Federal-Aid Highways: Federal Requirements for Highways May Influence Funding Decisions and Create Challenges, but Benefits and Costs Are Not Tracked
Published: 2008-12-12T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: As highway congestion continues to be a problem in many areas, states are looking to construct or expand highway projects. When a state department of transportation (DOT) receives federal funding for highway projects from the Federal Highway Administration (FHWA), the projects must comply with the National Environmental Policy Act (NEPA), the Davis-Bacon prevailing wage requirement, the Disadvantaged Business Enterprise (DBE) program, and the Buy America program. While complying with these requirements, states must use limited transportation dollars efficiently. As requested, GAO addressed (1) the types of benefits and costs associated with these requirements for federal-aid highway projects; (2) the influence of these federal requirements on states' decisions to use nonfederal or federal funds for highway projects; and (3) the challenges associated with the federal requirements and strategies used or proposed to address the challenges. To complete this work, GAO reviewed 30 studies, surveyed DOTs in all states and the District of Columbia, and interviewed transportation officials and other stakeholders.
section_title: What GAO Found
paragraphs: Several of the studies GAO reviewed describe the benefits of environmental requirements for highway projects, such as better protection for wetlands, but none attempted to quantify these benefits. Some studies quantified certain types of environmental costs, such as costs for administering NEPA. In general, however, quantitative information on environmental benefits and costs is limited because states do not generally track such information. Several studies attempted to quantify the benefits and costs of the Davis-Bacon prevailing wage requirement; however, these studies did not focus on transportation projects specifically. Furthermore, while the studies reviewed did not identify the benefits of the DBE program, transportation officials identified some benefits of the program, such as providing greater opportunities for DBE firms. One study we reviewed identified the benefits of the Buy America program, including protecting against unfair competition from foreign firms. The studies reviewed also identified, and in some cases quantified, the costs of the DBE and Buy America programs, including administrative costs and the use of higher priced iron and steel in projects. Of the 51 state DOTs GAO surveyed, 39 reported that, in the past 10 years, federal requirements had influenced their decision to use nonfederal funds for highway projects that were eligible for federal aid. Thirty-three of these state DOTs reported that NEPA factored into their decision to use nonfederal funds, while the other three requirements GAO reviewed were a factor only in a few states. State officials said that they use nonfederal funds for certain projects to avoid project delays or costs associated with the federal requirements or because of other factors, such as requirements imposed by a state legislature. A state's funding decision may depend on whether the state has requirements similar to these federal requirements. The decision may also take into consideration the availability of nonfederal and federal funds. For example, officials from one state said that they have limited nonfederal funds available, and as a result, like other states GAO interviewed, rely on the federal funds to finance their highway projects. According to transportation officials and contractors, administrative tasks associated with the federal requirements pose challenges. For example, analyzing impacts and demonstrating compliance with NEPA requires extensive paperwork and documentation. State officials also said that coordinating with multiple government agencies on environmental reviews is challenging, in part because these agencies may have competing interests. Furthermore, according to state DOTs, some provisions of the federal requirements may be outdated. For example, the $2,500 regulatory cost threshold for compliance with the Buy America program for purchasing domestic steel and $750,000 regulatory personal net worth ceiling of the DBE program have not been updated since 1983 and 1999, respectively. All of these challenges may cause delays and increase project costs. Some government agencies have implemented strategies to address these challenges and these strategies have had varied success in decreasing project costs and delays.

section_title: Letter
paragraphs: The nation’s highways are critical not only to mobility—the free flow of  passengers and goods through the transportation system—but also to  sustaining America’s economic growth. The growth of the U.S. economy  will depend, in part, on the soundness and adequacy of the nation’s  transportation system. As demand for and congestion of our highways is  increasing, states and localities are proposing highway construction or  expansion projects, yet transportation dollars are limited. Federal, state,  and local governments are facing financing challenges, and the future of  the Highway Trust Fund—which supports highway construction and  maintenance, highway safety, and transit—is uncertain. Consequently,  using limited transportation dollars as efficiently as possible will be  critical.
The United States has about 4 million miles of roads, including 47,000  miles of interstate highways. Most of the nation’s roads and highways are  not owned by the federal government but rather by state and local  governments. Since Congress passed the Federal-Aid Road Act in 1916, the  federal government has supported states’ investment in highway  construction, and in 1956, Congress established the Highway Trust Fund,  which supports investment in highway construction via a grant-based cost  reimbursement funding strategy. Under this strategy, the federal  government reimburses states for a portion of their highway expenses  after states incur the expenses. Generally, the federal share of expenses  for a federal-aid highway project is 80 percent, while the state and local  share is 20 percent. States rely on federal funding to construct,  rehabilitate, and maintain their highway and road systems.
When a state accepts federal funding for a highway project, it is subject to  several federal requirements. For example, states must ensure that    projects go through an environmental review process, established under  the National Environmental Policy Act (NEPA);    highway contractors pay their employees at least the Davis-Bacon  prevailing wage, in accordance with 23 U.S.C. § 113;    minority- and women-owned firms are not discriminated against in the  award and administration of highway projects via the Disadvantaged  Business Enterprise (DBE) program (23 U.S.C. § 140; 23 C.F.R. part 230; 49  C.F.R. part 26); and   highway contractors use American-made iron and steel to comply with the  Buy America program, established under 23 U.S.C. § 313.
