risks should be assessed
and how performance should be measured.
In addition to having oversight over some specific projects, FHWA
division offices oversee state DOTs through reviews of the departments'
programs and processes. Some of these reviews occur annually, and
others are undertaken at the discretion of the division office on the
basis of areas where there may be increasing risk to the highway
program. These reviews are meant to ensure that states have adequate
controls in place to effectively manage federally assisted projects and
will generally result in recommendations and corrective actions for the
state DOTs.
Over the past several years, GAO has expressed concerns about FHWA's
oversight role. For example, we reported in 2005 that FHWA lacked a
comprehensive approach in its oversight efforts.[Footnote 9] We found
that even though FHWA had made progress in improving its oversight
efforts, such as establishing performance goals and outcome measures to
limit cost growth and schedule slippage on projects, FHWA had not
linked these efforts to its day-to-day activities and was not using
them to identify problems and target oversight. More generally, we have
also raised concerns about federal transportation policy. For example,
we have reported that federal transportation funding is not linked to
system performance; that the federal government does not have direct
control over the vast majority of the activities that it funds; and
that highway grant funds are apportioned to state and local governments
by formula, without regard to the needs, performance, quality, or level
of effort of recipients.[Footnote 10] Transportation and other experts
recently told us that the nation's transportation policy has lost
focus, and that the nation's overall transportation goals need to be
better defined and linked to performance measures that evaluate what
the respective policies and programs actually accomplish.[Footnote 11]
States Have Increased the Contracting Out of Highway Activities, and
Consultants and Contractors Increasingly Have Substantial
Responsibility for Ensuring Quality and Delivery of Highway Projects:
State DOTs have increased the amount and type of highway activities
that they have contracted out to consultants and contractors over the
past 5 years. In particular, state DOTs have increasingly contracted
out preliminary engineering, design, right-of-way, and construction
engineering and inspection activities. We also found that state DOTs
have increasingly given consultants and contractors more responsibility
for project quality through a growing trend to contract out
construction inspection and engineering activities. Some state DOTs
have used broader contracting types and techniques that give additional
responsibility to consultants and contractors. For example, some state
DOTs have used consultants to serve on their behalf as project managers
or program managers to oversee and manage day-to-day activities on
highway projects.
States Have Increasingly Contracted Out Highway Activities:
On the basis of our survey (see sidebar) and discussions with state
officials, we found that states have increased the extent to which they
contract out some types of highway activities to consultants and
contractors (see fig. 2). Our survey results indicated that over the
past 5 years, more than half the states have increased the amount of
preliminary engineering, design, and right-of-way activities as well as
construction engineering and inspection activities they have contracted
out to third parties. A fewer number of states have increased
contracting out of maintenance and operations activities.
Preliminary Engineering: Includes activities such as surveying and
mapping, locations studies, traffic studies, planning, and
environmental impact analysis.
Highway Activities Included in the GAO Survey:
Design: Includes activities such as preliminary and final design work.
Construction Engineering and Inspection: Includes activities such as
inspections, materials testing, construction management, and schedule
analysis.
Federal-Aid Eligible Preventive Maintenance: Includes activities such
as pavement preservation, safety improvements, and seismic retrofits.
Routine Maintenance Not Eligible For Federal-Aid Program Funding:
Includes activities such as snow plowing, litter removal, and mowing.
Ongoing Operations: Includes activities such as intelligent
transportation systems management, toll collections, and signal and
sign systems.
Right-of-Way: Includes activities such as land appraisals, land
purchase negotiations, and assistance programs for individuals and
businesses displaced by highway projects.
Note: We did not include construction activities in our survey because
state DOTs have contracted out virtually all highway construction work
for over 60 years.
Figure 2: Number of State DOTs That Reported Increasing, Decreasing, or
Maintaining the Same Level of Contracting Out over the past 5 Years:
This figure is a combination bar graph showing the number of state DOTs
that reported increasing, decreasing, or maintaining the same level of
contracting out over the past 5 years. The X axis represents the
highway activities, and the Y axis represents the number of states. One
bar in each group represents increased. One represents maintained same
level, and one represents decreased.
[See PDF for image]
Source: GAO survey results.
[End of figure]
Several state DOT officials told us during our discussions that their
departments had increased their use of consultants in different areas.
For example, Illinois highway department officials told us that the
state has contracted out preliminary engineering and design activities
at various levels for 30 years, but that the state has only recently
begun to increase its use of consultants to perform right-of-way
activities. In addition, according to Georgia highway department
officials, they now contract out 65 to 75 percent of their design work
compared with very little design work being contracted out only a few
years ago.
The level of contracting varies considerably across the activities we
surveyed (see fig. 3). For example, 23 highway departments reported
that they were contracting out more than 75 percent of federal-aid
eligible preventive maintenance activities, while the amount of routine
maintenance activities that state DOTs contract out is still relatively
low--nearly half of the states reported that they contracted out less
than 25 percent of these activities.
Figure 3: Number of State DOTs at Various Levels of Contracting Out:
This figure is a combination bar chart showing the number of state DOTs
at various levels of contracting out. The X axis represents the highway
activities, and the Y axis represents the number of states. One bar in
each group represents 0%. One represents 1-25%. One represents 26-50%.
One represents 51-75%, and one represents 76-100%.
[See PDF for image]
Source: GAO survey results.
[End of figure]
Many States Have Increased the Use of Consultants and Contractors for
Inspection Activities:
Officials from 27 of the 50 states responding to our survey indicated
that their states had increased the contracting out of construction
engineering and inspection activities over the past 5 years, although
half the states report contracting out 25 percent or less of this work.
In our interviews, several states indicated that they have recently had
to increase their use of consultants for construction inspection
activities. For example, the South Carolina DOT began to increase its
use of consultants to perform construction engineering and inspection
work in 2000. Department officials estimated that they will contract
out about 10 percent of construction engineering and inspection work
next year. Prior to 2000, the South Carolina DOT only contracted out
construction inspection and engineering work on certain large, complex
projects. Maryland State Highway Administration officials also said
that they have been giving what have been traditionally in-house
construction engineering and inspection activities to consultants,
contracting out about 60 percent of these activities.
Officials from at least 3 state DOTs we interviewed indicated that they
would prefer to keep construction inspection and engineering activities
in-house to retain greater control over the quality of contracted work.
For example, Illinois highway department officials said that they
always assign an Illinois highway department engineer to oversee the
consultant because they do not like to have consultants oversee other
contractors and consultants, but that they need to contract out
inspection activity for projects that require expertise they do not
have in-house. The Maryland State Highway Administration officials also
said that they would prefer to retain the construction engineering and
inspection activities in-house, but they have been unable to hire a
sufficient number of staff. According to Utah DOT officials, the agency
has been able to avoid contracting out any construction engineering and
inspection activities so far, but they would likely contract out such
activities in the future if workload burdens on in-house highway
department staff continue to increase.
Some State DOTs Have Broadened the Types of Contracts and Contracting
Techniques That They Use:
Some state DOTs have used certain types of contracts where contractors
assume more responsibility and risk for project delivery and day-to-day
highway project oversight. For example, design-build contracts allow
contractors to be involved in both the design and the construction of a
highway project, and project management contracts (1) can assign
additional oversight responsibilities to contractors or consultants and
(2) can result in contractors overseeing other contractors. Figure 4
shows the number of states using these types of contracts and the
frequency with which they use them.
Figure 4: Number of State DOTs Using Different Types of Contracts over
the past 5 Years:
This figure is a combination bar chart showing the number of state DOTs
using different types of contracts over the past 5 years. The X axis
represents the broader contracting, and the Y axis represents the
number of states. One individual bar represents 0, one represents 1-10,
and one represents 11 or more.
[See PDF for image]
Source: GAO survey results.
[End of figure]
As figure 4 shows, more than half of the state DOTs have used a design-
build approach at least once, and 20 state DOTs have not let any design-
build contracts over the past 5 years. Our survey also indicates that
many state DOTs still have constraints on their ability to use design-
build contracting. Fifteen state DOTs reported that they do not have
authority to enter into design-build contracts, and an additional 10
state DOTs reported that they have only limited design-build authority.
Few states have experience with other contracting methods asked about
in our survey. Five states reported that they had used project managers
for more than 10 contracts, and 3 states reported having used
construction managers/general contractors more than 10 times to oversee
and manage the day-to-day activities of a project.
Our survey also asked about a variety of other contracting techniques
that state DOTs may use in an effort to help minimize construction time
and cost, such as cost plus time bidding (A+B),[Footnote 12] incentive
and disincentive contracts,[Footnote 13] and lane rental contracts.
Almost two thirds of the states indicated that they used more than one
of these contracting techniques at least occasionally. Of the
contracting techniques included in the survey, states reported using
incentives and disincentives and cost plus time bidding most often over
the past 5 years (see fig. 5).
Figure 5: States' Use of Various Contracting Techniques:
This figure is a combination bar chart showing the states' use of
various contracting techniques. The X axis represents the bid types and
contract techniques, and the Y axis represents the number of states.
One individual bar represents frequently, one represents occasionally,
one represents rarely, and one represents not at all.
[See PDF for image]
Source: GAO survey results.
[End of figure]
While some states have used these contracting techniques in their
highway projects, many states reported that they did not use them very
often. For example, only 10 states reported using more than 1 technique
frequently. Of these states, only 4 reported using more than 3 of these
techniques frequently. Two states reported using these tools either
rarely or not at all.
While our survey results do not indicate widespread use of these
different types of contracts and contracting techniques, these results
do not indicate that the use of these contracts is not an important or
growing trend in state contracting. State officials we interviewed told
us that many of these types of contracts, which are relatively new to
some state DOTs, are actively being considered and their use is likely
to grow in the future. In addition, some techniques are more suited to
projects in congested areas--such as lane rental contracts--and some
states may have fewer such projects than others. Other contract types,
such as design-build contracts, are often used for projects that are
large and complex in scope, which may be relatively rare in some
states.
Most States Do Not Expect the Level of Contracting to Increase over the
Next 5 Years:
While many state DOTs have increased their contracting out of various
activities over the past 5 years, officials at many highway departments
anticipate a slowing of this trend. As figure 6 shows, most state DOTs
reported that they expect to maintain their current level of
contracting over the next 5 years. For some activities, a number of
states even expect to see declines in their level of contracting. For
example, 15 state DOTs reported that they expect their contracting of
design activities to decrease over the next 5 years. State DOT
officials responded in the survey that their expectations for their
contracting levels over the next 5 years are based on their
expectations for highway program funding levels, legislative
considerations, anticipated workload, and staffing levels. For example,
the Oregon DOT officials stated in our survey that they expect their
funding levels for highway projects to greatly decline by 2010, thereby
reducing their need for consultants. However, the department noted that
if they are able to secure new funding, they anticipate continuing at
their current level of consultant use, which is at a historical peak
for the department.
Figure 6: Number of States Anticipating Increasing, Decreasing, or
Maintaining the Same Level of Contracting Out over the Next 5 Years:
This figure is a combination bar chart showing the number of states
anticipating increasing, decreasing, or maintaining the same level of
contracting out over the next 5 years. The X axis represents the
highway activities, while the Y axis represents the number of states.
One individual bar represents increase, one represents maintain same
level, and one represents decrease.
[See PDF for image]
Source: GAO survey results.
[End of figure]
Some states anticipated growth in their contracting for certain
activities. For example, Pennsylvania and Utah DOT officials responded
that they believe their state will increase contracting out work to
consultants and contractors for all seven categories of highway
activities. In addition, another state official indicated that its
state DOT expects to increase its contracting out of federal-aid
eligible preventive maintenance work in the next 5 years due to an
anticipated shift in its program to focus on system preservation,
rather than capital projects.
State DOTs Indicate That Lack of In-house Staff and Expertise Are the
Most Important Drivers in States' Contracting Decisions:
State DOTs indicate that the most important factor in state DOTs'
decision to contract out highway activities is the need to access the
manpower and expertise necessary to ensure the timely delivery of their
highway program, given in-house resource constraints. While state DOTs
consider cost issues when making contracting decisions, cost savings
are rarely the deciding factor in contracting decisions, and no state
we interviewed regularly performs formal assessments of costs and
benefits before deciding whether to contract out work. Several studies
have attempted to compare the costs of in-house and contracted work,
although limitations in the studies' methodology make it difficult to
conclude that the use of consultants and contractors is more or less
expensive than using public employees over the long term. In addition
to staffing and cost issues, there are other considerations, such as
the desire to maintain in-house expertise that can play a role in a
state DOT's decision of whether to contract out highway activities.
Need to Supplement In-house Staff and Access Expertise Are the Major
Drivers in the Decision to Contract Out Work:
In our survey, state DOTs listed "lack of in-house staff" as "very
important" or "important" in their decision to contract out work more
than any other factor for all seven of the highway activities included
in the study, as shown in table 2. Furthermore, all of the highway
department officials that we interviewed said that they do not have the
in-house staff resources available to deliver their program in a timely
manner, so they must contract out work to deliver projects and
services. For example, Illinois DOT officials said that at this point,
they rely on consultants to fulfill the department's work demands.
Table 2: Number of State DOTs That Reported Factors as "Important" or
"Very Important" in Decisions to Contract Out Activities:
Factor: Lack of in-house staff;
Number of state DOTs, by highway activity: Preliminary engineering: 45;
Number of state DOTs, by highway activity: Design: 44;
Number of state DOTs, by highway activity: Construction engineering and
inspection: 39;
Number of state DOTs, by highway activity: Federal-aid eligible
preventive maintenance: 34;
Number of state DOTs, by highway activity: Routine maintenance: 35;
Number of state DOTs, by highway activity: Ongoing operations: 31;
Number of state DOTs, by highway activity: Right-of-way activities: 44.
Factor: To maintain flexibility or manage variations in department
workload;
Number of state DOTs, by highway activity: Preliminary engineering: 36;
Number of state DOTs, by highway activity: Design: 36;
Number of state DOTs, by highway activity: Construction engineering and
inspection: 32;
Number of state DOTs, by highway activity: Federal-aid eligible
preventive maintenance: 19;
Number of state DOTs, by highway activity: Routine maintenance: 25;
Number of state DOTs, by highway activity: Ongoing operations: 17;
Number of state DOTs, by highway activity: Right-of-way activities: 38.
Factor: To access specialized skills or equipment;
Number of state DOTs, by highway activity: Preliminary engineering: 31;
Number of state DOTs, by highway activity: Design: 30;
Number of state DOTs, by highway activity: Construction engineering and
inspection: 19;
Number of state DOTs, by highway activity: Federal-aid eligible
preventive maintenance: 27;
Number of state DOTs, by highway activity: Routine maintenance: 23;
Number of state DOTs, by highway activity: Ongoing operations: 25;
Number of state DOTs, by highway activity: Right-of-way activities: 26.
Factor: To increase speed of completion or to meet specific time
frames;
Number of state DOTs, by highway activity: Preliminary engineering: 35;
Number of state DOTs, by highway activity: Design: 32;
Number of state DOTs, by highway activity: Construction engineering and
inspection: 12;
Number of state DOTs, by highway activity: Federal-aid eligible
preventive maintenance: 21;
Number of state DOTs, by highway activity: Routine maintenance: 19;
Number of state DOTs, by highway activity: Ongoing operations: 14;
Number of state DOTs, by highway activity: Right-of-way activities: 39.
Factor: To meet federal or state legislative mandates, legal
requirements, or policy initiatives;
Number of state DOTs, by highway activity: Preliminary engineering: 20;
Number of state DOTs, by highway activity: Design: 18;
Number of state DOTs, by highway activity: Construction engineering and
inspection: 20;
Number of state DOTs, by highway activity: Federal-aid eligible
preventive maintenance: 17;
Number of state DOTs, by highway activity: Routine maintenance: 9;
Number of state DOTs, by highway activity: Ongoing operations: 13;
Number of state DOTs, by highway activity: Right- of-way activities:
15.
Factor: To identify innovative approaches or new techniques;
Number of state DOTs, by highway activity: Preliminary engineering: 10;
Number of state DOTs, by highway activity: Design: 14;
Number of state DOTs, by highway activity: Construction engineering and
inspection: 4;
Number of state DOTs, by highway activity: Federal-aid eligible
preventive maintenance: 11;
Number of state DOTs, by highway activity: Routine maintenance: 4;
Number of state DOTs, by highway activity: Ongoing operations: 11;
Number of state DOTs, by highway activity: Right-of-way activities: 5.
Factor: To obtain cost savings;
Number of state DOTs, by highway activity: Preliminary engineering: 3;
Number of state DOTs, by highway activity: Design: 3;
Number of state DOTs, by highway activity: Construction engineering and
inspection: 1;
Number of state DOTs, by highway activity: Federal-aid eligible
preventive maintenance: 10;
Number of state DOTs, by highway activity: Routine maintenance: 9;
Number of state DOTs, by highway activity: Ongoing operations: 3;
Number of state DOTs, by highway activity: Right- of-way activities: 3.
Source: GAO survey results.
[End of table]
In recent years, state DOTs have experienced a substantial growth in
funding for their highway programs, without a commensurate increase in
staffing levels. Results from our survey show that the majority of
state DOTs have experienced constant or declining in-house staffing
levels. State DOTs indicated that staff reductions occurred most
frequently in the areas of design, construction engineering and
inspection, and maintenance, as shown in table 3.
Table 3: Number of State DOTs That Reported Changes in Professional
Staff over the past 5 Years:
Type of professional and technical staff: Planning and environment;
Number of state DOTs, by staff change: Increased: 16;
Number of state DOTs, by staff change: Decreased: 13;
Number of state DOTs, by staff change: Stayed the same: 18;
Number of state DOTs, by staff change: No basis to judge: 1.
Type of professional and technical staff: Design (roadway, bridges, and
traffic engineering);
Number of state DOTs, by staff change: Increased: 4;
Number of state DOTs, by staff change: Decreased: 28;
Number of state DOTs, by staff change: Stayed the same: 17;
Number of state DOTs, by staff change: No basis to judge: 0.
