Testimony

Before the Subcommittee on 

Transportation, Treasury and Independent 

Agencies, Committee on Appropriations, 

House of Representatives 

United States General Accounting Office 

GAO

Hearing held on 

May 8, 2003 

Statement Submitted on 

May 8, 2003 

FEDERAL-AID HIGHWAYS

Cost and Oversight of Major 

Highway and Bridge 

Projects—Issues and 

Options 

Statement for the Record by 

JayEtta Z. Hecker, Director, 

Physical Infrastructure Issues 

GAO-03-764T 
GAO and others have reported that cost growth has occurred on major 

highway and bridge projects; however, overall information on the amount of 

and reasons for cost increases is generally not available because neither 

FHWA nor state highway departments track this information for entire 

projects. GAO has found that costs grow, in part, because initial cost 

estimates, which are generally developed to compare project alternatives 

during a required environmental review phase, are not reliable predictors of 

projects’ total costs. In addition, FHWA approves the estimated costs of 

major projects in phases, rather than agreeing to the total costs at the outset. 

By the time FHWA approves the total cost of a major project, a public 

investment decision might, in effect, already have been made because 

substantial funds could already have been spent on designing the project and 

acquiring property. FHWA’s implementation of a TEA-21 requirement that 

states develop annual finance plans for major projects estimated to cost $1 

billion or more has improved the oversight of some major projects, and 

FHWA is incorporating more risk assessment in its day-to-day oversight 

activities. 

Should Congress determine that enhancing federal oversight of major 

highway and bridge projects is needed and appropriate, GAO has identified 

options, including improving information on the cost performance of 

selected major projects, improving the quality of initial cost estimates, and 

enhancing and clarifying FHWA’s role in reviewing and approving major 

projects. Adopting any of these options would require balancing the states’ 

sovereign right to select projects and desire for flexibility and more 

autonomy with the federal government’s interest in ensuring that billions of 

federal dollars are spent efficiently and effectively. In addition, the 

additional costs of each of these options would need to be weighed against 

its potential benefits. 

Major Federal-aid Highway Projects 

Source: Art Explosion.

Improving the oversight and 

controlling the costs of major 

highway and bridge projects is 

important for the federal 

government, which often pays 80 

percent of these projects’ costs. 

Widespread consensus exists on 

the need to fund such projects, 

given the doubling of freight traffic 

and worsening congestion 

projected over the next 20 years, 

yet growing competition for limited 

federal and state funding dictates 

that major projects be managed 

efficiently and cost effectively. 

The Federal Highway 

Administration (FHWA) provides 

funding to the states for highway 

and bridge projects through the 

federal-aid highway program. This 

funding is apportioned to the 

states, and state departments of 

transportation choose eligible 

projects for funding. FHWA 

provides oversight to varying 

degrees, and, under the 

Transportation Equity Act for the 

21st Century (TEA-21), FHWA and 

each state enter into an agreement 

documenting the types of projects 

the state will oversee. 

This statement for the record 

summarizes cost and oversight 

issues raised in reports and 

testimonies GAO has issued since 

1995 on major highway and bridge 

projects and describes options that 

GAO has identified to enhance 

federal oversight of these projects, 

should Congress determine that 

such action is needed and 

appropriate. 

www.gao.gov/cgi-bin/getrpt?GAO-03-764T.

To view the full testimony, including the scope 

and methodology, click on the link above. 

For more information, contact JayEtta Hecker 

at (202) 512-2834 or heckerj@gao.gov. 

Highlights of GAO-03-764T, a statement 

for the record for the Subcommittee on 

Transportation, Treasury, and 

Independent Agencies, House 

Committee on Appropriations 

May 8, 2003 

FEDERAL-AID HIGHWAYS

Cost and Oversight of Major Highway and 

Bridge Projects—Issues and Options 
Page 1 GAO-03-764T 

Mr. Chairman and Members of the Subcommittee: 

We appreciate the opportunity to offer this statement for the record 

concerning efforts by the Federal Highway Administration (FHWA) to 

oversee and control the costs of major highway and bridge projects—80 

percent of which are often paid by the federal government.1

 With freight 

traffic expected to double and congestion projected to worsen over the 

next 20 years, widespread consensus exists on the need to maintain and 

improve the nation’s surface transportation infrastructure. Given that both 

the federal government and state governments are facing budget deficits in 

the hundreds of billions of dollars in the coming years, it is even more 

important that major highway and bridge projects be managed efficiently 

and cost effectively. While effectively managing these projects involves 

many factors other than cost—including safety, quality, mobility, and 

environmental impact—cost increases on major projects often take center 

stage, especially in light of the growing competition for federal dollars. 