These requirements are intended to protect the environment, enable  highway workers to earn a prevailing wage, assist members of  disadvantaged populations in overcoming the effects of discrimination,  and help the American iron and steel industry compete in the global  economy. Some of these requirements apply to transportation projects,  while others apply generally to any type of construction project that uses  federal funds. While recognizing the value of these requirements, some  state highway officials and highway contractors are concerned that they  may increase project costs by, among other reasons, delaying projects for  environmental reviews or increasing the state’s administrative  responsibilities. In addition, the inflation that occurs during project delays  reduces the purchasing power of federal funds allocated to the states. As a  result, according to some state transportation officials, states have  sometimes sought to use nonfederal funds for projects to avoid the costs  or delays involved in complying with federal requirements.
You asked us to examine issues related to the benefits and costs of the  various requirements that the federal government places on states that  accept federal highway funding. Although many requirements apply to  federally funded highway projects, our review focused on NEPA, the  Davis-Bacon prevailing wage requirement, the DBE program, and the Buy  America program. We selected these requirements on the basis of initial  interviews with federal agency officials and industry experts and because  these requirements are project-specific. This report discusses (1) the types  of benefits and costs associated with these requirements for federal-aid  highway projects; (2) the influence of these federal requirements on states’  decisions to use nonfederal or federal funds for highway projects; and (3)  the challenges associated with the federal requirements and strategies that  federal, state, and local government agencies and contractors have used or  proposed to address these challenges.
To address these issues, we gathered information from a literature review,  a nationwide survey of state transportation department officials and  structured interviews with some of these officials, case studies of selected  states, and interviews with other industry stakeholders. Specifically, we  reviewed 30 studies that address the benefits or costs of one or more of  the federal requirements addressed in our review. For each of the studies  we identify in this report, we reviewed its methodology, including the  study’s datasets, sample size, and data collection techniques, and  concluded that the methodology is sufficiently reliable; however, we did  not independently verify the results of these studies. We received survey  responses from the departments of transportation (DOT) in all 50 states  and the District of Columbia, which we refer to collectively in this report  as state DOTs, and we conducted follow-up interviews with officials from  10 judgmentally selected state DOTs to obtain additional information on  their survey responses. The survey used for this study is reproduced in  appendix II. We selected the states for interviews on the basis of their  responses to the survey, their funding levels, and geographic dispersion.  We also selected five states (California, Florida, Idaho, Maryland, and  Texas) as case studies based on recommendations from officials at  industry associations, funding levels, and other factors. We visited and  conducted interviews with officials in California, Idaho, Maryland, and  Texas, and conducted phone interviews with officials in Florida. At each  state, we interviewed federal, state, and local government officials;  highway contractors; and metropolitan planning organizations (MPO).  Finally, we interviewed officials from the headquarters offices of several  federal agencies and industry groups. See appendix I for more information  on our scope and methodology.
We conducted this performance audit from October 2007 through  November 2008 in accordance with generally accepted government  auditing standards. Those standards require that we plan and perform the  audit to obtain sufficient, appropriate evidence to provide a reasonable  basis for our findings and conclusions based on our audit objectives. We  believe that the evidence obtained provides a reasonable basis for our  findings and conclusions based on our audit objectives.
subsections: section_title: Background
paragraphs: The Highway Trust Fund is a fund supported by taxes highway users pay  on fuel, tires, truck purchases, and the use of heavy vehicles. The revenue  from these taxes supports highway construction and maintenance,  highway safety, and transit. FHWA administers the Federal-Aid Highway  Program and apportions trust fund revenues to state highway departments  or transportation authorities, which oversee the construction of the  individual projects. Once FHWA notifies a state that a particular highway  project has been approved, a state can submit receipts to FHWA after it  has incurred expenses. FHWA approves reimbursements to the state for  its expenses, usually for 80 percent of a project’s costs; the state and local  governments are responsible for the other 20 percent. Federal  reimbursements from the Highway Trust Fund have risen from around $15  billion in 1990 to more than $35 billion in 2006, the last year for which data  are available. The federal reimbursements that states receive vary by state;  however, in general, in fiscal year 2006, the federal government provided  about 35 percent of the money that states and local governments spent on  highway projects. While the federal government provides most funding  from the Highway Trust Fund directly to the states and the states oversee  the use of these funds, by statute, states must provide some trust fund  revenues to other organizations, such as MPOs, for planning purposes.
Federally funded highway projects are typically carried out in four phases:  planning, preliminary design and environmental review, final design and  right-of-way acquisition, and construction. In the planning phase, state and  local highway planners look at transportation alternatives and work with  the public to choose projects that make the most sense for their areas.  According to FHWA, this phase can take up to 5 years for a major highway  project. During the preliminary design and environmental review phase,  states identify engineering issues, roadway alignment alternatives, transit  options, project costs, and other details. In addition, the proposed project  and any alternatives are examined for potential impacts on the  environment, public health, and welfare. This process can take 1 to 5  years, according to FHWA, depending on the complexity of the design and  possible environmental considerations that must be considered. During  the final design and right-of-way acquisition phase, states develop detailed  engineering plans consistent with the results of the environmental review  phase and acquire the right-of-way needed to construct the project. This  phase typically takes from 2 to 3 years for a major new highway  construction project, according to FHWA. Finally, during the construction  phase, the state evaluates bids from contractors and then oversees the  selected contractor’s construction of the project. The construction of a  major project typically takes, according to FHWA, 2 to 6 years. See figure 1  for a more detailed description of the types of activities and stakeholders  included in the phases of a highway project.
