Companion Guide to Video October 2018

www.fhwa.dot.gov/federal-aidessentials

To ensure that funds are spent wisely and 

programs are delivered in accordance with U.S. 

laws and regulations, Congress requires the 

Federal Highway Administration, or FHWA, to 

establish an oversight program and enter into 

an agreement with each State to define 

responsibilities. The Stewardship and Oversight 

Agreement fulfills that requirement. 

Historically, the FHWA has had an active role in 

the oversight of, and decisions for, Federal-Aid 

projects. Today, the FHWA operates more 

efficiently and effectively by employing a riskbased approach to stewardship and oversight. 

This approach identifies areas of risk and 

manages this risk through focused project and 

program involvement with the State DOTs. The 

FHWA involvement is directed to areas where it 

adds the most value.

How do the FHWA and State DOTs collaborate 

to implement risk-based stewardship and 

oversight across their programs and projects? 

As an important step, they collect program and 

project data on past performances and 

emerging challenges. Next, they rank risks and 

opportunities and prioritize agency efforts. For 

example, the priority list may include activities 

to mitigate the risk of a major change order on 

a $350 million project or to supplement 

environmental protection expertise on a bridge 

project in a wildlife sanctuary. Lastly, the FHWA 

and State DOTs outline joint expertise and 

resources for efficiently managing risks and 

opportunities. 

To improve stewardship and oversight in the 

upcoming year, the FHWA’s risk-based 

approach relies on timely and reliable data.

Primary tools for collecting data include 

projects of FHWA division interest, or PoDIs, 

program and process reviews, and the 

Federal-aid Program Overview

Risk-Based Stewardship and Oversight (RBSO)

Applying risk management tools in program delivery.
Federal-aid Essentials for Local Public Agencies

Compliance Assessment Program, known as 

CAP. 

Let’s review each tool. 

Assessing risks and opportunities informs the 

process to identify PoDIs. A typical PoDI has 

technical, procedural, or political complexities. 

If your project is identified as a PoDI, you can 

expect oversight from the FHWA division office 

that may include on-site visits and review of 

project activities, reports, and data. 

Unlike a single project, programs—such as the 

Disadvantaged Business Enterprise Program—

have regulatory and policy requirements that 

affect numerous projects. The FHWA conducts 

program reviews to evaluate program 

effectiveness. During a program review, the 

FHWA may request agency cooperation to view 

project records. 

To verify compliance with key Federal 

requirements, such as the use of American 

made steel or implementing equal opportunity 

hiring practices by contractors, the FHWA 

conducts the CAP annually. The CAP includes a 

statistical sampling of project data from every 

state. If one of your agency’s projects is 

randomly selected for review under the CAP, 

the FHWA may ask you for information to 

complete a verification review. 

To see how this risk-based approach to 

stewardship and oversight might work in 

practice, let’s follow along as the FHWA works 

with a State DOT to develop its annual 

stewardship and oversight activities.

To begin, the FHWA and State DOT analyze 

results of the annual CAP and program reviews 

along with State and local public agency project 

experiences. 
Federal-aid Essentials for Local Public Agencies

In this example, four issues surface as having an 

elevated risk: 

• Cost overruns on a $1 billion construction 

project related to project delays;

• Insufficient capacity in Borderland County 

to manage four concurrent construction 

projects;

• Statewide complaints of pedestrian 

inaccessible work zones; and

• Loss in institutional knowledge resulting 

from multiple retirements in the safety 

program.

The FHWA and State DOT take several actions 

to manage these risks. 

Two projects are selected as PoDIs for the 

upcoming year, the $1 billion construction 

project, and one of the projects in Borderland 

County. For each PoDI, they determine 

specific oversight actions and reporting 

activities.

The team also agrees that the FHWA will 

provide some technical expertise and training to 

mitigate the risk of inaccessible work zones and 

lost institutional knowledge in the safety 

program. 

Furthermore, the FHWA will review an 

upgraded safety program proposed by the 

State. 

As we have just seen, the FHWA and the State 

DOTs improve the efficiency and effectiveness 

of collaborative activities through risk-based 

analyses and mitigation strategies. 

The FHWA efficiently responds to risk to the 

Federal-Aid Highway Program by focusing its 

resources on areas where it most likely will add 

value and optimize the successful delivery of 

programs and projects.

Rather than visiting all Federal-Aid projects, the 

FHWA uses data from CAP and other oversight 

activities—such as inspections, audits, 

complaints, and program and process reviews—

to assure an acceptable level of consistency and 

compliance across the nation’s highway 

program. 

A project administered by your agency may be 

identified as a PoDI, or sampled as part of the 

CAP or a program or process review; 

consequently, the FHWA and State DOT may 

increase oversight activities and request 

documentation.

As a recipient of Federal funds, your agency is 

responsible for following all Federal laws and 

regulations. By participating in the riskmanagement process and providing data on 

your projects, your agency contributes to the 

efficient and effective management of the 

Federal-Aid Highway Program.
Federal-aid Essentials for Local Public Agencies

The content of this 

document is not a 

substitute for 

information obtained 

from State departments 

of transportation, 

appropriate FHWA 

Division Offices, and 

applicable laws. 

Scenarios have been 

simplified for emphasis 

and do not necessarily 

reflect the actual range 

of requirements 

applicable to the 

scenario or this topic. 

This document was 

created under contract 

number DTFH61-13-A00001 by the Federal 

Highway Administration, 

U.S. Department of 

Transportation, and is 

offered to the public to 

heighten and focus 

awareness of Federal-aid 

requirements within the 

local public agencies 

community and 

reinforces the 

importance of these 

necessary policies, 

procedures, and 

practices.

This Companion 

Resource is the script 

content for the video 

production of the same 

name. 

Additional Resources

• FHWA website that provides details of S&O program and links to all current 

State/FHWA Stewardship and Oversight Agreements 

https://www.fhwa.dot.gov/federalaid/stewardship/

• This 2014 FHWA Order applies to FHWA’s stewardship and oversight of the 

STAs’ LPA stewardship and oversight program

https://www.fhwa.dot.gov/legsregs/directives/orders/50202.cfm

• Clarifying updates in 2015 to the FHWA Order on S&O for LPAs

https://www.fhwa.dot.gov/federalaid/stewardship/feb2015update.cfm

• An FHWA document of Q&As about RBSO implementation and processes as 

applied to FHWA Field office operations. Includes detailed terminology and 

program applicability.

https://www.fhwa.dot.gov/federalaid/stewardship/140328_faq.pdf