My statement today is based on a body of work we have performed and 

products we have issued since 1995 on the costs and oversight of major 

highway and bridge projects. (See the list of related GAO products at the 

end of this statement.) Today’s statement (1) summarizes these cost and 

oversight issues, (2) discusses FHWA’s recent efforts to improve the 

management and oversight of these projects, and (3) describes options we 

have identified that might enhance federal oversight of these projects, 

should Congress determine that such action is needed and appropriate. 

In summary: 

• We have reported—as has the Department of Transportation’s (DOT) 

Inspector General and various state audit and evaluation agencies—that 

cost growth has occurred on many major highway and bridge projects. 

However, overall information on the amount of and reasons for cost 

increases on major projects is generally not available because neither 

FHWA nor state highway departments track this information over the life 

of projects. While many factors can cause costs to increase, we have 

found, on projects we have reviewed, that costs increased, in part, because 

initial cost estimates were not reliable predictors of the total costs or 

financing needs of projects. Rather, these estimates were generally 

 1

There is currently no standard definition of what constitutes a “major” project. The 

definition has been applied to projects ranging from those with a total cost of as little as 

$10 million to those estimated to cost $1 billion or more. 
Page 2 GAO-03-764T 

developed for the environmental review—whose purpose was to compare 

project alternatives, not to develop reliable cost estimates. In addition, we 

reported in 19972

 that FHWA had done little to ensure that containing costs 

was an integral part of the states’ project management, in part because 

FHWA believed it had no mandate to either encourage or require states to 

adopt such practices. Finally, we have noted that FHWA generally 

approves the estimated cost of a major project in phases, when individual 

project segments are ready for construction, rather than agreeing to the 

total cost of the entire project at the outset. By the time FHWA approves 

the total cost of a major project, a public investment decision might, in 

effect, already have been made because substantial funds would already 

have been spent on designing the project and acquiring property, and 

many of the increases in the project’s estimated costs might already have 

occurred. 

• Since 1998, FHWA has taken a number of steps to improve the 

management and oversight of major projects, including implementing a 

requirement of the Transportation Equity Act for the 21st Century (TEA21) that states develop, and that the Secretary approve, annual finance 

plans for any highway or bridge project estimated to cost $1 billion or 

more. As of May 2003, FHWA had approved finance plans for 10 federalaid highway projects and expected finance plans to be prepared 5 

additional projects in the future.3

 As I testified in May 2002,4 while 

indications are that the finance plan requirement has improved the 

oversight of some major projects, many multibillion-dollar corridor 

projects representing a substantial investment of federal funds will not be 

covered by the requirement because the projects will be constructed as a 

series of smaller projects that will cost less than $1 billion each. Other 

steps FHWA has taken to improve its oversight include introducing greater 

risk-based oversight into its day-to-day activities and attempting to resolve 

conflicting interpretations of its oversight role that it believes have 

occurred since 1991, when the states began assuming greater 

responsibility for approving the design and construction of many projects. 

 2

Transportation Infrastructure: Managing the Costs of Large-Dollar Highway Projects 

(GAO/RCED-97-47, Feb. 27, 1997). 

3

FHWA also requires finance plans for projects that funded under the Transportation 

Infrastructure Finance and Innovation Act. Currently, 3 additional projects funded under 

the act have approved finance plans. 