Type of professional and technical staff: Construction engineering and
inspections (inspections, materials testing, and scheduling);
Number of state DOTs, by staff change: Increased: 9;
Number of state DOTs, by staff change: Decreased: 20;
Number of state DOTs, by staff change: Stayed the same: 20;
Number of state DOTs, by staff change: No basis to judge: 0.
Type of professional and technical staff: Operations (ongoing
Intelligent Transportation Systems, toll collection, and signal and
sign systems);
Number of state DOTs, by staff change: Increased: 11;
Number of state DOTs, by staff change: Decreased: 8;
Number of state DOTs, by staff change: Stayed the same: 23;
Number of state DOTs, by staff change: No basis to judge: 6.
Type of professional and technical staff: Maintenance;
Number of state DOTs, by staff change: Increased: 6;
Number of state DOTs, by staff change: Decreased: 20;
Number of state DOTs, by staff change: Stayed the same: 20;
Number of state DOTs, by staff change: No basis to judge: 1.
Type of professional and technical staff: Right-of-way and utilities;
Number of state DOTs, by staff change: Increased: 7;
Number of state DOTs, by staff change: Decreased: 15;
Number of state DOTs, by staff change: Stayed the same: 24;
Number of state DOTs, by staff change: No basis to judge: 2.
Type of professional and technical staff: Other nonadministrative;
Number of state DOTs, by staff change: Increased: 2;
Number of state DOTs, by staff change: Decreased: 10;
Number of state DOTs, by staff change: Stayed the same: 23;
Number of state DOTs, by staff change: No basis to judge: 12.
Type of professional and technical staff: Overall professional and
technical staff;
Number of state DOTs, by staff change: Increased: 12;
Number of state DOTs, by staff change: Decreased: 21;
Number of state DOTs, by staff change: Stayed the same: 17;
Number of state DOTs, by staff change: No basis to judge: 0.
Source: GAO survey results.
[End of table]
Of the 50 states that completed the survey, only 12 highway departments
stated that they employ more professional and technical highway staff
than they did in the past 5 years. The remainder of the highway
departments said that their workforces have either stayed the same or
decreased over the last 5 years.
Analysis of Census of Governments data also illustrated these trends in
staffing at state DOTs. From 1992 to 2005, employment at state DOTs
across the country declined by a little over 0.5 percent
annually.[Footnote 14] At the same time, state spending on highways
increased by 0.2 percent annually, in real (inflation-adjusted) terms.
These trends have resulted in an increase in the amount of highway
spending per employee at state DOTs, with each state DOT employee on
average having to "manage" a larger amount of his or her state's
program. Overall, across the country, state DOT inflation-adjusted
expenditures per employee have grown by 0.75 percent annually from 1992
to 2005.
Officials at every state DOT we interviewed also acknowledged
challenges in delivering highway infrastructure and services demanded,
given their in-house staffing situations. Several of the officials
cited budgetary issues and political pressure to reduce the size of
government as constraints on their ability to hire additional in-house
staff. For example, Illinois DOT officials, whose staff has been cut
nearly in half since the 1970s, stated that these staff reductions have
been primarily linked to budget issues, such as those associated with
the state's public employee pensions. In South Carolina, the
legislature has not substantially changed the highway department's
staffing levels despite the department's increased program size.
Consequently, department officials stated that there is more work to do
than the department can handle with its in-house staff alone.
Officials from several state DOTs also mentioned that market
conditions, including a lack of qualified engineers and the higher
salaries paid in the private sector, limit their ability to hire and
retain qualified personnel, even when they have the budget authority to
do so. In Georgia, DOT officials said that the department is often
engaged in bidding wars with private firms for prospective employees,
and that they simply do not have the ability to offer equivalent
compensation.
In addition to supplementing ongoing shortages of in-house staff, many
state DOTs viewed contracting as a valuable strategy for managing short-
term workload fluctuations. For example, Louisiana Department of
Transportation and Development officials said that contracting is
beneficial because it provides them with added flexibility and allows
them to respond more rapidly to spikes in their highway program than if
they had to bring new in-house staff on board. Once work slows,
contracting also allows the state DOTs to draw down their workforce
without having to lay off in-house employees. In our survey, state DOTs
listed the desire to "maintain flexibility or manage variations in
department workload" as "very important" or "important" more frequently
overall than any other factor except "lack of in-house staff" in their
decision to contract out work.
In addition to increasing their overall level of manpower, state DOTs
also frequently contract out work to access specialized skills or
expertise they may not have in-house, according to our survey results
and interviews with state highway officials. For example, the
Pennsylvania DOT does not always have the specialized skills in-house
to do certain geotechnical analyses and environmental impact
assessments, so this work is contracted out. Several state DOTs also
indicated that they tend to use consultants on complex projects that
require more specific expertise. For example, Illinois DOT officials
told us that they typically use consultants for larger, more complex
projects that generally will have a higher associated dollar amount due
to the need for specialized expertise. In addition, Louisiana
Department of Transportation and Development officials said that they
usually hire consultants to design the more complex and larger projects
due to a decrease in design staff as well as in-house expertise.
Maryland State Highway Administration officials also indicated that
staff reductions in their agency have had a disproportionate effect on
positions requiring more experience and has led to the agency using a
greater proportion of consultants on large projects.
Cost Savings Are Not a Major Driver in Decisions to Contract Out Work:
Cost savings do not appear to be an important driver in the trend
toward the increased contracting out of highway activities. Of the
seven factors listed in the survey that might potentially lead a state
DOT to decide to contract out an activity, "to obtain cost savings" was
listed as "very important" or "important" the least number of times of
any of the factors, across six of the seven highway activities studied.
Furthermore, "to obtain cost savings" was listed by states as "of
little importance" or "of no importance" the most times of any factor
for five of the seven highway activities studied, as table 4 shows.
During our interviews, no state DOT official cited cost savings as a
primary reason for their departments' increased use of consultants and
contractors in delivering their highway program. The Georgia DOT
initially attempted to perform some cost-benefit analyses when the
department was going through a surge in its contracting out work;
however, the department abandoned these efforts after it became
apparent that the results of the analyses did not matter since the
department needed to contract out the work regardless.
Table 4: Number of State DOTs Reporting Factors as "Of Little
Importance" or "Of No Importance" in Decisions to Contract Out
Activities:
Factor: To obtain cost savings;
Number of state DOTs, by highway activity: Preliminary engineering: 32;
Number of state DOTs, by highway activity: Design: 37;
Number of state DOTs, by highway activity: Construction engineering and
inspection: 36;
Number of state DOTs, by highway activity: Federal-aid eligible
preventive maintenance: 24;
Number of state DOTs, by highway activity: Routine maintenance: 20;
Number of state DOTs, by highway activity: Ongoing operations: 22;
Number of state DOTs, by highway activity: Right-of-way activities: 31.
Factor: To identify innovative approaches or new techniques;
Number of state DOTs, by highway activity: Preliminary engineering: 21;
Number of state DOTs, by highway activity: Design: 23;
Number of state DOTs, by highway activity: Construction engineering and
inspection: 34;
Number of state DOTs, by highway activity: Federal-aid eligible
preventive maintenance: 15;
Number of state DOTs, by highway activity: Routine maintenance: 20;
Number of state DOTs, by highway activity: Ongoing operations: 14;
Number of state DOTs, by highway activity: Right-of-way activities: 32.
Factor: To meet federal or state legislative mandates, legal
requirements, or policy initiatives;
Number of state DOTs, by highway activity: Preliminary engineering: 17;
Number of state DOTs, by highway activity: Design: 24;
Number of state DOTs, by highway activity: Construction engineering and
inspection: 16;
Number of state DOTs, by highway activity: Federal-aid eligible
preventive maintenance: 15;
Number of state DOTs, by highway activity: Routine maintenance: 21;
Number of state DOTs, by highway activity: Ongoing operations: 16;
Number of state DOTs, by highway activity: Right-of-way activities: 26.
Factor: To increase speed of completion or to meet specific time
frames;
Number of state DOTs, by highway activity: Preliminary engineering: 5;
Number of state DOTs, by highway activity: Design: 6;
Number of state DOTs, by highway activity: Construction engineering and
inspection: 22;
Number of state DOTs, by highway activity: Federal-aid eligible
preventive maintenance: 5;
Number of state DOTs, by highway activity: Routine maintenance: 9;
Number of state DOTs, by highway activity: Ongoing operations: 8;
Number of state DOTs, by highway activity: Right-of-way activities: 2.
Factor: To access specialized skills or equipment;
Number of state DOTs, by highway activity: Preliminary engineering: 4;
Number of state DOTs, by highway activity: Design: 10;
Number of state DOTs, by highway activity: Construction engineering and
inspection: 16;
Number of state DOTs, by highway activity: Federal-aid eligible
preventive maintenance: 3;
Number of state DOTs, by highway activity: Routine maintenance: 7;
Number of state DOTs, by highway activity: Ongoing operations: 4;
Number of state DOTs, by highway activity: Right-of-way activities: 10.
Factor: To maintain flexibility or manage variations in department
workload;
Number of state DOTs, by highway activity: Preliminary engineering: 0;
Number of state DOTs, by highway activity: Design: 2;
Number of state DOTs, by highway activity: Construction engineering and
inspection: 6;
Number of state DOTs, by highway activity: Federal-aid eligible
preventive maintenance: 5;
Number of state DOTs, by highway activity: Routine maintenance: 3;
Number of state DOTs, by highway activity: Ongoing operations: 9;
Number of state DOTs, by highway activity: Right-of-way activities: 3.
Factor: Lack of in-house staff;
Number of state DOTs, by highway activity: Preliminary engineering: 1;
Number of state DOTs, by highway activity: Design: 1;
Number of state DOTs, by highway activity: Construction engineering and
inspection: 1;
Number of state DOTs, by highway activity: Federal-aid eligible
preventive maintenance: 4;
Number of state DOTs, by highway activity: Routine maintenance: 2;
Number of state DOTs, by highway activity: Ongoing operations: 2;
Number of state DOTs, by highway activity: Right-of-way activities: 3.
Source: GAO survey results.
[End of table]
While cost savings are rarely the driver in the decision to contract
out highway activities, the perception of higher contracting costs may
influence states to continue to perform activities in-house, rather
than contracting out the activities. In our survey, state DOTs listed
the higher costs of consultants and contractors as a "very important"
or "important" factor in the decision to use in-house staff to perform
an activity more times overall than all but one factor, as shown in
table 5. As an example, officials at the Pennsylvania DOT conducted an
evaluation and found that it would be more expensive to contract out
for highway line painting and decided to continue to do the majority of
this work with in-house staff.
Table 5: Number of State DOTs Reporting Factors as "Important" or "Very
important" in Decisions to Use Department Staff to Perform an Activity:
Factor: The need to retain key skills and expertise in-house;
Number of state DOTs, by highway activity: Preliminary engineering: 33;
Number of state DOTs, by highway activity: Design: 37;
Number of state DOTs, by highway activity: Construction engineering and
inspection: 34;
Number of state DOTs, by highway activity: Federal-aid eligible
preventive maintenance: 18;
Number of state DOTs, by highway activity: Routine maintenance: 28;
Number of state DOTs, by highway activity: Ongoing operations: 30;
Number of state DOTs, by highway activity: Right-of-way activities: 33.
Factor: Costs of consultants/ contractors are greater than using in-
house staff;
Number of state DOTs, by highway activity: Preliminary engineering: 24;
Number of state DOTs, by highway activity: Design: 25;
Number of state DOTs, by highway activity: Construction engineering and
inspection: 30;
Number of state DOTs, by highway activity: Federal-aid eligible
preventive maintenance: 19;
Number of state DOTs, by highway activity: Routine maintenance: 24;
Number of state DOTs, by highway activity: Ongoing operations: 23;
Number of state DOTs, by highway activity: Right-of-way activities: 24.
Factor: Belief that work will be of higher quality if performed by in-
house staff;
Number of state DOTs, by highway activity: Preliminary engineering: 25;
Number of state DOTs, by highway activity: Design: 28;
Number of state DOTs, by highway activity: Construction engineering and
inspection: 24;
Number of state DOTs, by highway activity: Federal-aid eligible
preventive maintenance: 12;
Number of state DOTs, by highway activity: Routine maintenance: 18;
Number of state DOTs, by highway activity: Ongoing operations: 13;
Number of state DOTs, by highway activity: Right-of-way activities: 21.
Factor: Belief that work can be performed more quickly using in-house
staff;
Number of state DOTs, by highway activity: Preliminary engineering: 16;
Number of state DOTs, by highway activity: Design: 20;
Number of state DOTs, by highway activity: Construction engineering and
inspection: 12;
Number of state DOTs, by highway activity: Federal-aid eligible
preventive maintenance: 13;
Number of state DOTs, by highway activity: Routine maintenance: 24;
Number of state DOTs, by highway activity: Ongoing operations: 17;
Number of state DOTs, by highway activity: Right-of-way activities: 27.
Factor: Legal restrictions or policy initiatives regarding the use of
consultants or contractors;
Number of state DOTs, by highway activity: Preliminary engineering: 11;
Number of state DOTs, by highway activity: Design: 11;
Number of state DOTs, by highway activity: Construction engineering and
inspection: 13;
Number of state DOTs, by highway activity: Federal-aid eligible
preventive maintenance: 7;
Number of state DOTs, by highway activity: Routine maintenance: 9;
Number of state DOTs, by highway activity: Ongoing operations: 10;
Number of state DOTs, by highway activity: Right-of-way activities: 11.
Factor: Required skills or expertise are not available in the private
sector;
Number of state DOTs, by highway activity: Preliminary engineering: 4;
Number of state DOTs, by highway activity: Design: 3;
Number of state DOTs, by highway activity: Construction engineering and
inspection: 7;
Number of state DOTs, by highway activity: Federal-aid eligible
preventive maintenance: 2;
Number of state DOTs, by highway activity: Routine maintenance: 6;
Number of state DOTs, by highway activity: Ongoing operations: 7;
Number of state DOTs, by highway activity: Right-of-way activities: 9.
Factor: Concerns with liability or accountability for contracted work;
Number of state DOTs, by highway activity: Preliminary engineering: 3;
Number of state DOTs, by highway activity: Design: 3;
Number of state DOTs, by highway activity: Construction engineering and
inspection: 10;
Number of state DOTs, by highway activity: Federal-aid eligible
preventive maintenance: 4;
Number of state DOTs, by highway activity: Routine maintenance: 11;
Number of state DOTs, by highway activity: Ongoing operations: 7;
Number of state DOTs, by highway activity: Right-of-way activities: 10.
Factor: Lack of competition/ insufficient number of bidders;
Number of state DOTs, by highway activity: Preliminary engineering: 3;
Number of state DOTs, by highway activity: Design: 3;
Number of state DOTs, by highway activity: Construction engineering and
inspection: 3;
Number of state DOTs, by highway activity: Federal-aid eligible
preventive maintenance: 4;
Number of state DOTs, by highway activity: Routine maintenance: 4;
Number of state DOTs, by highway activity: Ongoing operations: 3;
Number of state DOTs, by highway activity: Right-of-way activities: 3.
Source: GAO survey results.
[End of table]
State DOTs Do Not Formally Assess Costs and Benefits before Contracting
Out Work:
Although state DOTs consider cost issues and estimate the costs of
performing certain activities, none of the 10 departments from which we
interviewed officials had a formal process in place to systematically
or regularly assess the costs and benefits of contracting out
activities before entering into contracts. State officials we
interviewed acknowledged difficulties in accurately comparing costs of
work performed in-house and work performed by contractors and
consultants. For example, Minnesota DOT officials stated that they have
difficulties in determining how to properly calculate overhead rates
for in-house staff. Reports from state auditors in several states also
acknowledged difficulties in comparing the costs of using consultants
versus using in-house staff. Some reports also found that the highway
departments in their states did not thoroughly or adequately study
costs associated with the use of consultants compared with in-house
staff to effectively manage the use of consultants, or actively
negotiate with consultants to ensure that contract prices were fair and
reasonable.
While formal assessments are not undertaken, officials from several
state DOTs we interviewed generally perceived contracting out to be
more expensive than using in-house staff, particularly for engineering
services. In fact, no state DOT official we interviewed perceived
engineering work to be cheaper on an hourly basis when contracted out.
However, some officials indicated that they found opportunities for
cost savings in some circumstances for specific activities. For
example, the Utah DOT found that it was cheaper to contract out its
pavement management data collection work because it allowed the
department to avoid having to invest in the expensive equipment
required, which tends to become rapidly outdated. Officials from
another state DOT acknowledged that there were potential cost
efficiencies through contracting if contract employees were laid off
during periods of reduced activity, such as during the winter months.
This department conducted an analysis that found that if the agency
laid off consultant construction inspectors for at least 3 months out
of the year, the agency's cost for the inspectors would equal that of
in-house employees. However, officials stated that the department has
not laid off consultant inspectors consistently due to concerns that
the department would not be able rehire them once their services were
needed again.
A number of studies have attempted to compare the costs of contracting
out and using in-house staff for highway activities. In our review of
these studies, we identified a series of methodological issues and
other limitations that make it difficult to make any conclusions about
whether consultants and contractors are more or less expensive than
public employees over the long term.[Footnote 15] In addition, we
reviewed other studies that have attempted to synthesize the results of
existing cost comparisons and have raised many of these same issues.
First, numerous challenges exist in obtaining accurate and reliable
data to make comparisons. Such challenges include difficulties in
properly assigning in-house overhead costs to specific projects and
activities, finding "like" projects to compare, and using state DOT
systems and records that have incomplete and unreliable data. Second,
very few of the studies we reviewed sought to systematically determine
the benefits resulting from contracted work or in-house work, thus
providing an incomplete picture as to the extent to which contracting
out highway activities might or might not be desirable. For example,
additional costs of using consultants or contractors could be offset by
benefits in completing the project more quickly than it would have been
done by in-house staff, or the quality of the work may be worth the
premium paid for the service. Finally, the studies did not adequately
consider the long-term implications of contracting out work or
performing it in-house, such as long-term pension obligations
associated with in-house employees that are not incurred when work is
directly contracted out.