The federal, state, and local governments all have a role construction of federally financed highway projects. However, the state  DOT is the focal point for these activities. It is responsible for setting a  state’s transportation goals and for planning safe and efficient  transportation between cities and towns in the state. The state DOT also  in the  designs most projects, acquires right-of-way for highway constr awards contracts to build projects. Local governments also carry out man transportation planning functions, such as scheduling improvements and  maintenance for local streets and roads. At the federal level, FHWA is the  primary agency involved in transportation project decision making and  oversight. FHWA oversees the transportation planning and project  activities of state DOTs by approving state transportation plans and  certifying that states have met all legal requirements associated with  accepting federal funding.
According to FHWA, over 7 federal funding for highway projects. Some of these requirements are  transportation specific, such as requirements under the DBE program and  the Buy America program, while others, such as NEPA, are general  requirements that can apply to other construction projects, such as federal  building construction. FHWA officials stated that they identify all  requirements that states must meet in the documentation FHWA provides  to states when funding for a project is approved. States in turn  communicate these requirements to potential bidders, so the contractors  know, for example, what wages they must pay or whether they  must buy  American-made iron and steel.  0 requirements may apply to states that accept  The requirements for analyzing  funded highway projects originated in NEPA, enacted in 1969. This  legislation requires agencies to consider and, if possible, avoid or mitigate  potential environmental degradation from federally funded infrastructure  projects before these projects moved forward. FHWA ensures that  federally funded projects go through an environmental review process, as  prescribed in NEPA and its implementing regulations. FHWA officia stated that under FHWA’s NEPA implementation process, the lead agency  must demonstrate that it will implement the project consistently with  several environmental laws. Laws under FHWA’s NEPA “umbrella”  include, but are not limited to  the environmental impact of federally  the Clean Water Act, protecting wetlands;   water quality and ensuring protection of  ir Act, protecting air quality;  the Endangered Species Act, protecting t species and their habitats;  hreatened and endangered    Section 138, Title 23 of the U.S. Code, preventing the use of parkland or  recreational areas in the development of highway projects, except where  no feasible and prudent alternative exists; and the National Historic Preservation Act of 1966, identifying historic  properties that may be damaged by the construction of infrastructure  projects, and determining ways to avoid, minimize, or mitigate such  damage.
If no federal funds are used on a project or if a project does not require  federal approval, NEPA is generally inapplicable; however, these projects  still must comply with all applicable federal environmental laws, which  can include the Clean Water and Clean Air Acts.
While FHWA is generally the lead agency in ensuring that states comply  with NEPA on federally financed highway projects, other federal agencies  have responsibilities under these laws. These agencies include    EPA (air and water quality, wetlands preservation); the Fish and Wildlife Service (terrestrial threatened and endangered  species) within the Department of the Interior; the National Marine Fisheries Service (marine threatened and endangered  species, effects on fish and spawning grounds) within the Department of  Commerce;   USACE (effects on U.S. waters, including wetlands); and    ACHP (effects on historic properties).
According to FHWA, under the NEPA process, FHWA decides how  extensive an environmental review a federally funded highway project will  undergo. This decision is based on the size and complexity of the project,  as well as the project’s expected environmental impact. For example,  FHWA may deem a project that is expected to have no significant  environmental impact to be categorically excluded, meaning that the  project will not need an environmental assessment (EA) or an  environmental impact statement (EIS) to comply with NEPA. A project  whose environmental impact is unknown or may be potentially significant  will undergo an EA to determine if the impact could be significant and  thus require an EIS. A project that is expected to have a significant  environmental impact will require an EIS, which will determine the  particular environmental impacts of the project and include plans for  mitigating these impacts. States usually have only a few EISs under way at  any one time, since they are performed generally for the largest highway  projects, which pose significant impacts to the environment. For projects  undergoing an EIS, FHWA issues a Record of Decision when the process is  complete. The Record of Decision indicates whether a project complies  with environmental laws and determines changes to the project for  environmental mitigation, such as the creation of additional wetlands to  mitigate the loss of wetlands or a change in route to avoid environmental  impacts. EPA is responsible for reviewing and commenting on all major  federal actions for which an EIS is required and for working with FHWA to  ensure compliance with environmental statutes. FHWA has the final  approval authority and determines when the EIS is in compliance with  applicable environmental laws and other requirements.
Outside the environmental arena, states must meet requirements for  paying a prevailing wage for construction work when accepting federal  highway funding. The Davis-Bacon prevailing wage requirement mandates  that workers on all federal-aid highway projects receive at least the local  prevailing wage for their work. The law stems from a Depression-era  practice of transporting workers from a lower-paying area to bypass local  workers who would demand a higher wage. The Davis-Bacon prevailing  wage requirement prevented this practice by ensuring that workers on  federal projects are paid at least the local prevailing local wage. DOL sets  the minimum wage that must be paid in each county in the United States  for various job categories, such as sheet metal worker or concrete finisher.  DOL sets these minimum wage rates based on periodic surveys it conducts  of employers in each county. To show they have paid the prevailing wage  to their employees, highway contractors must provide their payroll data to  the state DOT and certify that they have complied with the Davis-Bacon  prevailing wage requirement. All subcontractors must provide this  documentation to the lead contractor on a project, known as the prime  contractor, who in turn provides it to the state DOT. The state then  reviews the documentation to ensure compliance; if the state discovers  noncompliance, the contractor must pay the employees supplemental  wages to cover the difference between what was paid and the original  agreed-to prevailing wage. If the contractor still does not comply with  wage requirements, the state DOT may use contractual remedies, such as  withholding progress payments, to ensure compliance. FHWA occasionally  spot-checks the documentation to further ensure compliance with the  Davis-Bacon prevailing wage requirement.
