Report to the Ranking Minority

Member, Subcommittee on Clean Air,

Wetlands, Private Property, and

Nuclear Safety

United States General Accounting Office

GAO

July 2001 U.S.

INFRASTRUCTURE

Agencies’ Approaches

to Developing

Investment Estimates

Vary

GAO-01-835
Page i GAO-01-835 U.S. Infrastructure

Letter 1

Results in Brief 2

Background 4

Agencies’ Procedures Reflect Some Leading Practices, but This

Does Not Guarantee Accurate Estimates 17

GAO Observations 26

Agency Comments 27

Appendix I Objectives, Scope, and Methodology 29

Appendix II Agencies’ Infrastructure Investment Estimates 33

Appendix III Comments From the Environmental Protection

Agency 57

Appendix IV Comments From the General Services

Administration 59

Appendix V GAO Contacts and Staff Acknowledgments 62

Tables

Table 1: Selected Agencies’ Infrastructure Investment Estimates 12

Table 2: Federal Agencies and Types of Infrastructure Included in

the Report 29

Table 3: Investment Estimates for Mass Transit 51

Figures

Figure 1: Selected Agencies’ Roles in Developing Infrastructure 6

Figure 2: Infrastructure Spending for Selected Agencies, Fiscal

Years 1990 Through 1999 9

Contents
Page ii GAO-01-835 U.S. Infrastructure

Figure 3: Agencies’ Application of Leading Practices For

Determining Investment and Funding Decisions 18

Figure 4: Selected Leading Practices Related to Infrastructure

Investment Estimates 32

Figure 5: Strengths and Limitations of ARC’s Investment Estimate

for Highways 34

Figure 6: Strengths and Limitations of the Army Corps’ Investment

Estimate for Water Resources and Hydropower Facilities 37

Figure 7: Strengths and Limitations of EPA’s Investment Estimate

for Drinking Water Facilities 39

Figure 8: Strengths and Limitations of EPA’s Investment Estimate

for Wastewater Facilities 42

Figure 9: Strengths and Limitations of FAA’s Investment Estimate 44

Figure 10: Strengths and Limitations of FHWA’s Investment

Estimate 46

Figure 11: Strengths and Limitations of FTA’s Investment

Estimates 50

Figure 12: Strengths and Limitations of GSA’s Investment

Estimates 53
Page 1 GAO-01-835 U.S. Infrastructure

July 20, 2001

The Honorable George V. Voinovich

Ranking Minority Member

Subcommittee on Clean Air, Wetlands,

 Private Property, and Nuclear Safety

Committee on Environment and Public Works

United States Senate

Dear Senator Voinovich:

The federal government has spent an average of $149 billion (in constant

1998 dollars) annually since the late 1980s on the nation’s infrastructure.1

A sound public infrastructure plays a vital role in encouraging a more

productive and competitive national economy and meeting public

demands for safety, health, and improved quality of life. For example,

transportation systems directly support the nation’s economy by

facilitating the movement and manufacture of goods. Public office

buildings, courthouses, and other facilities support noneconomic goals

and allow federal agencies to carry out their missions. At least a portion

of federal financed infrastructure has benefits that accrue primarily to the

states and local communities rather than the nation as a whole. In

addition, state and local governments and the private sector play

important roles in developing, operating, and financing significant portions

of infrastructure.

The federal government plays a prominent role in identifying the nation’s

infrastructure investment needs. Little, however, is known about the

comparability and reasonableness of individual agencies’ estimates for

infrastructure needs. In fact, even the concept of infrastructure “need” is

difficult to define and to distinguish from “wish lists” of capital projects.

This report responds to your request for information on infrastructure

investment or “needs” estimates compiled by six federal agencies—the

U.S. Army Corps of Engineers, Environmental Protection Agency (EPA),

Federal Aviation Administration (FAA), Federal Highway Administration

(FHWA), Federal Transit Administration (FTA), and General Services

 1

Infrastructure has been defined in a number of ways. Broadly defined, infrastructure can

include facilities, structures, and land for public use and for other purposes, such as

national defense. See U.S. Infrastructure: Funding Trends and Opportunities to Improve

Investment Decisions (GAO/RCED/AIMD-00-35, Feb. 7, 2000).

United States General Accounting Office

Washington, DC 20548
Page 2 GAO-01-835 U.S. Infrastructure

Administration (GSA)—as well as the Appalachian Regional Commission

(ARC).2

 As you requested, we focused on the following infrastructure

areas—water resources (inland and deep draft navigation, flood control,

and shore protection), hydropower, water supply, wastewater treatment,

airports, highways, mass transit, and public buildings. For these seven

agencies and specified types of public infrastructure, we agreed to address

the following: (1) What are the agencies’ estimates for infrastructure

investment and how do the estimates compare in terms of how they are

developed and used? (2) To what extent do the agencies’ procedures for

developing the estimates embody practices of leading government and

private-sector organizations?

We did not independently verify the agencies’ investment estimates, but

we did rely on past reviews of these data by us and others that examined

the soundness and completeness of the methodology and/or data used to

develop the estimates. We incorporated findings from these reviews as

appropriate. The amount of information we present concerning an

estimate reflects the extensiveness of past reviews and does not imply that

an estimate is better or worse than other estimates. For some agencies—

ARC, the Army Corps, EPA, and FTA—we did not have past reviews

related to the estimates to draw upon. We reviewed agencies’

documentation of their procedures to develop the estimates, but we did

not verify whether these procedures were followed. We compared

agencies’ procedures with some of the capital decisionmaking practices

used by leading government and private sector organizations that we

identified and reported on in 1998.3

 This report focuses on those leading

practices that relate to developing and using investment estimates. We

included practices such as establishing a baseline inventory of assets,

using cost-benefit analysis to identify economically justified investments,

and ranking and selecting projects for funding based on established

criteria. See appendix I for additional information on our scope and

methodology.

The seven agencies we reviewed each estimated billions of dollars for

investment in infrastructure. The estimates ranged from GSA’s calculation

of $4.58 billion (in current dollars) over 1 to 5 years to repair public

 2

In this report, we will refer to all seven entities, including ARC, as agencies.

3

Executive Guide: Leading Practices in Capital Decision-Making (GAO/AIMD-99-32, Dec.

1998).

Results in Brief
Page 3 GAO-01-835 U.S. Infrastructure

buildings to FHWA’s estimate of $83.4 billion (in constant 1997 dollars) per

year over 20 years to improve highways. The estimates prepared by the

Army Corps (for water resources and hydropower) and GSA are for

federal spending; the other estimates are for spending from federal, state,

and local sources. Each of the seven agencies developed their investment

estimate using data from localities, states, or agency regional offices and

aggregating that information to produce a national estimate for

infrastructure investment. The estimates, however, were developed using

different analytical procedures. For example, FHWA used benefit-cost

analysis for its highway estimate, while EPA used engineering-based

approaches for its drinking water and wastewater estimates. The

investment estimates cannot be easily compared or simply “added up” to

produce a national estimate of infrastructure investment needs because of

differences in the methods used, time periods covered, and spending

sources. A fundamental reason that the estimates are prepared differently

and lack comparability is that they are developed and used for different

purposes. The Army Corps and GSA use the information to help determine

the financial resources needed to manage and/or repair their own assets.

The other five agencies develop estimates at the request of the Congress to

provide general information to decisionmakers or to help direct funding to

recipients of federal assistance.

Each of the seven federal agencies we reviewed had procedures for

developing infrastructure investment estimates that reflected some

practices used by leading government and private sector organizations. No

agency had procedures for all eight leading practices. Not following a

leading practice does not necessarily represent a deficiency on the part of

an agency because, in some cases—such as ARC’s and EPA’s estimates—

those practices that are not applied by the federal agency may be

implemented by state or local governments. The Army Corps had the

highest conformance to the leading practices, with procedures that

reflected six of the eight practices. Among the agencies, FHWA and FTA

came closest to reflecting an important leading practice--conducting

comprehensive assessments of the investments needed to meet outcomes

by focusing on the amounts needed to maintain or improve the condition

and performance of highways and transit systems. The remaining five

agencies developed estimates that are summations of the costs of projects

eligible to receive federal funding or projects identified by the Congress

and others, rather than comprehensive estimates of investments needed to

achieve outcomes. All seven agencies had procedures that called for

reviewing data developed by states and others, and five agencies

considered alternative noncapital ways to address unmet investment

requirements. By comparison, the agencies were less likely to follow
Page 4 GAO-01-835 U.S. Infrastructure

practices such as developing a long-term capital plan, using cost-benefit

analysis as the primary method to compare alternative investments,

ranking and selecting projects for funding based on established criteria,

and budgeting for projects in useful segments.

We make several observations in this report. First, for the most part, these

investment estimates are totals for the entire infrastructure network—

involving all levels of government and the private sector. The federal

government’s role in financing these amounts should be recognized and, in

some cases, this role might be small compared to other levels of

government or the private sector. Second, these investment estimates can

change significantly over time, with changes in the efficiency of delivering

infrastructure services or pricing strategies that alter the demand for

services. Third, these investment estimates focus on the condition of

facilities rather than the performance outcomes that can be expected from

the investments. The passage of the Government Performance and

Results Act signaled a shift in federal focus from inputs (such as the

condition of highways and airports) to outcomes (such as improved

mobility). In the infrastructure area, we caution against relying on

measures of need based primarily on the condition of facilities and instead

suggest comparing the costs and benefits of alternative approaches for

reaching outcomes, including noncapital alternatives.

To determine what would be sufficient to meet the nation’s demand for

infrastructure services such as efficient and safe mobility and clean water

is not simple. The investment requirements depend on (1) the supply of

service—what facilities exist, their condition and maintenance, how

efficiently they are operated, and how services might be provided other

than through capital spending—and (2) the demand for such services by

the public, which can be influenced, in part by the price charged for

infrastructure services and the state of the economy. Infrastructure

investment estimates can vary greatly depending on the extent to which

such factors are considered in investment calculations. For example, the

investment required to maintain or rehabilitate existing facilities could

differ significantly from the investment required to meet a specified level

of service. Moreover, focusing on the provision of service, rather than the

condition of a structure or facility, can lead to the consideration of less

costly, noncapital alternatives to meeting the demand for infrastructure.

For example, to meet a specified level of service on roads, such as keeping

traffic flowing at the speed limit, decisionmakers might consider changing

the timing of traffic lights rather than building new lanes. Furthermore,

future investment needs are not a predetermined reality and can be

affected by more efficient use of existing infrastructure. For example,

Background
Page 5 GAO-01-835 U.S. Infrastructure

technological improvements can increase the efficiency of infrastructure.

In addition, pricing strategies can affect the use of infrastructure—

relatively higher fees can encourage users to economize on their

consumption.

The seven agencies we reviewed develop information on infrastructure

investment requirements because of their roles in financing and

developing infrastructure. (See fig. 1.) ARC, the Army Corps, EPA, FAA,

FHWA, and FTA provide funding for transportation, water supply, and

wastewater treatment infrastructure that is owned, operated, and

maintained by others. GSA and the Army Corps are directly responsible

for acquiring and maintaining federal office buildings and dams and floodcontrol structures, respectively.

Selected Federal Agencies’

Roles in Developing

Infrastructure
Page 6 GAO-01-835 U.S. Infrastructure

Figure 1: Selected Agencies’ Roles in Developing Infrastructure
Page 7 GAO-01-835 U.S. Infrastructure

a

For this report, we excluded bridges from our analysis and included only FHWA’s estimate for

highways.

b

ARC also provides funds for economic development, sewer, and education projects.
Page 8 GAO-01-835 U.S. Infrastructure

c

Appalachia includes all of West Virginia and parts of 12 states; Alabama, Georgia, Kentucky,

Maryland, Mississippi, New York, North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee,

and Virginia.

d

GSA also leases facilities for federal agencies.

Sources: ARC, the Army Corps, EPA, DOT, and GSA.

At the request of the Congress, EPA, FAA, FHWA, and FTA periodically

prepare long-term infrastructure investment estimates. Every 5 years,

ARC prepares an estimate of the cost to complete the Appalachian

Development Highway System, which it finances by distributing federal

funds to states within Appalachia. GSA maintains information on the

investment needs for public buildings and the Army Corps maintains

information on the investment needs for water resources (inland and deep

draft navigation, flood control, and shore protection), hydropower, water

supply and wastewater treatment.