Additional Factors Can Also Play a Role in Contracting Decisions:
In addition to the factors that we have previously discussed, other
considerations can play a role in a state DOT's decision of whether to
contract out certain activities. Next to the staffing issues that we
have previously discussed, state DOTs most frequently reported using
consultants to meet specific time frames or to increase the speed of
completion of a task as an "important" or "very important" factor.
State-level legislative requirements and policy mandates are also
sometimes factors in state DOTs' decisions to contract out work. For
instance, the South Carolina Legislature enacted a budget provision in
1996, encouraging the highway department to use private contractors for
bridge replacements; surface treatments; thermo-plastic striping;
traffic signals; fencing; and guardrails, whenever possible. In our
survey, the Alaska DOT responded that one of the reasons it contracts
out preliminary engineering work is to satisfy direction that it has
received from the state government on using consultants. Conversely
some states may also have legislative limitations on their ability to
contract out work. For example, the California DOT, until recently, had
only limited authority to contract out engineering services under the
California constitution.
Regarding the decision to keep work in-house, the most commonly cited
factor in both our interviews and our survey was the desire to retain
key skills and expertise. State DOTs recognize that they need to
maintain a core of employees with sufficient experience and expertise
to be able to effectively oversee and manage consultants and
contractors and to also develop the expertise of more junior highway
department employees. In both our interviews and our survey, State DOT
officials stated that they often consciously keep certain activities in-
house so that employees can improve their skills.
The results from our survey indicated that state DOTs' perceptions
regarding differences in quality between work performed in-house and
work contracted out may at times be an important factor in decisions to
keep work in-house. For preconstruction activities in particular,
"belief that work will be of a higher quality if performed by in-house
staff" was one of the factors most frequently listed as being "very
important" or important" in the decision to perform work with in-house
staff. Furthermore, one state DOT noted in the survey that the
consultants they have used to perform construction engineering and
inspection work did not have adequate experience to effectively do the
job. In our interviews, few state officials expressed strong beliefs
about differences in quality between in-house and contracted out work,
although some departments acknowledged that the quality of work varies,
depending on the firm being used, and that there have been issues
regarding the performance of specific firms.
We also performed a correlation analysis to determine whether the
amount of work that state DOTs contract out is associated with certain
demographic or economic conditions in the state.[Footnote 16] The level
of correlation between most of the economic and demographic variables
selected for the analysis and the percentage of work that state DOTs
contract out was relatively weak or nonexistent. However, among the
variables that we considered, the percentage of a state's population
living in urban areas had the strongest positive correlation with the
amount of work that states contract out in preliminary engineering,
design, and construction engineering and inspection
activities.[Footnote 17] This correlation may occur because, as state
DOT officials told us, they are more likely to contract out larger and
more complicated projects, and there may be more of these types of
projects in those states that are more urbanized. Also, for the
majority of activities studied, there appears to be a moderate positive
correlation between the amount of work contracted out and the pace at
which states' populations have grown. This correlation is consistent
with the possibility that more rapidly growing states contract out
greater amounts of work to help meet surges in their workload spurred
by the increased demand for highways that growing populations foster,
but may also be due to other factors.
State DOTs Use Various Controls to Protect the Public Interest, but
They Face Additional Challenges Arising from Current Contracting
Trends:
State officials we interviewed told us that they have sufficient tools
and procedures in place to monitor and oversee contractors to ensure
that the public interest is protected. These tools and procedures
include such things as prequalification of contractors and consultants,
regular monitoring procedures, assessments of work performed, and
standards and requirements for certain types of work. However, 10 of
the 11 state auditor reports we reviewed found weaknesses in state
DOTs' contracting and oversight practices. With current trends in
contracting state DOTs face additional challenges in conducting
adequate oversight and monitoring. In particular, states' oversight has
generally become further removed from the day-to-day work on a project,
and state officials expressed long-term concerns in retaining adequate
expertise and staff needed to adequately oversee a growing contractor
and consultant workforce.
State DOTs Use a Variety of Tools and Processes to Protect the Public
Interest, Although Such Controls Are Inconsistently Applied:
State DOTs' contracts with consultants and contractors include a
variety of mechanisms and controls that are intended to address
potential project risks and protect the public interest, and the state
officials with whom we spoke believe that the controls they have in
place are adequate to protect the public interest. For example, state
DOTs may prequalify consulting firms and contractors to ensure that
those bidding on projects will be able to successfully perform
contracted activities. A previous survey on state contracting practices
found that state DOTs use a prequalification process for about two
thirds of the activities they contract out. The survey found that
prequalification processes were most common for design, right-of-way,
and operations activities, while prequalification processes where less
common when contracting out for maintenance and construction work. A
majority of state DOT officials we interviewed also stated that they
have prequalification processes for at least some activities. As part
of their prequalification requirements, state DOTs examine consultants'
and contractors' previous job experience and work capacity to identify
individuals and organizations from which the agency may accept a bid.
In addition, for engineering services, state DOTs are required to use a
qualification-based selection process to identify best-qualified
bidders. It is only once these best-qualified bidders have been
identified that the highway department enters into price negotiations
to determine a "fair and reasonable" price for the contracted
services.[Footnote 18]
States also report that they have policies to regularly monitor and
assess consultants and contractors during the project and upon project
completion and may include these assessments into prequalification
determinations for future projects. State officials indicate that a
state employee is always ultimately responsible for any particular
project or service and, therefore, are responsible for ensuring that
consultants and contractors are performing the work according to
contract provisions and other applicable standards and specifications.
State DOTs may address poor performance on an ongoing project by
requesting that the contractor or consultant replace a particular
employee or by requesting that the contractor or consultant address any
construction mistakes. In extreme circumstances, state DOTs can also
withhold payment to consultants or contractors. A poor performance
rating at the end of a highway project may result in a reduced chance
of securing future contracts.
All state DOTs have policies and rules governing consultant and
contractor independence. For projects on the National Highway System,
state DOTs require consultants and contractors to certify that they do
not have any potential or perceived conflicts of interest. Some state
DOTs have prohibitions against performing both design and construction
inspection activities.
State DOTs have also developed various standards, specifications, and
policies to help ensure that the public interest is protected on
highway projects. State DOTs require that standards and specifications
be followed whether work is performed by department staff or contracted
out. When work is contracted out, state DOTs outline all relevant
standards and specifications--such as design and construction
standards, and specifications regarding materials acquisitions--in the
terms of the contract after a winning bidder has been selected.
Finally, federal regulations require each state agency to have an
approved quality assurance program for materials used in and the
construction of federal-aid highway construction projects.[Footnote 19]
Quality assurance programs identify contractors' materials sampling,
testing, and inspection requirements as well as specific quality
characteristics to be measured for project acceptance. The regulations
also include requirements that each state DOT's quality assurance
program provides for an acceptance program and an independent assurance
program. In 1995, FHWA revised its regulations to allow state DOTs to
use contractor material testing data in their acceptance decisions if
accompanied by validation and verification procedures. However, state
employees must always make the final acceptance decision. On full
oversight projects, the state's FHWA division office is responsible for
providing final acceptance of projects at the completion of
construction, but the state is still responsible for providing project-
level acceptance of construction and materials quality during
construction.
State auditors in 10 of the 11 states that responded to our inquiry
found numerous weaknesses in state DOTs' contracting and oversight
practices. For example, one auditor's report found that the state DOT's
prequalification procedures do not always ensure that the most
qualified bidder is selected. Furthermore, auditors' reports in at
least 5 states found that the state DOTs did not aggressively negotiate
fair and reasonable prices when using qualifications-based selections,
or had not established criteria to define what constitutes a reasonable
price, resulting in negotiated prices that are perceived to be too high
compared with national benchmarks, or compared with other states'
experience. In addition, another auditor report found examples where
the state DOT failed to consistently assess consultant and contractor
performance, and examples where quality assurance procedures were not
adequately followed, which can result in lower-quality highway
construction.
Current Trends in Contracting Out Pose Challenges for State DOTs in
Conducting Adequate Oversight and Monitoring:
State DOTs may encounter challenges in conducting sufficient oversight
and monitoring for highway projects, given current trends in
contracting out. For projects using federal-aid highway funds, FHWA
requires that a state highway employee always have ultimate
responsibility for successful project completion. However, when
consultants and contractors have oversight or managerial roles on a
project, the state highway employee may be further removed from the day-
to-day project activities. This situation has the potential to limit
the ability of state DOT employees to identify and resolve problems
that occur during construction. For example, the National
Transportation Safety Board--in its report on an accident in Colorado
in which a car collided with a steel girder that had fallen from an
overpass--found that the state DOT did not conduct active oversight,
and that it was the department's policy to avoid telling a contractor
how to accomplish contracted work and to avoid interfering as the
contractor carried out the work.
In addition, state highway employees are increasingly moving into
project manager roles in which they may oversee several projects.
Several state DOT officials cited concerns and challenges in conducting
adequate oversight in such situations. In some states, consultants
oversee multiple projects as well. For example, the Maryland State
Highway Administration is beginning to use construction management
inspection contracts. Under these contracts, the contractor becomes
responsible for managing work on specific projects as well as a
portfolio of projects.
Erosion of state DOTs' in-house expertise as a result of staff cuts and
retirements also creates additional risk in the long term and creates
challenges for state DOTs in effectively overseeing consultant and
contractor work. All of the state DOT officials with whom we spoke
believe that they currently have sufficient expertise in-house to carry
out their highway programs and to oversee consultants and contractors.
However, according to officials at several state DOTs, there is a
"thinning" of expertise in their departments and fewer knowledgeable
staff are available to oversee and monitor consultants. As we have
previously stated, state DOTs have not been able to hire a sufficient
number of staff to replace experienced staff who may soon be retiring.
In addition, state DOTs compete with private firms for what in some
states is a relatively small number of new engineers graduating from
college. State highway officials in several states also commented that,
given the limitations inherent in a state budget, college graduates
often elect to either (1) go into the private sector right away or (2)
receive training at the state DOT, and then leave for a higher paying
job in the private sector.
Ensuring that consultants and contractors are independent and free from
conflicts of interest can be difficult. As we have previously
discussed, state DOTs are using consultants and contractors for a
greater variety of services, including project engineering and design,
construction inspection, and highway maintenance. Officials from
several state DOTs have expressed some concern because consultants and
contractors may work on multiple state projects where they are the lead
on one project and a subconsultant/subcontractor on another project.
For example, one firm may have an undisclosed financial relationship
with another firm beyond the work being done with the state DOT, and
this situation could pose difficulties if one of these firms is hired
to inspect the other. While some state DOT officials acknowledged that
situations have arisen that present the potential for conflicts of
interest, none of the state DOT officials with whom we spoke thought
their agencies had any significant problems with contractor and
consultant independence.
FHWA Focuses Much of Its Oversight Efforts on Ensuring That State DOTs
Comply with Laws and Regulations:
The federal-aid highway program provides states with broad flexibility
in deciding how to use their funds, which projects to pick, and how to
implement these projects; therefore, FHWA has a limited role in
determining how consultants and contractors should be used by state
DOTs. FHWA performs project-level oversight on only a limited number of
projects. FHWA division offices also conduct reviews of state programs
and processes that are related to the use of consultants and
contractors. These oversight activities are generally limited to
ensuring compliance with federal rules and regulations. On a national
level, FHWA has recently conducted some reviews that touch on states'
use of consultants and contractors. Through these reviews, FHWA has
identified a variety of risks associated with the use of consultants
and contractors, but the agency has not fully assessed how to respond
to these risks.
FHWA Has a Limited Role in Determining How Consultants and Contractors
Are Used on Highway Projects:
FHWA has only limited authority over many aspects of state DOTs'
programs, including their contracting practices. According to FHWA
officials, the agency does not have any specific policy regarding
highway departments' use of consultants and contractors beyond those
requirements contained in existing laws and regulations. Furthermore,
while federal law requires state highway departments to be "suitably
equipped and organized," the law also includes a provision that a state
may engage, to the extent necessary or desirable, the services of
private engineering firms in meeting these provisions.[Footnote 20]
According to FHWA, some FHWA division offices have interpreted this
regulation as providing state DOTs with broad authority to use
consultants to perform department work. FHWA has compiled relevant
legislation and regulations regarding the contracting out of highway
activities on its Web site to serve as guidance to state DOTs when
contracting out highway activities.
FHWA has also played a role in encouraging states to consider
alternative contracting techniques and methods, and to consider greater
involvement from the private sector through public-private partnerships
to improve project delivery and seek out alternative sources of
funding. For example, FHWA has encouraged contracting techniques and
public-private partnerships through Special Experimental Projects 14
and 15, with many of these techniques allowing consultants and
contractors to assume additional responsibilities in the delivery of
highway projects.
Some FHWA Oversight Activities Are Associated with the Use of
Consultants and Contractors:
While state DOTs conduct project-level oversight on the majority of
highway projects, FHWA retains project-level oversight on a limited
number of projects, based on its stewardship agreement with the state
DOT. Regarding states' use of consultants and contractors, the agency's
oversight efforts are generally focused on ensuring compliance with
existing laws and regulations. For example, the division office must
concur in the award of certain contracts, and when providing
concurrence for an engineering contract, a division office will seek to
ensure that the state DOT has used an appropriate qualifications-based
selection process, as required by law.
When conducting project-level oversight, division office officials will
also do at least some on-site monitoring of the work. During these on-
site visits, FHWA will assess the project's status and verify that the
project complies with plans and specifications. As part of this
process, division office officials told us that they will often observe
ongoing project activities to ensure that materials testing and other
quality control and quality assurance procedures follow regulations.
The amount of on-site oversight varies greatly, depending on the
perceived project risk, which is generally determined according to the
cost of the project, its complexity, and its visibility to and
potential impact on the public. Division office officials told us that
on projects with very high visibility, they will have an engineer on-
site up to several times a week. However, for other projects, they may
not send an engineer out to the site more than once or twice over the
life of a project. According to division office officials, even when
conducting project-level oversight, they still rely on the state DOTs
to properly administer the project and that much of FHWA's role is not
to perform direct oversight, but rather to make sure that the highway
department is doing appropriate oversight. Once the project is
completed, FHWA is responsible for final inspection and project
acceptance.
FHWA also conducts oversight related to the use of consultants and
contractors through reviews of state programs and processes that may
involve consultants and contractors. To identify those areas that pose
the greatest threats or opportunities to states' federal-aid programs
and to assist the division offices in allocating their limited
resources in the most effective manner, FHWA has encouraged a risk-
based approach to identifying areas for review, and given division
offices flexibility in determining which program areas to focus on in
their risk assessments. Through this risk assessment process, many
division offices have identified issues related to the use of
consultants and contractors. We have identified at least 15 states
where FHWA division offices have conducted process reviews specifically
concerning the contracting out of work over the past 5 years. We have
also identified at least 2 other states where FHWA division offices are
currently conducting similar reviews. These reviews focus on a variety
of issues related to the use of consultants and contractors, and many
have recommendations for how state DOTs can improve their processes for
procuring and administering consultants and contractors.
As a result of division offices' identification of the use of
consultants and contractors as an area of high risk, FHWA headquarters
has also conducted national reviews that involve issues related to this
matter. Under its recently created National Review Program, FHWA has
completed reports on quality assurance and oversight of local public
agencies that include discussions of issues associated with the
contracting out of work. FHWA is also currently undertaking an
additional review that is looking at the administration of consultant
contracts. In addition to these reviews, FHWA has also conducted a
series of annual reviews of state DOTs' quality assurance activities
over the last several years that have highlighted concerns related to
material testing conducted by consultants.
A final way that FHWA exercises oversight relating to the use of
consultants and contractors is through its approval of various state
DOT documents. As part of their oversight responsibilities, division
offices are responsible for approving a variety of state DOT manuals,
standards, and policy documents that establish procedures for
implementing the federal-aid highway program in the state. For example,
state DOTs must develop written procedures outlining their process for
procuring consultant services, which must be approved by FHWA.[Footnote
21] FHWA must also approve other documents that may not be directly
focused on the contracting out of work, but that address work that is
often performed by consultants or contractors. For example, division
offices are responsible for approving state DOTs' quality assurance
programs for materials on construction projects.
FHWA Has Identified Risks Associated with the Use of Consultants and
Contractors, but It Has Not Fully Assessed How to Respond to These
Risks:
FHWA has identified many ways that the contracting out of work can pose
risks to the federal-aid highway program. For example, a series of FHWA
reviews of quality assurance activities found many critical
deficiencies in state oversight of consultants in these activities,
such as the lack of independent sampling of highway materials for
verification tests; inadequate statistical comparisons of test results;
and insufficient state control of test samples, sampling locations, and
testing data. Such shortcomings in state DOTs' quality assurance
programs could potentially have a detrimental effect. For example, in
its quality assurance review, FHWA states that pavement on highways is
deteriorating faster than expected and asserts that this is likely, at
least in part, due to the identified weaknesses in state DOTs' quality
assurance programs.[Footnote 22] In addition, another national FHWA
study related to the use of local public agencies found that local
agencies are often highly dependent on consultants to deliver the
projects and may not have the expertise to adequately oversee the work
of the consultants and to be sure of the quality of the services they
are getting. The study further found that some states may not be
conducting adequate oversight over these projects, and that the states'
reviews tend to be reactive, rather than proactive.
Division offices have also cited areas of risk associated with the
growing use of consultants. For example, an Illinois Division Office
process review raised concerns about the possibility that firms that
had performed design work for a project might also do construction
inspection work on the same project, which would pose the potential for
conflicts of interest. In our interviews with division office
officials, many cited the challenges that contracting out poses for
state DOTs in regard to maintaining sufficient in-house expertise.