The DBE program requires that states attempt to expend a portion of the  funds they receive from U.S. DOT for highways, transit, and other  transportation-related contracts to firms owned by members of  disadvantaged populations. The intent of this program is to remove  barriers to participation in federal contracting and ensure  nondiscrimination in awarding federal contracts. Legislation, executive  action, and judicial decisions have resulted in modifications to the initial  program. U.S. DOT presumes disadvantaged population groups to include  African-Americans, Hispanics, Asians, Native Americans, and other  minorities found to be disadvantaged by the Small Business  Administration. To be eligible to participate in the DBE program, firms  must be at least 51 percent owned by a member or members of these  groups. Where there is a contract goal on a particular contract (not all U.S.  DOT-funded contracts must have contract goals), the state tells the prime  contractor to subcontract a set percentage of the project’s work to a DBE  subcontractor or, if unsuccessful, to demonstrate that a “good faith effort”  was made to find a DBE subcontractor.
Each state has a process for certifying firms that wish to participate in the  DBE program. States use several criteria, established by U.S. DOT, to  determine whether a firm can participate in the DBE program, including  verifying that the owner of the DBE firm has a personal net worth under  $750,000. Under the DBE rules, a DBE firm’s participation counts toward a  goal only if the firm performs a “commercially useful function” to ensure  that the firms are not hired simply to meet the program’s goals.  FHWA  works with states to ensure that they meet the program’s goals on highway  projects and also periodically audits individual state programs to ensure  that the programs are operating within the law.  Other U.S. DOT entities,  such as the Federal Transit Administration, ensure that the DBE program’s  goals are met in other transportation areas.  The U.S. DOT Inspector  General investigates cases of possible fraud, such as where firms  misrepresent themselves as minority-owned.
Finally, FHWA’s Buy America program establishes requirements related to  purchasing materials. Specifically, the Buy America program requires that  federally funded highway projects use steel manufactured in the United  States. FHWA officials said the goal of the program is to protect the U.S.  steel industry from foreign competition. FHWA has the statutory authority  to grant waivers to states when domestic iron or steel is unavailable or  when there is another compelling public interest to use imported iron or  steel, and FHWA has, through regulation, established a program threshold  limiting the program to projects costing over $2,500. In addition, under an  alternative bid procedure, states may use foreign iron and steel if the  lowest total project bid using domestic materials exceeds the lowest total  bid using foreign materials by 25 percent. Contractors working on  federally funded highway projects must provide documentation and a  certification regarding the country in which the iron and steel originated.  All manufacturing of the iron and steel must take place in the United  States. If any part of the manufacturing occurs outside the United States,  the iron or steel is considered foreign. State DOTs spot-check iron and  steel, and the appropriate certifications, to ensure compliance. FHWA  must approve the procedures that states use to verify compliance and can  also perform spot checks. If a state DOT or FHWA finds that foreign iron  or steel was used in a highway project, the contractor must remove the  offending iron or steel. This can delay the project and add costs, although  in these cases, the contractor is responsible for the additional costs to  correct the mistake.
section_title: Several Types of Benefits and Costs Are Associated with Federal Requirements for Highway Projects, but Quantitative Estimates Are Limited
paragraphs: Many of the 30 studies we reviewed concluded that there are different  types of benefits and costs linked to federal requirements for highway  projects. However, only a few of these studies attempted to quantify these  benefits or costs. For federal environmental requirements, the most visible  and measurable benefits are fewer adverse impacts to the environment.  The benefits also include improvements in air and water quality and  preserving wetlands, among other things. While providing benefits, federal  environmental requirements can also increase projects’ overall costs.  Studies have quantified some of these costs, such as those for  administering NEPA, but have not quantified other types of costs, such as  those that occur when projects are delayed for environmental reviews. In  general, quantitative information on environmental benefits and costs is  limited because states have not tracked such information; however, some  states are beginning to do so. The information on the benefits and costs of  the Davis-Bacon prevailing wage requirement identifies benefits due to  creating a level playing field for contractors and ensuring a prevailing  wage for skilled workers and costs due to administering the requirement.  However, the literature we reviewed is not exclusive to transportation or  highway projects. Finally, although none of the studies we reviewed  identified benefits of the DBE program, transportation officials identified  some benefits of the program, such as providing greater opportunities for  minority- and women-owned firms on federally funded projects. The  studies we reviewed did identify benefits of the Buy America program,  including protecting against unfair competition from foreign firms and  costs of the DBE and Buy America programs, such as increased  administrative costs to states and U.S. DOT due to participation in the  DBE program and potentially higher iron and steel costs. However, none  of the studies we reviewed separately estimated the costs of the Buy  America program’s requirements. Despite the potential for bias in studies  with economic and political implications, such as those we reviewed, we  concluded from our review of the studies’ methodologies that the studies  were sufficiently reliable for the purposes of our report. As noted,  however, we did not independently verify the results of the studies.
