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Highlights

Pressure on state and local governments to deliver highway projects and services, and limits on the ability of state departments of transportation (state DOT) to increase staff levels have led those departments to contract out a variety of highway activities to the private sector. As requested, this report addresses (1) recent trends in the contracting of state highway activities, (2) factors that influence state highway departments' contracting decisions, (3) how state highway departments ensure the protection of the public interest when work is contracted out, and (4) the Federal Highway Administrations' (FHWA) role in ensuring that states protect the public interest. To complete this work, GAO reviewed federal guidelines, state auditor reports, and other relevant literature; conducted a 50-state survey; and interviewed officials from 10 selected state highway departments, industry officials, and FHWA officials.

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Recommendations

Recommendations for Executive Action

Agency Affected Recommendation Status
Department of Transportation 1. To more effectively and consistently ensure that state DOTs are adequately protecting public interests in the highway program, given current trends in the use of consultants and contractors, the Secretary of Transportation should direct the Administrator of the Federal Highway Administration, in the context of FHWA's ongoing activities related to quality assurance programs and risk management, to work with FHWA division offices to give appropriate consideration to the identified areas of risk related to the increased use of consultants and contractors as division offices work to target their oversight activities.
Closed - Implemented
In January 2008, we reported that State Departments of Transportation (State DOT's) are increasingly reliant on consultant and contractor workforces, and existing oversight mechanisms are not always implemented effectively. Because State DOTs are becoming more reliant on contractors and consultants, there is increasing risk for conflicts of interest and independence issues to arise and potentially compromise the quality of Federal-aid highway projects. FHWA has conducted both local and national reviews that have identified, among other things, various risks related to the increased use of consultants, including weaknesses in state quality assurance programs and an increased potential for conflicts of interest. While FHWA has identified these risks, it has not comprehensively assessed how, if at all, it needs to adjust its oversight efforts to protect the public interest, given current trends in the use of consultants and contractors by State DOT's. Therefore, we recommended that FHWA, as part of its ongoing quality assurance and risk management activities, give appropriate consideration to risks associated with contractors and consultants as FHWA division offices target their oversight activities. In response to our recommendation, since 2010 FHWA has developed a new policy related to contractor costs; updated guidance for the procurement, management and administration of engineering and design services; and recommended standard operating procedures in support of enhancing FHWA division office oversight and consideration of the risks associated with use and oversight of consultant services in the development and delivery of the Federal-aid highway program. FHWA has also worked closely with the American Association of State Highway and Transportation Officials (AASHTO) in the development of the updated AASHTO Uniform Audit & Accounting Guide and the updated FHWA guidance to ensure the use of contractors and consultants is considered in State DOT's assessment of risk, controls, monitoring, and oversight of work performed by consultants and contractors. These actions will help to ensure that State DOT's have the proper mechanisms in place to avoid failures in quality control procedures, and ensure contractor and consultant independence.
Department of Transportation 2. To more effectively and consistently ensure that state DOTs are adequately protecting public interests in the highway program, given current trends in the use of consultants and contractors, the Secretary of Transportation should direct the Administrator of the Federal Highway Administration, in the context of FHWA's ongoing activities related to quality assurance programs and risk management, to work with FHWA division offices to develop and implement performance measures to better assess the effectiveness of state DOTs' controls related to the use of consultants and contractors to better ensure that the public interest is protected.
Closed - Implemented
In January 2008, we reported that State Departments of Transportation (State DOT's) are increasingly reliant on consultant and contractor workforces and that the Federal Highway Administration's (FHWA) oversight of how State DOT's use and monitor consultants and contractors was generally focused on ensuring that state processes related to this matter were in compliance with existing regulations, and had not sufficiently focused on the performance and effectiveness of those processes in protecting the public interest. Therefore, we recommended that FHWA develop and implement performance measures to better assess the effectiveness of state DOT's controls related to the use of consultants and contractors. In response to our recommendation, FHWA worked with the American Association of State Highway and Transportation Officials (AASHTO) and the Office of Management and Budget (OMB) to establish a process for State DOT's and local agencies to monitor and evaluate the use of consultants and contractor services when they conduct required audits. A section was added - Section I, under compliance requirements for highway planning and construction - to OMB's audit guide requiring State DOT's processes for using consultants and contractors to include a number of provisions aimed at performance and protecting the public interest, including one provision specific to monitoring and evaluating contractor performance. Furthermore, in 2010, FHWA developed standard operating procedures for FHWA division offices to conduct oversight of the policies, procedures, and practices State DOT's use in procuring consultant and contractor services that include a review of the OMB-required provisions. These actions will help to ensure that State DOT's use of consultants and contractors will focus on performance and protecting the public interest, and that FHWA will have the ability to more effectively monitor and gauge the performance of State DOT's processes for procuring consultant and contractor services.

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