Also, several division office officials perceived contracting out work
to be more expensive than keeping the work in-house, resulting in an
inefficient use of public funds. Division office officials we
interviewed also pointed out that FHWA's division offices have also
suffered reductions in staff and an erosion of expertise and
experience, which can hamper their oversight activities.
FHWA officials stated that many division offices also identified areas
of risk related to the contracting out of work during FHWA's first
national risk management cycle. Although the use of consultants and
contractors was not one of the 49 key elements that division offices
were required to assess, many division offices still identified it as
an area of risk. According to FHWA, 23 division offices identified
risks related to the use of consultants as one of their top risks, with
division offices finding such risks present throughout various state
DOT program areas, including in construction, design, and right-of-way.
These risks included concerns that consultants do not have the
necessary skills to complete tasks according to federal regulations,
consultants are not supplying sufficient personnel or resources to
complete jobs, and state DOTs have been overly relying on consultants
to select and manage contractors.
While FHWA has identified risks associated with the use of consultants
and contractors, the agency has not comprehensively assessed how, if at
all, it needs to adjust its oversight efforts to protect the public
interest, given current trends in the use of consultants and
contractors. Also, FHWA has not instructed its division offices to
consider issues related to the amount and type of work contracted out
when outlining oversight responsibilities in their stewardship
agreements with state DOTs. Overall, FHWA division offices generally
described their role as ensuring compliance with existing regulations
and not assessing the performance of state DOTs in achieving
transportation goals. This has the potential to limit the value of the
agency's oversight activities. For example, FHWA acknowledges in its
report on quality assurance in materials and construction that it is
possible to have a quality assurance program for materials that is
compliant with regulations, but is not performing effectively, and vice
versa.[Footnote 23] This FHWA report also finds that division offices
are often not fully aware of what components should be part of quality
assurance programs, and, as a result, the effectiveness of these
programs is not being adequately assessed.
FHWA has made progress in addressing some of the concerns related to
its oversight program and is considering additional steps to mitigate
risks associated with the use of consultants and contractors in the
future. The agency is currently developing an implementation plan in
response to the recommendations in its quality assurance report. This
plan may seek to address some of the risks associated with the
involvement of consultants and contractors in the quality assurance
process. Also, FHWA is continuing to refine its risk management
approach to better identify risks throughout the country and to more
fully develop methods for addressing identified risks. Finally, as we
have previously discussed, FHWA division offices have been working to
revise their current stewardship agreements to incorporate further
considerations of risk and to also identify performance measures that
will assist in increasing accountability in the federal-aid program,
based on FHWA guidance. However, FHWA guidance gives state DOTs and
division offices broad flexibility in how they assess risks and develop
performance measures. As of October 2007, FHWA reported that 21 of the
agreements had been revised, with 15 of them incorporating
considerations of risk and performance measures. Five more agreements
incorporated considerations of risk, but not performance measures.
Conclusions:
State DOTs have long used contractors and consultants to augment
existing workforces. Recent trends suggest that consultants and
contractors are used more than ever before and in a multitude of
different activities--from designing projects, to appraising and
acquiring rights-of-way, to managing and inspecting projects--and, in
some cases, consultants and contractors may be responsible for projects
from beginning to end. While there is no conclusive evidence of the
long-term differences in costs and benefits between using consultants
and contractors and obtaining additional state staff, this
consideration is largely inconsequential to state DOTs because many are
now dependent on consultants and contractors to deliver their growing
highway programs. Given this reality, effective oversight and
monitoring of consultant and contractor workforces become critical to
state DOTs to ensure that work is performed according to standards and
specifications, and that materials used meet quality and performance
standards. While the state officials that we interviewed generally
believe they have sufficient controls in place to conduct such
oversight, there is some evidence from state auditor's reports that
these controls are not always implemented effectively. Furthermore,
state officials we interviewed recognize that there will be increased
risk to the highway program over the long term, given (1) the growing
potential for conflicts of interest and independence issues and (2) the
reality of a changing workforce at state DOTs and difficulties in
attracting and retaining staff with key skills.
We have previously reported that there is a need for a fundamental
reexamination of the highway program and a need for national
transportation goals to be better defined and linked to performance
measures to evaluate what the respective programs actually accomplish.
Regarding the growing use of consultants and contractors by state
highway departments, FHWA's oversight has generally been focused on
ensuring that state processes related to this matter are in compliance
with existing regulations, and has not sufficiently focused on the
performance and effectiveness of those processes in protecting the
public interest or in achieving national transportation goals. We
recognize that FHWA has a number of efforts under way that are geared
toward refining FHWA's approach to oversight of state DOTs, including
developing a plan to address the issues raised in its national review
of quality assurance programs, working to identify areas of
vulnerability to the federal-aid highway program through its national
risk management cycle, and continuing a national program review
currently under way of consultant administration. In addition, division
offices are continuing to revise their stewardship agreements to be
more risk-and performance-oriented. However, further efforts to assess
how best FHWA could adjust its oversight and focus its activities on
consistently ensuring the performance and effectiveness of state DOTs'
programs and processes as they relate to the management of consultants
and contractors would increase the value of FHWA oversight in this
area. In addition, while several stewardship agreements have recently
been revised to incorporate a more risk-and performance-oriented
approach to conducting federal oversight, most states have yet to
revise their agreements, and some revised agreements have not
incorporated performance measures.
Recommendations for Executive Action:
To more effectively and consistently ensure that state DOTs are
adequately protecting public interests in the highway program, given
current trends in the use of consultants and contractors, we recommend
that the Secretary of Transportation direct the Administrator of the
Federal Highway Administration, in the context of FHWA's ongoing
activities related to quality assurance programs and risk management,
to work with FHWA division offices to (1) give appropriate
consideration to the identified areas of risk related to the increased
use of consultants and contractors as division offices work to target
their oversight activities and (2) develop and implement performance
measures to better assess the effectiveness of state DOTs' controls
related to the use of consultants and contractors to better ensure that
the public interest is protected.
Agency Comments:
We provided copies of this report to the Department of Transportation,
including FHWA, for its review and comment. DOT officials provided
technical clarifications, which we incorporated as appropriate. The
department took no position on our recommendation to work with FHWA
division offices regarding state DOTs' increased use of consultants and
contractors.
We are sending copies of this report to interested congressional
committees, the Secretary of Transportation, and the Administrator of
the Federal Highway Administration. 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 or your staff have any questions about this report, please
contact me at (202) 512-2834 or at heckerj@gao.gov. Contact points for
our Offices of Congressional Relations and Public Affairs may be found
on the last page of this report. GAO staff who made major contributions
to this report are listed in appendix IV.
Sincerely yours,
Signed by:
JayEtta Z. Hecker:
Director, Physical Infrastructure:
[End of section]
Appendix I: Objectives, Scope, and Methodology:
This report addresses the following objectives: (1) the recent trends
in the contracting out of state highway activities; (2) the factors
that influence state departments of transportation (state DOT) in
deciding whether to contract out activities and the extent to which
state DOTs assess costs and benefits when making such decisions; (3)
how state DOTs protect the public interest when work is contracted out,
particularly when consultants and contractors are given substantial
responsibility for project and service quality and delivery; and (4)
the Federal Highway Administration's (FHWA) role in ensuring that
states protect the public interest.
To determine the recent trends in the contracting out of state highway
activities, we performed a literature review of existing research and
survey data to identify general trends over the periods covered by
those surveys and to use as a general baseline for comparison with
current levels of contracting out. We also surveyed and received
responses from all 50 state DOTs, using a Web-based questionnaire. In
developing the survey, we consulted a representative from the American
Association of State Highway Transportation Officials (AASHTO) and also
consulted a highway expert who is a former President of AASHTO, a
former head of the Utah DOT, and an author of numerous studies on
highway contracting issues. On the basis of the information received in
these consultations, we revised our survey instrument. In addition, we
conducted survey pretests over the telephone with state DOTs in
Illinois and Maryland. We also revised our survey instrument on the
basis of information we received in these pretests. We conducted the
survey from mid-June to mid-September 2007. During this period, we sent
2 rounds of follow-up e-mails to nonrespondents in addition to the
initial e-mailing. We also made follow-up telephone calls and sent
follow-up e-mails to several state DOTs to encourage them to complete
the questionnaire. We then surveyed the state DOTs to learn about the
extent to which they contract for services across 7 categories of
highway activities, including preliminary engineering, design,
construction engineering and inspection, federal-aid eligible
preventive maintenance, routine maintenance activities not eligible for
federal-aid program funding, ongoing operations, and right-of-way
appraisals. We also surveyed state DOTs to determine how the levels of
contracting for these activities have changed over the past 5 years and
to gather information about potential future trends in contracting. In
addition, we used the survey to identify which factors state DOTs said
are driving them to contract out activities or to keep work in-house.
Finally, the survey gathered data on state DOTs' use of alternative
contract types and techniques and collected information on certain
contracting concerns that are specific to design-build contracts. In
developing the questionnaire and in collecting and analyzing the data,
we took steps to minimize errors that could occur during those stages
of the survey process. The detailed survey results are available in
appendix III.
Because this was not a sample survey, it has no sampling errors.
However, the practical difficulties of conducting any survey may
introduce errors, commonly referred to as "nonsampling" errors. For
example, difficulties in interpreting a particular question, making
sources of information available to respondents, entering data into a
database, or analyzing these data can introduce unwanted variability
into the survey results. We took steps in developing the questionnaire,
collecting the data, and analyzing the data to minimize such
nonsampling errors. For example, social science survey specialists
designed the questionnaire in collaboration with GAO staff who have
subject matter expertise. Then, as we have previously noted, our
questionnaire was reviewed by experts in this field and was pretested
in 2 states. When we analyzed the data, an independent analyst checked
all computer programs. Since this was a Web-based survey, respondents
entered their answers directly into the electronic questionnaire--
eliminating the need to key data into a database and further minimizing
errors.
To gather further information on the recent trends in the contracting
out of state highway activities, we performed a series of in-depth
interviews with highway department officials in 10 states throughout
the country: Arizona, California, Georgia, Illinois, Louisiana,
Maryland, Minnesota, Pennsylvania, South Carolina, and Utah. These
interviews allowed the team to gather in-depth and contextual
information on state DOT contracting practices that could not be
obtained through a survey. We conducted all of the interviews using a
data collection instrument that we developed.
In selecting state DOTs to interview, we used a nongeneralizable
sample, rather than performing random sampling. We chose this approach
to ensure that the sample set included state DOTs with a range of
contracting experiences and practices. When selecting which state DOTs
to include in the sample, we considered a range of criteria, including
(1) the region in which the state is located; (2) the degree to which
the state DOT contracts out highway activities; (3) the range of
contracting approaches the state uses, including nontraditional project
delivery methods such as design-build or asset management as reported
in previous reports; (4) the legal and policy requirements the state
faces in regard to contracting out highway activities; and (5) the
extent to which the state has performed analyses of the costs and
benefits of contracting out highway activities. To select the states
for the sample, we reviewed relevant academic, expert, state, and
federal research and existing survey data on state outsourcing
activities to make an initial assessment of where various state DOTs
fell along the spectrum for each of the criteria and to identify any
unique features of the states' outsourcing programs that would be
particularly useful to study in greater depth. For example, we looked
for criteria such as state DOTs that had developed unique contracting
practices, state DOTs that were rapidly changing the way their
departments conducted business, and state DOTs whose outsourcing
experiences had been particularly successful or problematic. Lastly, we
generally sought to avoid selecting states that had already been
studied in great depth and whose contracting experiences are already
well-documented, such as Florida.
To determine the factors that influence state DOTs in deciding whether
to contract out activities and the extent to which state DOTs assess
costs and benefits when making such decisions, we used state DOTs'
responses from our survey regarding the importance of various factors
in their decisions to contract out various highway activities and in
their decisions to continue to perform work with in-house staff. In
addition, we relied on information gathered in our in-depth interviews
to further determine the importance of various factors in contracting
decisions and to gain important contextual information on these various
factors that could not be achieved through the survey. We also reviewed
the literature to identify existing studies that sought to consider the
costs and benefits of contracting out highway activities versus
performing them with in-house staff, and we compiled and summarized the
results from various studies. We also identified methodological
limitations associated with such studies and the potential impacts they
have on the reliability of any findings.
To determine whether states' decisions to contract out highway
activities were associated with certain demographic or economic
conditions in each state, we conducted a correlation analysis. For the
analysis, we used data from our survey on the percentage of work that
state DOTs contract out for 7 types of activities. Although all 50
states completed the survey, some states did not provide values for all
activities. The number of states that provided values ranges from 39 to
46, depending on the activity. We then identified a series of state
characteristics to test whether they are associated with the extent to
which states contract out these activities. These variables included
population, population density, population growth over the past 5 and
10 years, the percentage of a state's population living in urban areas,
annual vehicle miles traveled in the state, annual vehicle miles
traveled per person in the state, total lane miles per person in the
state, the number of road miles with a pavement international roughness
index score greater than 170 (a measure of pavement quality, with a
score greater than 170 indicating pavement of poor quality) per person
in the state, state per capita income, state pension fund liabilities
per person, state highway capital outlays per person, and the change in
state highway capital outlays over the past 5 and 10 years. We selected
these variables because we could identify plausible reasons that states
with higher values of these variables might be either more or less
likely than states with lower values to contract out highway
activities. We identified reasons that each of these variables could
impact either highway demand or supply conditions in a state, or could
impact the state's ability to conduct highway activities with an in-
house workforce. Data on these various state characteristics were
compiled from the U.S. Census, FHWA, and the Public Fund
Survey.[Footnote 24] We then calculated the correlation coefficients
for the 98 relationships to be tested and analyzed the results to see
if there were any clear positive or negative associations among the
variables and to assess the strength of such associations, as shown in
table 6. We did not, however, analyze the associations among these
variables in a multivariable analysis because of the lack of a strong
conceptual framework based in economic theory for determining an
appropriate model. Given this, our analysis only considered the
percentage of work contracted out singly with each economic or
demographic characteristic selected and did not control for the effects
of other characteristics on contracting levels. Multivariable analysis
might have revealed more complex relationships among the state
characteristics and between those characteristics and the level of
contracting out highway activities.
Table 6: Correlation Coefficients:
Variables: Population density;
Preliminary engineering: 0.434;
Design: 0.327;
Construction engineering and inspection: 0.244;
Federal-aid eligible preventive maintenance: (0.141);
Routine maintenance: 0.088;
Ongoing operations: 0.147;
Right-of-way: (0.101).
Variables: Annual vehicle miles traveled per person;
Preliminary engineering: (0.252);
Design: (0.226);
Construction engineering and inspection: (0.335);
Federal-aid eligible preventive maintenance: 0.163;
Routine maintenance: 0.034;
Ongoing operations: (0.409);
Right- of-way: (0.047).
Variables: Total lane miles per person;
Preliminary engineering: (0.251);
Design: (0.282);
Construction engineering and inspection: (0.213);
Federal-aid eligible preventive maintenance: (0.039);
Routine maintenance: (0.289);
Ongoing operations: (0.294);
Right-of-way: (0.046).
Variables: Number of lane miles with an International Roughness Index
>170 per total lane miles;
Preliminary engineering: 0.179;
Design: (0.053);
Construction engineering and inspection: 0.028;
Federal-aid eligible preventive maintenance: (0.092);
Routine maintenance: (0.084);
Ongoing operations: 0.111;
Right-of-way: (0.174).
Variables: Per capita income;
Preliminary engineering: 0.221;
Design: 0.059;
Construction engineering and inspection: 0.322;
Federal-aid eligible preventive maintenance: (0.153);
Routine maintenance: (0.052);
Ongoing operations: 0.082;
Right-of-way: (0.113).
Variables: Percentage of state population living in urban areas;
Preliminary engineering: 0.409;
Design: 0.411;
Construction engineering and inspection: 0.452;
Federal-aid eligible preventive maintenance: (0.021);
Routine maintenance: 0.224;
Ongoing operations: 0.372;
Right-of-way: 0.131.
Variables: State pension fund liability per person;
Preliminary engineering: 0.003;
Design: 0.107;
Construction engineering and inspection: 0.211;
Federal-aid eligible preventive maintenance: (0.006);
Routine maintenance: (0.093);
Ongoing operations: 0.055;
Right-of-way: (0.040).
Variables: Highway capital outlays per person;
Preliminary engineering: (0.179);
Design: (0.096);
Construction engineering and inspection: (0.174);
Federal-aid eligible preventive maintenance: (0.181);
Routine maintenance: (0.224);
Ongoing operations: (0.015);
Right-of-way: (0.119).
Variables: Population;
Preliminary engineering: 0.030;
Design: (0.057);
Construction engineering and inspection: 0.288;
Federal-aid eligible preventive maintenance: 0.043;
Routine maintenance: 0.213;
Ongoing operations: 0.220;
Right-of-way: 0.010.
Variables: Annual vehicle miles;
Preliminary engineering: 0.034;
Design: (0.042);
Construction engineering and inspection: 0.270;
Federal-aid eligible preventive maintenance: 0.061;
Routine maintenance: 0.292;
Ongoing operations: 0.238;
Right-of-way: 0.000.
Variables: Population growth (past 10 years);
Preliminary engineering: (0.003);
Design: 0.219;
Construction engineering and inspection: 0.184;
Federal-aid eligible preventive maintenance: 0.071;
Routine maintenance: 0.226;
Ongoing operations: 0.031;
Right-of-way: 0.091.
Variables: Population growth (past 5 years);
Preliminary engineering: 0.013;
Design: 0.224;
Construction engineering and inspection: 0.191;
Federal-aid eligible preventive maintenance: 0.082;
Routine maintenance: 0.225;
Ongoing operations: 0.064;
Right-of-way: 0.084.
Variables: Change in capital outlays (past 10 years);
Preliminary engineering: 0.157;
Design: 0.051;
Construction engineering and inspection: 0.050;
Federal-aid eligible preventive maintenance: (0.053);
Routine maintenance: 0.249;
Ongoing operations: 0.003;
Right- of-way: 0.037.