subsections: section_title: Studies Found Benefits and Costs Associated with the Federal Environmental Requirements, but Quantitative Estimates Are Limited
paragraphs: Several of the studies we identified described the benefits and costs of  federal environmental requirements for highway projects. However, the  studies generally did not attempt to quantify the benefits and only  quantified some types of costs, such as mitigation costs and costs for  administering NEPA. An FHWA benefit-cost study is one of the few we  found that attempted to describe the costs and benefits of environmental  requirements. For example, it noted that federal environmental  requirements, including those associated with NEPA, have benefits that  can reduce adverse effects on the human and natural environment. These  benefits can include measured improvements in air and water quality and  noise pollution levels; the preservation of water supplies and of historic,  cultural, park, and natural resources; and increased protection of  wetlands. However, the FHWA benefit-cost study indicated that assessing  these benefits in economic terms and measuring them in dollars is difficult  because the valuation of environmental benefits is highly subjective.   The study also indicated that government agencies are not required to  track and quantify these benefits and, therefore, generally do not attempt  to do so.
Other studies we reviewed also found that, while federal environmental  requirements produce benefits, these requirements also can cause states  to incur costs. In their NEPA documents, state DOTs must include plans  for complying with environmental laws, as well as consider mitigating any  environmental damage. According to a study FHWA commissioned in  2006, these mitigation efforts—for example, replacing wetlands, building  sound walls to insulate surrounding areas from highway noise, or changing  the route of a project to avoid environmental damage—can create costs.  Some of the studies that we reviewed attempted to quantify mitigation  costs. A 2003 study by the Washington DOT evaluated a sample of 14  projects and concluded that mitigation efforts and costs vary from project  to project. Furthermore, a 2003 study published by the National  Cooperative Highway Research Program (NCHRP), an effort sponsored by  the American Association of State Highway and Transportation Officials  (AASHTO) in cooperation with FHWA, calculated that the environmental  review process adds costs to highway projects for environmental  mitigation activities and that more in-depth reviews add more costs than  less detailed reviews. For example, categorical exclusions on average  added 1.1 percent to a project’s overall construction cost, EAs on average  added 1.4 percent, and projects requiring EISs on average added 2.3  percent. The 2006 FHWA study, which was conducted by TransTech  Management, a management consulting company, reached similar  conclusions about environmental-related cost increases, including costs to  process NEPA documents and mitigation costs. In this study, TransTech  consultants conducted case studies of six highway and bridge projects in  Maryland, Montana, New Jersey, Oregon, Utah, and Washington. The study  concluded that overall environmental costs for these projects—which  included replacing bridges and interchanges and widening and upgrading  arterial highways from two lanes to four lanes—-ranged from 2 to 12  percent of total project costs and accounted, on average, for 8 percent of  total project costs. The study attributed some of this cost to requirements  for completing NEPA documentation, which involves coordinating with  other agencies, performing a detailed review of project alternatives,  acquiring permits, and conducting public outreach. In addition, the study  identified costs for the construction of stormwater facilities, mitigation of  wetland losses, erosion control, and landscaping to mitigate likely harms  to the environment from the projects.
When a highway project is delayed, inflation and additional administrative  and labor expenses increase its costs, and environmental requirements are  one of several potential causes of project delays we identified. A 2003 GAO  study reported that according to FHWA, for projects requiring an EIS and  for which FHWA approved the EIS in 2001, the environmental review took  an average of approximately 5 years to complete. Furthermore,  environmental reviews can take up a significant portion of projects’  overall time frames. For example, FHWA’s 2001 baseline report stated that  for projects constructed in the last 30 years, environmental review for  projects requiring an EIS accounted for an average of 3.6 years, or  approximately 28 percent of the overall time for project completion. In  addition, a study jointly sponsored by FHWA and AASHTO reported that  right-of-way acquisition is a major cause of delay in highway projects, and  where relocation is required, it takes an average of 1 to 2 years to purchase  a right-of-way after negotiations have begun. Because states generally  cannot begin to acquire right-of-way until the NEPA process is complete,  the additional time needed for these purchases has the potential to further  delay completion of a highway project. The study also cited efforts to  accommodate and relocate utilities as another cause of delays during the  design and construction phases of highway projects. While several state  DOT officials told us that delays can increase the overall cost of a project,  none could estimate how much they add to a project’s costs, and the  studies we reviewed did not estimate the costs attributable to  environmental-related project delays.
In general, we found that environmental cost data are not routinely  collected. For example, the 2003 NCHRP report found that (1) no  complete and consistent data on environmental costs were available at the  state level and (2) a majority of states do not track environmental costs  separately from overall project costs and no state has an environmental  accounting system that tracks these costs. Additionally, in its benefit-cost  study, FHWA concluded that none of the 32 state DOT environmental  officials that responded to a survey in the 2003 NCHRP report had studied  or tracked planning, design, and environmental costs related to  environmental review activities.