4

U.S. General Accounting Office, Transportation Infrastructure: Cost and Oversight 

Issues on Major Highway and Bridge Projects, GAO-02-702T (Washington, D.C.: May 1, 

2002). 
Page 3 GAO-03-764T 

Finally, FHWA has taken actions to respond to a DOT task force report on 

the management and oversight of major transportation projects,5

 such as 

developing and publishing core competencies for managers overseeing 

major projects. However, FHWA has not yet developed goals or 

measurable outcomes linking its oversight activities to its business goals in 

its performance plan, as an FHWA task force recommended in 2001. As I 

testified in May 2002, until FHWA takes these actions, it will be limited in 

its ability to judge the success of its efforts or to know whether conflicting 

interpretations of the agency’s roles have been resolved. 

• Our past work, including my testimony of May 2002, presented options for 

enhancing FHWA’s role in overseeing the costs of major highway and 

bridge projects, should Congress, in reauthorizing TEA-21, determine that 

such action is needed and appropriate. These options include improving 

information on the cost performance of selected major highway and 

bridge projects, improving the quality of initial cost estimates, and 

enhancing and clarifying FHWA’s role in reviewing and approving major 

projects. Each of these options entails a commitment of additional 

resources and poses costs and challenges that must be weighed against 

the option’s potential benefits. Adopting one or more of these options 

would require Congress to determine the appropriate federal role—

balancing the state’s sovereign right to select its projects and desire for 

flexibility and more autonomy with the federal government’s interest in 

ensuring that billions of federal dollars are spent efficiently and 

effectively. 

FHWA provides funding to the states for roadway construction and 

improvement projects through various programs collectively known as the 

federal-aid highway program.6

 Most highway program funds are 

distributed to the states through annual apportionments according to 

statutory formulas; once apportioned, these funds are generally available 

to each state for eligible projects. The responsibility for choosing projects 

to fund generally rests with state departments of transportation and local 

planning organizations. The states have considerable discretion in 

selecting specific highway projects and in determining how to allocate 

 5

Report of the ONE DOT Task Force on Oversight of Large Transportation Infrastructure 

Projects; December 2000 

6

Most of the funding for these programs is derived from highway user taxes, such as excise 

taxes on motor fuels, tires, and the sale of trucks and trailers, and taxes on the use of heavy 

vehicles. 

Background 
Page 4 GAO-03-764T 

available federal funds among the various projects they have selected. For 

example, section 145 of title 23 of the United States Code describes the 

federal-aid highway program as a federally assisted state program and 

provides that the federal authorization of funds, as well as the availability 

of federal funds for expenditure, “shall in no way infringe on the sovereign 

right of the states to determine which projects shall be federally financed.” 

While FHWA approves state transportation plans, environmental impact 

assessments, and the acquisition of property for highway projects, its role 

in approving the design and construction of projects varies. Relatively few 

projects are subject to “full” oversight, in which FHWA prescribes design 

and construction standards, approves design plans and estimates, 

approves contract awards, inspects construction progress, and renders 

final acceptance on projects when they are completed. Under TEA-21, 

FHWA exercises full oversight only of certain high-cost Interstate system 

projects.7

 For other federally assisted projects, there are two options. 

First, for a project that is not located on the Interstate system but is part of 

the National Highway System,8

 a state may assume responsibility for 

overseeing the project’s design and construction unless the state or FHWA 

determines that this responsibility is not appropriate for the state. Second, 

for a project that is not part of the National Highway System, the state is 

required to assume responsibility for overseeing the project’s design and 

construction unless the state determines that this responsibility is not 

appropriate for it. Under both options, TEA-21 requires FHWA and each 

state to enter into an agreement documenting the types of projects for 

which the state will assume oversight responsibilities. 

A major highway or bridge construction or repair project usually has four 

stages: (1) planning, (2) environmental review, (3) design and property 

acquisition, and (4) construction. The state’s activities and FHWA’s 

corresponding approval actions are shown in figure 1. 

 7

States may assume responsibilities for other types of Interstate system projects, including 

projects to resurface, restore, and rehabilitate Interstate roadways, and those Interstate 

construction or reconstruction projects estimated to cost less than $1 million. 

8

Designated in 1995, the 160,000-mile National Highway System consists of the Interstate 

Highway System and other principal arterial routes that serve major population centers, 

international border crossings, national defense requirements, and interstate and 

interregional travel needs. Other highways and roads make up the remaining 4 million 

miles of roads in the United States. 
Page 5 GAO-03-764T 

Figure 1: Stages of a Highway or Bridge Project 

Source: GAO. 

