oversight

Highway Infrastructure: Federal-State Partnership Produces Benefits and Poses Oversight Risks

Published by the Government Accountability Office on 2012-04-26.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

             United States Government Accountability Office

GAO          Report to the Ranking Member,
             Subcommittee on Highways and Transit,
             Committee on Transportation and
             Infrastructure, House of Representatives

April 2012
             HIGHWAY
             INFRASTRUCTURE
             Federal-State
             Partnership Produces
             Benefits and Poses
             Oversight Risks




GAO-12-474
                                               April 2012

                                               HIGHWAY INFRASTRUCTURE
                                               Federal-State Partnership Produces Benefits and
                                               Poses Oversight Risks
Highlights of GAO-12-474, a report to the
Ranking Member, Subcommittee on Highways
and Transit, Committee on Transportation and
Infrastructure, House of Representatives



Why GAO Did This Study                         What GAO Found
The U.S. Department of Transportation          Over the years, the federal-aid highway program has expanded to encompass
(DOT) provides about $40 billion to the        broader goals, more responsibilities, and a variety of approaches. As the
states annually to build and maintain          program grew more complex, the Federal Highway Administration’s (FHWA)
highways and bridges through the               oversight role also expanded, while its resources have not kept pace. As GAO
federal-aid highway program. While             has reported, this growth occurred without a well-defined overall vision of evident
this program has grown and changed             national interests and the federal role in achieving them. GAO has recommended
over time, the federal-state relationship      Congress consider restructuring federal surface transportation programs, and for
has been consistently one of                   this and other reasons, funding surface transportation remains on GAO’s high-
“partnership” since 1916. DOT’s FHWA
                                               risk list.
has offices in all 50 states that have
developed close working relationships          FHWA benefits from using recognized partnership practices to advance the
with states. Legislation approved by           federal-aid highway program and conduct program oversight—such as clear
the Senate in March 2012 would                 delineation of roles and responsibilities between FHWA and its state partners
establish a more performance-based             and formal and informal conflict resolution—that are recognized as leading
highway program, introducing                   practices. FHWA’s partnership approach allows it to proactively identify issues
performance measures for highways              before they become problems, achieve cost savings, and gain states’
and bridges and requiring FHWA to              commitment to improve their processes.
monitor states’ progress in meeting
those measures. As requested, GAO              FHWA’s partnership approach also poses risks. We observed cases where
examined (1) how the federal-aid               FHWA was lax in its oversight or reluctant to take corrective action to bring states
highway program and FHWA’s                     back into compliance with federal requirements, potentially resulting in improper
oversight have changed over time;              or ineffective use of federal funds. For example, while FHWA has made it a
(2) the extent to which FHWA’s                 national priority to recoup funds from inactive highway projects—projects that
partnership approach produces                  have not expended funds for over 1 year—FHWA officials in three states we
benefits; (3) the extent to which              visited were reluctant to do so because of concerns about harming their
FHWA’s partnership approach poses              partnership with the state. In other cases, FHWA has shown a lack of
risks; and (4) how FHWA’s partnership          independence in decisions, putting its partners’ interests above federal interests.
with state DOTs could affect a
                                               For example, FHWA allowed two states to retain unused emergency relief
transition toward a performance-based
                                               allocations to fund new emergencies, despite FHWA’s policy that these funds are
highway program. To do this work,
GAO conducted site visits and a
                                               made available to other states with potentially higher-priority emergencies. In
survey, reviewed relevant                      some instances, FHWA became actively and closely involved in implementing
documentation, and interviewed FHWA            solutions to state problems—this can create a conflict when FHWA later must
and state officials.                           approve or review the effectiveness of those solutions.

What GAO Recommends                            If proposals for a performance-based highway program are adopted, FHWA
                                               would have to work with states to develop measures and take corrective action if
Congress should consider restructuring         states do not meet them. FHWA’s partnership could help states develop
federal surface transportation                 measures, but it would need to mitigate the risks posed by its partnership to
programs. Based on GAO’s review,               ensure corrective action was effective when needed. The fundamental
there may be areas where national              reexamination of surface transportation programs, including the highway
interests are less evident and where           program, that GAO previously recommended presents an opportunity to narrow
opportunities exist to narrow FHWA’s           FHWA’s responsibilities so that it is better equipped to transition to a
responsibilities. Also, DOT should             performance-based system. GAO identified areas where national interests may
address the risks posed by its                 be less evident but where FHWA expends considerable time and resources—
partnership approach. DOT generally
                                               areas where devolving responsibilities to the states may be appropriate.
agreed with the recommendation.
View GAO-12-474. For more information,
contact Phillip R. Herr at (202) 512-2834 or
herrp@gao.gov.

                                                                                        United States Government Accountability Office
Contents


Letter                                                                                     1
               Background                                                                  3
               FHWA’s Partnership Role Was Established a Century Ago, but over
                 Time Its Responsibilities Have Expanded                                  6
               FHWA Benefits from Using Recognized Partnership Practices                 11
               FHWA’s Partnership with States Poses Risks in FHWA’s Oversight            20
               Partnering Could Help FHWA Implement a Performance-Based
                 System, but Long-standing Challenges Would Remain                       32
               Conclusions                                                               40
               Matter for Congressional Consideration                                    42
               Recommendations for Executive Action                                      42
               Agency Comments                                                           42

Appendix I     FHWA Organization                                                         44



Appendix II    Scope and Methodology                                                     46



Appendix III   GAO Contact and Staff Acknowledgments                                     49



Figures
               Figure 1: FHWA and State Oversight and Approval Activities for
                        Full and Delegated Projects                                       5
               Figure 2: Locations of FHWA’s Offices                                     45




               Page i                                       GAO-12-474 Highway Infrastructure
Abbreviations
DBE                   Disadvantaged Business Enterprise
DOT                   Department of Transportation
FHWA                  Federal Highway Administration
MAP-21                Moving Ahead for Progress in the 21st Century
MPO                   Metropolitan Planning Organization
NRT                   National Review Team
Recovery Act          American Recovery and Reinvestment Act of 2009
TMA                   Transportation Management Area


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Page ii                                                 GAO-12-474 Highway Infrastructure
United States Government Accountability Office
Washington, DC 20548




                                   April 26, 2012

                                   The Honorable Peter A. DeFazio
                                   Ranking Member
                                   Subcommittee on Highways and Transit
                                   Committee on Transportation and Infrastructure
                                   House of Representatives

                                   Dear Mr. DeFazio:

                                   Federal funding for highways is provided to the states mostly through a
                                   series of formula grant programs collectively known as the federal-aid
                                   highway program. Over the years, in response to changing transportation,
                                   environmental, and societal goals, the highway program has expanded to
                                   encompass broader goals, more responsibilities, and a variety of grant
                                   structures. As the highway program grew more complex, the federal
                                   government’s responsibility to oversee the program expanded as well.
                                   The role of the Department of Transportation’s (DOT) Federal Highway
                                   Administration (FHWA) has grown from overseeing the construction of
                                   highway projects to a wide range of activities including overseeing states’
                                   transportation planning processes; assessing environmental impacts; and
                                   monitoring states’ compliance with property acquisition, contracting, civil
                                   rights, and other requirements. 1 As we have reported, FHWA has faced
                                   challenges in ensuring that federal funds are efficiently and effectively
                                   used because the highway program is one in which there is limited
                                   federal control—it is a state-administered, federally assisted program. 2
                                   Funds are largely apportioned by formula, and the states enjoy broad
                                   flexibility in deciding which projects are supported. Furthermore, for nearly
                                   half of federal-aid highway funds, FHWA’s responsibility to oversee the
                                   design and construction of projects has been assumed by the states.

                                   To adapt to its evolving role, FHWA has relied on its historical partnership
                                   with the states in which FHWA and the states work collaboratively to


                                   1
                                    Prior to 1967, the federal-aid highway program was administered by the Bureau of Public
                                   Roads, then a bureau in the Department of Commerce. These responsibilities were
                                   transferred to the Secretary of Transportation in 1967. Department of Transportation Act,
                                   Pub. L. No. 89-670, § 6(a), 80 Stat. 931, 937 (1966), eff. April 1, 1967, 32 Fed. Reg. 5453.
                                   2
                                    GAO, Federal-Aid Highways: FHWA Needs a Comprehensive Approach to Improving
                                   Project Oversight, GAO-05-173 (Washington, D.C.: Jan. 31, 2005).




                                   Page 1                                                   GAO-12-474 Highway Infrastructure
construct highway infrastructure. Specifically, FHWA division offices, which
are located in every state, the District of Columbia, and Puerto Rico, have
developed close working relationships with state departments of
transportation (state DOTs). (For a complete list of division offices, see
appendix I.) We have reported that this partnership approach offers benefits,
such as more efficient project delivery, but can also create challenges. When
an overseer becomes an active partner in a project, the independent
perspective important to effective project oversight can be lost. 3

Legislation approved by the Senate in March 2012 4 would establish
performance measures for highways and require FHWA to monitor states’
progress in meeting these measures. As a consequence, FHWA’s
oversight approach could undergo significant change, as FHWA would
need to work with the states to develop measurable goals to improve the
condition and performance of the nation’s highway system and take
action when performance measures are not met. Given its history, FHWA
is likely to use its partnership with the states to implement such a system.
Also, administering a performance-based system would be an addition to
FHWA’s other duties.

You asked us to examine how FHWA’s partnership with state DOTs
affects its oversight of the highway program and, in particular, how it
might affect the transition to a more performance-based highway
program. This report addresses (1) the basis for FHWA’s partnership and
oversight role in relation to the states, and how the federal-aid highway
program and FHWA’s oversight have changed over time; (2) the extent to
which FHWA’s partnership approach produces benefits; (3) the extent to
which FHWA’s partnership approach poses risks; and (4) how FHWA’s
partnership with state DOTs could affect a transition toward a
performance-based highway program.

To achieve these objectives, we reviewed and analyzed relevant laws
and regulations, historical documentation, and stewardship agreements
between FHWA and state DOTs that delineate oversight responsibilities.
We conducted site visits to 9 of FHWA’s 52 division offices, which are
located in all 50 states, the District of Columbia, and Puerto Rico, chosen
based on a range of criteria, including the size of the state’s


3
GAO-05-173.
4
S. 1813 §§ 1106, 1112, 112th Cong. (as adopted by the Senate March 14, 2012).




Page 2                                              GAO-12-474 Highway Infrastructure
             transportation program and proportion of federal funding, the rural and
             urban composition of the state, and geographic distribution. During our
             site visits, we interviewed FHWA division office leadership as well as
             state officials, when possible, to understand how they characterize their
             relationship. To obtain a broader perspective than site visits provide, we
             designed and conducted a survey of the division administrators from each
             of the 52 FHWA division offices; our response rate was 100 percent. We
             also conducted 4 discussion groups that included representatives from 38
             of 52 state DOTs. Through a literature review, we identified best practices
             and risks associated with partnering, and used these criteria to assess
             FHWA’s current oversight approach by reviewing information from our
             audit work. We also analyzed available results from states’ 2010 Single
             Audit findings to independently identify areas of concern in oversight
             activities. See appendix II for more details on our scope and
             methodology.

             We conducted this performance audit from April 2011 to April 2012 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.


             Federal assistance for highway and bridge infrastructure—about $40
Background   billion each year—is distributed through multiple formula and
             discretionary grant programs collectively known as the federal-aid
             highway program. The federal-aid highway program is financed through
             the Highway Trust Fund, a dedicated source of federal revenue based on
             the “user-pay principle”—that is, users of transportation systems pay for
             the systems’ construction through the federal tax on motor fuels, tires,
             and trucks.

             FHWA uses a decentralized organizational structure to administer the
             federal-aid highway program, meaning that decision-making authority is
             largely delegated to FHWA’s 52 division offices. FHWA division offices
             have 10 to 61 staff each, depending on the size of the state’s highway
             program. While there are variations in division office organizational
             structures, each typically has teams that cover areas such as planning,
             environment, engineering, technical services, finance, and civil rights. As
             of February 2012, FHWA had 2,960 staff—1,962 in the field and 998 at
             headquarters.


             Page 3                                         GAO-12-474 Highway Infrastructure
FHWA’s responsibilities for the federal-aid highway program fall into two
broad categories: (1) advancing the program and (2) ensuring compliance
with federal law and regulations. To advance the program, FHWA
engages in a range of activities to encourage the effective and efficient
use of federal-aid highway funding and assist states in progressing
projects through construction to improve the highway system. To
accomplish these tasks, FHWA works with states to identify issues,
develop and advocate solutions, approve and obligate project funding for
eligible activities, and provide technical assistance and training to state
DOTs. 5 To ensure that states comply with federal laws and regulations,
FHWA, through its division offices, conducts oversight of federally funded
projects and reviews state DOT capacity and systems used to administer
approved projects. Actual project-level oversight is divided or shared
between FHWA and the state. FHWA oversees major interstate highway
projects. FHWA division offices and states jointly decide how to divide
oversight responsibility for other National Highway System projects. 6
States assume oversight responsibility for projects that are not on the
National Highway System. These can include locally administered
projects, which are projects in which a state DOT has given approval to a
local public agency (e.g. a city or county) to administer a project or phase
of a project such design, property acquisition, or construction.

