Budget Issues:

Cost Escalation on Three Major Department of Transportation Projects

AFMD-86-31: Published: Jul 17, 1986. Publicly Released: Jul 17, 1986.

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GAO examined the U.S. Coast Guard's Short Range Recovery Helicopter Program, the Federal Aviation Administration's (FAA) Airport Surveillance Radar Program, and the Urban Mass Transportation Administration's (UMTA) Buffalo Light Rail Rapid Transit System to determine the reasons for cost growth between the latest estimates for the projects and the initial estimates provided to Congress.

GAO found that, although some of the reasons for cost growth were outside the agencies' control, certain practices, techniques, and methodologies the agencies used in developing cost estimates contributed to cost growth. About two-thirds of the growth on the Coast Guard program and almost three-fifths of the growth on the FAA radar program were due to unanticipated inflation. Although the officials were aware that future inflation would increase their project costs, they did not provide for inflation in their initial estimates because the budget guidance at that time did not require it. The UMTA project had included inflation in its initial estimate; however, the inflation rate was higher than anticipated, so it experienced 11-percent cost growth. Other reasons for cost growth included: (1) changes in technology; (2) costs for major program components that the initial estimates omitted; and (3) additional equipment requirements and technical changes. GAO believes that future cost estimates should: (1) include the projects' total cost over acquisition or construction periods; (2) have current and reliable cost data; and (3) use current dollars to realistically provide for inflation.