In TEA-21, Congress required states to submit annual finance plans to DOT 

for highway and bridge projects estimated to cost $1 billion or more. 

Congress further required each finance plan to be based on detailed 

estimates of the costs to complete the project and on reasonable 

assumptions about future increases in such costs. 
Page 6 GAO-03-764T 

Our work has raised issues concerning the cost and oversight of major 

highway and bridge projects, including the following: 

• Cost growth has occurred on many major highway and bridge projects. 

For example, on 23 of 30 projects initially expected to cost over $100 

million, our 1997 report identified increases ranging from 2 to 211 

percent—costs on about half these projects increased 25 percent or more.9

In addition, the DOT Inspector General has recently identified cost 

increases on major projects such as the Wilson Bridge, Springfield 

Interchange, and Central Artery/Tunnel projects. As I testified in 2002, 

reviews by state audit and evaluation agencies have also highlighted 

concerns about the cost and management of major highway and bridge 

programs.10 For example in January 2001, Virginia’s Joint Legislative Audit 

and Review Commission found that final project costs on Virginia 

Department of Transportation projects were well above their cost 

estimates and estimated that the state’s 6-year, $9 billion transportation 

development plan understated the costs of projects by up to $3.5 billion. 

The commission attributed these problems to several factors, including 

not adjusting estimates for inflation, expanding the scope of projects, not 

consistently including amounts for contingencies, and committing design 

errors.11

• Although cost growth has occurred on many major highway and bridge 

projects, overall information on the amount of and reasons for cost 

increases on major projects is generally not available because neither 

FHWA nor state highway departments track this information over the life 

of projects. Congressional efforts to obtain such information have met 

with limited success. For example, in 2000 the former Chairman of this 

subcommittee asked FHWA to provide information on how many major 

federal-aid highway projects had experienced large cost overruns. Because 

FHWA lacked a management information system to track this information, 

officials manually reviewed records for over 1,500 projects authorized 

 9

GAO/RCED-97-47 

10GAO-02-702T. 

11Joint Legislature Audit and Review Commission of the Virginia General Assembly, Review 

of Construction Costs and Time Schedules for Virginia Highway Projects, House 

Document No. 31 (Richmond: Jan. 9, 2001). 

Issues Identified with 

the Costs and 

Oversight of Major 

Highway and Bridge 

Projects 
Page 7 GAO-03-764T 

over a 4-year period.12 FHWA’s information, however, measured only the 

increases in costs that occurred after the projects were fully designed. 

Thus, cost increases that occurred during the design of a project—where 

we have reported that much of the cost growth occurs—were not reflected 

in FHWA’s data. In contrast to the federal-aid highway program, the Office 

of Management and Budget requires federal agencies, for acquisitions of 

major capital assets, to prepare baseline cost and schedule estimates and 

to track and report the acquisitions’ cost performance. These requirements 

apply to programs managed by and acquisitions made by federal agencies, 

but they do not apply to the federal-aid highway program, a federally 

assisted state program. 

• While many factors can cause costs to increase, we have found, on 

projects we have reviewed, that costs increased, in part, because initial 

cost estimates were not reliable predictors of the total costs or financing 

needs of projects. Rather, these estimates were generally developed for 

the environmental review—whose purpose was to compare project 

alternatives, not to develop reliable cost estimates. In addition, each state 

used its own methods to develop its estimates, and the estimates included 

different types of costs, since FHWA had no standard requirements for 

preparing cost estimates. For example, one state we visited for our 1997 

report included the costs of designing projects in its estimates, while two 

other states did not.13 We also found that costs increased on projects in the 

states we visited because (1) initial estimates were modified to reflect 

more detailed plans and specifications as projects were designed and (2) 

the projects’ costs were affected by, among other things, inflation and 

changes in scope to accommodate economic development over time. 