The investment estimates developed by the seven agencies will be funded,

at least in part, by federal financing. The Army Corps’ estimate only

includes the federal portion of investment. GSA’s estimate for investment

in public buildings will be financed entirely with federal funds. Figure 2

shows the spending trends from fiscal years 1990 to 1999 for the seven

agencies. Spending (in constant 2000 dollars) ranges from an average of

$150 million per year for ARC to an average of $20.6 billion per year for

FHWA. Although these seven agencies have made large investments in

public infrastructure, state and local governments and the private sector

play important roles in financing significant portions of some

infrastructure, such as water treatment and supply and transportation.
Page 9 GAO-01-835 U.S. Infrastructure

Figure 2: Infrastructure Spending for Selected Agencies, Fiscal Years 1990 Through 1999

Note: All amounts are in constant 2000 dollars.

Source: GAO’s analysis of OMB’s data.

0

5,000

10,000

15,000

20,000

25,000 Dollars in millions.

GSA

EPA

FTA

FHWA

FAA

Army Corps

ARC

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Page 10 GAO-01-835 U.S. Infrastructure

Preparing investment estimates is a capital decisionmaking activity by

federal agencies. In 1998, we identified the practices of leading

government and private-sector organizations in capital decisionmaking.4

During that review, we found that conducting a comprehensive needs

assessment is an important first step in an organization’s decisionmaking

process for infrastructure because it allows an organization to (1) consider

its overall mission, (2) identify the resources needed to fulfill both

immediate requirements and anticipated future needs on the basis of

results-oriented goals and objectives that flow from the organization’s

mission, and (3) consider both capital and noncapital approaches to

addressing these goals. The following leading practices relate to

developing and using investment estimates:

• conduct a comprehensive assessment of the resources needed to meet

an agency’s mission and results-oriented goals and objectives;

• establish a baseline inventory of existing assets, evaluate their

condition, determine if they are performing as planned, and identify

excess capacity;

• consider alternative ways to address needs, including noncapital

alternatives;

• use cost-benefit analysis as a primary method to compare alternatives

and select economically justified investments;

• rank and select infrastructure projects for funding based on established

criteria;

• budget infrastructure projects in useful segments;

• develop a long-term capital plan that defines capital asset decisions;

and

• establish procedures to review data developed by others and using

independent reviews of data and methods to further enhance the

quality of estimates.5

The leading practices we identified reflect requirements that the Congress

and Office of Management and Budget (OMB) have placed on federal

agencies that are aimed at improving federal agencies’ capital

decisionmaking practices. These requirements relate to aspects of

investment estimates, such as developing cost information, measuring the

benefits of proposed investments, and using investment estimates as a first

 4 Executive Guide: Leading Practices in Capital Decision-Making (GAO/AIMD-99-32,

Dec. 1998).

5

This practice was identified as a result of information collected during this review.

Leading Practices and

Guidance to Improve

Infrastructure Planning
Page 11 GAO-01-835 U.S. Infrastructure

step toward acquiring infrastructure. These requirements include, for

example, the Chief Financial Officers’ Act of 1990, which required the

development of accounting and financial systems to report cost

information and that the principles used in accounting for program costs

be consistent with those used in developing program budgets. In addition,

the Government Performance and Results Act of 1993 (Results Act)

required agencies to develop mission statements, long-range strategic

goals and objectives, and annual performance plans. The Results Act

emphasized identifying and measuring outcomes, including benefits. In

addition, the Congress enacted the Federal Acquisition Streamlining Act of

1994 to improve the federal acquisition process. Title V of the act was

designed to foster the development of (1) measurable cost, schedule, and

performance goals and (2) incentives for acquisition personnel to reach

these goals. To help agencies integrate and implement these and other

requirements,6

 OMB added a section to its annual budget preparation

guidance (Circular A-11) requiring agencies to provide OMB with

information on major capital acquisitions and to submit a capital asset

plan and justification. This guidance is supplemented by OMB’s Capital

Programming Guide, which provides detailed steps on planning,

budgeting, acquiring, and managing infrastructure and other capital assets.

The steps in OMB’s guide include the concepts covered by our 10 leading

practices.

The seven agencies we reviewed produce investment estimates for water

resources, hydropower, water supply, wastewater treatment, airports,

highways, mass transit, and public buildings. Some estimates—for water

resources, hydropower, and public buildings—are developed for federal

spending; the other estimates are developed for spending from federal,

state, and local sources. The estimates cannot easily be compared because

they were developed using different methods, time periods, and funding

sources. A fundamental reason that the estimates were prepared

differently and lack comparability is that they are developed and used for

different purposes. Some agencies use the information to determine the

financial resources needed to manage and/or repair their own assets, and

 6

In addition, the Clinger-Cohen Act of 1996 was enacted to improve the implementation and

management of information technology projects by requiring that agencies engage in

capital planning and performance and results-based management. The Statement of

Federal Financial Accounting Standards, No. 6, Accounting for Property, Plant, and

Equipment, requires agencies’ financial statements to report deferred maintenance for all

property, plant, and equipment.

Agencies Develop and

Use Investment

Estimates Differently
Page 12 GAO-01-835 U.S. Infrastructure

other agencies develop estimates at the request of the Congress to provide

general information to decisionmakers or to help direct funding to

recipients of federal assistance.

The seven agencies identified investment amounts that vary from GSA’s

estimate of $4.58 billion over 1 to 5 years to repair public buildings to

FHWA’s estimate of $83.4 billion each year over 20 years to preserve and

improve the nation’s highways. The investment estimates are summarized

in table 1.

Table 1: Selected Agencies’ Infrastructure Investment Estimates

Agency

Activities and assets included in

estimate

Activities and assets excluded

from estimate

Time period

covered

Total estimate (in

billions)

ARC Construction of highways within

portions of 13 states

Maintenance, retrofit, or

improvements to completed

highways

1997-completion $8.5a

(1995 dollars)

Army Corps Construction and major rehabilitation

of water resources projects and

major rehabilitation of hydropower

projects nationwide

Non-construction costs, projects

not under construction, and critical

operations and maintenance work

2001-completion $38.0a

EPA Construction and upgrade of drinking

water supply systems nationwide

Costs due solely to population

growth and costs not eligible for

federal funding

1999-2018 $150.9a

(1999 dollars)

EPA Construction and upgrade of

wastewater treatment collection

facilities nationwide

Costs due solely to population

growth and costs not eligible for

federal funding

1996-2016 $139.5a

(1996 dollars)

FAA Construction, replacement, and

rehabilitation of airport facilities

nationwide

Costs not eligible for federal

funding

1998-2002 $35.1

(constant 1998

dollars)

FHWA Improvements to the nation’s

highways based on several

scenariosb

Costs to construct new roads 1998-2017 $50.8 - $83.4 per

year for 20 yearsb

(constant 1997

dollars)

FTA Replacement and refurbishing of

mass transit vehicles and facilities

nationwide based on four scenariosc

and construction of new systems

1998-2017 $10.8 - $16.0 per

year for 20 yearsc

(constant 1997

dollars)

GSA Repair and alteration of public

buildings

Buildings owned by federal

agencies other than GSA

Up to 5 years $4.58a

GSA Construction of border stations,

federal office buildings, and

courthouses

Up to 7 years $0.75 to $0.8 per

year for 5 to 7

yearsa

a

Current year dollars.

b

FHWA modeled several scenarios—including cost beneficial investments needed to maintain the

current physical condition—that provided a range of estimates.

Source: GAO’s analysis of agencies’ data.

Agencies Have Identified

Vast Amounts of

Investment Estimates
Page 13 GAO-01-835 U.S. Infrastructure

c

FTA’s analysis included scenarios that produced estimates ranging from investments needed to

maintain current condition and performance of mass transit to investments needed to improve its

current condition and performance.

Note: Estimates for the Army Corps and GSA are federal investments. Estimates for the remaining

agencies are a combination of federal, state, and other investment sources.

The investment estimates cannot be easily compared or simply “added up”

to produce a national estimate of all infrastructure investment needs

because of differences in the methods used, time periods covered, and

funding sources. For example, EPA used engineering-based approaches to

develop costs for its drinking water and wastewater treatment estimates.

By contrast, FHWA developed a computer model to forecast the future

condition of and improvements to highway segments that uses cost-benefit

analysis as the primary criteria for including improvements in its overall

investment estimate. In addition, the estimates involve differing time

periods. For example, FAA’s estimate of airport infrastructure investment

covers 5 years, while ARC and the Army Corps produce estimates of

undefined time periods for highways and water resource projects,

respectively. Some agencies prepared their estimates in constant year

dollars—ARC’s estimate is in 1995 dollars—while other agencies, such as

GSA, presented their estimates in current dollars. The estimates also

include differing funding sources: estimates by the Army Corps and GSA

include only the costs to the federal government, while estimates by the

other five agencies include total costs to federal, state, and local

organizations.

Each of the seven agencies used data from various localities, states, or

agency regional offices and aggregated those data to produce a national

estimate for infrastructure investment. Each agency’s process for

developing its investment estimate is summarized below. They are

described in detail in appendix II.

The Army Corps estimated that $38 billion in federal funds was required to

complete water resources and hydropower infrastructure projects already

under construction as of March 30, 2001. Infrastructure projects included

in this estimate were initially identified by local governments, groups,

and/or private citizens, who requested assistance from the local Army

Corps district office. According to an Army Corps official, regional Army

Corps personnel evaluate the requests and determine both the seriousness

of the problems and the need for immediate solutions. Project costs are

estimated by engineers and other professionals using existing industry

data. The agency also uses cost-benefit analysis to determine which

projects are economically justified and would assist the agency in reaching

Estimates Used Data From

Local, State, or Regional

Sources
Page 14 GAO-01-835 U.S. Infrastructure

its goals, such as environmental protection and flood mitigation. The

evaluation and cost estimate is sent to the agency’s headquarters, and

selected projects are submitted for funding as part of the Department of

Defense’s annual budget.

FAA estimated that $35.1 billion in federal and nonfederal funds was

required for airport infrastructure from 1998 to 2002. Data for the

investment estimate come primarily from airport plans—such as airport

master plans and layouts--which include proposals and cost estimates for

specific infrastructure projects at individual airports. FAA officials in field

offices review each project, and approved projects are entered into a FAA

database. FAA officials in headquarters review the database for anomalies

in the data, then add up the estimated cost of each project to produce an

overall investment estimate. Because this estimate is not a spending plan,

FAA has reported that it makes no attempt to prioritize the projects or

determine if the benefits of specific projects would exceed their cost. This

estimate is prepared and submitted to the Congress biennially, as required

by statute.

FTA also used local sources of data to estimate an investment of $10.8

billion to $16.0 billion per year for mass transit systems (such as buses and

railcars) from 1998 to 2017, depending on whether the condition and

performance of mass transit systems would be maintained or improved.

The estimates cover both federal and nonfederal shares of costs. FTA used

data from local urban transit agencies to determine the age and condition

of mass transit infrastructure and then estimated the cost of either

maintaining or improving that infrastructure. FTA used an estimate

developed by its Transit Economic Requirements Model. The model

performed a benefit-cost analysis to determine if replacing an asset was

economically justified. The model then aggregated the cost of all the

infrastructure projects that were justified by benefit-cost analysis to

determine the total investment estimate for the nation’s mass transit

systems. FTA uses this estimate to provide general support for its budget

and information on changes in mass transit systems.

ARC estimated that it would cost $8.5 billion from state and federal

sources to complete the Appalachian Development Highway System. To

do this, it relied on state highway officials within Appalachia, who

determined the estimated cost to complete individual highway corridors

within their particular state that are part of the highway system. These

estimates used engineering structural criteria to estimate the cost of

constructing highway corridors. The estimate included costs for project

design, environmental mitigation, rights of way access, and construction.
Page 15 GAO-01-835 U.S. Infrastructure

ARC officials provided instructions to the states for computing this

estimate and reviewed the estimates by comparing the costs to the costs of

similar highway projects within that state and to FHWA’s data on

construction costs. The costs were not adjusted for inflation. ARC then

aggregated the data from each state to produce an overall estimate of the

cost to complete the entire highway system. ARC uses this estimate as the

basis for allocating funds appropriated for the Appalachian Development

Highway System. Specifically, ARC calculates each state’s percentage

share of the total cost to complete the highway system and distributes

funding to each state accordingly.