Variables: Change in capital outlays (past 5 years);
Preliminary engineering: 0.051;
Design: 0.124;
Construction engineering and inspection: 0.184;
Federal-aid eligible preventive maintenance: (0.229);
Routine maintenance: 0.116;
Ongoing operations: 0.017;
Right- of-way: (0.109).
Source: GAO survey results.
[End of table]
To determine how state DOTs protect the public interest when work is
contracted out, particularly when consultants and contractors are given
substantial responsibility for project and service quality and
delivery, we used information from our in-depth interviews with the
state DOTs. In our interviews with the state DOTs, we gathered
information regarding the manner in which state DOTs define and
determine the key interests of the public. We asked state DOTs about
the various controls they put in place throughout the highway delivery
process to ensure that the public interest is protected when work is
contracted out. Along with this, we asked about prequalification
procedures, bidding processes, the oversight and monitoring of
consultants and contractors while work is being performed, and quality
assurance programs, among other things. We also conducted interviews
with industry stakeholders from six different organizations
knowledgeable about the outsourcing of highway activities to obtain
additional perspectives on how state DOTs seek to protect the public
interest. In addition, we used state DOT responses from our survey to
identify various alternative contract types and techniques that states
use to achieve desired outcomes, such as time or cost savings, and to
determine how frequently state DOTs use such techniques. Finally, we
sent out a request to auditing agencies in all states for any reports
available on the contracting out practices of state DOTs and reviewed
additional reports discussed in the literature. We reviewed reports
from 11 states that addressed their state DOTs' use of consultants and
contractors.
To determine FHWA's role in ensuring that states protect the public
interest, we reviewed applicable federal laws and regulations as well
as FHWA policy and guidance documents. We also interviewed FHWA
officials at the national level as well as at 10 division offices
corresponding to the 10 state DOTs we selected for in-depth interviews.
FHWA headquarters offices we met with include the following: the Office
of Infrastructure, the Office of Asset Management, the Office of
Professional and Corporate Development, the Office of Program
Administration, and the Office of Planning, Environment and Realty. In
addition, we reviewed program and process reviews from FHWA's national
and division offices to identify key areas of oversight focus and key
findings that have been reached in such reviews regarding state
contracting procedures and quality assurance procedures.
For this report, we limited the scope of our review to contracts where
firms are paid to provide a service related to highway infrastructure.
Although essentially contractual relationships, we did not include
public-private partnerships--where a firm takes effective ownership of
a facility and assumes control over it, usually for an extended period-
-in the scope of our work.
We conducted this performance audit from December 2006 through January
2008 in accordance with generally accepted government auditing
standards. Those standards require that we plan and perform the audit
to obtain sufficient, appropriate evidence to provide a reasonable
basis for our findings and conclusions based on our audit objectives.
We believe that the evidence obtained provides a reasonable basis for
our findings and conclusions based on our audit objectives.
[End of section]
Appendix II: Summary of the Cost Comparison Studies That We Reviewed:
In our research, we identified a variety of studies that seek to
compare the costs of performing highway activities with in-house staff
versus contracting out the work. A variety of parties have conducted
such studies, including highway departments, state auditing agencies,
academics, industry groups, and employee unions. Some studies focused
on one particular state, while other studies considered a range of
states' experiences. Of the studies we identified, engineering
activities (design, construction engineering and inspection, or both)
were the most common focus, although we also reviewed several studies
that examined the contracting out of maintenance activities. A few
studies examined a range of activities within a state DOT's highway
program. While some studies sought to do their own analyses, many
simply reviewed and summarized other analyses that have been performed.
In addition, several of the studies focused on the methodological
challenges faced in conducting cost comparisons and sought to suggest
ways that such studies could more effectively be structured, rather
than actually performing any of their own cost comparison analyses.
Findings on Costs:
Of the studies we reviewed, almost all that considered engineering
activities found contracting out to be more expensive. Generally,
studies attributed this extra expense to higher salaries paid by
private firms, higher overhead costs for private firms, private firms'
need to earn a profit, and highway department contract administration
costs. Among those studies that performed separate analyses for
different types of engineering work, there was some indication that
cost differentials may vary, with consultant and in-house costs being
more comparable for certain types of engineering activities. For
example, one study by PriceWaterhouseCoopers for the Texas DOT found
that of the 13 design activities it considered, consultants were more
expensive for 8 of these activities. The results were inconclusive for
the other 5 activities. Among those 8 activities where consultants were
found to be more expensive, the degree to which they were found to be
more expensive varied from 27 to 97 percent, depending on the activity.
Findings as to the degree by which consultants were more expensive than
in-house staff also varied significantly amongst studies. For example,
1 study that reviewed 16 other engineering cost studies found that of
the studies that found consultants to be more expensive, consultants
were found to be anywhere from less than 16 percent to over 100 percent
more expensive.
We reviewed only two studies that found that engineering consultants
were less expensive than using in-house employees. The first study,
which was performed by the state auditing agency in Alaska, found
consultants to be on average 24 percent less costly. The second study
was performed by the Wisconsin Department of Administration and sought
to rebut findings in an earlier Wisconsin highway department study that
had found consultants to be more expensive. We also have identified one
other study discussed in the literature that found that the cost of
professional engineering services, as a percentage of total
construction costs, declined as the proportion of engineering work
contracted out increased. A few studies also found either that there
were no significant differences in costs between in-house and
consultant performed engineering work, or that existing data
limitations and difficulties in developing appropriate methodologies
made the accuracy of cost results questionable.
Among those studies that examined differences in costs between in-house
and contracted out maintenance work, the picture was more mixed than
for engineering activities, with some studies indicating the potential
for cost savings through the contracting out of maintenance activities
in at least some situations. Studies cited various reasons why
contracting out maintenance work could potentially result in cost
savings, including the reduced need for state DOTs to make capital
investments in expensive equipment, added flexibility for the highway
departments to reduce staffing during slow periods (such as the
winter), and the increased competition generated by contracting out the
work. Studies that identified cost increases associated with the
contracting out of maintenance work pointed to difficulties in
administering contracts and monitoring performance, to the lack of
information to effectively negotiate prices, and to cost escalation
after work is privatized.
Methodological Issues and Other Limitations:
We identified a series of methodological issues and other limitations
that make accurate cost comparisons difficult and potentially impact
the reliability of these studies' findings. One of the most problematic
aspects of comparing in-house and consultant costs is establishing an
appropriate overhead rate for in-house work. State DOTs' accounting
systems are often not set up in such a manner that they accurately
capture all relevant overhead costs and appropriately apportion them
amongst individual projects or functional units in a highway
department. Also, data on in-house costs are often incomplete or
unreliable. For example, in-house staff may not accurately bill time
spent on a specific project, thereby distorting in-house costs for that
project. Many studies also leave out costs that may be relevant, such
as state insurance costs. There are also other life-cycle costs, such
as the pension costs associated with additional public employees that
are difficult to quantify and not considered in most studies. Another
problem encountered, is that many studies seek to identify "like"
projects and compare the costs of those performed by in-house employees
and those performed by consultants or contractors. No two projects are
the same, however, and it is often difficult to isolate other variables
that may have impacted costs.
A final weakness with the studies that we reviewed is that very few of
them sought to systematically determine the benefits of performing work
in-house versus contracting it out, thereby providing an incomplete
picture of the extent to which contracting out highway activities might
or might not be desirable. Some of the studies did use testimonial
evidence gathered through either surveys or interviews to attempt to
make some assessments of differences in quality, depending on whether
work was performed by in-house staff or contracted out. Of those
studies, the majority found that quality did not vary significantly
depending on whether the work was contracted out or performed in-house.
Some studies also provide anecdotal information on some potential
benefits or problems with contracting out work. Only one study that we
reviewed sought to quantitatively assess differences in quality between
in-house and consultant performed work. This study, performed by the
state auditing agency in Alaska, compared the number of change orders
on construction projects that had been designed by either in-house
staff or consultants and the average costs of such change orders. Using
this metric, the auditing agency found in-house performed design work
to be of a higher quality.
Given that the majority of the state DOTs with we whom we met told us
that they tend to contract out larger, more complicated projects, or
those requiring certain types of expertise not possessed in-house,
relying simply on comparisons of cost may not be appropriate. If
consultants are working on larger, more complicated projects, it is
reasonable to expect that the costs of these activities, such as design
work, may be higher. Also, it is not unreasonable to anticipate that a
premium would be paid for specialized expertise. In addition, none of
the studies sought to systematically quantify whether there are any
time savings associated with contracting out work and what the value of
such time savings would be for road users.
[End of section]
Appendix III: Summary Tables of Our Survey Results:
This appendix presents selected results of GAO's Web-based survey of
state DOTs (see tables 7 to 26). The purpose of this survey was to
gather information from the state DOTs about recent trends in their
contracting out of state highway activities. We surveyed the state DOTs
about the extent to which they contract for services across 7
categories of highway activities, including preliminary engineering,
design, construction engineering and inspection, federal-aid eligible
preventive maintenance, routine maintenance not eligible for federal-
aid program funding, ongoing operations, and right-of-way. We also
surveyed state DOTs to determine how the levels of contracting for
these activities have changed over the past 5 years and to gather
information about potential future trends in contracting. In addition,
we used the survey to identify which factors state DOTs said are
driving them to contract out activities or to keep work in-house.
Finally, the survey gathered data on state DOTs' use of alternative
contract types and techniques and collected information on certain
contracting concerns that are specific to design-build contracts. We
sent this survey to the 50 state DOTs. We received 50 completed surveys
for a response rate of 100 percent. However, not all states responded
to every survey question. Appendix I contains a more detailed
discussion of our objectives, scope, and methodology. We administered
this survey from mid-June to mid-September 2007.
Table 7: Number of State DOTs That Reported Changes in Professional
Staff over the past 5 Years:
Staff: a. Planning and environmental;
Number of state DOTs, by staff changes: Increased: 16;
Number of state DOTs, by staff changes: Decreased: 13;
Number of state DOTs, by staff changes: Stayed the same: 18;
Number of state DOTs, by staff changes: No basis to judge: 1.
Staff: b. Design (roadway, bridges, and traffic engineering);
Number of state DOTs, by staff changes: Increased: 4;
Number of state DOTs, by staff changes: Decreased: 28;
Number of state DOTs, by staff changes: Stayed the same: 17;
Number of state DOTs, by staff changes: No basis to judge: 0.
Staff: c. Construction engineering and inspections (inspections,
materials testing, and scheduling);
Number of state DOTs, by staff changes: Increased: 9;
Number of state DOTs, by staff changes: Decreased: 20;
Number of state DOTs, by staff changes: Stayed the same: 20;
Number of state DOTs, by staff changes: No basis to judge: 0.
Staff: d. Operations (e.g., ongoing Intelligent Transportation Systems,
toll collection, signal and sign systems, etc.);
Number of state DOTs, by staff changes: Increased: 11;
Number of state DOTs, by staff changes: Decreased: 8;
Number of state DOTs, by staff changes: Stayed the same: 23;
Number of state DOTs, by staff changes: No basis to judge: 6.
Staff: e. Maintenance;
Number of state DOTs, by staff changes: Increased: 6;
Number of state DOTs, by staff changes: Decreased: 20;
Number of state DOTs, by staff changes: Stayed the same: 20;
Number of state DOTs, by staff changes: No basis to judge: 1.
Staff: f. Right-of-Way and Utilities;
Number of state DOTs, by staff changes: Increased: 7;
Number of state DOTs, by staff changes: Decreased: 15;
Number of state DOTs, by staff changes: Stayed the same: 24;
Number of state DOTs, by staff changes: No basis to judge: 2.
Staff: g. Other nonadministrative - Specify below;
Number of state DOTs, by staff changes: Increased: 2;
Number of state DOTs, by staff changes: Decreased: 10;
Number of state DOTs, by staff changes: Stayed the same: 23;
Number of state DOTs, by staff changes: No basis to judge: 12.
Source: GAO survey results.
[End of table]
Table 8: Number of State DOTs That Reported Contracting Out Highway
Activities in the Most Recently Completed Fiscal Year (Percentage of
Total Expenditures for That Activity):
Activity: a. Preliminary engineering;
Number of state DOTs, by percentage of total expenditures contracted
out for that activity: 0: 0;
Number of state DOTs, by percentage of total expenditures contracted
out for that activity: 1 to 25: 8;
Number of state DOTs, by percentage of total expenditures contracted
out for that activity: 26 to 50: 14;
Number of state DOTs, by percentage of total expenditures contracted
out for that activity: 51 to 75: 11;
Number of state DOTs, by percentage of total expenditures contracted
out for that activity: 76 to 100: 10.
Activity: b. Design;
Number of state DOTs, by percentage of total expenditures contracted
out for that activity: 0: 0;
Number of state DOTs, by percentage of total expenditures contracted
out for that activity: 1 to 25: 5;
Number of state DOTs, by percentage of total expenditures contracted
out for that activity: 26 to 50: 15;
Number of state DOTs, by percentage of total expenditures contracted
out for that activity: 51 to 75: 20;
Number of state DOTs, by percentage of total expenditures contracted
out for that activity: 76 to 100: 4.
Activity: c. Construction engineering and inspection;
Number of state DOTs, by percentage of total expenditures contracted
out for that activity: 0: 4;
Number of state DOTs, by percentage of total expenditures contracted
out for that activity: 1 to 25: 25;
Number of state DOTs, by percentage of total expenditures contracted
out for that activity: 26 to 50: 10;
Number of state DOTs, by percentage of total expenditures contracted
out for that activity: 51 to 75: 3;
Number of state DOTs, by percentage of total expenditures contracted
out for that activity: 76 to 100: 1.
Activity: d. Preventive maintenance;
Number of state DOTs, by percentage of total expenditures contracted
out for that activity: 0: 5;
Number of state DOTs, by percentage of total expenditures contracted
out for that activity: 1 to 25: 4;
Number of state DOTs, by percentage of total expenditures contracted
out for that activity: 26 to 50: 3;
Number of state DOTs, by percentage of total expenditures contracted
out for that activity: 51 to 75: 4;
Number of state DOTs, by percentage of total expenditures contracted
out for that activity: 76 to 100: 23.
Activity: e. Routine maintenance;
Number of state DOTs, by percentage of total expenditures contracted
out for that activity: 0: 6;
Number of state DOTs, by percentage of total expenditures contracted
out for that activity: 1 to 25: 23;
Number of state DOTs, by percentage of total expenditures contracted
out for that activity: 26 to 50: 5;
Number of state DOTs, by percentage of total expenditures contracted
out for that activity: 51 to 75: 3;
Number of state DOTs, by percentage of total expenditures contracted
out for that activity: 76 to 100: 4.
Activity: f. Ongoing operations;
Number of state DOTs, by percentage of total expenditures contracted
out for that activity: 0: 8;
Number of state DOTs, by percentage of total expenditures contracted
out for that activity: 1 to 25: 16;
Number of state DOTs, by percentage of total expenditures contracted
out for that activity: 26 to 50: 5;
Number of state DOTs, by percentage of total expenditures contracted
out for that activity: 51 to 75: 2;
Number of state DOTs, by percentage of total expenditures contracted
out for that activity: 76 to 100: 8.
Activity: g. Right-of-way;
Number of state DOTs, by percentage of total expenditures contracted
out for that activity: 0: 1;
Number of state DOTs, by percentage of total expenditures contracted
out for that activity: 1 to 25: 20;
Number of state DOTs, by percentage of total expenditures contracted
out for that activity: 26 to 50: 16;
Number of state DOTs, by percentage of total expenditures contracted
out for that activity: 51 to 75: 6;
Number of state DOTs, by percentage of total expenditures contracted
out for that activity: 76 to 100: 3.
Source: GAO survey results.
[End of table]
Table 9: Number of State DOTs Reporting the Importance of Various
Factors in Their Decision to Contract Out Some or All Preliminary
Engineering Activities:
Factor: a. To meet federal or state legislative mandates, legal
requirements, or policy initiatives;
Number of state DOTs, by importance of factor: Very important: 12;
Number of state DOTs, by importance of factor: Number of state DOTs, by
importance of factor: Important: 8;
Number of state DOTs, by importance of factor: Moderately important:
10;
Number of state DOTs, by importance of factor: Of little importance: 9;
Number of state DOTs, by importance of factor: Of no importance: 8;
Number of state DOTs, by importance of factor: No basis to judge: 2.
Factor: b. Lack of in-house staff;
Number of state DOTs, by importance of factor: Very important: 28;
Number of state DOTs, by importance of factor: Important: 17;
Number of state DOTs, by importance of factor: Moderately important: 3;
Number of state DOTs, by importance of factor: Of little importance: 1;
Number of state DOTs, by importance of factor: Of no importance: 0;
Number of state DOTs, by importance of factor: No basis to judge: 0.
Factor: c. To access specialized skills or equipment;
Number of state DOTs, by importance of factor: Very important: 11;
Number of state DOTs, by importance of factor: Important: 20;
Moderately important: 13;
Number of state DOTs, by importance of factor: Of little importance: 4;
Number of state DOTs, by importance of factor: Of no importance: 0;
Number of state DOTs, by importance of factor: No basis to judge: 0.
Factor: d. To increase speed of completion or to meet specific time
frames;
Number of state DOTs, by importance of factor: Very important: 12;
Number of state DOTs, by importance of factor: Important: 23;
Number of state DOTs, by importance of factor: Moderately important: 9;
Number of state DOTs, by importance of factor: Of little importance: 4;
Number of state DOTs, by importance of factor: Of no importance: 1;
Number of state DOTs, by importance of factor: No basis to judge: 0.
Factor: e. To obtain cost savings;
Number of state DOTs, by importance of factor: Very important: 0;
Number of state DOTs, by importance of factor: Important: 3;
Number of state DOTs, by importance of factor: Moderately important:
10;
Number of state DOTs, by importance of factor: Of little importance:
18;
Number of state DOTs, by importance of factor: Of no importance: 14;
Number of state DOTs, by importance of factor: No basis to judge: 4.