• In 1997, we reported that cost containment was not an explicit statutory or 

regulatory goal of FHWA’s full oversight. On projects where FHWA 

exercised full oversight, it focused primarily on helping to ensure that the 

applicable safety and quality standards for the design and construction of 

highway projects were met. According to FHWA officials, controlling costs 

was not a goal of their oversight and FHWA had no mandate in law to 

encourage or require practices to contain the costs of major highway 

projects. While FHWA influenced the cost-effectiveness of projects when it 

reviewed and approved plans for their design and construction, we found 

 12For the purposes of this analysis, FHWA identified major projects as those that were 

expected to cost $10 million or more to construct and had experienced cost increases of 25 

percent or more. FHWA identified 80 such major projects, 12 of which were part of the 

Central Artery/Tunnel project in Massachusetts. 

13GAO/RCED-97-47. 
Page 8 GAO-03-764T 

it had done little to ensure that cost containment was an integral part of 

the states’ project management. 

• Finally, we have noted that FHWA’s oversight and project approval 

process consists of a series of incremental actions that occur over the 

years required to plan, design, and build a project. In many instances, 

states construct a major project as a series of smaller projects, and FHWA 

approves the estimated cost of each smaller project when it is ready for 

construction, rather than agreeing to the total cost of the major project at 

the outset. In some instances, by the time FHWA approves the cost of a 

major project, a public investment decision may, in effect, already have 

been made because substantial funds have already been spent on 

designing the project and acquiring property, and many of the increases in 

the project’s estimated costs have already occurred. 

Since 1998, FHWA has taken a number of steps to improve the 

management and oversight of major projects. FHWA implemented TEA21’s requirement that states develop an annual finance plan for any 

highway or bridge project estimated to cost $1 billion or more. 

Specifically, FHWA developed guidance that requires state finance plans 

to include a total cost estimate for the project, adjusted for inflation and 

annually updated; estimates about future cost increases; a schedule for 

completing the project; a description of construction financing sources 

and revenues; a cash flow analysis; and a discussion of other factors, such 

as how the project will affect the rest of the state’s highway program. As of 

May 2003, FHWA had approved finance plans for 10 federal-aid highway 

projects and expected finance plans to be prepared for 5 additional 

projects at the conclusion of those projects’ environmental review phase.14

In addition, FHWA established a major projects team that currently tracks 

and reports each month on these 15 projects, and has assigned—or has 

requested funding to assign—a full-time manager to each project to 

provide oversight. These oversight managers are expected to monitor their 

project’s cost and schedule, meet periodically with project officials, assist 

in resolving issues and problems, and help to bring “lessons learned” on 

their projects to other federally assisted highway projects. 

 14FHWA also requires finance plans for projects that funded under the Transportation 

Infrastructure Finance and Innovation Act. Currently, 3 additional projects funded under 

the act have approved finance plans. 

Efforts by FHWA to 

Improve the 

Management and 

Oversight of Major 

Projects 
Page 9 GAO-03-764T 

As I testified in 2002,15 there are indications that the finance plan 

requirement has produced positive results. For example, in Massachusetts, 

projections of funding shortfalls identified in developing the Central 

Artery/Tunnel project’s finance plan helped motivate state officials to 

identify new sources of state financing and implement measures to ensure 

that funding was adequate to meet expenses for the project. However, 

some major corridor projects will not be covered by the requirement. 

FHWA has identified 22 corridor projects that will be built in “usable 

segments”—separate projects costing less than $1 billion each—and 

therefore will not require finance plans. According to FHWA officials, 

states plan these long-term projects in segments because it is very difficult 

for them to financially plan for projects extending many years into the 

future. Nevertheless, these major projects represent a large investment in 

highway infrastructure. For example, planned corridor projects that will 

not require finance plans total almost $5 billion in Arkansas, about $12.3 

billion in Texas, about $5.3 billion in Virginia, and about $4.2 billion in 

West Virginia. In addition, the $1 billion threshold does not consider the 

impact of a major highway and bridge project on a state’s highway 

program. In Vermont, for instance, a $300 million project would represent 

a larger portion of the state’s federal highway program funding than a $1 

billion dollar project would represent in California. 