In May 2001, GSA’s data indicated that $4.58 billion in federal funds was

required over the next 5 years to meet the repair and alteration needs of

public buildings. GSA estimated that an additional $250 million to $300

million was required annually over the next 5 years to construct new

border stations and federal office buildings, and $500 million annually was

required over 5 to 7 years to construct new courthouses. Investment

projects are identified by regional offices, which are expected to

determine the best way to meet the agencies’ space requirements. The cost

data for projects that have estimated costs of between $10,000 and less

than $1.99 million are developed using engineering criteria and are derived

from various sources, including contractors, safety inspectors, and seniorlevel building management staff. Projects that have estimated costs greater

than $1.99 million are evaluated by headquarters officials and ranked in

order of priority. GSA’s cost data are used as input in determining funding

priorities.

EPA estimated that $150.9 billion in federal, state, and local funds was

needed for capital investment in drinking water facilities between 1999

and 2018. Only costs eligible for funding under the Drinking Water State

Revolving Fund were included. These costs were not adjusted for

inflation. To develop the estimate, EPA surveyed all of the large water

systems in the United States as well as a sample of the medium water

systems. In addition, EPA conducted site visits to 599 small systems and

extrapolated data from these surveys and site visits to compute the total

investment estimate. The surveys and supporting cost documentation for

medium and large systems were submitted to states for review and were

subsequently reviewed by EPA. The agency uses the results of this

estimate to allocate monies to the states for the Drinking Water State

Revolving Fund based on each state’s share of the total investment

amount.
Page 16 GAO-01-835 U.S. Infrastructure

In 1996, EPA estimated that $139.5 billion in federal and state funds was

needed between 1996 and 2016 for water pollution control, primarily for

capital investment in already-existing wastewater treatment facilities. Only

costs eligible for funding under Title VI of the Clean Water Act were

included in the estimate. These costs were not adjusted for inflation. EPA

developed the estimate from a nationwide database of wastewater

treatment facilities that is periodically updated by surveying the states.

The states provided revised estimates of capital investment needs from

their documented plans, which were supplemented by costs modeled by

EPA when the state lacked this information. In addition, EPA modeled the

costs for each state for combined sewer overflows and activities to control

stormwater runoff and nonpoint sources of pollution. The Congress has

used this information as one consideration in appropriating funds for

capitalization grants to the states, through the Clean Water State Revolving

Fund loan program. According to EPA, the estimate is also used to assist

in program planning and evaluation.

In May 2000, FHWA issued investment estimates for highways for the

years 1998 to 2017. These estimates ranged from $50.8 billion per year for

cost-beneficial improvements that would maintain the current physical

condition of highways to $83.4 billion per year for all improvements that

would improve pavement condition and reduce highway users’ travel

costs. The estimates included both federal and nonfederal portions of

funding and were in constant 1997 dollars. To determine the estimates,

FHWA used data from a statistically drawn national sample of 125,000

highway segments as well as information from the states on forecasts such

as travel growth. FHWA officials reviewed the data submitted by the

states, looked for anomalies or unusual patterns, and asked the states to

correct serious flaws and improve some data submissions. FHWA used a

computer model to simulate the effects of infrastructure improvements on

a sample of highway data and used a benefit-cost analysis to identify

economically justified highway improvements. FHWA’s estimate is used by

legislative and executive branch offices to obtain general information on

the nation’s overall need for investment in highways.
Page 17 GAO-01-835 U.S. Infrastructure

The federal agencies we reviewed all had procedures for developing their

infrastructure investment estimates that reflect some leading practices

that we identified, although some agencies followed more leading

practices than others. However, following the leading practices does not

ensure a quality investment estimate and each estimate had limitations

associated with the quality of the data used in developing it. The strengths

and limitations of each investment are summarized in appendix II.7

Correcting such limitations will improve the quality and reliability of the

agencies’ investment estimates.

None of the agencies we reviewed had procedures for all eight of the

leading practices. Not following a leading practice does not necessarily

represent a deficiency on the part of an agency because, in many cases,

when these practices are not applied by the federal agency, they are

implemented at the state or local level. For example, for EPA’s drinking

water investments, six of eight practices are undertaken at the local or

state level, according to agency officials. The Army Corps had the highest

conformance to the leading practices, with procedures that reflected six of

the eight practices, such as establishing an inventory of assets and their

condition and using cost-benefit analysis to select among investment

alternatives. Among the seven agencies, FHWA and FTA came closest to

conducting comprehensive assessments of the investments needed to

meet results-oriented agency goals—the estimates were results oriented

by focusing on the amounts needed to maintain or improve the

performance of highways and transit systems; but the estimates did not

consider alternative, noncapital ways to address investment needs. The

remaining five agencies developed estimates that are summations of the

costs of projects eligible to receive federal funding or projects identified

by the Congress and others, rather than comprehensive estimates of

investments needed to achieve outcomes. All seven agencies had

procedures that called for reviewing data developed by states and others

and four agencies considered alternative noncapital ways to address

unmet investment requirements. By comparison, the agencies were less

likely to follow practices such as developing a long-term capital plan,

using cost-benefit analysis as the primary method to compare alternative

investments, ranking and selecting projects for funding based on

 7

 We considered agency procedures that reflected leading practices and factors that

enhanced the soundness or completeness of an estimate to be strengths of an estimate. We

considered factors that detracted from the soundness or completeness of an estimate or its

source data to be limitations of an estimate.

Agencies’ Procedures

Reflect Some Leading

Practices, but This

Does Not Guarantee

Accurate Estimates
Page 18 GAO-01-835 U.S. Infrastructure

established criteria, and budgeting for projects in useful segments. Figure

3 shows each agency’s level of conformance to the leading practices.

Figure 3: Agencies’ Application of Leading Practices For Determining Investment and Funding Decisions

Source: GAO’s analysis of agencies’ procedures for developing investment estimates.

c b

b

a

b

c

a
Page 19 GAO-01-835 U.S. Infrastructure

An important first practice of leading organizations is to conduct a

comprehensive assessment or analysis of program requirements by

identifying and documenting the resources needed to meet the

organization’s results-oriented goals and objectives that flow from the

organization’s mission. This type of assessment is results-oriented in that it

determines what is needed to obtain specific outcomes—such as improved

mobility on highways or reduced flight delays at airports—rather than

identifying the resources needed on a project-by-project basis.

Furthermore, placing the focus on results drives an organization to

consider alternative, noncapital ways to fulfill program requirements. Until

recently, agencies have not been required to relate their planned

infrastructure spending to their missions and goals, so evaluating these

plans has presented a challenge to agencies and the Congress. This

situation changed with the enactment of the Government Performance and

Results Act of 1993 and corresponding revisions to OMB Circular A-11.

Since then, federal agencies—including the seven we reviewed—were

required to develop mission statements, long-range strategic goals and

objectives, and annual performance plans and to link annual performance

plans to capital planning efforts. The benefit of conducting a needs

assessment linked to achieving objectives is that managers will be able to

determine what is needed to obtain specific outcomes rather than what is

needed to maintain or expand existing capital stock.

Although each agency we reviewed prepared estimates directly related to

their mission, no agency prepared a comprehensive assessment of the

resources (and strategies) to achieve mission-focused outcomes. For

example, an evaluation of the effectiveness of ARC’s highway construction

estimate is directly related to its mission, which is to enhance economic

development in Appalachia.8

 However, ARC’s investment estimate is a

compilation of cost estimates to construct specific highway corridors,

rather than a comprehensive determination of the resources needed to

meet its mission.

The investment estimates by FTA and FHWA come closest to being

comprehensive assessments of resources needed to meet results-oriented

goals. Both agencies focus on the resources needed to achieve specific

outcomes—maintaining or improving the performance of the nation’s

 8

ARC evaluated the effectiveness of its highway construction program towards meeting its

mission and concluded that the program (1) enabled the region to be better able to

compete for economic opportunities; (2) created thousands of jobs; and (3) increased

population, wages, and travel efficiencies in that area.

Practice 1: Conduct a

Comprehensive

Assessment of the

Resources Needed to Meet

Mission and ResultsOriented Goals
Page 20 GAO-01-835 U.S. Infrastructure

mass transit systems and highways. Performance includes factors related

to the quality of service such as congestion on highways and waiting times

and reliability of transit service. FTA examines how these outcomes could

be achieved by maintaining or improving existing transit facilities and

assets and by constructing new systems to meet forecasted capacity

needs. FHWA’s estimate models improvements to maintain or improve

existing highways—it excludes new construction. However, these

estimates do not comprehensively consider alternatives to meeting

investment needs—for example, neither estimate considers alternative,

noncapital ways to address investment needs. The remaining agencies do

not prepare estimates to achieve outcomes. Rather, they prepare

investment estimates that are summations of projects’ costs: projects

eligible to receive federal funding (EPA and FAA) and projects identified

by others, including the Congress, local communities, and other federal

agencies (ARC, the Army Corps, and GSA).

Leading organizations establish an inventory of current assets and their

condition and determine if the assets are performing as planned. By

routinely assessing the condition of assets and facilities, decisionmakers

can evaluate the capabilities of current assets and plan for their

replacement. In addition, OMB’s Capital Programming Guide instructs

agencies to evaluate the capacity of their existing assets for major

programs, to determine if they are performing as planned. OMB’s

instructions cover assets funded by federal grants for capital investment as

well as those owned by federal agencies.

Inventory information on infrastructure assets—including their condition

and performance—can assist decisionmakers in identifying excess

infrastructure capacity that is draining its resources. This is particularly

important for federal buildings and facilities. For example, in 1998, the

National Research Council reported that the number of excess federal

facilities appeared to be increasing as agencies realigned their missions in

response to changing circumstances.9

Of the agencies we reviewed, the Army Corps, FTA, and GSA maintain

inventory and evaluation information on assets. For example, the Army

Corps collects information on the condition of equipment at hydropower

 9

See Stewardship of Federal Facilities: A Proactive Strategy for Managing the Nation’s

Public Assets, National Research Council (Washington, D.C.: 1998).

Practice 2: Inventory

Existing Assets and

Identify Their Condition

and Performance and

Excess Capacity
Page 21 GAO-01-835 U.S. Infrastructure

plants, particularly turbines, and uses this information to determine repair

and rehabilitation needs. GSA maintains an inventory that identifies the

location, type, and availability of its buildings. According to agency

officials, GSA maintains separate information on the condition of these

buildings. In addition, GSA has programs that oversee the disposal of

excess and surplus real property. In contrast, ARC, EPA, FAA, FHWA do

not maintain inventories, but some of them rely on inventories kept by

state or local agencies. For example, states maintain highway inventories

and provide input to FHWA’s investment estimate. According to EPA

officials, local communities maintain inventories of their water and

wastewater infrastructure.10 Over the next few years, new financial

reporting standards released by the Government Accounting Standards

Board will require the financial statements of state and local governments

to disclose information on capital infrastructure assets, such as their

physical condition.

Leading organizations consider a wide range of alternative approaches to

satisfy their needs, including noncapital alternatives, before choosing to

purchase or construct facilities or other capital assets. OMB incorporated

this practice in its Capital Programming Guide, which suggests that

federal agencies select alternatives to acquiring new capital assets to

achieve the same programmatic goals whenever practicable and more cost

beneficial. OMB also suggests that agencies consider options such as

meeting objectives through regulation or user fees, using human capital

rather than capital assets, and applying grants or other means beyond a

direct service provision supported by capital assets.

Army Corps, EPA (wastewater), FAA, and GSA indicated that efforts are

made at their agencies to identify noncapital solutions to some of their

investment needs and, where feasible, to implement those rather than

acquiring new capital assets. However, it is not clear how routinely

agencies follow this practice or, in some cases, what value is added by this

practice. For example, according to EPA officials, decisions on pursuing

noncapital ways to address infrastructure needs are often conducted at the

local level. For example, a public water system may choose to implement a

water conservation plan as an alternative to adding additional storage and

treatment capacity to a system.