According to its benefit-cost study, FHWA is taking steps to strengthen its  own environmental cost-tracking efforts, by conducting a multiphase  effort to measure the impact of NEPA and identify trends. As noted above,  in 2001, FHWA completed a comprehensive baseline study that assessed  the impact of the NEPA process on the total time and costs involved in  completing highway projects. Phase one of the study will be used to assess  future environmental streamlining efforts, including an ongoing detailed  analysis of the time required to complete FHWA’s EIS documents.  However, for phase two of the study, data limitations, such as a lack of  centrally located official completion dates for projects that have gone  through the NEPA process have prevented FHWA from analyzing the costs  associated with NEPA compliance efforts. Furthermore, recognizing the  need to improve environmental cost estimating methodologies for  transportation projects, including highway projects, NCHRP is creating  guidelines for developing such improved methodologies. These guidelines  are scheduled to be completed in late 2008. Additionally, four states  (Montana, Washington, Oregon, and Wisconsin) have begun or plan to  begin efforts to quantify the environmental costs associated with  transportation project delivery. For example, an Oregon DOT official told  us that his department has been tracking annual overall environmental  costs for project development since 2000, as required by the Oregon  legislature. These costs have consistently averaged 4.5 percent of overall  project costs.
section_title: Studies Included Information on the Benefits and Costs of the Davis-Bacon Prevailing Wage Requirement but Did Not Specifically Focus on Highway Projects
paragraphs: Several studies we reviewed attempted to quantify benefits and costs of  the Davis-Bacon prevailing wage requirement, but these studies did not  provide data exclusive to transportation or highway projects. According to  FHWA’s benefit-cost study, benefits associated with the Davis-Bacon  prevailing wage requirement include (1) creating a level playing field for  honest contractors, (2) ensuring that skilled workers are paid wages that  prevail in the communities where the work is performed, and (3)  minimizing predatory contracting practices that could undercut local  contractors. FHWA’s benefit-cost study also found that the requirement  also promotes more training for labor, resulting in more experienced and  qualified contractors working on highway projects. In addition, the  National Alliance for Fair Contracting, a labor-management organization,  and the Construction Labor Research Council, an organization that  researches construction labor costs, conducted studies in 1995 and 2004,  respectively, which concluded that higher prevailing wages under the  Davis-Bacon prevailing wage requirement contributed to higher  productivity on federal highway projects. The studies concluded that the  cost per mile for highway construction was inversely related to the hourly  wage paid to contractors—specifically, that a higher wage rate resulted in  a lower highway cost per mile—which could indicate a positive effect of  the Davis-Bacon prevailing wage requirement. According to the report,  higher wages attracted high-quality, highly skilled labor; enhanced  productivity; and possibly offset potential labor cost savings from lower  wages.
section_title: Studies Did Not Identify Benefits Arising from the DBE Program but Did Identify Benefits of the Buy America Program and Costs of the DBE and Buy America Programs
paragraphs: A.J. Thieblot, “A New Evaluation of Impacts of Prevailing Wage Law Repeal,” Journal of  Labor Research (Spring 1996). through the continued use and development of certain industries within  the U.S. economy, like the iron and steel industries.
In terms of costs, a 2001 GAO report indicated that U.S. DOT, states, and  local transportation agencies incur costs in implementing and  administering the DBE program. For example, U.S. DOT estimated that it  incurred about $6 million in costs, including salaries and training  expenses, to administer the DBE program for highway and transit  authorities in fiscal year 2000. Sixty-nine percent of the states and transit  authorities that responded to GAO’s survey for the 2001 report estimated  that they incurred a total of about $44 million in costs to administer the  DBE program in fiscal year 2000. For individual state respondents, these  administrative costs ranged from a high of $4.5 million to a low of about  $10,000. However, U.S. DOT, states, and local transportation agencies had  not studied or analyzed other DBE-related program costs. For example,  according to the 2001 GAO study, states and transit authorities had said  that the DBE program increased project costs, but 99 percent of the states  and transportation agencies surveyed for the report had not conducted a  study or analysis to quantify whether the DBE program has an impact on  their contract costs. We reported that U.S. DOT had also not conducted  such an analysis.
Finally, none of the studies we reviewed attempted to quantify the costs of  Buy America program requirements. One study—FHWA’s benefit-cost  study—identified higher iron and steel prices, higher overall project costs,  reduced bidding competition, and project delays as the major types of  costs that federally funded transportation projects could incur in  complying with Buy America program provisions, but the study did not  attempt to quantify these costs.
section_title: Federal Requirements, among Other Factors, Influence State Funding Decisions
paragraphs: According to our survey results, the federal requirements we reviewed are  among the factors that influence states’ decisions to use nonfederal or  federal funds for highway projects. Most state transportation officials we  interviewed told us that the federal requirements may encourage them to  use nonfederal funds for certain highway projects eligible for federal aid  because they may be able to save time and costs, but they also told us that  other factors influence their decisions to use nonfederal funds.  Conversely, some state officials we interviewed told us they may use  federal funds to avoid certain limitations associated with nonfederal funds  or to obtain certain benefits associated with using federal funds. In  general, the type of funding a state chooses to use—nonfederal or  federal—varies and depends on the circumstance in the state. Some states,  for example, have requirements similar to the federal requirements we are  reviewing. This may reduce some of the time or cost savings states might  otherwise realize by using nonfederal funds. Furthermore, a state’s  decision to use nonfederal or federal funds is generally influenced by the  relative availability of these funds.
subsections: section_title: Federal Requirements May Encourage States to Use Nonfederal Funds for Certain Highway Projects, but Other Factors Also Influence Their Decision
paragraphs: Most state transportation officials told us that costs and delays associated  with the federal requirements we reviewed have, in certain instances,  encouraged them to use nonfederal funds for certain highway projects  eligible for federal aid; however, other factors, such as a state legislature’s  requirements and the availability of nonfederal funds, also contribute to a  state’s decision to use nonfederal funds. More specifically, 39 of the 51  state DOTs we surveyed reported that, in the past 10 years, the federal  requirements had, in at least one instance, influenced their decision to use  nonfederal funds for highway projects that were eligible for federal aid. A  majority (33 states) of these 39 states reported that the NEPA requirement  factored into their decision to use nonfederal funds rather than federal  funds for highway projects. Some of the 39 states also reported that the  other requirements we reviewed also influenced their decision making: 5  states noted that the Davis-Bacon prevailing wage requirement factored  into their decision to use nonfederal funds; 2 states noted that the DBE  program factored into their decision to use nonfederal funds; and 5 states  noted that the Buy America program factored into their decision to use  nonfederal funds. See figure 2 for more information on how many states  reported using nonfederal funds and the reasons behind these decisions.  The survey used for this study is reproduced in appendix II.