For those projects where both FHWA and the state make decisions about
oversight responsibilities, the respective responsibilities are generally
mapped out in a “stewardship agreement.” This agreement defines which
projects will receive “full” oversight, in which FHWA oversees most
aspects of the construction process, or projects in which states assume
oversight responsibility (we refer to these as “delegated” projects). Figure
1 describes aspects of oversight that are led by FHWA or the state
depending on the status of the project.




5
 FHWA’s mission to advance the program is articulated in its national leadership strategic
goal, which states that FHWA “leads in developing and advocating solutions to national
transportation needs” as well as in its stewardship agreements.
6
 The National Highway System consists of approximately 160,000 miles of roadway
important to the nation’s economy, defense, and mobility. It includes Interstates, principal
arterials, roads, and connectors important to the United States’ strategic defense policy.
These roadways provide access, continuity, and emergency capabilities for defense
purposes, and connect to major intermodal facilities, such as airports or transit hubs.




Page 4                                                   GAO-12-474 Highway Infrastructure
Figure 1: FHWA and State Oversight and Approval Activities for Full and Delegated Projects




                                         To evaluate state DOTs’ systems and capacity to administer approved
                                         projects, FHWA division offices assess internal controls and processes
                                         across programmatic areas such as construction, finance, property
                                         acquisition, and locally administered projects. A common tool for this type
                                         of oversight is a “process review,” which involves an analysis of key
                                         program components and processes employed by the state DOT.
                                         Typically, this includes a file review of a sample of projects, interviews
                                         with relevant state DOT staff, and field reviews when applicable. In
                                         addition, FHWA, in conjunction with the Federal Transit Administration,
                                         performs a federal certification review of Metropolitan Planning
                                         Organizations (MPO), which are responsible for transportation planning in




                                         Page 5                                              GAO-12-474 Highway Infrastructure
                        urban areas with populations larger than 50,000 7 every 4 years, 8 meaning
                        that periodically FHWA determines if the organization complies with
                        applicable federal requirements. FHWA division offices have a range of
                        corrective actions they can use if a state does not comply with federal
                        requirements. Among other things, it may withhold funding from all or part
                        of a project, deobligate inactive funds, withhold approval until an issue is
                        resolved, or require corrective action plans.


                        Over the years, the federal-aid highway program has grown to
FHWA’s Partnership      encompass broader goals, more responsibilities, and a variety of
Role Was Established    approaches; however, the concept of a federal-state partnership has
                        been an integral feature of the highway program since it was established
almost a Century Ago,   by the Federal Aid Road Act of 1916. 9 This and other early highway
but over Time Its       legislation established federal-state responsibilities, wherein states select
Responsibilities Have   the placement of roads, construct, and maintain them, and the federal
                        government sets standards and provides a portion of the funding. The
Expanded                Federal-Aid Highway Act of 1973 further refined the federal-state
                        relationship by stating that “the authorization of the appropriation of
                        Federal funds…shall in no way infringe on the sovereign rights of the
                        States to determine which projects shall be federally financed” and
                        defined the federal-aid highway program as a “federally assisted State




                        7
                         Federal and state governments oversee this regional planning process. At the federal
                        level, the Federal Transit Administration and FHWA work together to perform federal
                        certification reviews—certifying that each Transportation Management Area (TMA) has
                        carried out its planning according to the applicable federal statutes. More specifically, the
                        certification review requires that the federal government assess TMAs every 4 years to
                        determine how well they are working with the transportation-related organizations, local
                        governments, public transportation operators, and citizens in their area, as well as with the
                        state DOTs, to meet the many statutory and regulatory requirements applicable to the
                        planning process. Additionally, the certification review assesses the quality of the required
                        planning documents. The certification review includes a desk review of the MPO’s plans
                        and a site visit, among other things. Additionally, all MPOs, including both TMAs and non-
                        TMAs, must also self-certify that their planning process meets the federal requirements.
                        8
                         Required by 23 U.S.C. § 134(k)(5).
                        9
                         Act of July 11, 1916, ch. 241, § 4, 64th Cong., 39 Stat. 355, 357.




                        Page 6                                                   GAO-12-474 Highway Infrastructure
program.” 10 This language helped shape FHWA’s interpretation of the
federal-state relationship, leading to an understanding of its role that
anchors FHWA’s approach to oversight in partnership and is cited today
in FHWA’s policy documents. 11 Almost all the division administrators we
surveyed described their work with states as a partnership and in ways
that emphasized the importance of partnership in carrying out FHWA’s
mission to advance the transportation program. In addition, as we
previously reported, both FHWA and state officials believe that over the
years the partnership has helped to build trust and respect between state
transportation agencies and FHWA, ensuring that as partners they can
accomplish tasks such as planning and building projects more efficiently
and effectively. 12

The goals and scope of the federal-aid highway program expanded
during much of the 20th century, as did the roles and responsibilities of
FHWA. Initially, the highway program was administered by the
Department of Agriculture through the Bureau of Public Roads, a
predecessor to FHWA. 13 The bureau focused oversight at the project
level to ensure that materials and construction methods met federal
standards. The bureau also brought engineering expertise to the states,
many of which either lacked skilled engineers or were not ensuring that


10
  The act also referred to the federal-state relationship as contractual and authorized
withdrawal of a portion of the San Antonio North Expressway as a federal-aid highway
project upon repayment into the Highway Trust Fund of funds previously paid by the
federal government. Texas’ desire to withdraw the Expressway stemmed from an impasse
over routing to minimize environmental impact by complying with the National
Environmental Policy Act of 1969, Pub. L. No. 91-190, 83 Stat. 852 (1970) (codified, as
amended at 42 U.S.C. ch. 55). Congress has enacted legislation authorizing states to
withdraw highways from the program in other specific instances as well.
11
  FHWA policy documents and officials have altered this language slightly and widely
refer to the program today as a “federally assisted state-administered program.”
12
 GAO-05-173.
13
  Responsibility for public roads was at various times with the Department of Agriculture
(Act of July 11, 1916, § 1, 39 Stat. 355), Federal Works Administration (Reorganization
Plan No. 1 of 1939, § 302, 53 Stat. 1423, 1427), and the Department of Commerce
(Reorganization Plan No. 7 of 1949, 63 Stat. 1070). The Department of Transportation Act
established a Federal Highway Administration, headed by an administrator, into which
was transferred the Department of Commerce Bureau of Public Roads reporting to its
former administrator, retitled the Director of Public Roads. (Pub. L. No. 89-670, §§ 3(d),
(4), 80 Stat., 932-933 (1066)). The position of Director of Public Roads was abolished by
the Federal-Aid Highway Act of 1970, Pub. L. No. 91-605, § 114, 84 Stat. 1713, 1722-
1723.




Page 7                                                 GAO-12-474 Highway Infrastructure
federal dollars were being used to produce quality construction. The
Defense Highway Act of 1941 extended the 1916 act to fund a strategic
network of highways, including secondary and feeder routes. Eligibility
was extended again in 1944 to include an array of other secondary roads,
including rural farm-to-market roads, rural mail and bus routes, county
roads, and others that became eligible for post-war federal aid. 14 In 1950,
Congress made additional roads—including county, township, and urban
roads—eligible for aid. 15 By then, however, the focus of the highway
program was turning increasingly to constructing the Interstate Highway
System. Designated as mandated in 1944, 16 construction of the system
began in earnest with passage of the Federal-Aid Highway Act of 1956 17
and establishment of the Highway Trust Fund, a dedicated funding source
deriving revenue primarily from taxes on motor fuels, tires, and trucks to
finance the construction of the Interstate system. 18

Construction of the Interstate remained the focus of the federal-aid
highway program in the years that followed, and Congress continued to
expand the types of projects eligible for federal funds. In the 1970s,
Congress expanded the federal role in bridge infrastructure by making
highway bridges located on public roads and longer than 20 feet eligible
for federal funds. 19 Congress also expanded the eligibility of federal aid
beyond initial construction. Under the 1916 Act and Interstate
authorizations, the federal government was to fund the construction of
highways while maintenance was the states’ responsibility. However, as
the Interstate began to age, Congress allowed states to use federal funds
for road maintenance on Interstate highways and all eligible bridges by
redefining certain activities—such as resurfacing, rehabilitation, and
reconstruction—as capital investments rather than maintenance. 20 By


14
  Act of December 20, 1944, ch. 626, §§ 1, 3(b), 58 Stat. 838-839. Federal-aid-Secondary
Program (1952-1991), Urban Extensions (1944-1976).
15
  Federal-Aid Highway Act of 1950, ch. 912, § 1(b), (c), 64 Stat. 785, 786 (1950), See,
also, the Federal-Aid Highway Act of 1948, ch. 732, 62 Stat. 355 (1948).
16
 Act of December 20, 1944, § 8, 58 Stat., 842.
17
 Federal-Aid Highway Act of 1956, ch. 462., Title I, 70 Stat. 374.
18
 Highway Revenue Act of 1956, ch. 462, Title II, 70 Stat. 387.
19
 Highway Safety Act of 1970, 91-605, Title II, § 204(a), 84 Stat. 1739, 1741 (1970).
20
  Intermodal Surface Transportation Efficiency Act of 1991 (ISTEA), Pub. L. No. 102-240,
§ 1007(b)(1), 105 Stat. 1914.




Page 8                                                  GAO-12-474 Highway Infrastructure
1991, as a result of changes over the years, use of highway funds was
authorized to fund a wide range of transportation enhancement activities,
including activities connected with highway beautification, historic
preservation, and the establishment of bicycle and pedestrian trails. 21

In addition to expanding the types of projects eligible for federal highway
funds, over time Congress adopted legislation to achieve social goals
such as advancing civil rights and environmental protection, and
enhancing urban planning and economic development, which affected the
federal-aid highway program and FHWA’s role and responsibilities. For
example, the National Environmental Policy Act of 1969 22 required grant
recipients to comply with federal environmental requirements by
conducting environmental reviews for federally funded transportation
projects. The Federal-Aid Highway Act of 1962 established urban
transportation planning as a matter of national interest and required all
construction projects to be part of a continuing, comprehensive, and
cooperative planning process. 23 Other federal requirements have included
requiring compliance with prevailing wage standards applicable to federal
contracts under the Davis-Bacon Act, a Disadvantaged Business
Enterprise program to enhance participation of women- and minority-
owned businesses, and Buy America provisions for acquiring steel and
other materials. As the goals of the highway program expanded, FHWA
added expertise in its division offices beyond civil engineers and hired
economists, right-of-way specialists, planners, historians, ecologists,
safety experts, civil rights experts, and others.

In the early 1990s, Congress revised FHWA’s role and responsibilities.
With the Interstate Highway System nearly complete, Congress created
the National Highway System and subsequently states began to assume
authority from FHWA. In addition, FHWA’s staff was reduced from 3,556


21
  ISTEA, Pub. L. No. 102-240, § 1007(c), 105 Stat. 1914, listed these as making
“provision of facilities for pedestrians and bicycles, acquisition of scenic easements and
scenic or historic sites, scenic or historic highway programs, landscaping and other scenic
beautification, historic preservation, rehabilitation and operation of historic transportation
buildings, structures, or facilities (including historic railroad facilities and canals),
preservation of abandoned railway corridors (including the conversion and use thereof for
pedestrian or bicycle trails), control and removal of outdoor advertising, archaeological
planning and research, and mitigation of water pollution due to highway runoff.”
22
  Pub. L. No. 91-190, 83 Stat. 852 (1970) (codified as amended at 42 U.S.C. ch. 55).
23
  Pub. L. No. 87-866, § 9, 76 Stat. 1148 (1962).