 10EPA maintains a database of cost and technical information on publicly-owned

wastewater facilities.

Practice 3: Consider

Alternative Ways to

Address Investment Needs,

Including Noncapital

Approaches
Page 22 GAO-01-835 U.S. Infrastructure

Some leading organizations use cost-benefit analysis as a tool to ensure

that the organization’s investment will obtain the greatest benefits for the

least cost. A cost-benefit analysis, which OMB suggests for federal

agencies, compares the costs and benefits of alternative investments in

order to identify those investments that are economically justified

(greatest net benefits) and achieve agency goals at the least cost. The

types of analysis can range from a complete cost-benefit analysis—which

includes full life-cycle costs, estimating and discounting cash flows, and

determining the return on the investment based on a specified discount

rate—to an analysis that compares alternatives and recommends the most

cost-effective (least-cost) option for achieving a specific goal.

Three agencies we reviewed—Army Corps, FHWA, and FTA—conduct

cost-benefit analyses of proposed projects and use the results as a main

factor in developing their investment estimates. For example, FHWA’s

computer model, which is used to determine future investment

requirements, simulates the effects of infrastructure improvements for

highway segments and compares the relative benefits and costs associated

with alternative improvement options. Only improvements for which the

benefits exceed the cost are included in the overall estimate. According to

EPA officials, cost-benefit analyses are done at the local level for drinking

water and wastewater investment, as utility managers consider projects

needed for public health and water quality purposes. In addition,

according to an ARC official, states conduct cost-benefit analyses to help

determine the routes of new highways.

Leading organizations have defined processes for ranking potential

infrastructure investments in order to find those that are the most cost

effective for achieving organizational goals over the long-term, and for

selecting and budgeting those projects for full up-front funding or funding

in useful segments. The organizations implement these practices by

establishing a framework for reviewing and approving decisions

concerning infrastructure and other capital assets, ranking and selecting

projects on the basis of established criteria and technical analyses, and

preparing long-term plans for infrastructure and capital development.

OMB’s guidance to federal agencies on the ranking and selecting of

infrastructure investments advises them to consider the availability and

affordability of the investment, and whether the costs and benefits of the

new asset will merit their inclusion in the agency’s portfolio of proposed

assets that are considered for funding. For the agencies that we reviewed,

the Army Corps, FAA, and GSA have processes in place to rank and select

investment projects for funding. For example, GSA staff assess the merits

Practice 4: Use CostBenefit Analysis to Identify

Economically Justified

Investments

Practice 5: Rank and Select

Projects For Funding

Based on Established

Criteria
Page 23 GAO-01-835 U.S. Infrastructure

of proposed projects with the aid of computer-based software that uses

five weighted criteria—including economic return, project risk, and

project urgency—to rank projects that are competing for funding.

In some cases—ARC, EPA, FHWA, and some FTA projects—state, local or

other federal entities are responsible for determining which investment

projects to fund. For example, officials with ARC and EPA told us that

capital projects funded by their agencies are ranked and selected by the

state agency or entity in charge of a particular project. Hence, while ARC

provides funding for highways, the state departments of transportation

prioritize and rank the highway investment needs for their particular state.

Similarly, individual states rank drinking water projects that are funded

through EPA based on a priority system that focuses on public health,

compliance, and the economic needs of the community. FHWA and FTA

projects that are funded by formula grants are also prioritized at the state

or local level.

A strategy that has proven useful to organizations in dealing with the

problems posed by full funding in a capped budget environment is to

budget for projects in useful segments. This means that when a decision

has been made to undertake a specific capital project, funding sufficient to

complete a useful segment of the project is provided in advance. OMB has

defined a useful segment as a component that either (1) provides

information that allows the agency to plan the capital project, develop the

design, and assess the benefits, costs, and risks before proceeding to full

acquisition (or canceling the acquisition) or (2) results in a useful asset for

which the benefits exceed the costs even if no further funding is

appropriated.

For the agencies we reviewed, investment estimates, particularly those

that involve the construction or rehabilitation of an asset, are often based

on the full cost of projects. In two cases—FTA and GSA projects that

exceed a dollar threshold—the projects are funded based on their full

costs and the funds are spent over a period of years. However, funding for

other federal agencies’ investment projects are often made for only part of

the estimated cost or part of a usable asset—a part that would not be

usable if no further funding were provided. Such incremental funding is

usually sufficient to cover obligations estimated to be incurred in one

fiscal year.

Incrementally funding infrastructure projects could affect the quality and

reliability of investment estimates if the full estimated costs of projects are

Practice 6: Budget for

Projects in Useful

Segments
Page 24 GAO-01-835 U.S. Infrastructure

not made apparent at the time that initial funding decisions are made. For

example, most of the Army Corps’ multiyear water resource projects are

funded at each phase. For instance, in fiscal year 1986, the Army Corps

estimated the federal share of work it intended to do on a water resources’

project in Petersburg, WV at $14 million. The estimate did not include over

$600,000 appropriated to the Army Corps between fiscal years 1986 and

1989 to study the proposed project. The agency requested and received

funds each fiscal year for various phases of the work until fiscal year 1997,

by which time the total federal share of the work had increased to $20.4

million, due to inflation and cost overruns. As another example, ARC

officials told us that prior to fiscal year 1999, it had been difficult for the

agency to develop realistic estimates for the cost of completing the

highways under its jurisdiction because funding was limited and was only

sufficient to construct a few sections each year. Although ARC’s funding

for fiscal year 1999 was revised to guarantee a minimum level of funds

each year, the amount does not fully fund the states’ highway investment

estimates.11

Leading organizations use capital plans, which generally cover multiyear

periods, to establish priorities for implementing organizational goals and

objectives and to manage resources and debts over the long-term. The

capital plans are updated either annually or biennially, depending on the

changing needs of the organizations or, in the case of federal agencies,

legislative and/or executive requirements. Developing a long-term capital

plan enables an organization to review and refine a proposed project’s

scope and cost estimates over several years, which helps to reduce cost

overruns. While out-year cost estimates are preliminary, they help to

provide decisionmakers with an overall sense of a project’s funding needs.

As a project moves closer to the year of implementation, its scope

becomes more clearly refined and cost estimates also can be refined to

more accurately reflect actual project costs.

Among the agencies we reviewed, the Army Corps prepares a long-term

capital plan to document specifically planned projects, plan for resource

use over the long-term, and establish priorities for implementation. FAA

prepares a long-term plan that is an aggregate of local airport plans;

priorities for implementation are established during the annual budget

 11 In some cases, states prefinance segments of the ADHS and are reimbursed over time by

funds distributed by ARC.

Practice 7: Develop a LongTerm Capital Plan That

Defines Capital Asset

Decisions
Page 25 GAO-01-835 U.S. Infrastructure

process and are not part of the long-term capital plan. In the case of GSA,

its long-term capital plan for courthouse construction is prepared by the

Judicial Conference of the United States.12 However, the Conference’s role

in this process is limited because it does not have independent authority to

lease, construct, plan, or design space. In addition, we reported in 2000

that GSA lacks a multiyear capital plan for repairs and alterations.13 For

the other agencies we reviewed, capital plans may be developed at the

state or local levels or by other federal entities. For example, in the case of

ARC and FHWA, the states are responsible for developing long-term

capital plans for their highway and other transportation needs. According

to EPA officials, local water and wastewater utilities develop capital

improvement plans for infrastructure needs, the results of which are used

by EPA in developing its estimates.

The agencies we reviewed use data from a variety of sources, including

states, municipalities, and contractors, to determine how much it will cost

to acquire, construct, repair, or maintain federal and public infrastructure.

The quality of the cost estimates prepared by federal agencies depends

heavily on the quality of this data. By reviewing capital investment data

prepared by others, agencies can enhance the quality of their investment

estimates. In addition, an independent review of the data and methods

used to develop the estimates can further enhance quality and help ensure

that investment decisions are supported by quality information. All

agencies we reviewed have procedures for reviewing the data provided by

outside sources. FHWA also had independent reviews to critique and

refine the methods used to produce the estimate. For example, FHWA’s

computer model for developing its estimate was reviewed by

transportation and economic experts to both assess and improve it. In

June 1999, the experts found that FHWA has strengthened the model over

time and that recent refinements have increased its applicability and

credibility. In addition, FTA has under way a review of its methodology for

determining transit investment estimates.

 12The Judicial Conference of the United States is composed of the Chief Justice of the

United States and other federal judges who consider policy and legislative and

administrative issues affecting the federal courts.

13GSA told us that by the end of December 2001, it will establish a 3- to 5-year capital plan

for repair and alteration investments. That plan must then be coordinated with the

Administration.

Practice 8: Establish

Procedures to Review Data

Developed By Others, and

Use Independent Reviews

of Data and Methods to

Further Enhance the

Quality of Estimates
Page 26 GAO-01-835 U.S. Infrastructure

Nonetheless, officials at ARC, EPA, FAA, FHWA, FTA, and GSA

acknowledged that the data used to develop their investment estimates

might not have been sufficiently comprehensive or accurate. For example,

EPA reported that its most recent investment estimates for drinking water

supply, issued in February 2001, were derived from a 1999 nationwide

survey of the documented needs of community water systems. However,

EPA officials stated that the estimates might understate water supply

needs because some water systems submitted cost estimates covering a 2-

to 5-year period, rather than the 20-year period requested by EPA.

Inaccurate data and assumptions can affect the quality of investment

estimates. For example, the National Academy of Sciences found that

flawed data created unsound economic assumptions in the Army Corps’

draft feasibility study for the navigation system infrastructure on the

Upper Mississippi River and Illinois Waterway. This resulted in inadequate

forecasts of future events, such as the level of barge shipping rates and

grain demand, which compromised the integrity of analysis and led to an

overstatement of the level of investment. Since this project is not yet

under construction, it is not part of the Army Corps’ $38 billion investment

estimate.

In addition to promoting inaccurate estimates of investment needs,

erroneous data can affect agencies’ assessments of repair and

maintenance needs for existing infrastructure. For example, in March

2000, we reported that GSA’s database of needed repairs and alterations

had numerous problems, such as repairs that were not included in the

database, some repairs that were included but were already in progress or

completed, some incorrect reporting of data, and some cost estimates for

repairs that were not current. Since the review, GSA has taken steps to

improve the quality of the data used to manage its inventory of buildings.

Some perspective is called for in reviewing the investment estimates by

the seven agencies. First, for the most part, these investment estimates

are totals for the entire infrastructure network—involving all levels of

government and the private sector. The federal government’s role in

financing these amounts should be recognized; and, in some cases, this

role might be small compared to other levels of government or the private

sector. Second, these investment estimates can change significantly over

time with changes in the efficiency of delivering infrastructure services or

pricing strategies that alter the demand for services. For example, the

consolidation of smaller water systems or the introduction of user charges

can reduce the need to expand or replace infrastructure. Third, these

investment estimates focus on the condition of facilities rather than the

GAO Observations
Page 27 GAO-01-835 U.S. Infrastructure

performance outcomes that can be expected from the investments. The

passage of GPRA signaled a shift in federal focus from inputs (such as the

condition of highways and airports) to outcomes (such as improved

mobility). In the infrastructure area, we caution against relying on

measures of need based primarily on the condition of facilities and instead

suggest comparing the costs and benefits of alternative approaches for

reaching outcomes, including noncapital alternatives.

We provided a draft of this report to ARC, EPA, DOT, GSA, and the

Department of Defense (DOD) for review and comment. EPA said that the

report clearly distinguishes between federal agencies that directly invest in

infrastructure and agencies, such as EPA, that manage programs to fund

infrastructure. GSA stated that the database used to derive the estimate

for public building repair and alteration costs is continually changing as

work items are tracked from identification to completion and that the

database does not represent investment needs, rather it provides input to

decisions that determine funding priorities. We revised this report to

indicate that the data are used as input to funding decisions. GSA also

stated that the draft report did not acknowledge that the agency uses costbenefit analysis as one criterion in making investment decisions and that

GSA has made progress in improving the accuracy of its data. We did not

make any changes to this report based on these comments because both

items were already included. Written comments by EPA and GSA and our

responses to GSA’s comments appear in appendices III and IV. ARC, EPA,

DOT, and GSA provided technical clarifications, which we included in this

report where appropriate. DOD had no comments on this report.

