Transportation Infrastructure:

Managing the Costs of Large-Dollar Highway Projects

RCED-97-47: Published: Feb 28, 1997. Publicly Released: Feb 28, 1997.

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John H. Anderson, Jr
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Pursuant to a congressional request, GAO reviewed the Federal Highway Administration's (FHwA) oversight of large-dollar highway projects, focusing on: (1) whether large-dollar highway projects experience cost growth; (2) how FHwA approves large-dollar projects and agrees to their costs; and (3) how FHwA ensures that project costs are controlled and that federal funds are efficiently used.

GAO found that: (1) cost growth has occurred on many of the large-dollar projects that GAO examined, however, the amount of and reasons for these increases beyond the initial cost estimates on large-dollar highway projects cannot be determined because data to track this information over the life of projects are not readily available from FHwA or state highway departments; (2) as of August 1996, costs on 23 of 30 ongoing projects initially estimated to cost more than $100 million had increased from their initial estimates, while estimates on seven projects had decreased or had remained the same; (3) FHwA's project approval process consists of a series of incremental actions that occur over the period of years required to plan, design, and build a project; (4) FHwA approves the estimated cost of a large-dollar project in segments, rather than agreeing to the total cost of the project from the outset; (5) by the time FHwA approves the cost of a large-dollar project, a public investment decision may have effectively been made because substantial funds will already have been spent on designing the project and the project's estimated costs will have already occurred; (6) while many factors can cause costs to increase, several factors worked together to increase costs beyond the initial estimates for projects in the six states visited: (a) initial estimates are preliminary and not designed to be reliable predictors of a project's costs; (b) initial estimates are modified to reflect more detailed plans and specifications as a project is designed; and (c) a project's costs are affected by, among other things, inflation and changes in scope to accommodate economic development that occurs over time; (7) FHwA has done little to ensure that cost containment is an integral part of the states' project management; (8) FHwA influences the cost-effectiveness of projects by its review and approval of design and construction plans and through daily interaction with state departments of transportation; (9) some states GAO visited have initiated project management practices that focus on cost containment; (10) however, FHwA, has not been proactive in working with states to evaluate these practices and disseminate information on them to help other states enhance their cost management practices; and (11) the debate has already begun on the appropriate federal role in funding and overseeing federal-aid highway projects, particularly those that receive substantial federal funds.

Recommendation for Executive Action

  1. Status: Closed - Implemented

    Comments: FHwA has initiated a number of actions designed to increase its oversight of large federal highway projects and identify best management and construction practices throughout the country. FHwA has also taken steps, through conferences and other means, to disseminate information on best state practices to other projects who could benefit from these experiences. For example, many of the cost control measures used in the Boston Central Artery project have been conveyed to Utah, which is initiating a large federal highway project in preparation for the 2002 Olympics.

    Recommendation: To enhance states' ability to manage costs on large-dollar highway projects, the Secretary of Transportation should direct the Administrator, FHwA, to work with states to evaluate and disseminate information on best state practices concerning cost management to all states.

    Agency Affected: Department of Transportation


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