Page 9                                                    GAO-12-474 Highway Infrastructure
in 1998 to 2,960 in February 2012. 24 Recognizing its changing roles,
responsibilities, and decline in staff levels, FHWA continued to adapt its
oversight approach. In 2006, it began adopting a risk management
approach to its oversight, recognizing in part that, while its role had
expanded, its resources had not. 25

FHWA has adapted to changes in demands for its oversight, but its role
and responsibilities are complicated by the fact that the current federal
approach to surface transportation in general—and to highways in
particular—is not working well. 26 The expansion of the program did not
result from a specific rationale or plan, but rather an agglomeration of
policies and programs since the 1950s without a well-defined overall
vision of the national interest and federal role in our surface transportation
system. 27 Federal goals and programs are now numerous and sometimes
conflicting, and federal roles are unclear. Furthermore, although DOT and
FHWA establish national goals and priorities, federal highway funding is
apportioned to states without regard to the accomplishment of specific
outcomes or the performance of grantees. This makes it difficult to assess
the extent to which funding is achieving transportation goals. For these
and other reasons, funding surface transportation remains on GAO’s
high-risk list. 28



24
  Congress authorized the final funding apportionments to complete the construction of
the Interstate Highway legislation and created the National Highway System, consisting of
the Interstate Highway System and other roadways connecting to major transportation
hubs such as ports, airports, international border crossings, and public transportation and
transit facilities. ISTEA, §§ 2, 1001, 1003(a)(2),1006, 105 Stat. 1914. DOT and the states
cooperatively identified these roads and selected 160,000 miles of interstate and other
roads that by 1996 carried more than 40 percent of all highway traffic, 75 percent of heavy
truck traffic, and 90 percent of tourist traffic. Once the roads were selected, Congress
formalized this plan in the National Highway System Designation Act of 1995. Pub. L. No.
104–59, § 101(a), 109 Stat. 568 (1995).
25
   FHWA’s risk management approach requires field offices to identify risks to the federal-
aid highway program, assess the risks on the basis of the potential impact and the
likelihood that they will occur, develop response strategies for key risks, and include these
strategies in the offices’ planned oversight activities.
26
  GAO, Surface Transportation: Restructured Federal Approach Needed for More
Focused, Performance-Based, and Sustainable Programs, GAO-08-400 (Washington,
D.C.: Mar. 6, 2008).
27
 GAO, Surface Transportation: Principles Can Guide Efforts to Restructure and Fund
Federal Programs, GAO-08-744T (Washington, D.C.: July 10, 2008).
28
  GAO, High-Risk Series: An Update, GAO-11-278 (Washington, D.C.: February 2011).




Page 10                                                  GAO-12-474 Highway Infrastructure
FHWA Benefits from
Using Recognized
Partnership Practices

Partnering Activities and   In the face of its evolving roles and responsibilities, FHWA has relied on
Practices                   its historical partnership with the states in which FHWA and the states
                            work collaboratively to construct highway infrastructure. FHWA uses
                            partnering activities and practices with the states that are, based on our
                            review and synthesis of partnering literature, recognized as best
                            practices. These activities and practices enable parties to achieve
                            individual and mutually beneficial goals and results, such as expedited
                            project time frames and cost savings. We observed the following
                            examples of successful partnerships:

                            •   Open and regular communication includes clear and candid
                                discussions among partners as well as an understanding of the inner
                                workings and decision-making processes of participating
                                organizations. FHWA division and state DOT officials reported having
                                regular formal and informal meetings (at leadership and working
                                levels) as well as frequent contact by e-mail and telephone.

                            •   Clear delineation of roles and responsibilities involves understanding
                                individual partner roles as well as articulating responsibilities for joint
                                actions and tasks. FHWA stewardship agreements describe the roles
                                of FHWA divisions and state DOTs. Some stewardship agreements
                                that we examined include detailed matrices addressing factors such
                                as work activities and their frequency, legal authority, and specific
                                division office and state DOT responsibilities.

                            •   Proactive issue identification and resolution, in a mutually agreeable
                                way, is closely linked to open and regular communication between
                                partnering members. FHWA officials in several division offices told us
                                that they work closely with their state DOT counterparts to identify
                                problems early and develop solutions. For example, one division
                                administrator explained that, at times, the division office is forced to
                                tell the state DOT that, because of its approach, a certain portion, or
                                an entire construction project, is not eligible for federal funding.
                                However, the administrator stated that the next question the division
                                staff asks is, “How can we do this?” to work with the state DOT to
                                bring the project into compliance with federal requirements, and
                                therefore allowing the state DOT to use federal funds.



                            Page 11                                          GAO-12-474 Highway Infrastructure
                            •   Conflict resolution processes include formal (documented protocols or
                                escalation procedures) and informal (verbal agreements between
                                parties) procedures for how to handle disagreements. FHWA division
                                and state officials discussed their commitment to collaborative
                                problem solving and using informal issue escalation procedures, for
                                example, by elevating problematic issues to the leadership level for
                                resolution. One FHWA division incorporated conflict resolution
                                protocols into its formal partnering agreement with the state DOT. The
                                agreement advocated using face-to-face communication for conflict
                                resolution and outlined procedures for escalating issues.


Partnership Benefits in     In our survey and interviews, FHWA division administrators reported that
Advancing the Federal-Aid   FHWA uses its partnering relationship with state DOTs to advance the
Highway Program             federal-aid highway program by ensuring that projects move to
                            construction in a timely fashion, facilitating knowledge transfer, and
                            promoting federal transportation priorities. Specifically, 51 of 52 survey
                            respondents stated that their partnering relationship with their state was
                            very or somewhat important to their ability to achieve the mission of the
                            federal-aid highway program. Most division administrators (44 of 52) also
                            indicated that the partnering relationship produces multiple benefits.
                            Some of these benefits—such as expedited project time frames and cost
                            savings—were noted as positive outcomes of partnership in the literature
                            we reviewed. For example, FHWA officials in a northern state with a short
                            summer construction season told us they work closely with state DOT
                            officials to make timely decisions and move projects along to ensure that
                            construction can be completed during the warmer months. FHWA officials
                            in this state generally conducted non-construction-related process
                            reviews in the winter season so that they and state DOT officials could
                            focus on construction inspections and construction-related process
                            reviews during the warmer months. Similarly, in another state, FHWA and
                            state officials told us that by working together to resolve issues
                            expediently, they were able to complete the environmental review and
                            approval process for a large-scale project to reduce congestion on an
                            important regional highway in about half of the time normally required.

                            Forty-four of 52 division administrators indicated in response to our
                            survey that partnering was very helpful in facilitating the transfer of
                            technical knowledge. In our site visits, FHWA officials explained that
                            partnering helps FHWA to use technical knowledge transfer to advance
                            the federal-aid highway program by assisting states in addressing
                            technical or programmatic concerns, closing skill gaps, enhancing
                            compliance, and informing decision making. FHWA division officials in



                            Page 12                                       GAO-12-474 Highway Infrastructure
one state told us that they had financed a trip by state DOT officials to
learn about an alternative interchange design. As a result, the state DOT
was able to make interchange improvements without removing and
replacing an existing bridge, reducing costs from estimated $10 to $15
million to $3 million. Similarly, when FHWA officials observed crumbling
materials used for retaining walls and supporting structures, they brought
in the technical expertise of the FHWA Resource Center, which resulted
in the state DOT revising its materials specifications to ensure higher-
quality materials are used.

Forty-nine of 52 division administrators also indicated in response to our
survey that partnering helps the agency to advance federal transportation
priorities. One respondent stated that “partnering helps us advance more
federal priorities and achieve greater public benefit than simply being
parochial authoritarians that refuse to discuss anything that doesn’t
directly involve a federal dollar or regulation.” For example, officials in one
FHWA division office developed a business case for an approach to
address congestion in a key section of highway as an alternative to the
state’s planned solution. FHWA promoted its alternative to the state DOT
and other stakeholders, and ultimately the state accepted FHWA’s
approach because the data showed it would be more effective and less
costly. In another example, FHWA division officials believed they
influenced the state DOT to improve safety by using higher-quality
barriers and rumble strips on highways to alert drivers straying off the
road. Likewise, to improve safety, officials in another FHWA division office
promoted cable barriers on highway medians as a risk-based, lower-cost
alternative to concrete barriers.

Similarly, during our site visits, some FHWA officials said that their
partnering relationship creates an opportunity to promote projects of
national or regional significance within a state. For example, FHWA
officials in one division office persuaded the state to address congestion
around a toll plaza on a major interstate route. The state did not consider
the project a high priority, because it did not affect most state residents as
much as out-of-state drivers traveling through the state. However, FHWA
division officials were able to persuade the state to construct the project
when funding from the American Recovery and Reinvestment Act of 2009
(Recovery Act) 29 became available. One of the FHWA officials



29
 Pub. L. No. 111-5, Title XII, 123 Stat. 115 (2009).




Page 13                                                GAO-12-474 Highway Infrastructure
                           commented, “Without partnerships, you lose opportunities to do things
                           that would be good for the taxpayer.”


Partnership Benefits in    FHWA relies on its partnering approach with state DOTs to facilitate
Oversight and Effects on   oversight of the federal-aid highway program by engaging states in open
Corrective Action          dialogue about risks and obtaining their buy-in on program improvements.
                           In our survey, 50 of 52 FHWA division administrators said that their
Decisions                  division office’s partnering relationship was very or somewhat helpful in
                           producing more effective oversight. Officials we spoke with during our site
                           visits offered several illustrations of how partnership improves oversight.
                           One FHWA division administrator told us that the state DOT proactively
                           brings problems to FHWA’s attention rather than waiting for FHWA to
                           discover them. We observed that this open dialogue about risks allows
                           FHWA to address issues in a timely fashion and adopt a more responsive
                           and problem-solving attitude. According to one FHWA division official,
                           FHWA worked collaboratively with the state DOT to determine which
                           process reviews to conduct during the year and then conducted the
                           majority of those reviews jointly. According to the FHWA official, this
                           practice strengthened oversight by helping to gain the state DOT’s buy-in
                           and commitment to improving its processes, facilitating honest
                           communication about risk areas, and creating an opportunity for FHWA to
                           provide on-the-spot training when problems were identified. In another
                           example, an FHWA division office holds annual meetings with state DOT
                           officials where the two parties determine which projects should receive
                           full oversight and which should be assumed by the state. We observed
                           that this approach can strengthen oversight by allowing FHWA to
                           incorporate the state’s perception of risk and weaknesses into their
                           oversight plan by engaging in open dialogue with state officials about
                           risks. Additionally, for each summer construction season, the two parties
                           identify one of the state’s regions as a focus for full oversight. This allows
                           each region and their project managers to receive training while their
                           projects, primarily related to pavement preservation, are being reviewed
                           by FHWA.

                           FHWA’s partnership with state DOTs also affects its use of corrective
                           action. FHWA emphasizes working with state DOTs to bring them back
                           into compliance through less stringent corrective action instead of more
                           punitive action. Responses to our survey of division administrators
                           showed that the most frequently used corrective action in the last 3 fiscal
                           years was withholding approval of a particular request until an issue was
                           resolved. According to one division administrator, withholding approval
                           provides the greatest ability to address and resolve a particular issue and


                           Page 14                                         GAO-12-474 Highway Infrastructure
encourages the state to take corrective action in a timely manner.
Additionally, 43 of 52 division administrators reported that in the last 3
fiscal years they have used the threat of a corrective action, which helps
to achieve compliance without actual punitive actions. Reportedly, the
threat of a corrective action is effective because it communicates the
consequences of not complying with federal requirements and helps to
bring about problem resolution. In addition, to address deficiencies, 51 of
52 division administrators reported that they had required state DOTs to
develop a corrective action plan to outline how the state would change a
process or program to comply with federal requirements.

When FHWA moves toward a more punitive corrective action, it is most
likely to withhold funding from a part of a project. Withholding partial
funding often amounts to not paying for a line item in a project’s budget.
For example, one division administrator explained that when the state
purchases proprietary equipment, such as certain types of light posts or
signs, when a less expensive nonproprietary option is available, FHWA
withholds funds for the purchase. The federal-aid highway program is a
reimbursement program. As a consequence, if FHWA withholds funds,
state DOTs must replace federal funding with state funding. All 52 division
offices indicated they withheld partial federal funding from a project in the
last 3 fiscal years, and withholding partial funding was the second most
frequently used tool for corrective action.

FHWA division offices reported that they rarely use their most punitive
corrective actions, such as withholding funding for an entire project or
organization. Although 30 division administrators we surveyed reported
that they had withheld federal funding from an entire project during the
past 3 fiscal years, none listed this action as one of their three most
frequently used corrective actions. According to FHWA officials, such
action is damaging to the state’s federal-aid highway program and
provokes tension with state DOTs. FHWA officials stated that they see
this measure as a last resort and try to use their partnership with the
states to elicit compliance. Furthermore, division offices periodically
review MPOs, which can receive federal-aid highway funding and
implement construction projects. If the office declines to certify an MPO,
federal funds for that organization are withheld until the deficiencies
identified are corrected.




Page 15                                        GAO-12-474 Highway Infrastructure
Navigating the “Gray   FHWA division officials use partnering practices, such as open and
Areas”                 regular communication, with state DOT officials as they exercise
                       administrative discretion 30 in situations where the rules and how to apply
                       them are not clear—situations we refer to as “gray areas.” In
                       administering the federal-aid highway program, FHWA often has
                       discretion to take a less stringent action even when the law permits a
                       harsher one, if circumstances warrant. Such an approach is embodied in
                       a stewardship agreement from one division office, which states that the
                       division office “will make use of available regulatory flexibility when in the
                       public interest.” FHWA officials spend time and effort addressing gray
                       areas, as they seek to make a decision that is not only consistent with
                       federal regulations but also appropriate to the particular facts and
                       circumstances of the situation. For example, the federal regulations
                       governing federal-aid contracts call for state DOTs to use reasonable
                       judgment in evaluating contractors’ good faith effort to hire women- and
                       minority-owned businesses but do not specify the type of documentation
                       contractors must submit to demonstrate their effort. 31 Because there are
                       no specifications on the type of documentation demonstrating a good faith
                       effort, FHWA and state DOT officials must work through this gray area to
                       determine how best to demonstrate their efforts.