We conducted our review between December 2000 and July 2001 in

accordance with generally accepted government auditing standards.

Agency Comments
Page 28 GAO-01-835 U.S. Infrastructure

We are sending copies of this report to the Secretaries of the Departments

of Transportation and Defense; the Administrator, EPA; the

Commissioners of GSA and ARC; and the Director, Office of Management

and Budget. Copies will also be made available to others upon request. If

you or your staff have any questions about this report, please call me at

(202) 512-2834. Key contacts and major contributors to this report are

listed in appendix V.

Sincerely yours,

Peter F. Guerrero

Director

Physical Infrastructure
Appendix I: Objectives, Scope, and

Methodology

Page 29 GAO-01-835 U.S. Infrastructure

Our report focuses on infrastructure investment estimates compiled by six

federal agencies—the U.S. Army Corps of Engineers, Environmental

Protection Agency (EPA), Federal Aviation Administration (FAA), Federal

Highway Administration (FHWA), Federal Transit Administration (FTA),

and General Services Administration (GSA)—and the Appalachian

Regional Commission (ARC). For these agencies and selected types of

infrastructure (see table 2), we addressed the following objectives: (1)

What are the agencies’ estimates for infrastructure investment and how do

the estimates compare in terms of how they are developed and used? (2)

To what extent do the agencies’ procedures for developing the estimates

embody practices of leading government and private-sector organizations?

Table 2: Federal Agencies and Types of Infrastructure Included in the Report

Federal agency

Infrastructure area ARC

Army

Corps EPA FAA FHWA FTA GSA

Highways X X

Water resources X

Hydropower X

Water supply X

Wastewater treatment X

Airports X

Mass transit X

Public buildings X

To identify agencies’ infrastructure investment estimates, we obtained and

analyzed the most recent estimates reported by ARC, EPA, FAA, FHWA,

and FTA. For the Army Corps, we used estimates for water resources and

hydropower that the agency prepared in March 2001. The Army Corps

does not develop investment estimates for water supply and treatment.

For GSA, we obtained information from the Inventory Reporting

Information System (IRIS)—a computerized database of information on

building repairs and alterations. According to GSA database managers, the

data we used were representative of the repair and alteration needs

contained in IRIS as of May 2, 2001. GSA’s estimate for building

construction was developed by GSA staff for the building priorities

identified by the Judicial Conference of the United States and other federal

agencies. We did not independently verify the agencies’ investment

estimates, but we did rely on past reviews by us and others that examined

the soundness and completeness of the methodology and/or data used to

develop the estimates. We incorporated findings from these reviews as

appropriate.

Appendix I: Objectives, Scope, and

Methodology
Appendix I: Objectives, Scope, and

Methodology

Page 30 GAO-01-835 U.S. Infrastructure

To obtain information on the procedures agencies used to develop these

investment estimates and how agencies used the estimates, we

interviewed officials from ARC; the Army Corps’ Planning and Policy

Division, and Programs, Formulation and Evaluation Branch; EPA’s Office

of Ground Water and Drinking Water and Office of Wastewater

Management; the Department of Transportation’s FAA, FHWA, and FTA;

and GSA’s Office of Portfolio Management. We reviewed agencies’

documentation of the procedures used to develop the estimates, but we

did not verify whether these procedures were followed. We also relied on

our past reviews of FAA, FHWA, and GSA for information on how these

agencies develop and use the investment estimates.

To accomplish our second objective, we used leading practices contained

in our report Executive Guide: Leading Practices in Capital DecisionMaking. We also reviewed laws and related guidance issued by the Office

of Management and Budget (OMB), including the Government

Performance and Results Act of 1993, the Federal Acquisition Streamlining

Act of 1994, the Clinger-Cohen Act of 1996, OMB’s Executive Order 12893

(Jan. 26, 1994), OMB Circular A-11, and OMB’s Capital Programming

Guide. In addition, we reviewed the Statement of Federal Financial

Accounting Standards, No. 6, Accounting for Property, Plant, and

Equipment. We also reviewed reports by the U.S. Advisory Commission

on Intergovernmental Relations, National Council on Public Works

Improvement, the President’s Commission on Capital Budgeting, and the

National Academy of Sciences. We compared the procedures used by each

agency to develop infrastructure investment estimates with the leading

practices, which are listed in figure 4. The first seven practices were

identified in our executive guide.

The eighth practice—establish procedures to review data developed by

others and use independent reviews of data and methods to further

enhance the quality of estimates—was identified as a result of information

collected during this review. We found that each estimate relied to some

extent on data provided by others, such as the states. In past reviews, we

have noted problems with the consistency of data that is collected from

states and other sources. For example, DOT collects information on

pavement condition from the states. Our review of the statistic used to

indicate pavement condition demonstrated that states reported no

information on 7 percent of the miles on the National Highway System,

varied in their approaches to measuring and reporting the statistics, and
Appendix I: Objectives, Scope, and

Methodology

Page 31 GAO-01-835 U.S. Infrastructure

did not follow uniformly DOT’s guidance for making these

measurements.14 The independent review of data and analytical methods

can enhance the quality of estimates. For example, given the uncertainty

associated with predicting future impacts of regulatory alternatives, we

recommended rigorous and independent peer review to enhance the

analyses.15 Furthermore, it has been noted by others that over time FHWA

has continuously improved its model to estimate investment needs.16

FHWA has used an independent review of the model to help make

improvements.

 14 Transportation Infrastructure: Better Data Needed to Rate the Nation’s Highway

Conditions (GAO/RCED-99-264, Sept. 27, 1999). According to DOT, the states reported

pavement condition data for all of the sample pavement sections included in the

department’s investment estimate. Therefore, the missing data on pavement condition did

not effect DOT’s calculations.

15 Regulatory Reform: Agencies Could Improve Development, Documentation, and

Clarity of Regulatory Economic Analyses (GAO/RCED-98-142, May 26, 1998).

16 Highway Performance Public Works: A New Federal Infrastructure Investment

Strategy for America, U.S. Advisory Commission on Intergovernmental Relations (Nov.

1993).
Appendix I: Objectives, Scope, and

Methodology

Page 32 GAO-01-835 U.S. Infrastructure

Figure 4: Selected Leading Practices Related to Infrastructure Investment Estimates
Appendix II: Agencies’ Infrastructure

Investment Estimates

Page 33 GAO-01-835 U.S. Infrastructure

In 1997, the Appalachian Regional Commission (ARC) estimated that it

would cost $8.5 billion (in current 1995 dollars) to complete the

Appalachian Development Highway System (ADHS), a 3,025 mile system

of highways that is designed to bring economic development to

Appalachia.17 The amount is for initial construction only—it does not

include maintenance, retrofits, or safety improvements to completed

segments of the highway system. According to ARC officials, this estimate

is probably understated due to the limited amount of detailed information

available in 1997 and because the estimate was prepared before obtaining

public input or identifying and addressing environmental or historic

preservation concerns about specific highway corridors. ARC plans to

issue an updated estimate in 2002.

The major strengths and limitations of ARC’s estimate are summarized in

figure 5. We have not done prior work related to ARC’s investment

estimate or data used for the estimate. The amount of information we

present concerning the estimate does not imply that it is better or worse

than others.

 17 Appalachia includes all of West Virginia and parts of 12 states: Alabama, Georgia,

Kentucky, Maryland, Mississippi, New York, North Carolina, Ohio, Pennsylvania, South

Carolina, Tennessee, and Virginia.

Appendix II: Agencies’ Infrastructure

Investment Estimates

ARC’s Investment

Estimate for the

Appalachian

Development

Highway System
Appendix II: Agencies’ Infrastructure

Investment Estimates

Page 34 GAO-01-835 U.S. Infrastructure

Figure 5: Strengths and Limitations of ARC’s Investment Estimate for Highways

Note: We considered procedures that reflected leading practices and factors that enhanced the

soundness or completeness of an estimate to be strengths of an estimate. We considered factors

that detracted from the soundness or completeness of an estimate or its source data to be limitations

of an estimate.

a

Reflects a leading practice.

To produce an estimate for the highway system, each of the 13 states

within Appalachia estimated the cost to complete the system within their

state, and ARC aggregated the estimates. ARC and the Federal Highway

Administration (FHWA) distributed an instruction manual to each state

that detailed the methods and criteria for arriving at the estimate. Each

state’s department of transportation, in conjunction with the local FHWA

office, then prepared a detailed estimate of the cost to complete the

unfinished portions of the highway system within their state. The states

produced these cost estimates using preliminary or final plans,

specifications, and estimates to the extent they were available. At a

minimum, ARC’s instructions indicated that the states should have

preliminary layouts of the proposed road and all major structures and

interchanges so that reasonably accurate estimates could be made for

items such as construction and paving. In addition, qualified appraisers

were used to help determine the cost of rights-of-way and any relocation

expenses. ARC and FHWA reviewed states’ estimates to ensure uniformity

and accuracy. They assessed the reasonableness of the cost estimates by

comparing them to the costs of similar highway projects within the state

and FHWA’s data on construction costs. In addition, major changes to the

scope and location of highways and the amount of the estimate had to be

reviewed and approved by ARC, according to agency officials. ARC then

How the Estimate Was

Developed
Appendix II: Agencies’ Infrastructure

Investment Estimates

Page 35 GAO-01-835 U.S. Infrastructure

totaled the estimates from each state and calculated the total cost to

complete the highway system.

Many of the estimates were made before the highway segments had

undergone the planning process mandated by the National Environment

Policy Act and, therefore, may be understated. This planning process

includes obtaining input from the public, federal and state agencies, and

historical societies and assessing any environmental or historic

preservation concerns. Some states will not go through this planning

process until a particular highway corridor is the next construction

project. As a result, many of the highway estimates that ARC relied upon

were made before this planning process occurred. As states go through

this process, construction costs can rise dramatically if new concerns,

such as environmental issues and historic preservation, result in changes

to highway routes or even legal cases to determine the routes.

ARC uses the estimate to distribute funding made available through the

Highway Trust Fund to each state based on each state’s percentage share

of the remaining highway system. For example, according to the latest

estimate, 15.3 percent of the cost to complete the highway system is for

highways within West Virginia. As a result, ARC gives 15.3 percent of its

annually appropriated monies for the highway system to West Virginia.

Each state sets its priorities for completing the highway system within its

state with the funds received from ARC.

Appalachian Development Highway System: 1997 Cost to Complete

Report, Appalachian Regional Commission, Aug. 1997.

Appalachian Development Highways: Economic Impact Studies., Wilbur

Smith Associates, July 1998.

Instruction Manual for Preparation and Submission: 1997 Estimate of

Cost to Complete the Appalachian Development Highway System,

Appalachian Regional Commission, Sept. 1996.

How the Estimate is Used

Related Reports
Appendix II: Agencies’ Infrastructure

Investment Estimates

Page 36 GAO-01-835 U.S. Infrastructure

The U.S. Army Corps of Engineers estimated that, as of March 30, 2001, it

had about $38 billion in unmet water resources (inland and deep draft

navigation, flood control, and shore protection) and hydropower

infrastructure investment requirements for its civil works program. This

estimate includes only projects that are already under construction. Of

that amount, about $37 billion is for the construction of new water

resource projects, $217 million is for the major rehabilitation of water

resource projects, $400 million is for the major rehabilitation of

hydropower plants, and $182 million is for other work at hydropower

plants. In addition to the $38 billion, the Army Corps estimated that in

fiscal year 2002, it would require $835 million to perform critical

operations and maintenance work on water resources and related land

projects, and $80 million in critical maintenance on the Mississippi River

and tributaries’ projects. The Army Corps does not develop an investment

estimate for water supply and wastewater treatment requirements.

Instead, the Congress and local interests estimate water supply

requirements for individual projects, and local governments are

responsible for determining wastewater investment requirements.

