However, only a few of these studies attempted to quantify these  benefits or costs. In  general, quantitative information on environmental benefits and costs is  limited because states have not tracked such information; however, some  states are beginning to do so. Finally, although none of the studies we reviewed  identified benefits of the DBE program, transportation officials identified  some benefits of the program, such as providing greater opportunities for  minority- and women-owned firms on federally funded projects. The  studies we reviewed did identify benefits of the Buy America program,  including protecting against unfair competition from foreign firms and  costs of the DBE and Buy America programs, such as increased  administrative costs to states and U.S. Studies Included Information on the Benefits and Costs of the Davis-Bacon Prevailing Wage Requirement but Did Not Specifically Focus on Highway Projects

Several studies we reviewed attempted to quantify benefits and costs of  the Davis-Bacon prevailing wage requirement, but these studies did not  provide data exclusive to transportation or highway projects. For example, U.S. One study—FHWA’s benefit-cost  study—identified higher iron and steel prices, higher overall project costs,  reduced bidding competition, and project delays as the major types of  costs that federally funded transportation projects could incur in  complying with Buy America program provisions, but the study did not  attempt to quantify these costs. Federal Requirements May Encourage States to Use Nonfederal Funds for Certain Highway Projects, but Other Factors Also Influence Their Decision

Most state transportation officials told us that costs and delays associated  with the federal requirements we reviewed have, in certain instances,  encouraged them to use nonfederal funds for certain highway projects  eligible for federal aid; however, other factors, such as a state legislature’s  requirements and the availability of nonfederal funds, also contribute to a  state’s decision to use nonfederal funds. More specifically, 39 of the 51  state DOTs we surveyed reported that, in the past 10 years, the federal  requirements had, in at least one instance, influenced their decision to use  nonfederal funds for highway projects that were eligible for federal aid. Some states have laws that require the use of domestically made steel and  other materials. Officials from one of these 37 states, Hawaii, said that they have  limited nonfederal funds available. As a result, the officials said that they  do not often use nonfederal funds to avoid federal requirements and that  they have to rely on federal funds to finance their highway projects. They also  claimed that coordinating with the multiple stakeholders involved in  planning a highway project can be challenging because agencies may have  competing interests and lack enforceable time frames. Furthermore,  according to a U.S. In addition to the federal government, several state transportation  agencies are implementing strategies to expedite compliance with the  federal requirements we are reviewing. Recommendations for Executive Action

To address the challenges associated with the federal requirements we  reviewed, to better ensure that federal funds are used as efficiently as  possible, and to assist states in minimizing project delays and costs  associated with federal requirements, we recommend that the Secretary of  Transportation re-evaluate the $2,500 regulatory threshold for the Buy  America program and the $750,000 regulatory personal net worth ceiling of  the DBE program, and modify them, if necessary, through appropriate  rulemaking. Appendix I: Objectives, Scope, and Methodology

The objectives of this report were to review (1) the types of benefits and  costs associated with selected federal requirements for federal-aid  highway projects; (2) the influence of these federal requirements on states’  decisions to use nonfederal or federal funds for highway projects; and (3)  the challenges associated with the federal requirements and strategies that  federal, state, and local government agencies and contractors have used or  proposed to address these challenges. Although many requirements apply to federally funded highway projects,  our review focused on four federal requirements: the National  Environmental Policy Act (NEPA), the Davis-Bacon prevailing wage  requirement, the Disadvantaged Business Enterprises (DBE) program, and  the Buy America program. To determine the influence of these federal requirements on states’  decisions to use nonfederal or federal funds for highway projects, we  surveyed state DOT officials in all 50 states and the District of Columbia. This  proposal has not been finalized.
Why GAO Did This Study

As highway congestion continues to be a problem in many areas, states are looking to construct or expand highway projects. When a state department of transportation (DOT) receives federal funding for highway projects from the Federal Highway Administration (FHWA), the projects must comply with the National Environmental Policy Act (NEPA), the Davis-Bacon prevailing wage requirement, the Disadvantaged Business Enterprise (DBE) program, and the Buy America program. While complying with these requirements, states must use limited transportation dollars efficiently. As requested, GAO addressed (1) the types of benefits and costs associated with these requirements for federal-aid highway projects; (2) the influence of these federal requirements on states' decisions to use nonfederal or federal funds for highway projects; and (3) the challenges associated with the federal requirements and strategies used or proposed to address the challenges. To complete this work, GAO reviewed 30 studies, surveyed DOTs in all states and the District of Columbia, and interviewed transportation officials and other stakeholders.

What GAO Found

Several of the studies GAO reviewed describe the benefits of environmental requirements for highway projects, such as better protection for wetlands, but none attempted to quantify these benefits. Some studies quantified certain types of environmental costs, such as costs for administering NEPA. In general, however, quantitative information on environmental benefits and costs is limited because states do not generally track such information. Several studies attempted to quantify the benefits and costs of the Davis-Bacon prevailing wage requirement; however, these studies did not focus on transportation projects specifically. Furthermore, while the studies reviewed did not identify the benefits of the DBE program, transportation officials identified some benefits of the program, such as providing greater opportunities for DBE firms. One study we reviewed identified the benefits of the Buy America program, including protecting against unfair competition from foreign firms. The studies reviewed also identified, and in some cases quantified, the costs of the DBE and Buy America programs, including administrative costs and the use of higher priced iron and steel in projects. Of the 51 state DOTs GAO surveyed, 39 reported that, in the past 10 years, federal requirements had influenced their decision to use nonfederal funds for highway projects that were eligible for federal aid. Thirty-three of these state DOTs reported that NEPA factored into their decision to use nonfederal funds, while the other three requirements GAO reviewed were a factor only in a few states. State officials said that they use nonfederal funds for certain projects to avoid project delays or costs associated with the federal requirements or because of other factors, such as requirements imposed by a state legislature. A state's funding decision may depend on whether the state has requirements similar to these federal requirements. The decision may also take into consideration the availability of nonfederal and federal funds. For example, officials from one state said that they have limited nonfederal funds available, and as a result, like other states GAO interviewed, rely on the federal funds to finance their highway projects. According to transportation officials and contractors, administrative tasks associated with the federal requirements pose challenges. For example, analyzing impacts and demonstrating compliance with NEPA requires extensive paperwork and documentation. State officials also said that coordinating with multiple government agencies on environmental reviews is challenging, in part because these agencies may have competing interests. Furthermore, according to state DOTs, some provisions of the federal requirements may be outdated. For example, the $2,500 regulatory cost threshold for compliance with the Buy America program for purchasing domestic steel and $750,000 regulatory personal net worth ceiling of the DBE program have not been updated since 1983 and 1999, respectively. All of these challenges may cause delays and increase project costs. Some government agencies have implemented strategies to address these challenges and these strategies have had varied success in decreasing project costs and delays.