In addition to implementing TEA-21’s requirements, FHWA convened a 

task force on the stewardship and oversight of federal-aid highway 

projects and, in June 2001, issued a policy memorandum to improve its 

oversight. The memorandum directed FHWA’s field offices to conduct risk 

assessments within their states to identify areas of weakness, set priorities 

for improvement, and work with the states to meet those priorities. Soon 

afterwards, FHWA convened a review team to examine its field offices’ 

activities, and in March 2003, it published an internal “best practices” 

guide to assist the field offices in conducting risk assessments. FHWA also 

began an effort during 2003 to identify strategies for assessing and 

managing risks and for allocating resources agencywide. 

FHWA’s policy memorandum further sought to address the task force’s 

conclusion that changes in the agency’s oversight role since 1991 had 

resulted in conflicting interpretations of the agency’s role in overseeing 

projects. The task force found that because many projects were classified 

as “exempt” from FHWA’s oversight, some of the field offices were taking 

 15GAO-02-702T. 
Page 10 GAO-03-764T 

a “hands off” approach to these projects. The policy stipulates that while 

states have responsibility for the design and construction of many 

projects, FHWA is ultimately accountable for the efficient and effective 

management of all projects financed with federal funds and for ensuring 

compliance with applicable laws, regulations, and policies. 

While FHWA has been moving forward to incorporate risk-based 

management into its oversight through the use of risk assessments, it has 

not yet developed goals or measurable outcomes linking its oversight 

activities to the business goals in its performance plan, nor has it 

developed a monitoring plan as its task force recommended in 2001. As I 

testified in May 2002,16 until FHWA takes these actions, it will be limited in 

its ability to judge the success of its efforts or to know whether the 

conflicting interpretations of its roles discussed above have been resolved. 

Finally, FHWA has taken actions to respond to a DOT task force report on 

the management and oversight of major projects. In December 2000, this 

task force concluded that a significant effort was needed to improve the 

oversight of major transportation projects—including highway and bridge 

projects. The task force made 24 recommendations, including 

recommendations to establish an executive council to oversee major 

projects, institute regular reporting requirements, and establish a 

professional cadre of project managers with required core competencies, 

training, and credentials. The task force’s recommendations were not 

formally implemented for several reasons, including turnover in key 

positions and the need to reevaluate policy following the change in 

administrations in January 2001, and higher priorities brought on by the 

events of September 11, 2001. However, FHWA believes it has been 

responsive to the task force’s recommendations by establishing a major 

projects oversight team, designating an oversight manager for each 

project, and, most recently, developing and publishing core competencies 

for managers overseeing major projects. 

In addition, 7 of the task force’s 24 recommendations would have required 

legislation. For example, the task force recommended establishing a 

separate funding category for preliminary engineering and design—those 

activities that generally accomplish the first 20 to 35 percent of a project’s 

design. The task force concluded that a separate funding category would 

allow a new decision point to be established. Initial design work could 

 16GAO-02-702T. 
Page 11 GAO-03-764T 

proceed far enough so that a higher-quality, more reliable cost estimate 

would be available for decisionmakers to consider before deciding 

whether to complete the design and construction of a major project—and 

before a substantial federal investment had already been made. 

In my testimony of May 2002, I presented options for enhancing FHWA’s 

role in overseeing the costs of major highway and bridge projects, should 

Congress, in reauthorizing TEA-21, determine that such action is needed 

and appropriate. Each of these options would be difficult and possibly 

costly; each represents a commitment of additional resources that must be 

weighed against the option’s potential benefits. Adopting any of these 

options would require Congress to determine the appropriate federal 

role—balancing the states’ sovereign right to select its projects and desire 

for flexibility and more autonomy with the federal government’s interest in 

ensuring that billions of federal dollars are spent efficiently and 

effectively. These options include the following: 

• Have FHWA develop and maintain a management information system on 

the cost performance of selected major highway and bridge projects, 

including changes in estimated costs over time and the reasons for such 

changes. While Congress has expressed concern about cost growth on 

major projects, it has had little success obtaining timely, complete, and 

accurate information about the extent of and the reasons for this cost 

growth on projects. Such information could help define the scope of the 

problem with major projects and provide insights needed to fashion 

appropriate solutions. 

