	Background

Federal funding for highways is provided to the states mostly through a  series of formula grant programs collectively known as the federal-aid  highway program. For example, in 1997, we reported that the overall amount of and  reasons for cost increases on highway and bridge projects could not be  determined because data were not readily available from FHWA or the  states. FHWA Established Some Oversight Goals and Measures but Has Not Effectively Implemented Them

FHWA established measurable, outcome-oriented goals and measures  related to cost and schedule performance for the first time in its 2004  performance plan, but FHWA has not effectively implemented these goals  and measures in order to improve oversight. Activities undertaken in response to  prior concerns included increasing the use of project oversight managers,  issuing guidance to states for improving cost estimates throughout the life  of projects, developing some information on cost growth of major and  other large projects, incorporating more risk assessments into its reviews  of state management processes, and attempting to address congressional- committee direction to develop a multidisciplinary approach to its  oversight. FHWA’s activities in these areas have promising elements and  limitations. FHWA Established Competencies for Project Oversight Managers but Did Not Establish Roles or Consistent Performance Expectations

FHWA has taken some positive steps in its use of project oversight  managers for major projects, but it has not yet defined the role of project  oversight managers or established agency wide performance expectations  for them. In spite of this progress, FHWA still does not have the capability to measure  the extent of and reasons for cost growth on projects. These challenges also stem from FHWA’s decentralized organization,  human capital challenges that mirror those faced throughout government,  and FHWA’s perception that it has received conflicting signals on its  oversight role over the years. Because these challenges are in large part  rooted in FHWA’s organization and culture, and in the structure of the  program it administers, they may be difficult to surmount. The absence of such a link may make it more difficult for  FHWA to define its role, the purpose of its oversight, and what its oversight  is designed to accomplish. For FHWA, this government wide challenge manifests itself in a number of  ways, including the need to transform its workforce and culture to meet its  evolving mission. Having measurable goals gives managers the means to objectively and  quantifiably assess progress toward achieving certain outcomes. A comprehensive approach would avail itself  of best practices and would include (1) goals and outcome measures with  activities and performance expectations set for its staff that are linked to  these goals and measures; (2) an overall plan for FHWA’s oversight  initiatives and activities that responds to past concerns raised about its  program and is tied to its goals and measures; (3) workforce planning  efforts that support the goals, measures, and overall plan; (4) centrally  defined roles and responsibilities for key staff, such as oversight managers  for major projects; and (5) the capability to track and measure costs over  the life of projects in order to identify problems, help target resources, and  transfer lessons learned. Given the limitations present today, questions exist about the ability of  FHWA to effectively absorb these new responsibilities and to improve its  oversight of the federal-aid highway program in the years ahead. Recommendations

In order to establish a comprehensive approach to project oversight, we  recommend that the Secretary of Transportation direct the Administrator,  FHWA, to take the following four actions:   link FHWA’s day-to-day activities and the performance expectations set  for its staff to its goals and outcome measures;  develop an overall plan for its oversight initiatives that is tied to its goals  and measures, along with priorities and time frames, and that includes  workforce planning efforts that support these goals and measures;  improve the use and performance of project oversight managers by  centrally defining their role and responsibilities; and  develop the capability to track and measure costs over the life of  projects to help identify the extent of and reasons for problems, target  resources, and transfer lessons learned. Scope and Methodology

We reviewed the Federal Highway Administration’s (FHWA) approach to  improving its federal-aid highway project oversight efforts since 2002,  including (1) FHWA’s oversight-related performance goals and measures,  (2) FHWA’s oversight improvement activities, (3) challenges FHWA faces in  improving project oversight, and (4) best practices for project oversight.
Why GAO Did This Study

The federal-aid highway program provides over $25 billion a year to states for highway and bridge projects, often paying 80 percent of these projects' costs. The federal government provides funding for and oversees this program, while states largely choose and manage the projects. Ensuring that states effectively control the cost and schedule performance of these projects is essential to ensuring that federal funds are used efficiently. We reviewed the Federal Highway Administration's (FHWA) approach to improving its federal-aid highway project oversight efforts since we last reported on it in 2002, including (1) FHWA's oversight-related goals and performance measures, (2) FHWA's oversight improvement activities, (3) challenges FHWA faces in improving project oversight, and (4) best practices for project oversight.

What GAO Found

FHWA has made progress in improving its oversight efforts since 2002, but it lacks a comprehensive approach, including goals and measures that guide its activities; workforce plans that support these goals and measures; and data collection and analysis efforts that help identify problems and transfer lessons learned. FHWA's 2004 performance plan established, for the first time, performance goals and outcome measures to limit cost growth and schedule slippage on projects, but these goals and measures have not been effectively implemented because FHWA has not linked its day-to-day activities or the expectations set for its staff to them, nor is FHWA fully using them to identify problems and target its oversight. FHWA undertook activities in response to concerns raised about the adequacy of its oversight efforts that have both promising elements and limitations. For example, while FHWA now assigns a project oversight manager to each major project (generally projects costing $1 billion or more) and identified skills these managers should possess, it has not yet defined the role of these managers or established agencywide performance expectations for them. While FHWA issued guidance to improve cost estimating and began collecting information on cost increases, it still does not have the capability to track and measure cost growth on projects. Finally, although FHWA received direction to develop a more multidisciplinary workforce to conduct oversight, it has not fully incorporated this direction into its recruiting and training efforts. FHWA faces challenges to improving its oversight that are in large part rooted in the structure of the federal-aid highway program and in FHWA's organization and culture. As such, they may be difficult to surmount. For example, because the program does not link funding to states with the accomplishment of performance goals and outcome measures, it may be difficult for FHWA to define the role and purpose of its oversight. Also, FHWA's decentralized organization makes it difficult to achieve a consistent organizational vision. Human capital challenges affecting much of the federal government have affected FHWA, particularly in its need to transform its workforce to meet its evolving oversight mission. FHWA faces an increased oversight workload in the years ahead as the number of major projects grows and if provisions Congress is considering to increase FHWA's responsibilities become law. Questions exist about FHWA's ability to effectively absorb these new responsibilities, overcome underlying challenges, and improve its oversight. We identified selected best practices that could help FHWA develop a framework for a comprehensive approach to project oversight. These include establishing measurable goals to objectively and quantifiably assess progress, making oversight managers accountable for the effective implementation of these goals, providing professional training, and collecting and transferring lessons learned.