                       In our interviews and observations, we noted that FHWA officials rely on
                       partnering practices with states when federal regulations and FHWA
                       policies leave room for interpretation and discretion, creating gray areas
                       for FHWA officials to resolve. For example, routine roadway maintenance
                       is not eligible for federal reimbursement, 32 but preventive maintenance




                       30
                         Administrative discretion is a public official’s ability to decide whether a particular
                       administrative act is to be implemented, and in what manner.
                       31
                         49 C.F.R. Part 26, Appendix A. When a state DOT sets Disadvantaged Business
                       Enterprise contract goals on individual U.S. DOT-assisted contracts, bidders on those
                       contracts must make good faith efforts to meet those goals. The bidder can meet this
                       requirement in one of two ways: (1) meet the goal on the individual U.S. DOT-assisted
                       contract, or (2) document that it made an adequate good faith effort—meaning that the
                       bidder took the necessary and reasonable steps to achieve the goal even though it did not
                       succeed in obtaining enough DBE participation to do so. State DOTs are responsible for
                       evaluating whether bidders made good faith efforts to meet their goals, and according to
                       U.S. DOT officials, this evaluation is subject to FHWA review as appropriate.
                       32
                         23 U.S.C. § 116(a).




                       Page 16                                                     GAO-12-474 Highway Infrastructure
can be. 33 According to an FHWA division administrator in one state, there
is room for interpretation and discretion between the two types of
maintenance. This division administrator told us that in recent years the
state DOT has sought reimbursement from FHWA for roadway
maintenance activities that are typically ineligible for reimbursement—a
situation he attributed to the economic environment affecting state
budgets. This required time and effort by both FHWA and the state DOT
to work through their different interpretations of the regulation. Ultimately,
FHWA and the state agreed to develop asset management systems to
identify and prioritize preventive maintenance needs in a systematic way.
The division administrator explained that this approach would show and
document how the maintenance strategies would extend the roadway life
and prevent deterioration and higher maintenance costs later, which
would make these costs eligible for federal funding.

We also observed FHWA using partnering practices to negotiate the gray
areas that may arise when the rules are clear, but practical considerations
complicate implementing the rule. When implementing a rule, public
officials may need to consider cost-benefit implications, time frames, local
economic conditions, or other local circumstances that are not necessarily
dealt with explicitly in rules or regulations. For example, FHWA officials in
one division office explained that FHWA’s regulations require roadside
guardrails on National Highway System routes to be a minimum height of
27 ¾ inches from the top of the guardrail to the top of the pavement. The
height of a guardrail governs its effectiveness. However, as states overlay
pavement with new asphalt to address road deterioration, the height of
the guardrail relative to the road surface decreases and the guardrail
becomes less effective. This creates practical trade-offs with regard to the
costs of guardrail replacement and safety, raising questions regarding
whether to use funds to improve the pavement condition of, for example,
20 miles of road without replacing guardrails or to pave fewer miles of
road but replace the guardrails to ensure they are at the full height
prescribed in the regulation. Both approaches offer safety benefits.
Determining the best course of action requires navigating a gray area and



33
  23 U.S.C. § 116(d). Routine maintenance is defined as work that is planned and
performed on a routine basis to maintain and preserve the condition of the highway
system at an adequate level of service. Preventive maintenance is defined as a planned
strategy of cost-effective treatments to an existing roadway system that preserves the
system, retards future deterioration, and maintains or improves the functional condition of
the system.




Page 17                                                  GAO-12-474 Highway Infrastructure
                           requires FHWA to understand the state’s priorities, weigh the safety
                           outcomes, and use its partnership with the state to agree on an approach
                           that meets transportation needs and federal responsibilities.


States’ Perspectives on    While FHWA officials largely viewed their partnering relationship with
Partnering and Oversight   state DOTs in positive terms, state officials offered a more tempered
                           response. Specifically, our interviews and discussion groups with officials
                           from 38 state DOTs revealed that while states acknowledged having good
                           working relationships with their FHWA division counterparts, they also
                           expressed some frustrations. On the positive side, state DOT officials
                           appreciated regular and ongoing communication with FHWA officials and
                           characterized FHWA staff as accessible, responsive, and solution-
                           oriented. State DOT officials told us that stewardship agreements were
                           helpful in clarifying roles and expectations and that they consider risk-
                           based oversight to be a strength of the FHWA-state relationship. Officials
                           also appreciated FHWA’s help in navigating federal requirements and
                           sharing technical expertise and industry best practices. Furthermore,
                           state officials appreciated that FHWA officials recognized the unique
                           needs, context, and features of their state. State DOT officials
                           participating in our discussion groups asserted that they do not want a
                           “one size fits all” FHWA.

                           However, state DOT officials’ positive feedback about FHWA was
                           tempered with other perspectives on partnering and FHWA decision
                           making. We noted three themes among the comments of state DOT
                           officials when voicing perspectives different from FHWA.

                           1. State officials viewed partnership less favorably than FHWA. Many
                              state DOT officials characterized FHWA’s role as providing oversight
                              and enforcing regulations rather than acting as a partner. Some
                              officials indicated FHWA began emphasizing enforcement over
                              partnership around the time of the completion of the Interstate
                              Highway System, as FHWA responded to legislative changes,
                              adopting what many state officials viewed as an audit-focused
                              approach to oversight. According to some state DOT officials, the
                              sense of camaraderie between state DOT and FHWA officials that
                              existed during the building of the Interstate is no longer there, and
                              currently there is “less partnership and more regulation.” Reflecting
                              the states’ more tempered perspective, one state DOT official
                              characterized the relationship with FHWA as “a partnership within an
                              arranged marriage.”




                           Page 18                                       GAO-12-474 Highway Infrastructure
2. State officials viewed FHWA as imposing personal preferences. Many
   state DOT officials told us that FHWA officials routinely imposed
   personal preferences—for example, questioning particular design
   solutions—and would threaten to withhold federal funds or approval
   even though, in the states’ view, the approach the state had
   developed complied with federal standards and regulations. State
   DOT officials pointed out that these preferences are not covered in
   the regulations but rather involve professional judgment regarding
   such factors as cost, appearance, and durability that are not
   prescribed in regulation and are often unique to a particular
   construction project. For example, according to officials at one state
   DOT, FHWA had a preference for sequencing construction activities
   in a particular way rather than leaving the decision up to the state
   DOT, and on this particular project FHWA made its preference a
   requirement. Some states also said that FHWA gives too much focus
   to smaller issues and is overly involved in routine matters.

3. State officials were frustrated by inconsistencies in FHWA’s decision
   making across states. Many state DOT officials expressed frustration
   about the inconsistencies they perceived in FHWA’s decisions across
   states. Specifically, several noted that FHWA division offices in other
   states had been more permissive of certain solutions or requirements
   compared to the FHWA division office in their state and stated that
   FHWA does not always use the maximum flexibility it has at its
   disposal in interpreting federal rules. For example, a state DOT official
   told us that the division office in his state did not approve a certain
   material for markings on the state’s highways, but he learned that the
   same material had been approved in 17 other states.

The inconsistencies experienced by state DOTs may not be
unreasonable and could stem from the decentralized nature of the
federal-aid highway program and the fundamental challenge FHWA and
the states face in navigating gray areas on complex projects with unique
political, financial, engineering, and other challenges. These complexities
likely contribute to FHWA and state DOTs’ differing perspectives. For
example, we previously reported a case in which a state DOT planned to
construct new soundwalls on an existing highway. FHWA noted that the
state was planning to widen the road a few years later and that the walls
would likely have to be destroyed and rebuilt. FHWA recommended that
the state construct the walls at the location envisioned for the widening
project, but state DOT officials resisted because of the additional costs to
acquire property. FHWA then informed the state that it would only fund
construction of the walls once—either at the location along the existing



Page 19                                        GAO-12-474 Highway Infrastructure
                         highway as the state had planned or at the location needed once the road
                         was widened. 34 This example illustrates a case in which state officials
                         may have viewed FHWA as imposing its personal preferences and may
                         have been aware of similar situations in other states in which FHWA
                         officials made different decisions inconsistent with this approach. FHWA,
                         on the other hand, may have viewed its decision as exercising
                         professional judgment to promote the most long-term cost-effective
                         solution, consistent with its role as a steward of federal funds.


                         While successful partnering relationships offer benefits, they also present
FHWA’s Partnership       potential risks, according to the literature we reviewed. First, one partner
with States Poses        may grow lax in holding the other to standards. Second, one partner can
                         lose independence in its decisions. We observed cases where FHWA
Risks in FHWA’s          was lax in its oversight by trusting but not verifying state activities and
Oversight                cases where FHWA demonstrated reluctance to take corrective action to
                         bring states back into compliance, which can result in ineffective,
                         wasteful, and potentially improper use of federal funds. We also observed
                         instances in which FHWA sometimes showed a lack of independence in
                         decisions, putting the states’ interests above federal ones, and other
                         instances in which FHWA took extraordinary measures to advance the
                         program to the point of becoming actively and closely involved in
                         implementing solutions to state problems. This can create an inherent
                         conflict when FHWA later must review and approve those actions or
                         review their effectiveness. Despite the risks partnership poses, FHWA
                         has good oversight practices in several areas of the federal-aid highway
                         program.


Partnership Created      We have expressed concerns about the risks posed by FHWA’s
Challenges for FHWA in   partnership approach in the past. The Central Artery/Tunnel project in
the Past                 Boston, Massachusetts, provides examples of both lax oversight and a
                         lack of independence that resulted in ineffective and inefficient use of
                         federal funds and damaged FHWA’s credibility. 35 This highway project—
                         one of the largest, most complex, and expensive ever undertaken—



                         34
                           GAO, Transportation Infrastructure: Managing the Costs of Large-Dollar Highway
                         Projects, GAO/RCED-97-47 (Washington, D.C.: Feb. 27, 1997).
                         35
                           GAO, Federal-Aid Highways: FHWA Needs a Comprehensive Approach to Improving
                         Project Oversight, GAO-05-173 (Washington, D.C.: Jan. 31, 2005), 5.




                         Page 20                                              GAO-12-474 Highway Infrastructure
                         experienced widely reported cost increases, growing from around $2.3
                         billion in the mid-1980s to almost $15 billion in 2004. From 1995 through
                         1997, we reported concerns about cost growth and funding gaps on the
                         project and weaknesses in FHWA’s efforts to address them and to hold
                         the state accountable. 36 In March 2000, an FHWA task force charged with
                         reviewing FHWA’s oversight of the project concluded that “FHWA’s long
                         history of strong Federal/State partnerships failed” and that FHWA “had
                         failed to maintain an independent enough relationship with the state to
                         adequately fulfill its oversight role.” The task force attributed lax oversight
                         to FHWA placing too much trust in the state, reporting that FHWA’s
                         partnership approach failed to achieve independent and critical oversight
                         of the project. 37

                         As this example illustrates, although FHWA has experienced partnership
                         risks to its programs in the recent past, FHWA division administrators
                         generally do not recognize the risks of partnering as significant. In our
                         survey, more than half (29) stated they did not believe that partnering
                         creates any risks to their oversight of the federal-aid highway program. Of
                         the remainder, 5 said it may create “some risk,” 17 said there was a
                         “slight risk,” and only one stated partnering was a “significant risk” to
                         oversight.


FHWA Sometimes Was Lax   In some instances, FHWA was lax in its oversight in that it did not verify
in Its Oversight or      compliance with the requirements of the federal-aid highway program,
Reluctant to Take        instead trusting states to ensure its actions were in compliance, which
                         could have resulted in ineffective, wasteful, and potentially improper use
Corrective Action        of federal funds. For example:

                         •    Our November 2011 report on the Emergency Relief program (which
                              provides funds to states to repair roads damaged by natural disasters
                              and catastrophic failures) found that many of the project files reviewed



                         36
                           GAO, Transportation: Central Artery/Tunnel Project, GAO/RCED-95-213R (Washington,
                         D.C.: June 2, 1995), Transportation Infrastructure: Central Artery/Tunnel Project Faces
                         Financial Uncertainties, GAO/RCED-96-131 (Washington, D.C.: May 10, 1996),
                         Transportation Infrastructure: Progress On and Challenges to Central Artery/Tunnel
                         Project’s Costs and Financing, GAO/RCED-97-170 (Washington, D.C.: July 17, 1997),
                         and GAO/RCED-97-47.
                         37
                           FHWA, Federal Task Force on the Boston Central Artery Tunnel Project: Review of
                         Project Oversight and Costs (Mar. 31, 2000).