Factor: f. To maintain flexibility or manage variations in department
workload;
Number of state DOTs, by importance of factor: Very important: 14;
Number of state DOTs, by importance of factor: Important: 22;
Number of state DOTs, by importance of factor: Moderately important:
13;
Number of state DOTs, by importance of factor: Of little importance: 0;
Number of state DOTs, by importance of factor: Of no importance: 0;
Number of state DOTs, by importance of factor: No basis to judge: 0.
Factor: g. To identify innovative approaches or new techniques;
Number of state DOTs, by importance of factor: Very important: 1;
Number of state DOTs, by importance of factor: Important: 9;
Number of state DOTs, by importance of factor: Moderately important:
17;
Number of state DOTs, by importance of factor: Of little importance:
17;
Number of state DOTs, by importance of factor: Of no importance: 4;
Number of state DOTs, by importance of factor: No basis to judge: 1.
Factor: h. Other reason(s);
Number of state DOTs, by importance of factor: Very important: 1;
Number of state DOTs, by importance of factor: Important: 1;
Number of state DOTs, by importance of factor: Moderately important: 2;
Number of state DOTs, by importance of factor: Of little importance: 0;
Number of state DOTs, by importance of factor: Of no importance: 2;
Number of state DOTs, by importance of factor: No basis to judge: 9.
Source: GAO survey results.
[End of table]
Table 10: Number of State DOTs Reporting the Importance of Various
Factors in Their Decision to Use Department Staff to Perform Some or
All Preliminary Engineering Activities:
Factor: a. Legal restrictions or policy initiatives regarding the use
of consultants or contractors; Number of state DOTs, by importance of
factor: Very important: 9; Important: 2; Moderately important: 2; Of
little importance: 19; Of no importance: 15; No basis to judge: 1.
Factor: b. Costs of consultants/contractors are greater than using in-
house staff; Number of state DOTs, by importance of factor: Very
important: 5; Important: 19; Moderately important: 13; Of little
importance: 5; Of no importance: 5; No basis to judge: 1.
Factor: c. The need to retain key skills and expertise in-house; Number
of state DOTs, by importance of factor: Very important: 14; Important:
19; Moderately important: 14; Of little importance: 0; Of no
importance: 0; No basis to judge: 0.
Factor: d. Lack of competition/insufficient number of bidders; Number
of state DOTs, by importance of factor: Very important: 1; Important:
2; Moderately important: 0; Of little importance: 17; Of no importance:
24; No basis to judge: 4.
Factor: e. Required skills or expertise are not available in the
private sector; Number of state DOTs, by importance of factor: Very
important: 1; Important: 3; Moderately important: 4; Of little
importance: 20; Of no importance: 16; No basis to judge: 4.
Factor: f. Belief that work can be performed more quickly using in-
house staff; Number of state DOTs, by importance of factor: Very
important: 5; Important: 11; Moderately important: 20; Of little
importance: 6; Of no importance: 5; No basis to judge: 1.
Factor: g. Belief that work will be of higher quality if performed by
in-house staff; Number of state DOTs, by importance of factor: Very
important: 3; Important: 22; Moderately important: 12; Of little
importance: 7; Of no importance: 1; No basis to judge: 3.
Factor: h. Concerns with liability or accountability for contracted
work; Number of state DOTs, by importance of factor: Very important: 2;
Important: 1; Moderately important: 6; Of little importance: 24; Of no
importance: 13; No basis to judge: 2.
Factor: i. Other reason(s); Number of state DOTs, by importance of
factor: Very important: 3; Important: 2; Moderately important: 0; Of
little importance: 0; Of no importance: 1; No basis to judge: 9.
[End of table]
Source: GAO survey results.
Table 11: Number of State DOTs Reporting the Importance of Various
Factors in Their Decision to Contract Out Some or All Design
Activities:
Factor: a. To meet federal or state legislative mandates, legal
requirements, or policy initiatives; Number of state DOTs, by
importance of factor: Very important: 11; Important: 7; Moderately
important: 6; Of little importance: 13; Of no importance: 11; No basis
to judge: 2.
Factor: b. Lack of in-house staff; Number of state DOTs, by importance
of factor: Very important: 25; Important: 19; Moderately important: 5;
Of little importance: 1; Of no importance: 0; No basis to judge: 0.
Factor: c. To access specialized skills or equipment; Number of state
DOTs, by importance of factor: Very important: 8; Important: 22;
Moderately important: 10; Of little importance: 9; Of no importance: 1;
No basis to judge: 0.
Factor: d. To increase speed of completion or to meet specific time
frames; Number of state DOTs, by importance of factor: Very important:
10; Important: 22; Moderately important: 12; Of little importance: 4;
Of no importance: 2; No basis to judge: 0.
Factor: e. To obtain cost savings; Number of state DOTs, by importance
of factor: Very important: 0; Important: 3; Moderately important: 7; Of
little importance: 18; Of no importance: 19; No basis to judge: 3.
Factor: f. To maintain flexibility or manage variations in department
workload; Number of state DOTs, by importance of factor: Very
important: 13; Important: 23; Moderately important: 12; Of little
importance: 2; Of no importance: 0; No basis to judge: 0.
Factor: g. To identify innovative approaches or new techniques; Number
of state DOTs, by importance of factor: Very important: 1; Important:
13; Moderately important: 13; Of little importance: 20; Of no
importance: 3; No basis to judge: 0.
Factor: h. Other reason(s); Number of state DOTs, by importance of
factor: Very important: 1; Important: 1; Moderately important: 0; Of
little importance: 0; Of no importance: 1; No basis to judge: 11.
[End of table]
Source: GAO survey results.
Table 12: Number of State DOTs Reporting the Importance of Various
Factors in Their Decision to Use Department Staff to Perform Some or
All Design Activities:
Factor: a. Legal restrictions or policy initiatives regarding the use
of consultants or contractors; Number of state DOTs, by importance of
factor: Very important: 8; Important: 3; Moderately important: 5; Of
little importance: 18; Of no importance: 14; No basis to judge: 1.
Factor: b. Costs of consultants/contractors are greater than using in-
house staff; Number of state DOTs, by importance of factor: Very
important: 9; Important: 16; Moderately important: 14; Of little
importance: 5; Of no importance: 5; No basis to judge: 0.
Factor: c. The need to retain key skills and expertise in-house; Number
of state DOTs, by importance of factor: Very important: 23; Important:
14; Moderately important: 11; Of little importance: 1; Of no
importance: 0; No basis to judge: 0.
Factor: d. Lack of competition/insufficient number of bidders; Number
of state DOTs, by importance of factor: Very important: 1; Important:
2; Moderately important: 3; Of little importance: 15; Of no importance:
25; No basis to judge: 3.
Factor: e. Required skills or expertise are not available in the
private sector; Number of state DOTs, by importance of factor: Very
important: 0; Important: 3; Moderately important: 8; Of little
importance: 18; Of no importance: 17; No basis to judge: 3.
Factor: f. Belief that work can be performed more quickly using in-
house staff; Number of state DOTs, by importance of factor: Very
important: 3; Important: 17; Moderately important: 15; Of little
importance: 7; Of no importance: 4; No basis to judge: 3.
Factor: g. Belief that work will be of higher quality if performed by
in-house staff; Number of state DOTs, by importance of factor: Very
important: 5; Important: 23; Moderately important: 13; Of little
importance: 4; Of no importance: 1; No basis to judge: 3.
Factor: h. Concerns with liability or accountability for contracted
work; Number of state DOTs, by importance of factor: Very important: 0;
Important: 3; Moderately important: 7; Of little importance: 23; Of no
importance: 14; No basis to judge: 2.
Factor: i. Other reason(s); Number of state DOTs, by importance of
factor: Very important: 4; Important: 2; Moderately important: 0; Of
little importance: 0; Of no importance: 1; No basis to judge: 9.
[End of table]
Source: GAO survey results.
Table 13: Number of State DOTs Reporting the Importance of Various
Factors in Their Decision to Contract Out Some or All Construction
Engineering and Inspection:
Factor: a. To meet federal or state legislative mandates, legal
requirements, or policy initiatives; Number of state DOTs, by
importance of factor: Very important: 11; Important: 9; Moderately
important: 7; Of little importance: 9; Of no importance: 7; No basis to
judge: 2.
Factor: b. Lack of in-house staff; Number of state DOTs, by importance
of factor: Very important: 29; Important: 10; Moderately important: 5;
Of little importance: 1; Of no importance: 0; No basis to judge: 0.
Factor: c. To access specialized skills or equipment; Number of state
DOTs, by importance of factor: Very important: 7; Important: 12;
Moderately important: 10; Of little importance: 13; Of no importance:
3; No basis to judge: 0.
Factor: d. To increase speed of completion or to meet specific time
frames; Number of state DOTs, by importance of factor: Very important:
1; Important: 11; Moderately important: 11; Of little importance: 16;
Of no importance: 6; No basis to judge: 0.
Factor: e. To obtain cost savings; Number of state DOTs, by importance
of factor: Very important: 0; Important: 1; Moderately important: 4; Of
little importance: 15; Of no importance: 21; No basis to judge: 4.
Factor: f. To maintain flexibility or manage variations in department
workload; Number of state DOTs, by importance of factor: Very
important: 12; Important: 20; Moderately important: 7; Of little
importance: 3; Of no importance: 3; No basis to judge: 0.
Factor: g. To identify innovative approaches or new techniques; Number
of state DOTs, by importance of factor: Very important: 0; Important:
4; Moderately important: 5; Of little importance: 18; Of no importance:
16; No basis to judge: 2.
Factor: h. Other reason(s); Number of state DOTs, by importance of
factor: Very important: 0; Important: 0; Moderately important: 3; Of
little importance: 0; Of no importance: 1; No basis to judge: 9.
[End of table]
Source: GAO survey results.
Table 14: Number of State DOTs Reporting the Importance of Various
Factors in Their Decision to Use Department Staff to Perform Some or
All Construction Engineering and Inspection Activities:
Factor: a. Legal restrictions or policy initiatives regarding the use
of consultants or contractors; Number of state DOTs, by importance of
factor: Very important: 12; Important: 1; Moderately important: 9; Of
little importance: 15; Of no importance: 9; No basis to judge: 2.
Factor: b. Costs of consultants/contractors are greater than using in-
house staff; Number of state DOTs, by importance of factor: Very
important: 11; Important: 19; Moderately important: 10; Of little
importance: 3; Of no importance: 4; No basis to judge: 1.
Factor: c. The need to retain key skills and expertise in-house; Number
of state DOTs, by importance of factor: Very important: 18; Important:
16; Moderately important: 10; Of little importance: 2; Of no
importance: 1; No basis to judge: 0.
Factor: d. Lack of competition/insufficient number of bidders; Number
of state DOTs, by importance of factor: Very important: 1; Important:
2; Moderately important: 6; Of little importance: 12; Of no importance:
24; No basis to judge: 3.
Factor: e. Required skills or expertise are not available in the
private sector; Number of state DOTs, by importance of factor: Very
important: 1; Important: 6; Moderately important: 8; Of little
importance: 17; Of no importance: 13; No basis to judge: 3.
Factor: f. Belief that work can be performed more quickly using in-
house staff; Number of state DOTs, by importance of factor: Very
important: 3; Important: 9; Moderately important: 13; Of little
importance: 12; Of no importance: 7; No basis to judge: 3.
Factor: g. Belief that work will be of higher quality if performed by
in-house staff; Number of state DOTs, by importance of factor: Very
important: 8; Important: 16; Moderately important: 9; Of little
importance: 9; Of no importance: 4; No basis to judge: 2.
Factor: h. Concerns with liability or accountability for contracted
work; Number of state DOTs, by importance of factor: Very important: 3;
Important: 7; Moderately important: 6; Of little importance: 19; Of no
importance: 11; No basis to judge: 0.
Factor: i. Other reason(s); Number of state DOTs, by importance of
factor: Very important: 2; Important: 4; Moderately important: 0; Of
little importance: 1; Of no importance: 1; No basis to judge: 5.
[End of table]
Source: GAO survey results.
Table 15: Number of State DOTs Reporting the Importance of Various
Factors in Their Decision to Contract Out Some or All Federal-Aid
Eligible Preventive Maintenance Activities:
Factor: a. To meet federal or state legislative mandates, legal
requirements, or policy initiatives; Number of state DOTs, by
importance of factor: Very important: 6; Important: 11; Moderately
important: 8; Of little importance: 9; Of no importance: 6; No basis to
judge: 0.
Factor: b. Lack of in-house staff; Number of state DOTs, by importance
of factor: Very important: 18; Important: 16; Moderately important: 2;
Of little importance: 3; Of no importance: 1; No basis to judge: 0.
Factor: c. To access specialized skills or equipment; Number of state
DOTs, by importance of factor: Very important: 12; Important: 15;
Moderately important: 9; Of little importance: 2; Of no importance: 1;
No basis to judge: 0.
Factor: d. To increase speed of completion or to meet specific time
frames; Number of state DOTs, by importance of factor: Very important:
7; Important: 14; Moderately important: 13; Of little importance: 5; Of
no importance: 0; No basis to judge: 1.
Factor: e. To obtain cost savings; Number of state DOTs, by importance
of factor: Very important: 4; Important: 6; Moderately important: 4; Of
little importance: 18; Of no importance: 6; No basis to judge: 2.
Factor: f. To maintain flexibility or manage variations in department
workload; Number of state DOTs, by importance of factor: Very
important: 7; Important: 12; Moderately important: 15; Of little
importance: 4; Of no importance: 1; No basis to judge: 1.
Factor: g. To identify innovative approaches or new techniques; Number
of state DOTs, by importance of factor: Very important: 0; Important:
11; Moderately important: 11; Of little importance: 12; Of no
importance: 3; No basis to judge: 3.
Factor: h. Other reason(s); Number of state DOTs, by importance of
factor: Very important: 2; Important: 2; Moderately important: 0; Of
little importance: 0; Of no importance: 0; No basis to judge: 8.
[End of table]
Source: GAO survey results.
Table 16: Number of State DOTs Reporting the Importance of Various
Factors in Their Decision to Use Department Staff to Perform Some or
All Federal-Aid Eligible Preventive Maintenance Activities:
Factor: a. Legal restrictions or policy initiatives regarding the use
of consultants or contractors; Number of state DOTs, by importance of
factor: Very important: 6; Important: 1; Moderately important: 7; Of
little importance: 10; Of no importance: 10; No basis to judge: 3.
Factor: b. Costs of consultants/contractors are greater than using in-
house staff; Number of state DOTs, by importance of factor: Very
important: 7; Important: 12; Moderately important: 9; Of little
importance: 4; Of no importance: 3; No basis to judge: 2.
Factor: c. The need to retain key skills and expertise in-house; Number
of state DOTs, by importance of factor: Very important: 7; Important:
11; Moderately important: 9; Of little importance: 7; Of no importance:
1; No basis to judge: 2.
Factor: d. Lack of competition/insufficient number of bidders; Number
of state DOTs, by importance of factor: Very important: 0; Important:
4; Moderately important: 5; Of little importance: 10; Of no importance:
14; No basis to judge: 5.
Factor: e. Required skills or expertise are not available in the
private sector; Number of state DOTs, by importance of factor: Very
important: 0; Important: 2; Moderately important: 8; Of little
importance: 11; Of no importance: 13; No basis to judge: 3.
Factor: f. Belief that work can be performed more quickly using in-
house staff; Number of state DOTs, by importance of factor: Very
important: 6; Important: 7; Moderately important: 9; Of little
importance: 9; Of no importance: 4; No basis to judge: 3.
Factor: g. Belief that work will be of higher quality if performed by
in-house staff; Number of state DOTs, by importance of factor: Very
important: 3; Important: 9; Moderately important: 9; Of little
importance: 10; Of no importance: 4; No basis to judge: 3.
Factor: h. Concerns with liability or accountability for contracted
work; Number of state DOTs, by importance of factor: Very important: 0;
Important: 4; Moderately important: 4; Of little importance: 15; Of no
importance: 12; No basis to judge: 3.
Factor: i. Other reason(s); Number of state DOTs, by importance of
factor: Very important: 1; Important: 0; Moderately important: 0; Of
little importance: 0; Of no importance: 1; No basis to judge: 9.
[End of table]
Source: GAO survey results.
Table 17: Number of State DOTs Reporting the Importance of Various
Factors in Their Decision to Contract Out Some or All Routine
Maintenance Activities:
Factor: a. To meet federal or state legislative mandates, legal
requirements, or policy initiatives;
Number of state DOTs, by importance of factor: Very important: 4;
Number of state DOTs, by importance of factor: Important: 5;
Number of state DOTs, by importance of factor: Moderately important:
10;
Number of state DOTs, by importance of factor: Of little importance: 6;
Number of state DOTs, by importance of factor: Of no importance: 15;
Number of state DOTs, by importance of factor: No basis to judge: 1.
Factor: b. Lack of in-house staff;
Number of state DOTs, by importance of factor: Very important: 20;
Number of state DOTs, by importance of factor: Important: 15;
Number of state DOTs, by importance of factor: Moderately important: 4;
Number of state DOTs, by importance of factor: Of little importance: 1;
Number of state DOTs, by importance of factor: Of no importance: 1;
Number of state DOTs, by importance of factor: No basis to judge: 0.
Factor: c. To access specialized skills or equipment;
Number of state DOTs, by importance of factor: Very important: 7;
Number of state DOTs, by importance of factor: Important: 16;
Number of state DOTs, by importance of factor: Moderately important: 9;
Number of state DOTs, by importance of factor: Of little importance: 4;
Number of state DOTs, by importance of factor: Of no importance: 3;
Number of state DOTs, by importance of factor: No basis to judge: 2.