Some state DOT officials we interviewed stated that by using nonfederal  funds instead of federal funds for certain projects, they avoided project  delays and costs associated with the federal requirements. Maine DOT  officials, for example, told us that if they had used federal funds for  several particular state-only funded projects, the projects would have been  delayed by one or more construction seasons due primarily to a  requirement designed to protect parklands and recreational areas.  Instead, Maine DOT used state resources and worked with the State  Historic Preservation Officer to expedite critical bridge improvements  through an accelerated review process. Maine DOT officials told us that  although they cannot finance major EIS projects using only state funds,  they are confident that if they used only state funds for these projects,  planning studies at the EIS level could be expedited by a year or more  without any major changes in the outcome. According to the Maine  officials, state legislation outlines steps necessary in a transportation  decision-making process that consider impacts to the human, social, and  natural environment that are as precise or more as NEPA, but do not  contain the added federal administrative responsibilities.
A few states reported in our survey that the Davis-Bacon prevailing wage  requirement and Buy America program also factored into their decision to  use nonfederal funds on certain projects. A New Hampshire DOT official  that we interviewed told us that the Davis-Bacon prevailing wage  requirement can slow a project because it imposes payroll processing  requirements that create additional administrative responsibilities,  particularly for small highway contractors who may not understand what  they must do to comply. As a result, the state official told us they use state  funds for many small resurfacing projects to reduce the administrative  responsibilities for contractors. Similarly, Washington DOT officials we  interviewed said that they used nonfederal funds for the Tacoma Narrows  Bridge project—which cost nearly $850 million—and saved $30 million to  $35 million by purchasing foreign steel instead of domestic steel. Had they  used federal funds for the project, they would have had to spend these  funds for domestic steel under the Buy America program.
Some states have minimized project delays by using nonfederal funds for  certain aspects of a project. For example, some states have used  nonfederal funds to acquire the right-of-way for a project—the rights to  the land over which the highway will pass—so that they could conduct the  NEPA review at the same time. Generally, federal funds cannot be used to  acquire a right-of-way until FHWA completes the NEPA process. Some  state DOT officials told us that because states cannot conduct certain  NEPA activities concurrently with other project activities, such as  developing an EIS and acquiring right-of-way, projects can face delays.  Ohio DOT officials said that there are risks in acquiring right-of-way before  the NEPA review has been finalized. For example, after acquiring the right- of-way, the NEPA document may not be approved or may be significantly  modified to require a right-of-way in a different location. Ohio DOT  officials said, however, that deciding on a right-of-way alternative after  obtaining sufficient information and involving the public involvement  lessens this risk. By using state funds for right-of-way purchases, Ohio  DOT officials said that they are able to reduce project costs because they  avoid the impact of inflation (which would raise property and construction  costs) and complete the project faster. However, these officials had not  tracked or quantified the savings resulting from this practice. FHWA  officials said that states have the option of acquiring right-of-way with  nonfederal funds but that states that do this will not be eligible to have  those acquisition costs reimbursed with federal funds.  Agreeing with Ohio  DOT officials, FHWA officials also said that the state bears the risk in  acquiring right-of-way before the NEPA process is completed.
In addition to the federal requirements, some state officials noted that  other factors play a role in their decisions to use nonfederal funds for  some projects. For example, Washington DOT officials informed us that  their state legislature passed transportation revenue packages in 2003 and  2005 requiring them to use state funding for selected projects. They had  wanted to use federal funding for some of these projects, particularly  those that already have federal agency involvement due to environmental  issues such as a need for permits to build in a wetland area, but the  legislature denied the request. Sometimes, although not generally, a state  may use nonfederal funds for projects because it has a significant amount  of nonfederal funds available to it. For example, in California, more than  85 percent of funding available for transportation, including highways,  originates from nonfederal sources. As a result, California funds many  projects with state and local funds. However, California DOT officials  explained that they use state and local funds for these projects—not  because of the federal requirements—but because state funds are more  available than federal funds.
section_title: States May Use Federal Funds to Avoid Certain Limitations of Nonfederal Funds or to Obtain Certain Benefits Associated with Federal Funds
paragraphs: States may face a number of limitations when they use nonfederal funding  for highway projects and may use federal funds to avoid these limitations,  or they may use federal funds because they can obtain certain benefits by  using these funds. Some states told us that one limitation associated with  using nonfederal funds for projects is that using these funds and not  complying with certain federal requirements can preclude or delay states  from obtaining federal funds later if needed. More specifically, if a state  uses nonfederal funds for a specific highway project, this project is not  required to meet certain federal requirements, such as the federal design  standards. Consequently, if state officials need additional funding for the  project during its later stages, they may find it difficult to obtain federal  funds because federal requirements were not previously met. However,  some state officials we interviewed said that they follow or try to follow  federal requirements even if they use nonfederal funds for a project  because they then have the flexibility to add federal funds to the project at  any stage. Furthermore, Ohio DOT officials explained that using state  funds for highway projects depletes state funds that could be used to  match federal funds for other highway projects or other state priorities.  Finally, according to Ohio DOT officials, if nonfederal funds are used on  projects, public involvement in projects may be limited or environmental  issues may not undergo systematic reviews since these projects do not  have to comply with the public and environmental review processes under  NEPA. However, as noted below, some states have environmental  requirements that are similar to NEPA’s requirements, which could lessen  the impact of this limitation.