                         Page 21                                               GAO-12-474 Highway Infrastructure
     did not contain documentation to support FHWA decisions that
     projects met program eligibility requirements. 38 Specifically, of the 83
     projects reviewed, 81 projects (representing $193 million in federal
     funds) had missing or incomplete documentation. As a result, we were
     unable to determine the basis of FHWA’s eligibility decisions for many
     of the projects reviewed. We also found that FHWA divisions relied
     heavily upon the information provided by states to make FHWA
     eligibility decisions without verifying that information. For example,
     one FHWA division office reported that it reviewed preliminary cost
     estimates for about one-third of the projects included in our review
     before determining that projects were eligible. 39 As a result, we could
     not determine the basis of FHWA’s eligibility decisions for those
     project cost estimates it did not review and as such, FHWA ran the
     risk of providing funds to ineligible projects.

•    In the Disadvantaged Business Enterprise (DBE) program, which
     aims to increase the participation of small businesses owned and
     controlled by socially and economically disadvantaged individuals,
     state DOTs are among those entities responsible for certifying firms to
     participate. 40 In an interview with one FHWA division office, the FHWA
     official said that he knows that the state DOT official is very
     experienced with the DBE certification process and, because of that,
     relies on the state to make certification decisions consistent with
     federal regulations. As a result, the official stated that FHWA is
     generally not involved in verifying the eligibility of DBE firms certified
     by the state. Although FHWA is not required to review every
     certification, in this instance FHWA’s partnering relationship with the
     state influenced the level of oversight conducted in this area and
     exposed FHWA to the risk that ineligible firms might be certified as
     DBEs.




38
 GAO, Highway Emergency Relief: Strengthened Oversight of Eligibility Decisions
Needed, GAO-12-45 (Washington, D.C.: Nov. 8, 2011).
39
  FHWA told us that this risk-based approach was appropriate since states have assumed
oversight responsibility for design and construction of many federal-aid highway projects,
including emergency relief projects. However, we found that this approach did not appear
to be consistent with FHWA’s procedures as outlined in its Emergency Relief Manual.
40
  GAO, Disadvantaged Business Enterprise Program: Assessing Use of Proxy Data
Would Enhance Ability to Know if States Are Meeting Their Goals, GAO-12-78
(Washington, D.C.: Oct. 13, 2011).




Page 22                                                GAO-12-474 Highway Infrastructure
•    Officials from the FHWA division offices we spoke to said they tended
     not to do unannounced inspections. Instead, FHWA alerts the relevant
     construction sites and offices of an inspection ahead of time. Officials
     from one FHWA division office explained that they rely primarily on
     announced visits because they do not want to create a “gotcha”
     environment, which might hurt their relationship with the state.
     Division officials from another office explained that announcing
     inspections gives state DOT staff time to do things like assemble the
     appropriate records or personnel for FHWA’s inspection or allows
     FHWA to observe specific activities, such as materials testing, on the
     day that particular activity is occurring. While there are some
     advantages to announced inspections, the Institute of Internal
     Auditors includes unannounced visits as a common practice used by
     firms to mitigate risks associated with partnering. 41 By not conducting
     unannounced inspections, FHWA is essentially trusting the state and
     its contractors to put compliance with federal requirements over
     meeting competing demands like cost and schedule. In doing so, it
     may be missing the opportunity to more accurately verify compliance
     with federal requirements, observe normal operations, and create an
     environment conducive to compliance.

The partnering relationship between FHWA and state DOTs at times may
have also resulted in FHWA being reluctant to require corrective action to
bring a state back into compliance with program requirements.
Specifically, FHWA staff acknowledged that, in their daily decision
making, they have to think about how to preserve their relationship with
their state counterpart and that they view taking corrective action as
potentially damaging to that relationship. For example:

•    We and the DOT Office of Inspector General have reported multiple
     times on the problem of funds committed to inactive federal-aid
     highway projects. 42 FHWA has made it a priority to decrease nationally
     the number of outstanding inactive projects to ensure that federal funds
     are being used in a timely and effective way. For example, FHWA had



41
 Institute of Internal Auditors Research Foundation, Managing Strategic Alliance Risk:
Survey Evidence of Control Practices in Collaborative Inter-organizational Settings (2006), 7.
42
  Inactive projects are state and local construction projects to which federal funds have
been obligated, but which have not had any expenditures over a 1-year period or for which
funds are available but are unlikely to be obligated by FHWA within 1 year, as certified by
the state.




Page 23                                                   GAO-12-474 Highway Infrastructure
     reduced the percent of funds obligated to inactive projects to about 3.4
     percent of all obligations by March of 2012—this percentage had stood
     at around 8 percent as recently as September 2010. 43 In 2008, it
     established a Financial Integrity Review and Evaluation program
     requiring division offices to conduct a quarterly review of inactive
     projects and determine the validity of the amount obligated for each
     project. FHWA division offices have the authority to de-obligate funds
     from inactive projects. However, FHWA division officials with oversight
     responsibility for three states we visited expressed reluctance to use
     this authority because of concerns that it would negatively affect their
     working relationship with the state. Instead, these division offices
     negotiated with state officials to get them to explicitly agree to allow
     FHWA to de-obligate funds. FHWA officials acknowledged that this is a
     long, time-intensive process. For example, over the course of 6 months,
     one FHWA division office sent reminder letters with specific deadlines
     for the state to provide a rationale for allowing inactive funds to remain
     obligated. Yet at the end of this process there were still outstanding
     inactive projects that had not been resolved. In another state, FHWA
     finance personnel described having ongoing conversations with their
     state counterparts, asking them the status of inactive projects and
     negotiating to de-obligate those funds. The FHWA division office
     described the process as “walking the tightrope” with the states when
     making decisions to de-obligate. The amount of time officials we spoke
     with devoted to addressing inactive funds raises questions about
     whether, on the whole, division offices could have moved more quickly
     to make these funds available to other needed projects had officials not
     had to consider the impact of withdrawing funds on their partnership
     with the state.

•    One state identified serious compliance issues with one of its major
     cities dating as far back as 2003, including federal construction
     specifications not being followed, insufficient field equipment, and lack
     of appropriate construction supervision. In 2009, FHWA withheld
     funding from the city for about 2 weeks while the state DOT drafted a
     corrective action plan. FHWA approved the plan and resumed
     funding. However, nearly 2 years later, as of August 2011, there were
     still points in the plan that had not been addressed. As a result,




43
  FHWA tracks data on inactive projects and, although it does not publish these data, it
provided them to us in commenting on this report.




Page 24                                                 GAO-12-474 Highway Infrastructure
     federal funds continued to flow to projects that may not have fully met
     federal requirements.

•    FHWA can delegate to the state the responsibility of approving
     consultant contracts to ensure compliance with federal regulations.
     One state DOT lacked FHWA-approved written procedures for how it
     selects consultants, which are necessary to comply with federal
     regulations. The FHWA division office had given the state an
     extended opportunity—about 5 years—to address the compliance
     issue, allowing it to use interim procedures as long as the state DOT
     was developing final procedures and planning to have them approved
     by FHWA. After 5 years, due to the failure of the state to develop final
     procedures, the FHWA division office suspended all state DOT
     contract approvals and temporarily re-assumed the responsibility of
     approving consultant contracts to ensure compliance with federal
     procurement regulations. Once the state DOT developed written
     procedures and they were approved, FHWA restored consultant
     contract approval authority to the state DOT.

As discussed earlier, FHWA division administrators reported that they
rarely use their most punitive corrective action tools such as cutting off
funding for a program or organization. While FHWA, in cooperation with
the Federal Transit Administration, is responsible for certifying that MPOs
meet federal requirements, as we reported in September 2009, FTA and
FHWA officials were unaware of any instance in which an MPO was not
certified due to noncompliance in the previous 10 years. 44 In our survey of
division administrators, for fiscal years 2009 through 2012, one FHWA
division administrator reported that he withheld certification of an MPO
due to issues in its congestion mitigation plan. However, FHWA still
allowed project approvals to move forward. The FHWA division office put
together a corrective action plan with the MPO, identifying action steps,
deadlines, and people responsible. According to the FHWA division
administrator, as long as the state is making progress toward resolving
the issue, FHWA will not prevent the MPO from obtaining project
approvals and moving construction forward. He noted that MPOs have a
4-year window to become recertified, and if an MPO reached the end of
its window but still had not taken sufficient action for FHWA to certify it,



44
  GAO, Metropolitan Planning Organizations: Options Exist to Enhance Transportation
Planning Capacity and Federal Oversight GAO-09-868 (Washington, D.C.: Sept. 9, 2009).




Page 25                                             GAO-12-474 Highway Infrastructure
                            FHWA would likely provide an extension and grant the MPO “conditional”
                            certification, rather than decertify it.

                            Similarly, none of the 52 FHWA division administrators stated they had
                            not approved their state’s bridge program any time in the past 3 fiscal
                            years. In 2010, the DOT Office of Inspector General found some cases
                            where FHWA bridge engineers reported that a state’s bridge program
                            substantially complied with federal regulations despite deficiencies that
                            could have posed serious risks to public safety. 45 For example, one
                            FHWA bridge engineer judged a state to be substantially compliant
                            despite reporting that the state failed to close 96 bridges, as required. A
                            bridge engineer in another state reported that 47 bridges were not closed
                            as required, but concluded that the state was substantially compliant. In
                            two other cases, FHWA bridge engineers reported states as substantially
                            compliant even though 200 bridges in one case and over 500 bridges in
                            the other case were not posted with maximum weight limit signs, as
                            required.


FHWA Sometimes Showed       FHWA’s partnership relationship with the state may have made it
a Lack of Independence in   vulnerable to a lack of independence in decisions to advance the program
Decisions                   in some cases, resulting in it putting the states’ interests above federal
                            interests. For example:

                            •   The Recovery Act required that projects from economically distressed
                                areas be given priority for project selection. The Public Works and
                                Economic Development Act of 1965, as amended, defined these
                                areas, and FHWA supplemented it with guidance to address
                                determination questions. However, as we reported previously, three
                                states developed their own guidelines to determine eligibility. 46 FHWA
                                eventually determined that the states’ efforts to determine eligibility
                                did not meet the federal criteria, but it did so after obligating nearly all




                            45
                              DOT, Assessment of FHWA Oversight of the Highway Bridge Program and the National
                            Bridge Inspection Program (Washington, D.C.: Jan. 14, 2010), 9-10.
                            46
                              GAO, Recovery Act: States’ and Localities’ Uses of Funds and Actions Needed to
                            Address Implementation Challenges and Bolster Accountability, GAO-10-604
                            (Washington, D.C.: May 26, 2010).




                            Page 26                                              GAO-12-474 Highway Infrastructure
      the funds in those states, meaning FHWA’s determination was too
      late to affect project selection. 47

•     Our November 2011 report on the Emergency Relief program found
      instances in which two division offices funded new emergency events
      with allocations that were no longer needed from previous
      emergencies. 48 FHWA’s procedures specify that FHWA division
      offices are to identify, and then withdraw, unused program funding
      allocations so that FHWA can direct these funds to other
      emergencies. This provision exists because Emergency Relief
      program funding is often insufficient to fund emergency needs and a
      “backlog” list of projects exists. These two FHWA division offices gave
      priority to the state’s interest in maintaining control of funds over the
      federal interest of ensuring that scarce unused Emergency Relief
      funds were made available to other states with potentially higher-
      priority emergencies. In response to our recommendation that it do so,
      FHWA instructed its division offices in January 2012 to no longer
      permit states to transfer unobligated allocations from one emergency
      event to a new event.

•     We have previously expressed concerns about the Emergency Relief
      program prioritizing state’s interests in other instances as well. 49 In
      1996, we questioned the use of Emergency Relief funding in
      relocating and bettering the Cypress Viaduct, an elevated highway
      that collapsed in a catastrophic earthquake in Oakland, California.
      FHWA’s regulations limit the use of emergency relief funds for
      improvements to or changes in the character of a destroyed facility.
      The regulations allow for funding “betterments”—such as relocation,
      replacement, upgrades, or added features that did not exist prior to
      the disaster—only when they are clearly economically justified to
      prevent recurring damage. In 1991, FHWA and the California
      Department of Transportation decided, as a result of environmental
      and community concerns, to replace the collapsed 1.5 mile
      connection with roughly 5 miles of new freeway segments. We


47
  GAO-10-604 and GAO, Recovery Act: Opportunities to Improve Management and
Strengthen Accountability over States’ and Localities’ Uses of Funds, GAO-10-999
(Washington, D.C.: Sept. 20, 2010).
48
    GAO-12-45.
49
 GAO, Emergency Relief: Status of the Replacement of the Cypress Viaduct,
GAO/RCED-96-136 (Washington, D.C.: May 6, 1996).




Page 27                                              GAO-12-474 Highway Infrastructure
    questioned funding these improvements and additional costs through
    the Emergency Relief program, rather than through the annual
    formula funding states receive from the federal-aid highway program.
    This decision provided California with over $1 billion in additional
    funding that it then did not have to utilize from regular federal-aid
    funds or state sources. In 2007 and 2011, we reported additional
    cases of FHWA using the Emergency Relief program to fund projects
    that had grown in scope and cost as a result of environmental and
    community concerns. In 2007, we recommended that FHWA revise its
    regulations to tighten eligibility criteria and place limits on the use of
    Emergency Relief program funds to fully finance projects with scope
    and costs that have grown as a result of environmental and
    community concerns. FHWA has not acted on this recommendation.