Factor: d. To increase speed of completion or to meet specific time
frames;
Number of state DOTs, by importance of factor: Very important: 7;
Number of state DOTs, by importance of factor: Important: 12;
Number of state DOTs, by importance of factor: Moderately important:
13;
Number of state DOTs, by importance of factor: Of little importance: 5;
Number of state DOTs, by importance of factor: Of no importance: 4;
Number of state DOTs, by importance of factor: No basis to judge: 0.
Factor: e. To obtain cost savings;
Number of state DOTs, by importance of factor: Very important: 2;
Number of state DOTs, by importance of factor: Important: 7;
Number of state DOTs, by importance of factor: Moderately important: 9;
Number of state DOTs, by importance of factor: Of little importance:
14;
Number of state DOTs, by importance of factor: Of no importance: 6;
Number of state DOTs, by importance of factor: No basis to judge: 1.
Factor: f. To maintain flexibility or manage variations in department
workload;
Number of state DOTs, by importance of factor: Very important: 10;
Number of state DOTs, by importance of factor: Important: 15;
Number of state DOTs, by importance of factor: Moderately important:
12;
Number of state DOTs, by importance of factor: Of little importance: 1;
Number of state DOTs, by importance of factor: Of no importance: 2;
Number of state DOTs, by importance of factor: No basis to judge: 1.
Factor: g. To identify innovative approaches or new techniques;
Number of state DOTs, by importance of factor: Very important: 0;
Number of state DOTs, by importance of factor: Important: 4;
Number of state DOTs, by importance of factor: Moderately important:
15;
Number of state DOTs, by importance of factor: Of little importance:
12;
Number of state DOTs, by importance of factor: Of no importance: 8;
Number of state DOTs, by importance of factor: No basis to judge: 1.
Factor: h. Other reason(s);
Number of state DOTs, by importance of factor: Very important: 0;
Number of state DOTs, by importance of factor: Important: 2;
Number of state DOTs, by importance of factor: Moderately important: 0;
Number of state DOTs, by importance of factor: Of little importance: 0;
Number of state DOTs, by importance of factor: Of no importance: 1;
Number of state DOTs, by importance of factor: No basis to judge: 8.
Source: GAO survey results.
[End of table]
Table 18: Number of State DOTs Reporting the Importance of Various
Factors in Their Decision to Use Department Staff to Perform Some or
All Routine Maintenance Activities:
Factor: a. Legal restrictions or policy initiatives regarding the use
of consultants or contractors;
Number of state DOTs, by importance of factor: Very important: 6;
Number of state DOTs, by importance of factor: Important: 3;
Number of state DOTs, by importance of factor: Moderately important: 6;
Number of state DOTs, by importance of factor: Of little importance:
15;
Number of state DOTs, by importance of factor: Of no importance: 14;
Number of state DOTs, by importance of factor: No basis to judge: 0.
Factor: b. Costs of consultants/contractors are greater than using in-
house staff;
Number of state DOTs, by importance of factor: Very important: 7;
Number of state DOTs, by importance of factor: Important: 17;
Number of state DOTs, by importance of factor: Moderately important:
11;
Number of state DOTs, by importance of factor: Of little importance: 7;
Number of state DOTs, by importance of factor: Of no importance: 1;
Number of state DOTs, by importance of factor: No basis to judge: 2.
Factor: c. The need to retain key skills and expertise in-house;
Number of state DOTs, by importance of factor: Very important: 11;
Number of state DOTs, by importance of factor: Important: 17;
Number of state DOTs, by importance of factor: Moderately important:
11;
Number of state DOTs, by importance of factor: Of little importance: 4;
Number of state DOTs, by importance of factor: Of no importance: 1;
Number of state DOTs, by importance of factor: No basis to judge: 1.
Factor: d. Lack of competition/insufficient number of bidders;
Number of state DOTs, by importance of factor: Very important: 1;
Number of state DOTs, by importance of factor: Important: 3;
Number of state DOTs, by importance of factor: Moderately important:
10;
Number of state DOTs, by importance of factor: Of little importance:
19;
Number of state DOTs, by importance of factor: Of no importance: 9;
Number of state DOTs, by importance of factor: No basis to judge: 3.
Factor: e. Required skills or expertise are not available in the
private sector;
Number of state DOTs, by importance of factor: Very important: 1;
Number of state DOTs, by importance of factor: Important: 5;
Number of state DOTs, by importance of factor: Moderately important:
14;
Number of state DOTs, by importance of factor: Of little importance:
14;
Number of state DOTs, by importance of factor: Of no importance: 8;
Number of state DOTs, by importance of factor: No basis to judge: 3.
Factor: f. Belief that work can be performed more quickly using in-
house staff;
Number of state DOTs, by importance of factor: Very important: 7;
Number of state DOTs, by importance of factor: Important: 17;
Number of state DOTs, by importance of factor: Moderately important:
12;
Number of state DOTs, by importance of factor: Of little importance: 6;
Number of state DOTs, by importance of factor: Of no importance: 1;
Number of state DOTs, by importance of factor: No basis to judge: 2.
Factor: g. Belief that work will be of higher quality if performed by
in-house staff;
Number of state DOTs, by importance of factor: Very important: 5;
Number of state DOTs, by importance of factor: Important: 13;
Number of state DOTs, by importance of factor: Moderately important:
16;
Number of state DOTs, by importance of factor: Of little importance: 7;
Number of state DOTs, by importance of factor: Of no importance: 2;
Number of state DOTs, by importance of factor: No basis to judge: 2.
Factor: h. Concerns with liability or accountability for contracted
work;
Number of state DOTs, by importance of factor: Very important: 3;
Number of state DOTs, by importance of factor: Important: 8;
Number of state DOTs, by importance of factor: Moderately important: 7;
Number of state DOTs, by importance of factor: Of little importance:
16;
Number of state DOTs, by importance of factor: Of no importance: 9;
Number of state DOTs, by importance of factor: No basis to judge: 2.
Factor: i. Other reason(s);
Number of state DOTs, by importance of factor: Very important: 2;
Number of state DOTs, by importance of factor: Important: 0;
Number of state DOTs, by importance of factor: Moderately important: 0;
Number of state DOTs, by importance of factor: Of little importance: 0;
Number of state DOTs, by importance of factor: Of no importance: 2;
Number of state DOTs, by importance of factor: No basis to judge: 5.
Source: GAO survey results.
[End of table]
Table 19: Number of State DOTs Reporting the Importance of Various
Factors in Their Decision to Contract Out Some or All Ongoing
Operations Activities:
Factor: a. To meet federal or state legislative mandates, legal
requirements, or policy initiatives;
Number of state DOTs, by importance of factor: Very important: 3;
Number of state DOTs, by importance of factor: Important: 10;
Number of state DOTs, by importance of factor: Moderately important: 8;
Number of state DOTs, by importance of factor: Of little importance:
10;
Number of state DOTs, by importance of factor: Of no importance: 6;
Number of state DOTs, by importance of factor: No basis to judge: 0.
Factor: b. Lack of in-house staff;
Number of state DOTs, by importance of factor: Very important: 20;
Number of state DOTs, by importance of factor: Important: 11;
Number of state DOTs, by importance of factor: Moderately important: 4;
Number of state DOTs, by importance of factor: Of little importance: 0;
Number of state DOTs, by importance of factor: Of no importance: 2;
Number of state DOTs, by importance of factor: No basis to judge: 0.
Factor: c. To access specialized skills or equipment;
Number of state DOTs, by importance of factor: Very important: 13;
Number of state DOTs, by importance of factor: Important: 12;
Number of state DOTs, by importance of factor: Moderately important: 8;
Number of state DOTs, by importance of factor: Of little importance: 3;
Number of state DOTs, by importance of factor: Of no importance: 1;
Number of state DOTs, by importance of factor: No basis to judge: 0.
Factor: d. To increase speed of completion or to meet specific time
frames;
Number of state DOTs, by importance of factor: Very important: 6;
Number of state DOTs, by importance of factor: Important: 8;
Number of state DOTs, by importance of factor: Moderately important:
15;
Number of state DOTs, by importance of factor: Of little importance: 5;
Number of state DOTs, by importance of factor: Of no importance: 3;
Number of state DOTs, by importance of factor: No basis to judge: 0.
Factor: e. To obtain cost savings;
Number of state DOTs, by importance of factor: Very important: 0;
Number of state DOTs, by importance of factor: Important: 3;
Number of state DOTs, by importance of factor: Moderately important:
11;
Number of state DOTs, by importance of factor: Of little importance:
11;
Number of state DOTs, by importance of factor: Of no importance: 11;
Number of state DOTs, by importance of factor: No basis to judge: 1.
Factor: f. To maintain flexibility or manage variations in department
workload;
Number of state DOTs, by importance of factor: Very important: 7;
Number of state DOTs, by importance of factor: Important: 10;
Number of state DOTs, by importance of factor: Moderately important:
11;
Number of state DOTs, by importance of factor: Of little importance: 6;
Number of state DOTs, by importance of factor: Of no importance: 3;
Number of state DOTs, by importance of factor: No basis to judge: 0.
Factor: g. To identify innovative approaches or new techniques;
Number of state DOTs, by importance of factor: Very important: 1;
Number of state DOTs, by importance of factor: Important: 10;
Number of state DOTs, by importance of factor: Moderately important:
11;
Number of state DOTs, by importance of factor: Of little importance: 9;
Number of state DOTs, by importance of factor: Of no importance: 5;
Number of state DOTs, by importance of factor: No basis to judge: 1.
Factor: h. Other reason(s);
Number of state DOTs, by importance of factor: Very important: 0;
Number of state DOTs, by importance of factor: Important: 1;
Number of state DOTs, by importance of factor: Moderately important: 0;
Number of state DOTs, by importance of factor: Of little importance: 0;
Number of state DOTs, by importance of factor: Of no importance: 3;
Number of state DOTs, by importance of factor: No basis to judge: 4.
Source: GAO survey results.
[End of table]
Table 20: Number of State DOTs Reporting the Importance of Various
Factors in Their Decision to Use Department Staff to Perform Some or
All Ongoing Operations Activities:
Factor: a. Legal restrictions or policy initiatives regarding the use
of consultants or contractors;
Number of state DOTs, by importance of factor: Very important: 7;
Number of state DOTs, by importance of factor: Important: 3;
Number of state DOTs, by importance of factor: Moderately important: 9;
Number of state DOTs, by importance of factor: Of little importance:
12;
Number of state DOTs, by importance of factor: Of no importance: 11;
Number of state DOTs, by importance of factor: No basis to judge: 1.
Factor: b. Costs of consultants/contractors are greater than using in-
house staff;
Number of state DOTs, by importance of factor: Very important: 6;
Number of state DOTs, by importance of factor: Important: 17;
Number of state DOTs, by importance of factor: Moderately important:
12;
Number of state DOTs, by importance of factor: Of little importance: 6;
Number of state DOTs, by importance of factor: Of no importance: 2;
Number of state DOTs, by importance of factor: No basis to judge: 0.
Factor: c. The need to retain key skills and expertise in-house;
Number of state DOTs, by importance of factor: Very important: 9;
Number of state DOTs, by importance of factor: Important: 21;
Number of state DOTs, by importance of factor: Moderately important: 9;
Number of state DOTs, by importance of factor: Of little importance: 3;
Number of state DOTs, by importance of factor: Of no importance: 1;
Number of state DOTs, by importance of factor: No basis to judge: 0.
Factor: d. Lack of competition/insufficient number of bidders;
Number of state DOTs, by importance of factor: Very important: 0;
Number of state DOTs, by importance of factor: Important: 3;
Number of state DOTs, by importance of factor: Moderately important: 5;
Number of state DOTs, by importance of factor: Of little importance:
16;
Number of state DOTs, by importance of factor: Of no importance: 15;
Number of state DOTs, by importance of factor: No basis to judge: 4.
Factor: e. Required skills or expertise are not available in the
private sector;
Number of state DOTs, by importance of factor: Very important: 1;
Number of state DOTs, by importance of factor: Important: 6;
Number of state DOTs, by importance of factor: Moderately important: 6;
Number of state DOTs, by importance of factor: Of little importance: 9;
Number of state DOTs, by importance of factor: Of no importance: 19;
Number of state DOTs, by importance of factor: No basis to judge: 2.
Factor: f. Belief that work can be performed more quickly using in-
house staff;
Number of state DOTs, by importance of factor: Very important: 7;
Number of state DOTs, by importance of factor: Important: 10;
Number of state DOTs, by importance of factor: Moderately important:
11;
Number of state DOTs, by importance of factor: Of little importance:
11;
Number of state DOTs, by importance of factor: Of no importance: 3;
Number of state DOTs, by importance of factor: No basis to judge: 1.
Factor: g. Belief that work will be of higher quality if performed by
in-house staff;
Number of state DOTs, by importance of factor: Very important: 3;
Number of state DOTs, by importance of factor: Important: 10;
Number of state DOTs, by importance of factor: Moderately important:
13;
Number of state DOTs, by importance of factor: Of little importance:
11;
Number of state DOTs, by importance of factor: Of no importance: 4;
Number of state DOTs, by importance of factor: No basis to judge: 2.
Factor: h. Concerns with liability or accountability for contracted
work;
Number of state DOTs, by importance of factor: Very important: 2;
Important: 5;
Moderately important: 6;
Of little importance: 18;
Of no importance: 11;
No basis to judge: 1.
Factor: i. Other reason(s);
Number of state DOTs, by importance of factor: Very important: 3;
Number of state DOTs, by importance of factor: Important: 0;
Number of state DOTs, by importance of factor: Moderately important: 0;
Number of state DOTs, by importance of factor: Of little importance: 0;
Number of state DOTs, by importance of factor: Of no importance: 2;
Number of state DOTs, by importance of factor: No basis to judge: 5.
Source: GAO survey results.
[End of table]
Table 21: Number of State DOTs Reporting the Importance of Various
Factors in Their Decision to Contract Out Some or All Right-of-Way
Activities:
Factor: a. To meet federal or state legislative mandates, legal
requirements, or policy initiatives;
Number of state DOTs, by importance of factor: Very important: 8;
Number of state DOTs, by importance of factor: Important: 7;
Number of state DOTs, by importance of factor: Moderately important: 7;
Number of state DOTs, by importance of factor: Of little importance:
11;
Number of state DOTs, by importance of factor: Of no importance: 15;
Number of state DOTs, by importance of factor: No basis to judge: 0.
Factor: b. Lack of in-house staff;
Number of state DOTs, by importance of factor: Very important: 31;
Number of state DOTs, by importance of factor: Important: 13;
Number of state DOTs, by importance of factor: Moderately important: 1;
Number of state DOTs, by importance of factor: Of little importance: 3;
Number of state DOTs, by importance of factor: Of no importance: 0;
Number of state DOTs, by importance of factor: No basis to judge: 0.
Factor: c. To access specialized skills or equipment;
Number of state DOTs, by importance of factor: Very important: 9;
Number of state DOTs, by importance of factor: Important: 17;
Number of state DOTs, by importance of factor: Moderately important:
12;
Number of state DOTs, by importance of factor: Of little importance: 6;
Number of state DOTs, by importance of factor: Of no importance: 4;
Number of state DOTs, by importance of factor: No basis to judge: 0.
Factor: d. To increase speed of completion or to meet specific time
frames;
Number of state DOTs, by importance of factor: Very important: 20;
Number of state DOTs, by importance of factor: Important: 19;
Number of state DOTs, by importance of factor: Moderately important: 7;
Number of state DOTs, by importance of factor: Of little importance: 0;
Number of state DOTs, by importance of factor: Of no importance: 2;
Number of state DOTs, by importance of factor: No basis to judge: 0.
Factor: e. To obtain cost savings;
Number of state DOTs, by importance of factor: Very important: 1;
Number of state DOTs, by importance of factor: Important: 2;
Number of state DOTs, by importance of factor: Moderately important: 9;
Number of state DOTs, by importance of factor: Of little importance:
15;
Number of state DOTs, by importance of factor: Of no importance: 16;
Number of state DOTs, by importance of factor: No basis to judge: 5.
Factor: f. To maintain flexibility or manage variations in department
workload;
Number of state DOTs, by importance of factor: Very important: 20;
Number of state DOTs, by importance of factor: Important: 18;
Number of state DOTs, by importance of factor: Moderately important: 7;
Number of state DOTs, by importance of factor: Of little importance: 2;
Number of state DOTs, by importance of factor: Of no importance: 1;
Number of state DOTs, by importance of factor: No basis to judge: 0.
Factor: g. To identify innovative approaches or new techniques;
Number of state DOTs, by importance of factor: Very important: 3;
Number of state DOTs, by importance of factor: Important: 2;
Number of state DOTs, by importance of factor: Moderately important: 8;
Number of state DOTs, by importance of factor: Of little importance:
14;
Number of state DOTs, by importance of factor: Of no importance: 18;
Number of state DOTs, by importance of factor: No basis to judge: 2.
Factor: h. Other reason(s);
Number of state DOTs, by importance of factor: Very important: 0;
Number of state DOTs, by importance of factor: Important: 0;
Number of state DOTs, by importance of factor: Moderately important: 0;
Number of state DOTs, by importance of factor: Of little importance: 0;
Number of state DOTs, by importance of factor: Of no importance: 4;
Number of state DOTs, by importance of factor: No basis to judge: 8.
Source: GAO survey results.
[End of table]
Table 22: Number of State DOTs Reporting the Importance of Various
Factors in Their Decision to Use Department Staff to Perform Some or
All Right-of-Way Activities:
Factor: a. Legal restrictions or policy initiatives regarding the use
of consultants or contractors;
Number of state DOTs, by importance of factor: Very important: 7;
Number of state DOTs, by importance of factor: Important: 4;
Number of state DOTs, by importance of factor: Moderately important: 6;
Number of state DOTs, by importance of factor: Of little importance:
17;
Number of state DOTs, by importance of factor: Of no importance: 14;
Number of state DOTs, by importance of factor: No basis to judge: 1.
