The U.S. Government Accountability Office (GAO) recently issued a report1 that reviewed FHWA’s oversight of federal-aid highway projects administered by local public agencies. After reviewing projects and interviewing those involved in with project delivery in California, New Jersey, and Florida, three risks from project administration by local agencies were highlighted:

  • Noncompliance with federal requirements is a well-documented risk area and GAO’s analysis, derived from multiple sources, revealed a range of concerns including quality of construction and inadequate contract administration. FHWA has made efforts to mitigate this risk by providing training and guidance, among other things. While state departments of transportation (state DOTs) are required to determine whether local agencies have adequate systems and controls to properly manage federal funds, FHWA has not provided clear direction on how to implement this requirement. FHWA promotes, but does not require, a mechanism such as a certification program. FHWA has not developed minimum and uniform qualification criteria for state DOTs to use to assure local agencies are qualified to administer federal projects. Without such criteria, the effectiveness of existing or developing mechanisms may be limited.
  • The risk of ineffective oversight stems from a diffused oversight structure for locally administered projects. FHWA is accountable for ensuring federal funds are used efficiently and effectively. States are responsible for ensuring that projects are properly administered and local agencies have adequate systems to undertake federal-aid projects and sufficient controls to properly manage project funds. GAO’s review identified deficiencies in some state DOTs’ oversight practices, and FHWA is developing a tool to assess the quality of state DOT oversight. FHWA expects to finalize this tool by mid–2014.
  • Inefficient use of federal funds can occur when the cost of complying with federal requirements is high relative to a project’s cost. While FHWA has taken steps to improve the efficiency of federal-aid projects, it has not explored or issued guidance targeted to local agencies on how they can maximize administrative flexibilities, despite internal and external recommendations to do so. Some local agency officials GAO interviewed stated they do not pursue federal funding for projects under certain dollar thresholds because the cost involved outweighs the benefits; however, others choose to do so due to a lack of funding alternatives. FHWA has not examined potential thresholds at which federal funds may no longer be cost-effective, but it is well-positioned to undertake such an analysis.

As a result, several recommendations were made to FHWA:

  1. Collect data about which local public agencies are administering federal-aid projects,
  2. Collect information from state DOTs on local agencies’ capabilities,
  3. Identify and disseminate minimum and uniform criteria for qualifying local agencies, and
  4. Explore administrative flexibilities and potential dollar thresholds under which it may not be cost effective for local agencies to administer federal-aid projects.

Specific actions for implementation for these items have not been identified yet, but current status and comments will be posted at GAO’s site.