In addition, FHWA has on occasion taken extraordinary measures,
expending considerable resources to advance the program, to the point of
becoming actively and closely involved in developing and implementing
solutions to state problems. When an overseer becomes part of the
solution, the arms-length, independent perspective may be lost, as
agencies that are responsible for implementing program improvements
face an inherent conflict when they later approve those actions or review
their effectiveness. For example:

•   FHWA spent a substantial amount of time and effort with state DOT
    personnel and others trying to determine if funds used on a private
    bridge were eligible for use to help the state meet its matching
    requirement for federal funding. According to division office officials,
    the state was struggling to meet the 20 percent funding match
    required of states in order to receive the 80 percent federal-aid
    highway funding, due to the economic recession and poor fiscal
    situation of the state. Division office officials further explained that had
    it not met the match, the state could have lost about $200 million in
    federal funds in fiscal year 2012. States may receive “toll credits”—
    funds that can be credited by FHWA toward the state’s federal
    match—if it can demonstrate that toll revenues were spent on facility
    improvements and meet other requirements. In an effort to meet its
    match, officials explained that the state identified a private toll bridge
    that it repaired and improved using toll revenue, but had never
    claimed the revenues as federal toll credits. The FHWA division office
    committed staff, including their financial manager, to work with the
    state DOT, the private bridge company, and an outside auditing firm
    to determine the eligibility of the toll credits. Together they identified
    more than $50 million in eligible toll expenditures, finding individual
    line item expenditures in areas such as preventative maintenance and


Page 28                                          GAO-12-474 Highway Infrastructure
                                  capital improvements related to tolling equipment and real estate
                                  acquisition. The eligible toll credits helped the state meet its fiscal
                                  year 2012 federal match requirement. While FHWA officials
                                  characterized the Division’s activities as appropriate technical
                                  assistance that was needed because the state did not have the skills
                                  to identify these credits, it placed the agency in a position of approving
                                  actions it was actively and closely involved in developing.

                             •    In one state, an FHWA division office detailed a staff person to work
                                  full-time on-site at the state DOT to help bring the state into
                                  compliance with the requirements of the Highway Beautification Act of
                                  1965. 50 Division office officials had identified ongoing compliance
                                  issues with the state’s outdoor advertising program, including multiple
                                  examples of signs that were not in compliance with the state’s
                                  agreement with DOT. 51 As a result, FHWA could have withheld 10
                                  percent of the state’s federal-aid funds. However, the division did not
                                  withhold these funds. The division adopted an approach that entailed
                                  considerable time and effort on the part of FHWA by detailing a staff
                                  person to (1) research sign regulations on federally controlled routes
                                  to determine compliance with the federal-state agreement and the
                                  Highway Beautification Act, (2) review the state’s outdoor advertising
                                  inventory to determine the status of signs, and (3) provide
                                  interpretations, clarifications, and authoritative determinations
                                  concerning FHWA policy, among other activities.


Despite Partnership Risks,   Despite the risks partnership poses, in several areas of the federal-aid
FHWA Has Good Oversight      highway program, FHWA has good oversight practices. The Institute of
Practices in Several Areas   Internal Auditors has identified segregation of duties in the type of
                             partnership FHWA has with state DOTs as one of the most common
                             practices used in managing partnership-related risks. 52 During the
                             administration of the Recovery Act, FHWA developed the National
                             Review Teams (NRT) composed of FHWA staff—separated from the rest


                             50
                               Highway Beautification Act of 1965, Pub. L. No. 89-285, Title I, 79 Stat. 1028 (1965)
                             (codified as positive law in 23 U.S.C. § 131).
                             51
                               The 1965 act requires each state DOT to enter into a formal agreement with DOT to
                             control signs adjacent to the Interstate System and other routes included on what is now
                             the National Highway System.
                             52
                              Institute of Internal Auditors Research Foundation, Managing Strategic Alliance Risk:
                             Survey Evidence of Control Practices in Collaborative Inter-organizational Settings.




                             Page 29                                                 GAO-12-474 Highway Infrastructure
of the FHWA—to act as a neutral third party to conduct oversight. The
NRTs were able to maintain their neutrality and objectivity in part because
they did not have to concern themselves with preserving a partnering
relationship while conducting oversight and making recommendations for
action. In addition, the findings and recommendations of the NRTs were
reported both to the FHWA division office, which was responsible for
developing action items in response, and the responsible FHWA Director
of Field Services, who was responsible for ensuring the action items were
completed within the established time frames. This practice of providing
an independent review had several benefits. According to FHWA officials,
it provided

•   a consistent, comparative perspective on the oversight regularly
    conducted by division offices, and it gathered information at the
    national level on both best practices and recurring trouble spots
    across FHWA division offices;

•   additional “boots on the ground” for project-level oversight and
    increased awareness of federal oversight activity among states,
    MPOs, and other transportation organizations receiving Recovery Act
    funds; and

•   an independent outside voice to examine the Recovery Act projects
    and point out problems, keeping the partnering relationship between
    the division offices and the state DOTs intact.

The response to the NRT reviews from both division office and state
officials with whom we spoke was positive. For example, division office
officials said that the NRT reviews often echoed their own observations of
weaknesses in the state DOT’s program, but they said the state DOT
seemed more inclined to act because the NRT was a fresh voice
presenting the observations. Division office officials also told us that
having the NRT point out deficiencies was helpful to them in maintaining
their partnering relationship with the state. State DOT officials we spoke
with in our discussion groups generally agreed that the NRT reviews,
while they created an additional burden, provided an independent third-
party perspective during the implementation of the Recovery Act.

In administering the federal-aid highway program, FHWA makes use of
two practices that facilitate good oversight:

•   A risk management approach to oversight. Conducting risk
    assessments, which are part of FHWA’s approach, to identify both



Page 30                                       GAO-12-474 Highway Infrastructure
      internal and external risks to an agency is another best practice for
      agencies. 53 In particular, by targeting areas of risk at both the state
      and national level, FHWA can focus on specific program areas of
      concern and better utilize limited resources. Division offices conduct
      annual assessments of their states to identify the greatest risks and
      vulnerabilities, and FHWA headquarters uses this information to
      identify common risk areas across the nation. FHWA officials in
      several division offices we spoke with stated that they use the risk
      assessment to inform their oversight activities throughout the year and
      take specific steps, when applicable, to address the risks. In 2009, we
      reported that FHWA had improved its use of risk assessments by
      proactively identifying risks and their potential impact, as well as
      developing specific response strategies to inform its planned oversight
      activities. Our report concluded that FHWA’s guidance and training
      reflected best practices in risk management in three of four key
      areas. 54

•     Random sampling to review documentation of various financial
      transactions—a practice that is in keeping with its risk-based
      approach. This approach ensures that FHWA can assess compliance
      with financial requirements in a systematic way when it is impossible
      for FHWA to survey all occurring financial transactions. Furthermore,
      selecting transactions randomly protects the sample from selection
      bias, to which FHWA division offices could potentially be vulnerable
      because of their partnering relationship with the state. For example, in
      its Financial Integrity Review and Evaluation system, FHWA
      headquarters selects a random sample of transactions for each
      division office to check for compliance with the Improper Payments
      Information Act of 2002. 55 FHWA headquarters also randomly selects
      billing transactions each quarter to determine if there is sufficient
      documentation to support the billing item and amount.




53
  GAO, Standards of Internal Control in the Government, GAO/AIMD-00-21.3.1
(Washington: D.C. November 1999), 10.
54
  GAO, Federal-Aid Highways: FHWA Has Improved Its Risk Management Approach, but
Needs to Improve Its Oversight of Project Costs, GAO-09-751 (Washington, D.C.:
July 24, 2009).
55
    Pub. L. No. 107-300, 116 Stat. 2350 (2002).




Page 31                                             GAO-12-474 Highway Infrastructure
                          Legislation has been approved in the Senate that would move the federal-
Partnering Could Help     aid highway program toward a more performance-based approach.
FHWA Implement a          FHWA’s partnership—its close working relationship with the states—
                          could be useful in making the transition to such a system; however,
Performance-Based         FHWA would need to effectively address the risks posed by such a close
System, but Long-         partnership—lax oversight and lack of independence. In addition, it would
standing Challenges       have to address other existing weaknesses that we have identified in
                          previous reports, including improving the transportation planning process
Would Remain              and data collection and evaluation. Finally, long-standing challenges
                          stemming from the growth in the number of responsibilities and
                          complexity within the federal-aid highway program, as well as the lack of
                          well-defined federal goals and roles, would remain. Reexamining and
                          refocusing surface transportation programs, which we have previously
                          recommended, presents an opportunity to narrow the scope of FHWA’s
                          responsibilities so that it is better equipped to transition to a performance-
                          based system. This review identified areas where FHWA expends
                          considerable time and resources but exercises little effective control—
                          areas where devolving responsibilities to the states may be appropriate.


Legislation Approved by   A performance-based system is critical to the reexamination and
the Senate for a          restructuring of surface transportation programs that we and others have
Performance-Based         recommended. 56 Currently, most highway grant funds are distributed
                          through formulas that have only an indirect relationship to infrastructure
Highway Program
                          needs and many have no relationship to outcomes or the performance of
                          the grantees. Because funds are distributed without regard to
                          performance, it is difficult to know whether federal spending is improving
                          the performance of the nation’s highway infrastructure. 57

                          Under Moving Ahead for Progress in the 21st Century (MAP-21)—FHWA
                          would develop performance targets for minimum condition levels in two
                          areas: (1) pavement on the Interstate and non-Interstate highways on the
                          National Highway System and (2) bridges on the National Highway
                          System. 58 If a state did not to meet the minimum condition levels for 2
                          consecutive years, it would be required to commit a specific percentage



                          56
                           GAO-08-744T.
                          57
                           GAO-08-400.
                          58
                           S. 1813 §§ 1106, 1112.




                          Page 32                                         GAO-12-474 Highway Infrastructure
                            of its federal-aid highway funding to the deficient area. For other areas,
                            MAP-21 directs states to develop performance targets related to national
                            priorities identified in the legislation, 59 document these targets in their
                            statewide transportation improvement programs, and link investment
                            priorities to these targets. FHWA would have to (1) work with the states to
                            develop performance goals that represent real improvements relative to
                            the state’s current conditions and will improve the performance of the
                            nation’s transportation system, and (2) monitor and measure states’
                            progress and take corrective action should states not meet performance
                            targets. Legislation approved by the House Transportation and
                            Infrastructure Committee and the President’s fiscal year 2013 budget
                            proposal also refer to states developing performance measures and goals
                            to improve safety, congestion, and other areas.


FHWA’s Partnership          FHWA’s partnership with states could offer several benefits in moving
Approach Could Facilitate   toward a performance-based program. In particular, through the
a Transition to a           partnership’s collaborative approach, FHWA could provide technical
                            assistance to help states develop performance goals and targets and
Performance-Based           establish data collection methodologies to evaluate and track their
Program                     progress. States participating in our discussion groups found the technical
                            assistance, knowledge transfer, and policy advice that FHWA provides a
                            highly valuable benefit of the partnership relationship. Likewise, FHWA
                            division office personnel recognized the benefit partnership offers in
                            facilitating technical assistance.

                            Developing effective performance goals and targets and the data
                            collection methods to track targets poses challenges that technical
                            expertise can address. As we have reported, the more specific,
                            measurable, achievable, and outcome-based the goals are, the better the
                            foundation for allocating resources and optimizing results. 60 Also, goals
                            must be linked to project selection and funding decisions, and without
                            specific and measurable outcomes for federal involvement, policymakers
                            will have difficulty determining whether certain parts of the federal-aid
                            highway program are achieving the desired results. In addition,



                            59
                              These priorities include (1) safety, (2) infrastructure condition, (3) system reliability, (4)
                            freight movement and economic viability, and (5) environmental sustainability (S. 1813, §
                            1203).
                            60
                              GAO-08-400.




                            Page 33                                                     GAO-12-474 Highway Infrastructure
                     developing data collection methods that consistently and reliably capture
                     the metrics needed requires technology, planning, and training staff to
                     ensure high-quality data.

                     FHWA has recently developed performance metrics and revamped its
                     data collection approach for the National Bridge Inventory System.
                     Specifically, it adopted a new risk-based, data-driven approach that
                     incorporates the review of 23 individual performance metrics, and, where
                     appropriate, makes use of random sampling of the state’s bridges to
                     evaluate the metrics. 61 This recent experience, coupled with its technical
                     expertise in other areas and division office officials’ relationship with, and
                     knowledge of, their state, would help to facilitate knowledge transfer and
                     have the potential to create an effective performance-based program.


FHWA Would Need to   Moving to a more performance-based approach means monitoring and
Mitigate Risks of    measuring states’ progress, holding states accountable for meeting
Partnership          performance targets, and taking corrective action objectively and
                     consistently across states when needed. However, this can only be
                     achieved if the risks posed by partnership discussed earlier—lax
                     oversight, reluctance to take corrective action, and lack of independence
                     in decision making—are overcome.