• Improve the quality of initial cost estimates by having states develop—and 

having FHWA assist the states in developing—more uniform and reliable 

total cost estimates at an appropriate time early in the development of 

major projects. This option could help policymakers understand the extent 

of the proposed federal, state, and local investment in these projects, serve 

as a baseline for measuring cost performance over time, and assist 

program managers in reliably estimating financing requirements. 

• Have states track the progress of projects against their initial baseline cost 

estimates. Expanding the federal government’s practice of having its own 

agencies track the progress of the acquisition of major capital assets 

against baseline estimates to the federally assisted highway program could 

enhance accountability and potentially improve the management of major 

projects by providing managers with real-time information for identifying 

problems early, and for making decisions about project changes that could 

Options to Enhance 

Federal Oversight of 

Major Projects 
Page 12 GAO-03-764T 

affect costs. Tracking progress could also help identify common problems 

and provide a better basis for estimating costs in the future. 

• Establish performance goals for containing costs and implement strategies 

for doing so as projects move through their design and construction 

phases. Such performance goals could provide financial or other 

incentives to the states for meeting agreed-upon goals. Performance 

provisions such as these have been established in other federally assisted 

grant programs and have also been proposed for use in the federal-aid 

highway program. Requiring or encouraging the use of goals and strategies 

could also improve accountability and make cost containment an integral 

part of how states manage projects over time. 

• Expand FHWA’s finance plan requirement to other projects. While 

Congress has decided that enhanced federal oversight of the costs and 

funding of projects estimated to cost over $1 billion is important, projects 

of importance for reasons other than cost may not, as discussed earlier, 

receive such oversight. Should Congress believe such an action would be 

beneficial, additional criteria for defining projects would need to be 

incorporated into FHWA’s structure for overseeing the costs and financing 

of major projects. 

• Clarify FHWA’s role in overseeing and reviewing the costs and 

management of major projects. Changes in FHWA’s oversight role since 

1991 have created conflicting interpretations about FHWA’s role, and our 

work has found that FHWA questions its authority to encourage or require 

practices to contain the costs of major highway projects. Should 

uncertainties about FHWA’s role and authority continue, another option 

would be to resolve the uncertainties through reauthorization language. 

• Establish a process for the federal approval of major projects. This option, 

which would require federal approval of a major project at the outset, 

including its cost estimate and finance plan, would be the most farreaching and the most difficult option to implement. Potential models for 

such a process include the full funding grant agreement process that the 

Federal Transit Administration uses for major transit projects, and the 

DOT task force’s December 2000 recommendation calling for the 

establishment of a separate funding category for initial design work and a 

new decision point for advancing projects. Establishing such a federal 

approval process could have the potential to improve the reliability of the 

initial baseline estimates and the cost performance of major projects over 

time. 
Page 13 GAO-03-764T 

For further information on this statement, please contact JayEtta Z. 

Hecker (heckerj@gao.gov) or Steve Cohen (cohens@gao.gov). 

Alternatively, they may be reached at (202) 512-2834. 

Contacts 
Page 14 GAO-03-764T 14

Transportation Infrastructure: Cost and Oversight Issues on Major 

Highway and Bridge Projects. GAO-02-702T. Washington, D.C.: May 1, 

2002. 

Surface Infrastructure: Costs, Financing, and Schedules for Large-Dollar 

Transportation Projects. GAO/RCED-98-64. Washington, D.C.: February 

12, 1998. 

DOT’s Budget: Management and Performance Issues Facing the 

Department in Fiscal Year 1999. GAO/T-RCED/AIMD-98-76. Washington, 

D.C.: February 12, 1998. 

Transportation Infrastructure: Managing the Costs of Large-Dollar 

Highway Projects. GAO/RCED-97-27. Washington, D.C.: February 27, 1997. 

Transportation Infrastructure: Progress on and Challenges to Central 

Artery/Tunnel Project’s Costs and Financing. GAO/RCED-97-170. 

Washington, D.C.: July 17, 1997. 

Transportation Infrastructure: Central Artery/Tunnel Project Faces 

Financial Uncertainties. GAO/RCED-96-1313. Washington, D.C.: May 10, 

1996. 

Central Artery/Tunnel Project. GAO/RCED-95-213R. Washington, D.C.: 

June 2, 1995. 

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