According to Army Corps officials, the amount estimated for water

resources and hydropower investments might be inadequate because it

does not consider increases in the cost of completing a project over time

due to changing economic conditions. Those officials stated that it takes

an average of 12 years for the Army Corps to complete most projects.

During this time, increases in inflation and the costs of labor and material

could result in higher project costs than anticipated. In addition, their are

concerns that the quality of the estimate may be affected by inaccurate

data and assumptions. For example, the National Academy of Sciences

found that flawed data created unsound economic assumptions in the

Army Corps’ draft feasibility study for the navigation system infrastructure

on the Upper Mississippi River and Illinois Waterway. This resulted in

inaccurate forecasts of future events, such as the level of barge shipping

rates and grain demand, which compromised the integrity of analysis and

led to an overstatement of the level of investment needed. As a result of

problems with this draft feasibility study, the Army Corps plans to redo it.

Since this project is not yet under construction, it is not part of the Army

Corps’ $38 billion investment estimate.

The major strengths and limitations of the Army Corps’ estimate are

summarized in figure 6. We have not done prior work related to the Army

Corps’ investment estimate or data used for the estimate. The amount of

information we present concerning the estimate does not imply that it is

better or worse than others.

U.S. Army Corps of

Engineers’ Investment

Estimate for Water

Resources and

Hydropower
Appendix II: Agencies’ Infrastructure

Investment Estimates

Page 37 GAO-01-835 U.S. Infrastructure

Figure 6: Strengths and Limitations of the Army Corps’ Investment Estimate for

Water Resources and Hydropower Facilities

Note: We considered procedures that reflected leading practices and factors that enhanced the

soundness or completeness of an estimate to be strengths of an estimate. We considered factors

that detracted from the soundness or completeness of an estimate or its source data to be limitations

of an estimate.

a

Reflects a leading practice.

The water resources and hydropower estimates were developed by

aggregating the funds required to construct and rehabilitate specific

projects. Initially, Army Corps’ district offices submit lists of proposed

water resource problems (projects) in their area—including those

identified by local governments, organizations, and private citizens—to

division commanders who assess the projects based on several criteria.18

The criteria include (1) whether a project is in accord with the agency’s

current policy; (2) the urgency of resolving the problem; (3) geographic

 18 The Army Corps refers to activities that are studied and/or investigated before

construction as “problems.” For this report, we will use “project.”

How the Estimate Was

Developed
Appendix II: Agencies’ Infrastructure

Investment Estimates

Page 38 GAO-01-835 U.S. Infrastructure

distribution; (4) the economic viability of the recommended plan; (5) local

support for the project; (6) the possibility of nonfederal participation in

the project; (7) the scheduled project completion date; and (8) the impact

on fish, wildlife, and/or wetlands. A prioritized list of projects is submitted

to the Assistant Secretary of the Army for Civil Works, who further

screens the projects based on conformance to the administration’s

priorities and political sensitivity. The projects selected by the Assistant

Secretary are included in the Department of Defense’s budget submission

to OMB and, if approved, in the President’s budget submission to the

Congress. Ultimately, the Congress determines which projects to fund.

Funded projects undergo several lengthy reviews by the Army Corps,

including a feasibility study to investigate and recommend solutions to

water resources problems. The costs of such studies and other nonconstruction costs are not part of the Corps’ overall investment estimate.

The estimate for hydropower investment is based on the Army Corps’

inspections, tests, and evaluations of that equipment to determine service

condition. If the results of those assessments show trends of unexpected

deterioration, management decides whether the problem can be corrected

by routine repairs or whether it is a capital need that requires

rehabilitation or major repairs.

The investment estimate for water supply is derived by local interests who

engage the services of architectural and/or engineering firms to determine

the costs for water supply projects. The local interests can also request

assistance from an Army Corps’ field office in establishing a project’s cost.

The local interests, rather than the Army Corps, relay that figure to the

Congress.

The Army Corps uses the water resources and hydropower investment

estimates to determine the financial resources needed to manage, repair,

and rehabilitate the assets under its jurisdiction and for new construction.

The Army Corps uses the water supply estimate to provide planning,

design, and construction assistance to projects sponsored by local

interests when specifically directed, authorized, and funded by the

Congress.

Inland Navigation System Planning: The Upper Mississippi RiverIllinois Waterway, Report of the National Research Council (Feb. 28,

2001).

How the Estimate is Used

Related Reports
Appendix II: Agencies’ Infrastructure

Investment Estimates

Page 39 GAO-01-835 U.S. Infrastructure

The Congress required the Environmental Protection Agency (EPA) to

survey public water systems that are eligible for assistance from the

Drinking Water State Revolving Fund (DWSRF) about their capital

investment needs every 4 years. EPA’s second survey, issued in February

2001, estimated that $150.9 billion (in current 1999 dollars) was needed

from 1999 to 2018. Of that amount, $31.2 billion was needed to comply

with existing and proposed regulations of the Safe Drinking Water Act.

The major strengths and limitations of EPA’s estimate are summarized in

figure 7. We have not done prior work related to EPA’s investment

estimate or data used for the estimate. The amount of information we

present concerning the estimate does not imply that it is better or worse

than others.

Figure 7: Strengths and Limitations of EPA’s Investment Estimate for Drinking

Water Facilities

Note: We considered procedures that reflected leading practices and factors that enhanced the

soundness or completeness of an estimate to be strengths of an estimate. We considered factors

that detracted from the soundness or completeness of an estimate or its source data to be limitations

of an estimate.

a

Reflects a leading practice.

In contrast to EPA’s estimate, the Water Infrastructure Network (WIN)—a

consortium of 21 industry, municipal, and nonprofit associations—

EPA’s Investment

Estimate for Drinking

Water Facilities
Appendix II: Agencies’ Infrastructure

Investment Estimates

Page 40 GAO-01-835 U.S. Infrastructure

estimated that investment needs for drinking water will average about $24

billion per year through 2019 (expressed in constant 1997 dollars). Of the

$24 billion estimated by WIN, $19 billion is for capital investment and $5

billion represents financing costs.

EPA’s estimate was derived from a nationwide survey mailed to medium

and large-sized water systems. All of the nation’s largest systems (serving

more than 40,000 people) and a random sample of medium systems

(serving more than 3,300 people and fewer than 40,000 people) were

included in the survey. The water systems were asked to submit

documentation of the purpose and scope of each project so that EPA

could verify that the projects met the eligibility criteria for funding by the

DWSRF. EPA also required that each project cost be supported by

documentation indicating that the cost had undergone an adequate degree

of professional review. The systems returned the completed

questionnaires and supporting documentation to the states for review. The

states had the option of providing supplemental documentation on the

project or its cost. The states then forwarded the completed

questionnaires to EPA for review. EPA reviewed the project components

that were included in cost estimates, modeled costs for projects that

lacked cost documentation, and deleted projects that were ineligible for

funding under the DWSRF. The infrastructure demands of small systems

were obtained through site visits to approximately 599 systems, with at

least 6 systems selected in each state. EPA conducted an additional 100

site visits to assess the demands of not-for-profit noncommunity water

systems. The survey was designed to provide state-level estimates of

medium and large systems and national-level estimates of small systems

with a precision target of 95 percent +/- 10 percent. A precision target of 95

percent +/- 30 percent was established for the not-for-profit

noncommunity water systems.

The estimates, however, might understate water supply needs because

some systems submitted cost estimates covering 2 to 5 years rather than

the 20-year period requested by EPA. Further uncertainties exist with the

estimate because the water supply survey excluded costs arising solely

from population growth.

EPA uses the results of the most recent survey to allocate monies from the

DWSRF to the states, basing each state’s allocation on its share of the total

national investment amount, with a minimum allotment of 1 percent of

available funds. Each state develops a priority system for funding projects

How the Estimate Was

Developed

How the Estimate is Used
Appendix II: Agencies’ Infrastructure

Investment Estimates

Page 41 GAO-01-835 U.S. Infrastructure

based on public health criteria specified in the 1996 Safe Drinking Water

Act. In addition, EPA uses the survey as a tool for allocating the Tribal SetAside (up to 1.5 percent of the DWSRF annual appropriation) to American

Indian and Alaskan native village water systems.

Congressional Budget Office, Statement of Perry Beider before the

Subcommittee on Environment and Hazardous Materials, Committee on

Energy and Commerce, U.S. House of Representatives (Mar. 28, 2001).

EPA Office of Water, Drinking Water Infrastructure Needs Survey:

Second Report to Congress (EPA 816-R-01-004, Feb. 2001).

Water Infrastructure Network, Clean & Safe Water for the 21st Century:

A Renewed National Commitment to Water and Wastewater

Infrastructure (undated, available from the American Water Works

Association).

EPA periodically reports to the Congress on the nation’s investment needs

for municipal water pollution control facilities, primarily wastewater

treatment facilities. In the 1996 clean water needs survey report, EPA

estimated that $139.5 billion (in current 1996 dollars) was needed over the

years 1996 to 2016 to satisfy water pollution control needs. The total

included $44.0 billion for wastewater treatment, $10.3 billion for upgrading

existing wastewater collection systems, $21.6 billion for new sewer

construction, and $44.7 billion for controlling combined sewer overflows.

The investment estimate included costs for facilities used in conveyance,

storage and treatment, and recycling and reclamation of municipal

wastewater. In addition, the estimate included the costs for structural and

nonstructural measures to develop and implement stormwater and

nonpoint source pollution programs. The overall investment estimate did

not include costs that were ineligible for federal assistance under Title VI

of the Clean Water Act, such as house connections to sewers and costs to

acquire land that is not a part of the treatment process. The estimate did

not include information on private wastewater treatment facilities and

those serving Indian tribes and Alaskan native villages. More recently, EPA

estimated that the amount may be closer to $220 billion because some

needed work probably had not been documented and reported by the

states. EPA expects to submit its next clean water needs survey report to

the Congress in August 2002.

Related Reports

EPA’s Investment

Estimate for

Wastewater Facilities
Appendix II: Agencies’ Infrastructure

Investment Estimates

Page 42 GAO-01-835 U.S. Infrastructure

The major strengths and limitations of EPA’s investment estimate for

wastewater facilities are summarized in figure 8. We have not done prior

work related to EPA’s investment estimate or data used for the estimate.

The amount of information we present concerning the estimate does not

imply that it is better or worse than others.

Figure 8: Strengths and Limitations of EPA’s Investment Estimate for Wastewater

Facilities

Note: We considered procedures that reflected leading practices and factors that enhanced the

soundness or completeness of an estimate to be strengths of an estimate. We considered factors

that detracted from the soundness or completeness of an estimate or its source data to be limitations

of an estimate.

a

Reflects a leading practice.

EPA maintains a database of cost and technical information on publicly

owned wastewater treatment facilities, which is used to develop the

investment estimate. The database included about 16,000 wastewater

treatment facilities and 21,000 sewage collection systems in 1996, when

the last estimate was made. The database includes information on

individual facilities’ projects and programs that target documented water

quality or public health problems. EPA periodically requests information

from the states to update this database. In the 1996 clean water needs

survey, the states were asked to identify projects to build or expand

treatment facilities to accommodate the capacity required by the existing

How the Estimate Was

Developed
Appendix II: Agencies’ Infrastructure

Investment Estimates

Page 43 GAO-01-835 U.S. Infrastructure

population over the next 20 years. EPA also requested the states to update

the documentation for projects already in the database with estimated

costs greater than $5 million if the documentation was dated prior to 1990.

EPA reviewed all documentation submitted by the states to ensure

compliance with its established criteria. Generally, documentation—such

as capital improvement plans—was acceptable if it included details

concerning the proposed project, such as a definition of the problem, a

description of the solution, and cost estimates. If the documentation

lacked cost estimates, EPA estimated the cost using models. However, the

documentation provided to EPA sometimes covered only a 5-year period—

not the 20-year period asked for. Therefore, EPA officials believe the

estimates are conservative.

In addition, EPA modeled states’ costs for combined sewer overflows

(releases of raw sewage from systems that convey sewage and stormwater

in the same pipes) and activities to control stormwater runoff and

nonpoint sources of pollution. Furthermore, EPA reported that it believes

the investment estimates were understated for sanitary sewer overflows

(releases of raw sewage from sanitary sewer collection systems) and that

it was developing updated cost estimates separately from the 1996 clean

water needs survey.