                     In addressing the risks posed by its partnership, FHWA can draw on
                     some of its existing organizational structures. For example, during the
                     implementation of the Recovery Act, FHWA used its NRTs to augment
                     the oversight provided by division offices by conducting additional
                     programmatic reviews and project inspections. Officials stated that the
                     NRTs were able to maintain their neutrality and objectivity while
                     conducting oversight and making recommendations, and that NRT
                     personnel provided a consistent, comparative perspective to the oversight
                     regularly conducted by division offices. Officials also explained that the
                     NRTs’ observations often reinforced those of division staff while also
                     allowing the partnering relationship between the division offices and state
                     DOTs to remain strong.



                     61
                       However, at the moment the National Bridge Inspection Standards’ random sampling
                     selection does not use a stratified approach that may be beneficial in this case. As a
                     result, it is equally likely that a small, low-traffic, locally owned bridge would be selected
                     for inspection as a large, high-volume, load-rated bridge on the Interstate.




                     Page 34                                                     GAO-12-474 Highway Infrastructure
FHWA Would Need to           Although FHWA would have to work with the states to develop
Address Existing Oversight   performance goals and monitor and measure states’ progress, we have
Weaknesses in Planning       reported weaknesses in federal oversight of both the statewide and
                             metropolitan area planning processes that prevent effective measurement
and Data Collection          and tracking of performance outcomes. For example, we found that
                             FHWA’s oversight of statewide planning focuses on process, rather than
                             specific transportation outcomes. 62 As such, FHWA cannot assess
                             whether states’ investment decisions are improving the condition and
                             performance of the nation’s transportation system. Similarly, pursuant to
                             federal law, federal oversight of metropolitan planning is process-oriented
                             rather than outcome-oriented, making it difficult to determine whether this
                             oversight was improving transportation planning. Specifically, FHWA’s
                             oversight is geared toward determining whether MPOs are in compliance
                             with federal laws and regulations, and this procedural focus, coupled with
                             the fact that FHWA rarely withholds certification of MPOs, makes it
                             difficult to use the certification process as a performance indicator for
                             MPOs. In addition, we found that while FHWA identifies corrective actions
                             to bring MPOs into compliance, it does not routinely assess the progress
                             MPOs are making toward completing those corrective actions.

                             We recommended to Congress that FHWA more closely review states’
                             transportation improvement programs to assess whether states’
                             investments are achieving intended outcomes, rather than limiting its
                             evaluation to whether the state complied with federal processes for
                             developing the plan. We also recommended that Congress make the
                             metropolitan planning processes more performance-based in order for
                             FHWA to better assess the MPOs’ progress in achieving results and
                             better understand whether federal funds are being used to achieve
                             national goals. 63 When we completed our review, Congress has not yet
                             approved a multi-year surface transportation reauthorization measure,
                             which could potentially address these recommendations.

                             In addition, FHWA would need to improve its ability to collect national-
                             level data on highway performance to hold states accountable. Although




                             62
                               GAO, Statewide Transportation Planning: Opportunities Exist to Transition to
                             Performance-Based Planning and Federal Oversight, GAO-11-77 (Washington, D.C.: Dec.
                             15, 2010).
                             63
                              GAO-09-868.




                             Page 35                                            GAO-12-474 Highway Infrastructure
the Government Performance and Results Act of 1993 64 requires
agencies to measure performance toward the achievement of program
goals and objectives, 65 we have stated previously that the federal
government is not equipped to implement a performance-based approach
to transportation funding because it lacks comprehensive data. 66 For
example, during the administration of the Recovery Act we recommended
that DOT assess the long-term benefits of Recovery Act investments in
transportation infrastructure. In its response, DOT said it expected to be
able to report on Recovery Act outputs, such as the miles of road paved,
but not on outcomes, such as reductions in travel times. We have found
other areas in which the lack of comprehensive, national- level data would
hinder any move toward a performance-based system. For example, in
administering the on-the-job training program, FHWA does not collect
consistent national-level data on the number and demographics of
program participants, the trades involved, and status of trainees. As a
result, FHWA is not able to assess program results and hold states
accountable. 67 In another example, our review of statewide transportation
planning found that while FHWA division offices were collecting data on
progress made by states to advance projects on their statewide
transportation improvement programs to their construction phase, the
data were unreliable to the point of being unusable because they were
collected inconsistently across states and could not be used to compare
states’ progress. 68 We have made numerous recommendations to DOT
related to the need for national-level data—a number of which DOT has
yet to implement.




64
 Pub. L. No. 103-62, 107 Stat. 285 (1993) (codified at 31 U.S.C. §§ 1115-1116).
65
 GAO, Executive Guide: Effectively Implementing the Government Performance Results
Act, GAO/GGD-96-118 (Washington, D.C.: June 1996).
66
 GAO-08-744T.
67
 GAO-11-703.
68
 GAO-11-77.




Page 36                                               GAO-12-474 Highway Infrastructure
Long-standing Challenges   FHWA’s success in transitioning to a performance-based program is
and the Need to            dependent not only on addressing risks posed by its partnering
Reexamine and Reform the   relationship, but also by factors it cannot control. A performance-based
                           program represents new responsibilities at a time when the growth in the
Federal-Aid Highway        number and complexity of its responsibilities and the lack of well-defined
Program Remain             federal goals and roles leave FHWA, to a large extent, with a broad
                           mandate in an increasingly constrained budget environment. As we have
                           reported previously, a performance-based system is one part of the
                           broader need to reexamine and restructure the program. A clearer
                           definition of the federal role and, in turn, FHWA’s responsibilities is under
                           Congress’s purview, and therefore beyond FHWA’s or its partners’ ability
                           to address.

                           In 2008, we recommended that Congress consider a fundamental
                           reexamination and reform of surface transportation programs that would
                           potentially result in a more clearly defined federal role in relation to other
                           levels of government and thus a more targeted federal role focused
                           around evident national interests. For issues in which there is a strong
                           national interest, ongoing federal financial support and direct federal
                           involvement could help meet federal goals. Where national interests are
                           less evident, other stakeholders could assume more responsibility, and
                           some programs and activities may better be devolved to other levels of
                           government. In some cases, it may be appropriate to “turn back” activities
                           and programs to state and local governments if they are best suited to
                           perform them. 69

                           Devolving parts of the federal-aid highway program may be appropriate in
                           cases where not only national interests are less evident, but also where
                           FHWA expends considerable time and resources yet exercises little
                           effective control. During this review, we identified two such areas: (1)
                           delegated projects and (2) locally administered projects. By law, the
                           states assume oversight responsibility for delegated projects—that is, all
                           projects that are not on the National Highway System, and are thus off
                           the federal-aid system and not the focus of the national program. 70 In
                           fiscal year 2011, about 48 percent of federal-aid funds were obligated for
                           projects for which oversight could be assumed by the states. Even though
                           the states are responsible for oversight of the design and construction of


                           69
                            GAO-08-400.
                           70
                            23 U.S.C. § 106(c)(2).




                           Page 37                                         GAO-12-474 Highway Infrastructure
these projects, FHWA is still expected to evaluate state DOT capacity
through a number of processes and reviews. Division office officials told
us that these activities require a considerable amount of time and effort
on the part of their staff.

Locally administered projects are projects in which a state DOT has given
approval to a local public agency (e.g., a city or county) the responsibility
to administer a project or phase of a project such as design, property
acquisition, or construction. These projects can either receive full
oversight from FHWA or that responsibility can be assumed by the state.
During our review, FHWA did not have national-level information on the
number of projects or amount of federal funds spent on locally
administered projects. However, it began requiring division offices to
collect this information for newly authorized projects on March 12, 2012,
so such data will be available in the future. Nevertheless, locally
administered projects are ranked by FHWA’s risk assessments as among
the highest-risk areas in FHWA’s oversight portfolio at both the state and
national levels. For example, at least 33 division offices included risks
related to locally administered projects as their most pressing risk areas
in 2010. These risks included a lack of understanding of federal-aid
construction contract requirements and use of innovative or nontraditional
construction techniques by inexperienced local agencies. Likewise,
FHWA headquarters identified locally administered projects as high risk.
According to FHWA division and state officials, local agencies struggle to
meet federal regulations that accompany federal-aid funding because of
high staff turnover at the local level and the infrequency with which local
agencies receive federal funding.

These challenges were reiterated throughout the discussion groups we
conducted, as well as at the site visits to FHWA division offices that we
conducted across the country. FHWA officials from two states described a
wide range of risks posed by locally administered projects, including use
of outdated design standards, lack of quality control and assurance, lack
of standard documentation and recordkeeping, and insufficient knowledge
of the right-of-way acquisition requirements. One FHWA division office
provided examples of locally administered projects in their state that did
not conduct construction inspections or materials testing or bought
supplies from foreign countries, actions that are out of compliance with
federal regulations. According to officials in three of the FWHA division
offices we visited, locally administered projects require considerable time,
attention, and resources. For example, according to officials in three
division offices, FHWA staff expend a good deal of time and effort



Page 38                                        GAO-12-474 Highway Infrastructure
providing technical assistance and capacity-building to enhance the ability
of local agencies to successfully administer federal-aid projects.

Further, our analysis of the 2010 state Single Audits 71 showed that
insufficient monitoring of subrecipients, 72 such as on locally administered
projects, was one of the most common findings and that 18 of 47
reporting states had findings related to monitoring of subrecipients. Our
analysis also showed that state DOTs did not properly communicate
federal requirements in their awards to or contracts with subrecipients
and that their monitoring of subrecipients during the award was
inadequate. Specifically, state DOTs’ monitoring of subrecipients for
compliance with federal and state requirements lacked procedures for or
had poor compliance with existing procedures for regular site visits, risk
assessments, and performance reporting.

As we have reported, devolving parts of the federal-aid highway program
would have many implications and would require careful decisions to be
made at the federal, state, and local levels. Since the federal-aid highway
program has a dedicated source of funding (in that it is funded from fuel
taxes and other fees deposited into the Highway Trust Fund), devolving
parts of the highway program could entail reducing revenues into the
Highway Trust Fund. The decision to reduce revenues at this time would
be difficult because the Congressional Budget Office estimates, as of
March 2012, that to maintain current spending levels plus inflation
between 2013 and 2022, the Highway Trust Fund will require over $125
billion more than it is expected to take in over that period. 73 At the federal
level, it would need to be determined what functions would remain and
how federal agencies would be structured and staffed to deliver those


71
  A Single Audit is a required audit of states, local governments, and nonprofit entities that
expend at least $500,000 per year in federal awards. Single Audits include determinations
on whether the audited entity met the compliance requirements listed in the Office of
Management and Budget’s Circular No. A-133 Compliance Supplement for each major
program. There are 14 types of compliance requirements which include allowable
costs/cost principles, activities allowed or unallowed, and subrecipient monitoring.
72
  A subrecipient is an entity that receives a grant award from the prime recipient of an
award and is accountable to the prime recipient for the use of the federal funds provided
by the subaward. For the federal-aid highway program, this is generally a local public
agency that administers a federal-aid project, but may also be a nonprofit, educational
institution, and in some cases, another federal agency.
73
  Congressional Budget Office-March Fiscal Year 2012 Baseline Projections for the
Highway Trust Fund.




Page 39                                                   GAO-12-474 Highway Infrastructure
              programs. At the state and local levels, it would need to be determined
              whether to replace federal revenues with state taxes and what types of
              programs to finance. Deciding whether to replace federal revenues with
              state taxes would be difficult because states also face fiscal challenges
              and replacing revenues would have different effects on different states. 74


              FHWA’s partnership approach with the states allows it to proactively
Conclusions   identify issues before they become problems, achieve cost savings, and
              gain states’ commitment to improve their processes. In some areas,
              FHWA division offices have good oversight practices that complement its
              partnership, including using a risk-based approach to its oversight and
              using an independent, third- party review (the NRTs) to augment its
              oversight activities during the implementation of the Recovery Act.

              However, FHWA’s partnership also poses risks that it has not to date
              directly addressed, that can potentially result in improper or ineffective
              use of federal funds and the loss of independence necessary for effective
              oversight. Should Congress direct FHWA to move to a performance-
              based system, holding states accountable for achieving performance
              measures—and taking action when they do not—would be essential.
              Because of the nature of their partnership with the states, FHWA’s
              division offices may not be in the best position to mitigate partnership
              risks. Given that partnership produces benefits, the solution does not lie
              with eliminating FHWA’s partnership approach. Rather, a strategy built
              around leveraging the strengths of the partnership approach while
              managing its risks could provide a better way for FHWA to verify the
              states’ use of federal funds.

