Mass Transit:

Project Management Oversight Benefits and Future Funding Requirements

RCED-00-221: Published: Sep 15, 2000. Publicly Released: Oct 16, 2000.

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Pursuant to a congressional request, GAO reviewed the Federal Transit Administration's (FTA) oversight of major capital projects, focusing on: (1) how FTA oversees major capital projects; (2) how financial capacity assessments are used; (3) what types of benefits to grantees and FTA have resulted from FTA's project oversight activities; and (4) how these oversight activities are funded.

GAO noted that: (1) the project management oversight program is designed primarily to help ensure that grantees constructing major capital projects have the qualified staff and procedures to successfully build the projects according to accepted engineering principles; (2) to implement this program, FTA enters into contracts with competitively selected engineering firms, which serve as an extension of its limited technical staff; (3) while a project is being designed, the oversight contractor reviews the grantee's plan for managing and constructing the project; (4) this plan is the key document that the oversight contractor and FTA use to determine whether the grantee has the technical capability to complete the project; (5) once FTA approves the plan, the oversight contractor monitors the project to determine whether it is progressing on time, within budget, and according to approved plans and specifications; (6) as a result of FTA's experiences with the Los Angeles subway project in the mid-1990s, in 1998, FTA expanded its oversight efforts to include a formal and rigorous assessment of a grantee's financial capacity to build and operate a new project and of the financial impact to that project on the existing transit system; (7) FTA's project management oversight program has resulted in benefits for both grantees and FTA; (8) transit agencies have commended the program and cited numerous examples of how the FTA contractors have improved project management, especially quality controls; (9) FTA's oversight activities are supported by a statutorily limited set-aside of the funds made available annually for certain transit programs; (10) in the past, this set-aside has been more than sufficient to cover the costs of FTA's oversight contractors; (11) FTA officials now believe that this amount will not be sufficient to allow them to continue their current level of oversight activity, mainly because the number of projects in one of FTA's capital investment programs--new starts--has increased by almost 90 percent since 1996 and will continue to grow; (12) FTA believes that starting in fiscal year 2002, it will have to cut back its level of oversight activities on some projects; (13) this cutback could occur at a time when many of the proposed new transit projects are sponsored by transit agencies that have little or no experience in planning, designing, and constructing major transit projects; and (14) FTA officials could not tell GAO what level of shortfall would occur after fiscal year 2002 or exactly how it would address any shortfalls.

Recommendation for Executive Action

  1. Status: Closed - Implemented

    Comments: In FTA's fiscal year 2002 budget submission to the Congress, the agency estimated that there would be a $5 million shortfall in fiscal 2002. To meet this shortfall, FTA proposed legislation to increase the statutorily limited set-aside of funds for oversight from 0.75 percent to 1.0 percent. According to FTA, this additional $6.9 million would cover the projected shortfall and also allow FTA to increase its activities in the financial management oversight program. The subsequent House Committee Report included language directing FTA to use at least $28.6 million for project management oversight and $4.6 million for financial management oversight in fiscal year 2002. This effectively increases funding for oversight of major capital transit projects to 1.0 percent, as requested in FTA's budget.

    Recommendation: To address FTA's oversight needs, the Secretary of Transportation should direct the Administrator, FTA, to develop a plan to: (1) determine the amount of funds needed to maintain an adequate level of oversight for all projects requiring oversight, the level of funding that likely will be available for this purpose, and any resultant shortfall in funds; (2) identify options to cover any projected funding shortfalls; and (3) identify steps to respond to any shortfalls that may occur. The Secretary should also communicate this plan to Congress.

    Agency Affected: Department of Transportation


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