According to EPA, the clean water needs survey is also used to assist the

federal government and the states in program planning, policy evaluation,

and program management and to inform the Congress of the magnitude of

the needs. Private firms, public interest groups, and trade associations use

the survey information in marketing, cost estimating, and policy formation.

EPA 1996 Clean Water Needs Survey (CWNS) Report to Congress (EPA

832-R-97-003, Sept. 1997).

In 1999, the Federal Aviation Administration (FAA) submitted to the

Congress its most recent investment estimate for the nation’s airports—

$35.1 billion (in constant 1998 dollars) for the years 1998 to 2002. A

significant portion of this estimate is for projects that will bring existing

airports up to current design standards (37 percent), develop passenger

terminal buildings (16 percent), or add capacity to congested airports (13

percent) at 3,561 airports and proposed airports in the United States. The

estimate only includes projects that are eligible for funding under FAA’s

Airport Improvement Program. The major strengths and limitations of the

How the Estimate is Used

Related Reports

FAA’s Investment

Estimate for Airports
Appendix II: Agencies’ Infrastructure

Investment Estimates

Page 44 GAO-01-835 U.S. Infrastructure

estimate are summarized in figure 9. In a previous report, we reviewed the

database used to develop the estimate, and we have included the results of

that review in our analysis. The amount of information we present

concerning the estimate does not imply that it is better or worse than

others.

Figure 9: Strengths and Limitations of FAA’s Investment Estimate

Note: We considered procedures that reflected leading practices and factors that enhanced the

soundness or completeness of an estimate to be strengths of an estimate. We considered factors

that detracted from the soundness or completeness of an estimate or its source data to be limitations

of an estimate.

a

Reflects a leading practice.

FAA determined its investment estimate using the National Plan of

Integrated Airport Systems (NPIAS) database. NPIAS includes the

estimated cost of individual infrastructure investment projects requested

by airports. The projects originate primarily from airport plans, including

master plans. Airport officials may consider noncapital alternatives to

address unmet infrastructure requirements when producing these plans.

For example, officials may consider altering operational procedures or

practices to allow more airplanes to use one runway instead of requesting

funds for an additional runway. If noncapital alternatives do not exist,

airport officials request funding for a capital project within their plans,

which contain specific proposals and cost estimates for each project. FAA

How the Estimate Was

Developed
Appendix II: Agencies’ Infrastructure

Investment Estimates

Page 45 GAO-01-835 U.S. Infrastructure

officials in field offices review each project within each airport plan to

determine if the project is eligible and justified. A project is eligible if it

qualifies for federal funds under the Airport Improvement Program.19 A

project is justified based on a judgmental decision by FAA district

officials. For example, one airport in central Texas proposed adding four

new runways to the airport, which FAA officials considered unjustified

because the amount of air traffic served by the airport was insufficient to

merit the additional runways. Projects and plans that are approved by FAA

at the district level are then entered into the NPIAS database, along with

the estimated costs. FAA officials in Washington then review the data in

NPIAS and ensure that district officials have included only projects that

are eligible for federal funding and are justified. FAA officials add up the

estimated cost of these projects and produce an overall investment

estimate.

FAA submits the estimate to the Congress, as required by statute.

Report to Congress: National Plan of Integrated Airport Systems

(NPIAS) (1998-2002). U.S. Department of Transportation, Federal

Aviation Administration (Mar. 12, 1999).

Airport Development Needs: Estimating Future Costs (GAO/RCED-97-99,

Apr. 7, 1997).

Airport Financing: Funding Sources for Airport Development

(GAO/RCED-98-71, Mar. 12, 1998).

In May 2000, FHWA submitted to the Congress its most recent biennial

estimate of a range of investment needs for the nation’s highway and

bridge investment needs. First, it estimated that $83.4 billion20 per year

over 20 years (1998 to 2017) in highway investment would be economically

justified based on the benefits of the investment exceeding the cost.

Second, it estimated that $50.8 billion per year over 20 years would be

 19Generally, the Airport Improvement Program allows for all types of airport development

except for automobile parking structures, hangars, air cargo buildings, or the revenue

producing areas of large terminals.

20 FHWA’s estimate is in constant 1997 dollars.

How Estimate is Used

Related Reports

FHWA’s Investment

Estimate for

Highways
Appendix II: Agencies’ Infrastructure

Investment Estimates

Page 46 GAO-01-835 U.S. Infrastructure

needed to maintain the current physical condition of the nation’s

highways. Third, it estimated that $53.9 billion a year over 20 years would

be needed to maintain the current cost to users (such as travel-time costs,

vehicle-operating costs, and crash costs). These estimates of highway

investment cover all public road mileage—3.95 million miles in 1997.21 The

major strengths and limitations of FHWA’s investment estimate are

summarized in figure 10. In a June 2000 report, we reviewed FHWA’s

model used to develop these estimates, and we have included the results

of that review in our analysis. The amount of information we present

concerning the estimate does not imply that it is better or worse than

others.

Figure 10: Strengths and Limitations of FHWA’s Investment Estimate

Note: We considered procedures that reflected leading practices and factors that enhanced the

soundness or completeness of an estimate to be strengths of an estimate. We considered factors

that detracted from the soundness or completeness of an estimate or its source data to be limitations

of an estimate.

a

Reflects a leading practice.

 21 While FHWA also includes bridge investment requirements in the report to Congress, we

have only included FHWA’s estimate for highways in this analysis.
Appendix II: Agencies’ Infrastructure

Investment Estimates

Page 47 GAO-01-835 U.S. Infrastructure

FHWA developed the estimate using data from a statistically drawn

national-level sample of about 125,000 highway segments throughout the

United States. This sample included data on a variety of highway

conditions, including pavement roughness, traffic levels, and lane width.

The states also provided FHWA with forecasts on such matters as travel

growth. FHWA staff reviewed the data submitted by the states and looked

for anomalies or unusual patterns. FHWA asked the states to correct

serious flaws and improve data submission for minor flaws. Finally, FHWA

division offices periodically reviewed state data collection procedures to

ensure consistency among states. The corrected information was inputted

into FHWA’s Highway Performance Monitoring System.

FHWA primarily used the Highway Economic Requirements System

(HERS) model to determine future investment requirements. It assessed

the current condition of the sample highway segments and then projected

future condition and performance of the segments based on expected

changes in factors such as traffic volume. Based on this information, the

model simulated the effects of infrastructure improvements for the

highway segments and compared the relative benefits and costs associated

with alternative improvement options. While FHWA’s model analyzes

these sample sections individually, the model is designed to provide

estimates of investment requirements valid at the national level and does

not provide improvement recommendations for individual highway

segments. FHWA acknowledges that some HERS data, particularly

emissions data, varies in quality.

To reach a total estimate for highway investment requirements, FHWA

supplements results of this model with external adjustments to account

for (1) classes of highways not included in either the statistical sample or

the model22 and (2) certain types of capital investment. FHWA

acknowledges that the estimates are not based on benefit-cost analysis

and are less rigorous than the HERS results. The model currently does not

directly consider new roads or system enhancements—improvements

primarily related only to safety, traffic operations, or environmental

enhancements—as part of its analysis. According to FHWA’s most recent

estimate, FHWA assumed those types of improvements will consume the

 22 Rural minor collectors, rural local roads, and urban local roads are the three classes of

highways not included in the statistical sample, and their future needs are not estimated by

the model.

How the Estimate Was

Developed
Appendix II: Agencies’ Infrastructure

Investment Estimates

Page 48 GAO-01-835 U.S. Infrastructure

same overall percentage of highway capital investment as they have in the

past.

FHWA has had transportation and economic experts review the model to

assess and improve it. In June 1999, the experts found that FHWA has

strengthened the model over time and that recent refinements have

increased its applicability and credibility. Also, FHWA staff and

consultants continually look for ways to improve the model. For example,

FHWA officials told us they plan to eliminate a computational shortcut for

their next estimates, which they plan to issue in 2002. FHWA used this

shortcut to approximate the lifetime benefits associated with an

improvement. In addition, the National Cooperative Highway Research

Program is reviewing FHWA’s methodology for determining its investment

estimate.

We found the model was reasonable despite some limitations. First, the

model cannot completely reflect changes occurring among all highways in

the transportation network at the same time, since the model analyzes

each highway segment independently. Second, the model cannot estimate

the full range of uncertainties within which its estimates vary because it is

not designed to completely quantify the uncertainties associated with its

methods, assumptions, and data. In making estimates, the model relies on

a variety of estimating techniques and hundreds of variables, all of which

are subject to some uncertainties. For example, we have reported that

pavement roughness data reported by the states to FHWA are not

completely comparable, partly because the states use different devices to

measure roughness. Third, FHWA uses two different approaches in

compiling the estimate. The benefit-cost analysis used in the HERS model

is not comparable to the analysis used to estimate investment needs for

roads outside the sample and other kinds of road projects. Nevertheless,

FHWA combines these estimates and characterizes both as economically

justified.

The highway estimate provides federal officials a source of information for

decisionmaking concerning investments. In particular, legislative and

executive branch officials use the estimate to obtain general information

on the nation’s need for infrastructure investments. Also, some groups

may use the estimate in discussions about the level of federal funding for

highways.

How the Estimate is Used
Appendix II: Agencies’ Infrastructure

Investment Estimates

Page 49 GAO-01-835 U.S. Infrastructure

1999 Status of the Nation’s Highways, Bridges, and Transit: Conditions

& Performance. U.S. Department of Transportation, Federal Highway

Administration and Federal Transit Administration (May 2, 2000).

Highway Infrastructure: FHWA’s Model for Estimating Highway Needs

Is Generally Reasonable, Despite Limitations (GAO/RCED-00-133, June 5,

2000).

In May 2000, the Federal Transit Administration (FTA) submitted its

biennial estimate to the Congress on the nation’s mass transit systems,

including buses, rail cars, and ferries. The report covered 1998 to 2017 and

estimated investment requirements under four scenarios, depending on

whether the condition and/or the performance of existing mass transit

systems was maintained or improved. FTA estimated that the average cost

for these four scenarios ranged from $10.8 billion to $16.0 billion per year

(in constant 1997 dollars). This estimate is based on incomplete data and

imprecise predictions, which limit the usefulness of the estimate. The

major strengths and limitations of FTA’s investment estimates are

summarized in figure 11. We have not done prior work related to FTA’s

investment estimate or data used for the estimate. The amount of

information we present concerning the estimate does not imply that it is

better or worse than others.

Related Reports

FTA’s Investment

Estimate for Mass

Transit Systems
Appendix II: Agencies’ Infrastructure

Investment Estimates

Page 50 GAO-01-835 U.S. Infrastructure

Figure 11: Strengths and Limitations of FTA’s Investment Estimates

Note: We considered procedures that reflected leading practices and factors that enhanced the

soundness or completeness of an estimate to be strengths of an estimate. We considered factors

that detracted from the soundness or completeness of an estimate or its source data to be limitations

of an estimate.

a

Reflects a leading practice.

 FTA’s first scenario—“Maintain Conditions and Performance”—estimates

the capital investment needed to maintain the average condition of mass

transit assets over the 20-year period and add new capacity to maintain

current vehicle usage levels as passenger travel increases. The second

scenario—“Maintain Conditions and Improve Performance”—estimates

the investment needed to maintain the average existing conditions of mass

transit assets and to improve the service coverage and/or frequency of

mass transit service. The third scenario—“Improve Conditions and

Maintain Performance”—estimates the investment needed to bring the

average condition for each major asset type to “good” while maintaining

current vehicle usage levels as transit passenger travel increases. The

fourth scenario—“Improve Conditions and Improve Performance”—

estimates the investment needed to bring the average condition for each

major asset type to “good” and also improve service quality by increasing

the area covered by mass transit and/or increasing the frequency of mass

transit service. The estimates for these four scenarios taken from the

Department of Transportation’s 1999 Conditions and Performance report,

are shown in table 3.
Appendix II: Agencies’ Infrastructure

Investment Estimates

Page 51 GAO-01-835 U.S. Infrastructure

Table 3: Investment Estimates for Mass Transit

Scenario

Average annual cost

 (billions of dollars)

Maintain conditions and maintain performance $10.8

Maintain conditions and improve performance $14.4

Improve conditions and maintain performance $11.1

Improve conditions and improve performance $16.0

FTA developed its investment estimates using the National Transit Asset

Inventory. This inventory includes information on the age of buses and

railcars and on maintenance facilities. FTA estimates the condition of

buses and rail cars based on their age, using data gathered by the agency

over time from surveys of the condition of vehicles. The information for

this database is collected by every transit agency in an urbanized area that

receives federal assistance, according to an agency official.