              While such a strategy could take many forms, greater separation of the
              responsibilities to advance, oversee, and make corrective action
              decisions in the program would be consistent with good internal control
              practices and may help FHWA transition to a performance-oriented
              program. Specifically, a nationally focused, independent oversight entity
              modeled on the NRTs could be an effective vehicle to mitigate risks
              associated with partnering between FHWA division offices and state
              DOTs by conducting periodic evaluations of selected activities and
              making recommendations for improvement. This could be particularly



              74
               GAO-08-400.




              Page 40                                        GAO-12-474 Highway Infrastructure
helpful in instances in which the division offices have been reluctant to
take corrective action because of concerns about damaging the
partnering relationship. In addition, if Congress directed FHWA to move to
a performance-based system, an entity modeled on the NRTs could
assess states’ progress toward performance measures and hold states
accountable for meeting them. Responsibilities such as technical
assistance and knowledge transfer—areas where FHWA’s partnering
relationship can help states develop performance goals and targets—
could remain with the division offices.

Any successful transition to a performance-based system in the highway
program requires accurate, reliable national-level data. The partnership
that division offices have with state DOTs could help to ensure that states
develop data collection methods that would help determine whether the
highway system overall was improving. Furthermore, FHWA has the
expertise to develop and implement a rigorous national-level data
collection effort as it recently did with the National Bridge Inventory
System. We are not making a new recommendation to DOT on this
matter because many of our recommendations on collecting national-level
data remain open.

In 2008, we recommended that Congress consider reexamining and
refocusing surface transportation programs, establishing well-defined
goals with direct links to identified federal interests and roles, and
consider devolving to the states and other levels of government
responsibility for programs where national interests are less evident. The
information we gathered during the course of this review and the pending
transition to a more performance based federal-aid highway program
reinforces the need to act. First, FHWA’s responsibilities have expanded
over the years while its resources have not, and the addition of a
performance-based system to its already broad mandate would further
expand FHWA’s responsibilities. Reexamining and refocusing surface
transportation programs presents an opportunity to narrow the scope of
FHWA’s responsibilities so that it is better equipped to transition to a
performance-based system. Second, this review has identified specific
areas where devolving or turning back to the states the responsibilities for
managing and funding some parts of the highway program may be
appropriate. Turnback would have many implications and would require
careful decisions. Yet nearly half of federal-aid highway funds are spent
on roads off the National Highway System—projects for which oversight
has been assumed by the states—raising questions about whether
evident federal interests are at stake. In addition, the considerable federal
resources FHWA expends overseeing locally administered projects—


Page 41                                        GAO-12-474 Highway Infrastructure
                      including capacity-building activities for city and county governments—
                      raises questions about whether such time and effort is better spent in
                      support of more nationally focused programs and objectives.


                      As we have previously recommended, Congress should consider
Matter for            reexamining and refocusing surface transportation programs, including
Congressional         establishing well-defined goals with direct links to identified federal
                      interests and roles. Based on this review, there may be areas where
Consideration         national interests are less evident and where Congress may wish to
                      consider narrowing FHWA’s responsibilities.


                      We recommend that the Secretary of Transportation direct the FHWA
Recommendations for   Administrator to develop a strategy based on the NRT model to mitigate
Executive Action      the risks associated with its partnering approach with state DOTs, while
                      maintaining the strengths that the partnership approach brings to the
                      program. This strategy should address existing risks and, if Congress
                      directs FHWA to move to a performance-based system, partnering risks
                      that could affect the successful implementation of such a system.


                      We obtained oral comments from DOT officials, including the Director of
Agency Comments       FHWA’s Office of Program Administration. These officials stated that DOT
                      generally agreed with the findings and recommendations in the report.
                      Specifically, they recognized that the agency’s partnership approach with
                      the states poses oversight risks. They stated that they are implementing
                      efforts based on the NRT model to provide independent reviews and
                      accountability services to improve the efficiency and effectiveness of
                      FHWA programs. We will monitor these efforts to assess if the
                      department is responsive to our recommendation that DOT mitigate the




                      Page 42                                      GAO-12-474 Highway Infrastructure
risks of its partnership with the states. 75 DOT officials also provided
technical comments which we incorporated as appropriate.


As agreed with your offices, unless you publicly announce the contents of
this report earlier, we plan no further distribution until 30 days from the
report date. At that time, we will send copies of this report to
congressional subcommittees with responsibilities for surface
transportation issues and the Secretary of Transportation. In addition, this
report will be available at no charge on GAO’s website at
http://www.gao.gov.

If you or your staff have any questions about this report, please contact
me at (202) 512-2834 or herrp@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 that made significant contributions to this report
are listed in appendix III.

Sincerely yours,




Phillip R. Herr
Managing Director
  Physical Infrastructure Issues




75
  Section 236 of the Legislative Reorganization Act of 1970 requires the head of the
agency to submit a written statement on action taken on recommendations and submit the
statement to the Committee on Homeland Security and Governmental Affairs of the
Senate and the Committee on Oversight and Government Reform of the House of
Representative within 60 days of the release of this report, and the Committees on
Appropriations of both Houses of Congress in the first request for appropriations
submitted more than 60 days after the date of the report. Pub. L. No. 91-510, § 236, 84
Stat. 1140, 1171 (codified as amended at 31 U.S.C. § 720(b)).




Page 43                                               GAO-12-474 Highway Infrastructure
Appendix I: FHWA Organization
             Appendix I: FHWA Organization




             The Federal Highway Administration (FHWA) has 52 division offices—
             one in each state, the District of Columbia, and Puerto Rico—to carry out
             the day-to-day activities of the federal-aid highway program. These
             offices are generally located in the same city as the state departments of
             transportation (state DOTs), which is usually the state capital. In addition,
             jointly with the Federal Transit Administration, the FHWA operates four
             metropolitan offices in Philadelphia, Pennsylvania; New York, New York;
             Chicago, Illinois; and Los Angeles, California, which are extensions of
             their respective division offices. FHWA division offices are organized
             geographically under three directors of field service who provide
             administrative supervision and leadership on strategic initiatives to their
             constituent division offices. FHWA headquarters provides leadership and
             policy direction for the agency, and FHWA’s Resource Center, with five
             locations, provides technical expertise, guidance, and training to the
             states in areas such as air quality, civil rights, construction, environment,
             safety and bridges.




             Page 44                                         GAO-12-474 Highway Infrastructure
                                        Appendix I: FHWA Organization




Figure 2: Locations of FHWA’s Offices




                                        Page 45                         GAO-12-474 Highway Infrastructure
Appendix II: Scope and Methodology
              Appendix II: Scope and Methodology




              To address our objectives, we reviewed and analyzed relevant laws,
              regulations, and FHWA documentation. Specifically, we reviewed
              previous and current authorizations of the federal-aid highway program,
              as well as proposed reauthorization language. We also reviewed relevant
              sections of U.S. Code that pertain to FHWA and its relationship with the
              states. Additionally, we reviewed and summarized past GAO work
              regarding FHWA’s programmatic oversight responsibilities and its
              relationship with the states.

              To obtain information on current FHWA structure and oversight activities,
              we conducted site visits to nine FHWA division offices, including
              Colorado; Delaware/Maryland, which has a joint office; Maine; Michigan;
              North Carolina; Oklahoma; Virginia; and Washington, D.C. We selected
              these states to include a range of selection criteria, including the extent to
              which oversight responsibilities have been assumed by the state, the size
              of the state’s transportation program and proportion of federal funding
              relative to state funds, the type of transportation system in the state (e.g.,
              primarily rural highways and interstate or primarily infrastructure in
              densely populated urban areas); and geographic distribution. We
              interviewed FHWA and state DOT officials in multiple settings to learn
              how they characterize their relationship and what role partnership plays in
              oversight.

              We also reviewed selected academic literature on formal partnering
              practices and tools. To perform this analysis, GAO conducted a variety of
              literature and Internet searches, reviewed previous GAO reports, and
              analyzed literature recommended by engagement stakeholders. We read,
              analyzed, and synthesized these documents to construct a common
              definition of partnering, namely that “partnering is an approach that,
              through collaborative processes and activities, enables parties to achieve
              individual and mutually beneficial goals and results.” We also identified
              nine features of partnership from our review of the literature. Of those, we
              selected four features based on the applicability of these features to
              FHWA’s partnering relationship with state DOTs based on our
              observations of FHWA, interviews with FHWA and state DOTs, and from
              our review of documentation of formal partnering arrangements between
              states and FHWA division offices. In doing so, we developed the following
              definition of features of partnership: “Partnering processes and behaviors
              span a continuum of collaborative activities including information sharing,
              participative and consultative processes, collaborative problem solving,
              and formal team-building such as charter signing and relationship
              assessment.” Further, we reviewed literature to identify partnership risks,
              and after identifying a list of six risks, we identified two risks which were


              Page 46                                         GAO-12-474 Highway Infrastructure
Appendix II: Scope and Methodology




most evident in our audit work and that were most relevant to FHWA’s
partnering relationship with state DOTs: lax oversight and a lack of
independence emerged as two primary themes of partnering risk.

To obtain an independent view of issues in FHWA’s oversight, we
examined the results of the 2010 Single Audits—statewide audits of
financial statements and compliance with federal program requirements for
certain programs among recipients of federal funds. Forty-seven states
reported their results in the Federal Audit Clearinghouse as of October 28,
2011. 1 To determine relevant findings to our work, we identified audit
records for FHWA funding categories, which provided us with funding
amounts that were subject to audit findings as well as the types of audit
findings. 2 We analyzed these findings to determine the types of findings
occurring most frequently. For subrecipient monitoring, one of the most
frequent audit finding types, we examined full-text Single Audit reports,
comparing them against each other to identify common themes.

In addition to these efforts, we conducted a survey of all FHWA division
administrators, who lead the FHWA division offices located in each state,
as well as Washington, D.C., and Puerto Rico. With all 50 states and
Washington, D.C., and Puerto Rico, our universe was 52 division offices. 3
We developed a web-based survey instrument of seven closed-ended
questions and one open-ended question, regarding (1) FHWA’s partnering
relationship with state DOTs, and (2) FHWA’s use of available corrective
actions. We pre-tested the instrument with two division administrators in
November 2011. The survey was released in December 2011. We
received 52 completed surveys, for a 100 percent response rate.




1
 Four of the remaining states do not submit annual Single Audit reports, and the fifth state
did not submit any statewide Single Audit results for 2010 as of October 28, 2011.
2
 Single Audit finding types include activities allowed or unallowed; allowable costs/cost
principles; cash management; Davis-Bacon Act; eligibility; equipment and real property
management; matching; level of effort; earmarking; period of availability of federal funds;
procurement and suspension and debarment; program income real property acquisition
and relocation assistance; reporting; subrecipient monitoring; special tests and provisions;
and other.
3
 One division administrator oversees both the Puerto Rico and Florida division offices.
The survey instrument was sent out for each individual division office, and the
administrator was given instructions on how to determine which instrument was assigned
to which division office, and to respond fully to both, which he has done.




Page 47                                                  GAO-12-474 Highway Infrastructure
Appendix II: Scope and Methodology




To obtain input from states on their relationship with FHWA division
offices and their oversight of the federal-aid highway program, we
conducted four discussion groups of state DOT representatives. We
worked in conjunction with the American Association of State Highway
and Transportation Officials to speak with personnel from a variety of
geographic locations and various programs, including personnel from the
areas of construction, locally administered projects, engineering, bridges,
and leadership.

To determine the extent to which FHWA’s incorporation of partnering
practices into its oversight approach supports effective oversight, we used
academic literature and GAO reports to identify criteria and effective
practices for productive partnering and robust oversight. Using these
criteria and effective practices, we assessed FHWA’s current oversight
practices by reviewing information from interviews with FHWA
headquarters and division offices and state DOTs; site visit observations;
and relevant findings from recent and ongoing GAO engagements
examining various FHWA program areas.

To determine the extent to which FHWA’s partnering approach serves as
a foundation for moving toward a performance-based transportation
program, we identified principles for a performance-based transportation
system in previous GAO reports that can be applied to FHWA, including
(1) national transportation goals, (2) performance measures,
(3) appropriate performance targets, and (4) employing the best tools to
emphasize return on investment. We also reviewed the proposed
reauthorization bill, Moving Ahead for Progress in the 21st Century
(MAP-21), 4 to incorporate Congress’ expectations for moving toward a
performance-based system.

We conducted this performance audit from April 2011 to April 2012 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.




4
S. 1813 §§ 1106, 1112, 112th Cong. (as adopted by the Senate March 14, 2012).




Page 48                                             GAO-12-474 Highway Infrastructure
Appendix III: GAO Contact and Staff
                  Appendix III: GAO Contact and Staff
                  Acknowledgments



Acknowledgments

                  Phillip Herr, (202) 512-2834 or herrp@gao.gov
GAO Contact
                  In addition to the individual named above, other key contributors to this
Staff             report were Steve Cohen (Assistant Director), Joah Iannotta (Analyst-in-
Acknowledgments   Charge), Irina Carnevale, Kathryn Crosby, Peter Del Toro, Holly Dye, Bert
                  Japikse, Thomas James, Stuart Kaufmann, SaraAnn Moessbauer, Amy
                  Rosewarne, and Jeffrey Sanders.




(546046)
                  Page 49                                      GAO-12-474 Highway Infrastructure
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