Factor: b. Costs of consultants/contractors are greater than using in-
house staff;
Number of state DOTs, by importance of factor: Very important: 7;
Number of state DOTs, by importance of factor: Important: 17;
Number of state DOTs, by importance of factor: Moderately important:
10;
Number of state DOTs, by importance of factor: Of little importance: 9;
Number of state DOTs, by importance of factor: Of no importance: 3;
Number of state DOTs, by importance of factor: No basis to judge: 3.
Factor: c. The need to retain key skills and expertise in-house;
Number of state DOTs, by importance of factor: Very important: 18;
Number of state DOTs, by importance of factor: Important: 15;
Number of state DOTs, by importance of factor: Moderately important:
12;
Number of state DOTs, by importance of factor: Of little importance: 1;
Number of state DOTs, by importance of factor: Of no importance: 0;
Number of state DOTs, by importance of factor: No basis to judge: 3.
Factor: d. Lack of competition/insufficient number of bidders;
Number of state DOTs, by importance of factor: Very important: 0;
Number of state DOTs, by importance of factor: Important: 3;
Number of state DOTs, by importance of factor: Moderately important:
12;
Number of state DOTs, by importance of factor: Of little importance:
17;
Number of state DOTs, by importance of factor: Of no importance: 14;
Number of state DOTs, by importance of factor: No basis to judge: 3.
Factor: e. Required skills or expertise are not available in the
private sector;
Number of state DOTs, by importance of factor: Very important: 2;
Number of state DOTs, by importance of factor: Important: 7;
Number of state DOTs, by importance of factor: Moderately important: 8;
Number of state DOTs, by importance of factor: Of little importance:
14;
Number of state DOTs, by importance of factor: Of no importance: 14;
Number of state DOTs, by importance of factor: No basis to judge: 4.
Factor: f. Belief that work can be performed more quickly using in-
house staff;
Number of state DOTs, by importance of factor: Very important: 5;
Number of state DOTs, by importance of factor: Important: 22;
Number of state DOTs, by importance of factor: Moderately important: 8;
Number of state DOTs, by importance of factor: Of little importance: 9;
Number of state DOTs, by importance of factor: Of no importance: 1;
Number of state DOTs, by importance of factor: No basis to judge: 4.
Factor: g. Belief that work will be of higher quality if performed by
in-house staff;
Number of state DOTs, by importance of factor: Very important: 6;
Number of state DOTs, by importance of factor: Important: 15;
Number of state DOTs, by importance of factor: Moderately important:
10;
Number of state DOTs, by importance of factor: Of little importance:
13;
Number of state DOTs, by importance of factor: Of no importance: 0;
Number of state DOTs, by importance of factor: No basis to judge: 3.
Factor: h. Concerns with liability or accountability for contracted
work;
Number of state DOTs, by importance of factor: Very important: 0;
Number of state DOTs, by importance of factor: Important: 10;
Number of state DOTs, by importance of factor: Moderately important: 5;
Number of state DOTs, by importance of factor: Of little importance:
17;
Number of state DOTs, by importance of factor: Of no importance: 14;
Number of state DOTs, by importance of factor: No basis to judge: 3.
Factor: i. Other reason(s);
Number of state DOTs, by importance of factor: Very important: 0;
Number of state DOTs, by importance of factor: Important: 0;
Number of state DOTs, by importance of factor: Moderately important: 0;
Number of state DOTs, by importance of factor: Of little importance: 0;
Number of state DOTs, by importance of factor: Of no importance: 2;
Number of state DOTs, by importance of factor: No basis to judge: 9.
Source: GAO survey results.
[End of table]
Table 23: Number of State DOTs Reporting Increasing, Decreasing, or
Maintaining the Same Level of Contracting Out for Highway Activities
over the past 5 Years:
Activity: a. Preliminary engineering;
Number of state DOTs, by changes in level of contracting out:
Increased: 26;
Number of state DOTs, by changes in level of contracting out:
Maintained the same level: 21;
Number of state DOTs, by changes in level of contracting out:
Decreased: 3;
Number of state DOTs, by changes in level of contracting out: Not sure:
0.
Activity: b. Design;
Number of state DOTs, by changes in level of contracting out:
Increased: 27;
Number of state DOTs, by changes in level of contracting out:
Maintained the same level: 13;
Number of state DOTs, by changes in level of contracting out:
Decreased: 10;
Number of state DOTs, by changes in level of contracting out: Not sure:
0.
Activity: c. Construction engineering and inspections;
Number of state DOTs, by changes in level of contracting out:
Increased: 27;
Number of state DOTs, by changes in level of contracting out:
Maintained the same level: 15;
Number of state DOTs, by changes in level of contracting out:
Decreased: 6;
Number of state DOTs, by changes in level of contracting out: Not sure:
0.
Activity: d. Federal-aid eligible preventive maintenance;
Number of state DOTs, by changes in level of contracting out:
Increased: 13;
Number of state DOTs, by changes in level of contracting out:
Maintained the same level: 28;
Number of state DOTs, by changes in level of contracting out:
Decreased: 2;
Number of state DOTs, by changes in level of contracting out: Not sure:
5.
Activity: e. Routine maintenance activities not eligible for federal-
aid program funding;
Number of state DOTs, by changes in level of contracting out:
Increased: 13;
Number of state DOTs, by changes in level of contracting out:
Maintained the same level: 32;
Number of state DOTs, by changes in level of contracting out:
Decreased: 1;
Number of state DOTs, by changes in level of contracting out: Not sure:
2.
Activity: f. Ongoing operations ;
Number of state DOTs, by changes in level of contracting out:
Increased: 15;
Number of state DOTs, by changes in level of contracting out:
Maintained the same level: 24;
Number of state DOTs, by changes in level of contracting out:
Decreased: 4;
Number of state DOTs, by changes in level of contracting out: Not sure:
3.
Activity: g. Right-of-way - appraisals, acquisitions, and relocation;
Number of state DOTs, by changes in level of contracting out:
Increased: 28;
Number of state DOTs, by changes in level of contracting out:
Maintained the same level: 18;
Number of state DOTs, by changes in level of contracting out:
Decreased: 3;
Number of state DOTs, by changes in level of contracting out: Not sure:
0.
Source: GAO survey results.
[End of table]
Table 24: Number of State DOTs Anticipating Increasing, Decreasing, or
Maintaining the Same Level of Contracting Out over the Next 5 Years:
Activity: a. Preliminary engineering;
Number of state DOTs, by changes in level of contracting out: Increase:
9;
Number of state DOTs, by changes in level of contracting out: Maintain
the same level: 30;
Number of state DOTs, by changes in level of contracting out: Decrease:
9;
Number of state DOTs, by changes in level of contracting out: Not sure:
2.
Activity: b. Design;
Number of state DOTs, by changes in level of contracting out: Increase:
9;
Number of state DOTs, by changes in level of contracting out: Maintain
the same level: 23;
Number of state DOTs, by changes in level of contracting out: Decrease:
15;
Number of state DOTs, by changes in level of contracting out: Not sure:
3.
Activity: c. Construction engineering and inspections;
Number of state DOTs, by changes in level of contracting out: Increase:
7;
Number of state DOTs, by changes in level of contracting out: Maintain
the same level: 27;
Number of state DOTs, by changes in level of contracting out: Decrease:
11;
Number of state DOTs, by changes in level of contracting out: Not sure:
3.
Activity: d. Federal-aid eligible preventive maintenance;
Number of state DOTs, by changes in level of contracting out: Increase:
12;
Number of state DOTs, by changes in level of contracting out: Maintain
the same level: 28;
Number of state DOTs, by changes in level of contracting out: Decrease:
2;
Number of state DOTs, by changes in level of contracting out: Not sure:
5.
Activity: e. Routine maintenance activities not eligible for federal-
aid program funding;
Number of state DOTs, by changes in level of contracting out: Increase:
10;
Number of state DOTs, by changes in level of contracting out: Maintain
the same level: 31;
Number of state DOTs, by changes in level of contracting out: Decrease:
5;
Number of state DOTs, by changes in level of contracting out: Not sure:
2.
Activity: f. Ongoing operations;
Number of state DOTs, by changes in level of contracting out: Increase:
9;
Number of state DOTs, by changes in level of contracting out: Maintain
the same level: 30;
Number of state DOTs, by changes in level of contracting out: Decrease:
3;
Number of state DOTs, by changes in level of contracting out: Not sure:
3.
Activity: g. Right of way - appraisals, acquisitions, and relocation;
Number of state DOTs, by changes in level of contracting out: Increase:
11;
Number of state DOTs, by changes in level of contracting out: Maintain
the same level: 29;
Number of state DOTs, by changes in level of contracting out: Decrease:
5;
Number of state DOTs, by changes in level of contracting out: Not sure:
4.
Source: GAO survey results.
[End of table]
Table 25: Number of State DOTs Using Broader Types of Contracting over
the past 5 Years:
Contracts: a. Design-build;
Number of state DOTs, by use of broader types of contracting: 0: 20;
Number of state DOTs, by use of broader types of contracting: 1 to 10:
20;
Number of state DOTs, by use of broader types of contracting: 11 and
up: 8.
Contracts: b. Design-build operate-maintain;
Number of state DOTs, by use of broader types of contracting: 0: 30;
Number of state DOTs, by use of broader types of contracting: 1 to 10:
3;
Number of state DOTs, by use of broader types of contracting: 11 and
up: 0.
Contracts: c. Operations and maintenance management;
Number of state DOTs, by use of broader types of contracting: 0: 30;
Number of state DOTs, by use of broader types of contracting: 1 to 10:
7;
Number of state DOTs, by use of broader types of contracting: 11 and
up: 8.
Contracts: d. Project-management;
Number of state DOTs, by use of broader types of contracting: 0: 30;
Number of state DOTs, by use of broader types of contracting: 1 to 10:
11;
Number of state DOTs, by use of broader types of contracting: 11 and
up: 5.
Contracts: e. Construction manager/ general contractor;
Number of state DOTs, by use of broader types of contracting: 0: 40;
Number of state DOTs, by use of broader types of contracting: 1 to 10:
6;
Number of state DOTs, by use of broader types of contracting: 11 and
up: 3.
Source: GAO survey results.
[End of table]
Table 26: Number of State DOTs Using Alternative Bid Types and
Techniques over the past 5 Years:
Bid type or technique: a. Lane rental;
Number of state DOTs, by use of alternative bid types or techniques:
Frequently: 4;
Number of state DOTs, by use of alternative bid types or techniques:
Occasionally: 14;
Number of state DOTs, by use of alternative bid types or techniques:
Rarely: 13;
Number of state DOTs, by use of alternative bid types or techniques:
Not at all: 19;
Number of state DOTs, by use of alternative bid types or techniques: No
basis to judge: 0.
Bid type or technique: b. Cost + time (A+B) contracts;
Number of state DOTs, by use of alternative bid types or techniques:
Frequently: 9;
Number of state DOTs, by use of alternative bid types or techniques:
Occasionally: 26;
Number of state DOTs, by use of alternative bid types or techniques:
Rarely: 8;
Number of state DOTs, by use of alternative bid types or techniques:
Not at all: 7;
Number of state DOTs, by use of alternative bid types or techniques: No
basis to judge: 0.
Bid type or technique: c. Multiparameter bidding, including quality
(A+B+C);
Number of state DOTs, by use of alternative bid types or techniques:
Frequently: 1;
Number of state DOTs, by use of alternative bid types or techniques:
Occasionally: 7;
Number of state DOTs, by use of alternative bid types or techniques:
Rarely: 8;
Number of state DOTs, by use of alternative bid types or techniques:
Not at all: 34;
Number of state DOTs, by use of alternative bid types or techniques: No
basis to judge: 0.
Bid type or technique: d. Incentives/Disincentives provisions for early
contract completion;
Number of state DOTs, by use of alternative bid types or techniques:
Frequently: 17;
Number of state DOTs, by use of alternative bid types or techniques:
Occasionally: 29;
Number of state DOTs, by use of alternative bid types or techniques:
Rarely: 1;
Number of state DOTs, by use of alternative bid types or techniques:
Not at all: 2;
Number of state DOTs, by use of alternative bid types or techniques: No
basis to judge: 0.
Bid type or technique: e. Lump-sum bidding (no quantities);
Number of state DOTs, by use of alternative bid types or techniques:
Frequently: 6;
Number of state DOTs, by use of alternative bid types or techniques:
Occasionally: 8;
Number of state DOTs, by use of alternative bid types or techniques:
Rarely: 17;
Number of state DOTs, by use of alternative bid types or techniques:
Not at all: 19;
Number of state DOTs, by use of alternative bid types or techniques: No
basis to judge: 0.
Bid type or technique: f. Warranties;
Number of state DOTs, by use of alternative bid types or techniques:
Frequently: 3;
Number of state DOTs, by use of alternative bid types or techniques:
Occasionally: 13;
Number of state DOTs, by use of alternative bid types or techniques:
Rarely: 21;
Number of state DOTs, by use of alternative bid types or techniques:
Not at all: 13;
Number of state DOTs, by use of alternative bid types or techniques: No
basis to judge: 0.
Bid type or technique: g. Other type(s);
Number of state DOTs, by use of alternative bid types or techniques:
Frequently: 1;
Number of state DOTs, by use of alternative bid types or techniques:
Occasionally: 4;
Number of state DOTs, by use of alternative bid types or techniques:
Rarely: 2;
Number of state DOTs, by use of alternative bid types or techniques:
Not at all: 1;
Number of state DOTs, by use of alternative bid types or techniques: No
basis to judge: 5.
Source: GAO survey results.
[End of table]
[End of section]
Appendix IV: GAO Contact and Staff Acknowledgments:
GAO Contact:
JayEtta Hecker (202) 512-2834 or heckerj@gao.gov:
Staff Acknowledgments:
In addition, Andrew Von Ah (Assistant Director), Jay Cherlow, Steve
Cohen, Greg Dybalski, Colin Fallon, Brandon Haller, Bert Japikse,
Stuart Kaufman, Bonnie Pignatiello Leer, Jennifer Mills, Josh Ormond,
Minette Richardson, and Ryan Vaughan made key contributions to this
report.
[End of section]
Footnotes:
[1] Thomas R. Warne, NCHRP Synthesis 313: State DOT Outsourcing and
Private-Sector Utilization, A Synthesis of Highway Practice
(Washington, D.C.: National Cooperative Highway Research Program,
2003), for the Transportation Research Board of the National Academies.
[2] The highway activities included preliminary engineering, design,
construction engineering and inspection, federal-aid eligible
preventive maintenance, routine maintenance activities not eligible for
federal-aid program funding, ongoing operations, and right-of-way.
[3] A design-build contract is a method of project delivery where the
design-builder forges a single contract with the state transportation
agency to provide for architectural and engineering design and
construction services.
[4] FHWA has 52 division offices--1 in each state, the District of
Columbia, and Puerto Rico.
[5] GAO, Highway Public-Private Partnerships: Potential Benefits and
Risks Suggest Actions Are Needed to Protect Public and National
Interests, GAO-08-44 (Washington, D.C.: Jan. 18, 2008).
[6] Under the lane rental concept, a provision for a rental fee
assessment is included in the contract. The lane rental fee is based on
the estimated cost of delay or inconvenience to the road user during
the rental period. The fee is assessed for the time that the contractor
occupies or obstructs part of the roadway and is deducted from the
monthly progress payments.
[7] The Brooks Architect-Engineers Act (Pub. L. No. 92-582) established
the procurement process by which the federal government selects
architects and engineers for design contracts.
[8] On projects that are not located on the interstate system but are
part of the National Highway System, the states may assume
responsibility for overseeing the design and construction of projects,
unless the state or FHWA determines that this responsibility is not
appropriate.
[9] GAO, Federal-Aid Highways: FHWA Needs a Comprehensive Approach to
Improving Project Oversight, GAO-05-173 (Washington, D.C.: Jan. 31,
2005).
[10] GAO, Highlights of a Forum Convened by the Comptroller General of
the United States: Transforming Transportation Policy for the 21st
Century, GAO-07-1210SP (Washington, D.C.: Sept. 19, 2007).
[11] GAO-07-1210SP.
[12] The contract award is based on a combination of the traditional
bid for the contract items (the "A" component) and the bidder's
estimated total number of calendar days required for project completion
(the "B" component).
[13] State highway departments may use incentive/disincentive
provisions to motivate the contractor to complete the work on or ahead
of schedule.
[14] There was no Census of Governments employee survey in 1996;
therefore, there are no employment data for that year.
[15] See appendix II for a more detailed discussion of the cost
comparison studies that we reviewed.
[16] Although all 50 states completed the survey, some states did not
provide values for all activities. The number of states that provided
values ranges from 39 to 46, depending on the activity.
[17] The correlation coefficient for population in urban areas ranged
from 0.41 to 0.45 across the activities.
[18] States are required to use the qualification procedures adopted by
the Brooks Architect-Engineers Act (Pub. L. No. 92-582) when using
federal-aid funds to procure contractors to provide architectural and
engineering services (23 U.S.C. § 112). State and local agencies are
also required to use the indirect cost rates established by a cognizant
agency audit (23 C.F.R. § 172.7).
[19] 23 C.F.R. Part 637.
[20] 23 U.S.C. § 302(a).
[21] 23 C.F.R. § 172.9.
[22] U.S. Department of Transportation, Federal Highway Administration,
Office of Professional and Corporate Development, Quality Assurance in
Materials and Construction, Final Report (Washington, D.C.: June 2007),
9.
[23] Quality Assurance in Materials and Construction, 9.
[24] The Public Fund Survey is an online compendium of key
characteristics of 102 public retirement systems that administer
pension and other benefits for 12.8 million active public employees and
5.9 million retirees and other annuitants, and that hold more than $2.1
trillion in trust for these participants. The membership and assets of
systems included in the survey represent more than 85 percent of the
nation's total public retirement system community. The survey is
sponsored by the National Association of State Retirement
Administrators and the National Council on Teacher Retirement.
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