FTA used the Transit Economic Requirements Model to determine the

future infrastructure and asset needs for transit. This computerized model

predicts the changes that will occur to transit infrastructure and vehicles

over time and the investments needed to maintain or improve current

conditions and performance of mass transit systems. To forecast needs for

the condition of assets, the model includes aggregate data on the condition

of assets based on a 1 to 5 scale and uses a benefit-cost analysis to

determine if the benefit of replacing an asset (and thus improving its

condition) outweighs the cost of the replacement. If the benefit outweighs

the cost, the project is added to the final cost as reported by the model. To

forecast needs for the performance of assets, FTA uses predictions of the

number of future passengers developed by Metropolitan Planning

Organizations (MPO). FTA uses this information to determine future

capacity needs. Capacity needs are expressed as either more frequent

service or a new system. The Transit Cooperative Research Program7

 is

reviewing FTA’s methodology for determining its investment estimates.

According to FTA, the results of this review will be considered in

developing FTA’s next estimates in 2002.

Missing data and imprecise predictions limit the accuracy of the

investment estimates. For example, the database lacks future travel

 7

 The Transit Cooperative Research Program is a cooperative effort of FTA, the

Transportation Research Board, the Transit Development Corporation, and the American

Public Transportation Association that conducts and disseminates transit information.

How the Estimates Were

Developed
Appendix II: Agencies’ Infrastructure

Investment Estimates

Page 52 GAO-01-835 U.S. Infrastructure

forecasts for the New York City area. In addition, according to FTA, some

MPOs submit data that vary in quality. According to FTA, the agency also

does not have complete information on the condition of fare collection

systems, stations, and maintenance facilities that are part of the mass

transit systems. Finally, according to FTA, it is difficult to predict the

growth in travel over time.

According to FTA, the investment estimate is used to provide broad,

general support for FTA’s budget and to help tie the budget to the levels of

performance discussed in the estimate. The estimate provides information

to FTA and the Congress on changes in the condition and performance of

mass transit. Finally, the estimate serves as a baseline for performance

goals mandated under the Government Performance and Results Act and

identifies the performance goals FTA is likely to achieve in the future.

1999 Status of the Nation’s Highways, Bridges, and Transit: Conditions

and Performance, U.S. Department of Transportation: Federal Highway

Administration and Federal Transit Administration (May 2, 2000).

GSA’s data indicated that, as of May 2, 2001, it would cost $4.58 billion for

repairs and alterations of public buildings. This estimate included both

items currently needed and future work items to be undertaken over the

next 5 years. Examples of repairs and alterations include repairs to major

building components, such as electrical, heating, ventilation, and air

conditioning systems; fire alarm and sprinkler systems; and other fire and

life safety items. In fiscal year 2001, GSA estimated that an additional $250

million to $300 million was needed annually over the following 5 years for

new building construction for border stations and federal office buildings.

In addition, in fiscal year 2001, the Judicial Conference estimated $500

million was needed annually over the following 5 to 7 years to construct

new courthouses.9

 The major strengths and limitations of these

investment estimates are summarized in figure 12. In previous reports, we

reviewed the database used to develop the estimate of repairs and

alterations, and we have included the results of that review in our analysis.

 9

The estimate for courthouse construction comes from the Judicial Conference of the

United States’ 5 to 7 year courthouse project plan. The Judicial Conference is composed of

the Chief Justice of the United States and other federal judges who consider policy and

legislative and administrative issues affecting the federal courts.

How the Estimate is Used

Related Reports

GSA’s Investment

Estimate for Public

Buildings
Appendix II: Agencies’ Infrastructure

Investment Estimates

Page 53 GAO-01-835 U.S. Infrastructure

The amount of information we present concerning the estimate does not

imply that it is better or worse than others.

Figure 12: Strengths and Limitations of GSA’s Investment Estimates

Note: We considered procedures that reflected leading practices and factors that enhanced the

soundness or completeness of an estimate to be strengths or an estimate. We considered factors

that detracted from the soundness or completeness of an estimate or its source data to be limitations

of an estimate.

a

Reflects a leading practice.

GSA develops cost estimates when it determines that repairs and

alterations are needed.10 GSA’s overall estimate for repairs and alterations

was derived from information contained in the Inventory Reporting

Information System (IRIS), a database of projects. The projects are

identified and entered into the database at the regional level. The

projected cost data are derived from various sources, including

contractors, safety inspectors, and building engineers. The database

includes current and future projects. Work items in the database may be

updated daily by regional office staff as new work is identified and

completed work is deleted.

 10GSA manages its infrastructure needs through the Capital Investment and Leasing

Program. Under this program, it works with other agencies to determine space needs and

then determines the best way to meet these needs within anticipated budget levels.

How the Investment

Estimates Were Developed
Appendix II: Agencies’ Infrastructure

Investment Estimates

Page 54 GAO-01-835 U.S. Infrastructure

GSA’s process for developing investment estimates for new construction

projects also begin, with evaluations at the regional level. GSA regional

staff evaluate existing facilities, the availability of sites for new

construction, and the disposition of old facilities. Using a computer model,

GSA’s regional staff compare the cost of construction to the cost of leasing

space. The computer model uses cost estimates based on benchmark

values that are specified for locations around the country. The regional

offices submit their recommendations for construction projects along with

the computer analysis and other data to GSA headquarters for review.

GSA identifies projects that make up its overall investment estimate as

prospectus-level or nonprospectus-level: prospectus-level projects have

estimated costs of $1.99 million or more, and nonprospectus-level projects

have estimated costs greater than $10,000 and less than $1.99 million.11

GSA prioritizes prospectus-level investment projects as preparation for the

annual budget process. The regions identify proposed projects and submit

the proposals, along with supporting data, to GSA headquarters for review

and funding consideration. There, headquarters staff and the capital

investment panel12 assess the merits of each proposed project and rank the

projects with the aid of computer-based software called “Expert Choice.”

The model uses five weighted criteria to rank the projects that are

competing for funding. These criteria consider, in weighted order, (1)

economic return—whether the project will generate additional revenue for

the Federal Building Fund, the source of funds for GSA’s repair and

alterations and construction projects; (2) project risk—whether the

project will begin in the planned fiscal year and use the authorized

funding; (3) project urgency—whether the project will correct building

conditions that are unsafe or involve severe deterioration; (4) community

planning—whether the project will protect the building’s historic

significance and positively impact the local community; and (5) customer

urgency—the project will have a positive impact on the tenant agencies’

operations or mission. GSA officials, however, stated that the Expert

Choice model is not the sole basis for decisions; the model is not intended

to replace the professional judgment and knowledge of staff. During the

 11GSA’s Administrator is authorized to annually adjust the dollar threshold that defines

prospectus-level projects. The threshold was $1.99 million for fiscal year 2001 projects.

GSA must provide detailed support for each prospectus-level project that it plans to

undertake and have OMB approve and the Congress fund these projects before starting

work.

12The members of the capital investment panel vary from year to year, but the panel always

includes senior managers from GSA headquarters and regional offices.
Appendix II: Agencies’ Infrastructure

Investment Estimates

Page 55 GAO-01-835 U.S. Infrastructure

assessment process, each project is assigned a numerical score and then

ranked in order of priority. The projects with the higher scores usually

became candidates for funding. For fiscal year 2001, GSA assessed the

merits of 27 repair and alterations design projects proposed by its regional

staff and selected 12 to recommend for funding.

In 2000, we reported problems with the quality of data contained in IRIS.

For example, we found that not all repairs were included, some repairs

that were included were already in progress or completed, some data were

incorrectly reported, and some cost estimates for repairs were not current.

In addition, the projects that make up the estimate for repairs and

alterations are expressed in unadjusted dollars; in some cases the year that

the estimate was made is not included in the database. We have also

reported that the lack of a multiyear plan for repairs and alterations affects

the agency’s ability to make investment decisions.

In response to recommendations made in our previous reports, GSA is

engaged in several activities intended to improve its IRIS database and

enhance the management of its inventory of buildings. For example, the

agency is undertaking efforts to validate the quality and consistency of

IRIS, such as revising work item codes to be more descriptive. In addition,

the agency has significantly reduced the number of overdue work items in

the database, thereby improving the quality of the database, according to

GSA officials. GSA is also implementing a building condition assessment

survey, which provides automated cost estimates using industry-accepted

software. GSA began a pilot program in one region in 2000 and has

expanded the program to its other 10 regions. The agency expects to

complete initial building condition assessments on the entire inventory of

buildings by the end of September 2001. It plans to review information

gathered in these assessments and enter new work items into the IRIS

database. Existing work items will be updated with the results of the

condition assessments.

GSA’s IRIS database is used as input in determining funding priorities. For

prospectus-level projects, GSA’s headquarters staff review the estimates

submitted by the regions, apply the Expert Choice model and professional

judgment, and then select projects for inclusion in the agency’s budget

proposal that is sent to OMB. For nonprospectus-level repairs and

alterations projects, GSA’s headquarters staff allocate a portion of all

funds for repairs and alterations to each regional office based on regional

priorities.

How the Estimate Is Used
Appendix II: Agencies’ Infrastructure

Investment Estimates

Page 56 GAO-01-835 U.S. Infrastructure

Federal Buildings: Funding Repairs and Alterations Has Been A

Challenge—Expanded Financing Tools Needed (GAO-01-452, Apr. 12,

2001).

Federal Buildings: Billions Are Needed for Repairs and Alterations

(GAO/GGD-00-98, Mar. 30, 2000).

General Services Administration: Many Building Security Upgrades

Made but Problems Have Hindered Program Implementation (GAO-TGGD-98-141, June 4, 1998).

Federal Buildings: Actions Needed to Prevent Further Deterioration and

Obsolescence (GAO/GGD-91-57, May 13, 1991).

Related Reports
Appendix III: Comments From the

Environmental Protection Agency

Page 57 GAO-01-835 U.S. Infrastructure

Appendix III: Comments From the

Environmental Protection Agency
Appendix III: Comments From the

Environmental Protection Agency

Page 58 GAO-01-835 U.S. Infrastructure
Appendix IV: Comments From the General

Services Administration

Page 59 GAO-01-835 U.S. Infrastructure

Appendix IV: Comments From the General

Services Administration

Note: GAO comments

supplementing those in

the report text appear at

the end of this appendix.

See comment 3.

See comment 2.

See comment 1.
Appendix IV: Comments From the General

Services Administration

Page 60 GAO-01-835 U.S. Infrastructure
Appendix IV: Comments From

the General Services

Administration

Page 61 GAO-01-835 U.S. Infrastructure

The following are GAO’s comments on GSA’s letter dated July 6, 2001.

1. We revised the report to indicate that the database is used as input to

funding decisions.

2. We note in the report that GSA uses economic benefits as one criterion

ranking and selecting projects for funding.

3. We note in the report that GSA is engaged in activities intended to

improve the quality and consistency of its database on repairs and

alterations and provide examples of those activities.

GAO Comments
Appendix V: GAO Contacts and

Staff Acknowledgments

Page 62 GAO-01-835 U.S. Infrastructure

Peter F. Guerrero (202) 512-2834

Teresa F. Spisak (202) 512-2834

Other key contributors to this report were Phillis Riley, Sharon Dyer, John

Shumann, Christine Bonham, Catherine Colwell, Michael Curro, William

Dowdal, Timothy Guinane, Trina Lewis, Lisa Turner, and Alwynne Wilbur.

Appendix V: GAO Contacts and Staff

Acknowledgments

GAO Contacts

Acknowledgments

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