Transportation officials in two states told us they often prefer to use  federal funds because they can obtain certain benefits associated with  using these funds. Washington DOT officials told us, for example, that if  they use federal funds for a highway project, FHWA serves as the lead  agency under NEPA and is responsible for coordinating the many federal  agencies that are responsible for the various federal environmental  requirements. However, if they use only nonfederal funds, states still must  comply with federal environmental laws (such as those involved with  protecting air and water quality) but must coordinate directly with the  federal agencies that are responsible for those requirements, and need not  go through the NEPA process. In some instances, according to the  Washington DOT officials, they preferred to partially fund a state project  with federal funds because they have a good working relationship with  FHWA. Furthermore, FHWA can be more effective than the state in  coordinating environmental issues at the federal level. Also, Massachusetts  DOT officials said that federal agencies are more inclined to cooperate  with and respond to another federal agency, such as FHWA, than to the  state DOT, and such cooperation and responsiveness can contribute to a  project’s success. For example, FHWA can obtain Coast Guard permit  exemptions that state DOTs cannot, allowing some federally funded  projects to proceed faster than comparable nonfederal projects.
section_title: Some States Consider Differences between Federal and State Requirements When Deciding Whether to Use Nonfederal or Federal Funds for Highway Projects
paragraphs: Some states have requirements similar to the four federal requirements we  reviewed, and some state officials told us that they consider the  differences between these requirements when deciding whether to fund  highway projects with nonfederal or federal funds. Furthermore, having  state requirements that are similar to the federal requirements may reduce  some of the time or cost savings states might otherwise gain by using  nonfederal funds.
According to the Council on Environmental Quality, a federal agency that  oversees NEPA, 16 states and the District of Columbia have environmental  planning requirements similar to NEPA requirements. Other states,  including New Hampshire and Illinois, have state environmental  requirements that address specific environmental issues, such as wetlands  protection, but do not have an environmental planning law like NEPA that  provides for an environmental review process. FHWA’s benefit-cost study  noted that the extent to which state environmental requirements overlap  with federal requirements varies from state to state. The study also noted  that state requirements that parallel NEPA requirements could be more  than, less than, or just as stringent as the federal requirements. FHWA  officials agreed, noting that, while some environmental processes—such  as California’s Environmental Quality Act—are fairly stringent like NEPA,  other state environmental processes may not be. Furthermore, in some  cases, a federal agency can authorize a state to use its own state  environmental requirement to meet the federal requirement. For example,  in the National Pollutant Discharge Elimination System (NPDES)  stormwater permit program, EPA has approved most state NPDES permit  programs and allows these approved states to administer permits, in lieu  of EPA, to allow discharges into U.S. waters.
In addition to state environmental requirements, some states have  requirements that are roughly equivalent to the Davis-Bacon prevailing  wage, DBE, and Buy America requirements we reviewed:    According to FHWA’s benefit-cost study, 32 states and the District of  Columbia have active prevailing wage laws. State prevailing wage laws  may require higher or lower wages than Davis-Bacon prevailing wages. For  example, state DOT officials told us that in certain portions of Utah and  Oregon, the federal Davis-Bacon prevailing wage rate is higher than the  state prevailing wage rate; however, Maryland officials told us that for  many projects, Maryland’s prevailing wage rate is higher than the federal  Davis-Bacon prevailing wage rate. Furthermore, some contractors said  that they pay their employees wages that are higher than the federal Davis- Bacon prevailing wage. Similarly, Hawaii DOT officials said that they, with  little or no exception, award their federal-aid highway construction  contracts to unionized contractors and that union wages in Hawaii are  typically higher than Davis-Bacon prevailing wage rates.
Some states have laws to encourage participation from minority-owned  enterprises in transportation projects. For example, in Maryland, there  are federal and state DBE programs. FHWA officials told us that state DBE  programs may or may not mirror the federal DBE program and that state  DBE programs vary. For example, some state programs have residency  requirements to encourage local businesses, while other states do not.
Some states have laws that require the use of domestically made steel and  other materials. State requirements that are parallel to Buy America  requirements are often noted in a state’s standard specifications, which  are included in the bid documents provided to highway contractors. For  example, West Virginia has a standard specification that requires that  projects use aluminum, glass, steel, and iron products that are  domestically fabricated. Texas also has a steel preference provision. This  provision notes that a contract awarded by Texas DOT that does not use  federal aid must contain the same preference for steel and steel products  as required by the federal Buy America program.
In terms of environmental requirements, some state officials said they  consider the differences between state and federal requirements, while  other officials may not. For example, Hawaii DOT officials told us that the  differences between the state and federal environmental requirements may  influence their funding decision making because the state process is less  rigorous, less time-consuming, or both, and as a result, the state process is  less costly than the NEPA process. Washington DOT officials noted,  however, that a project employing nonfederal funds may not realize time  and cost savings because projects that use these funds still have to comply  with a number of federal environmental laws that require coordination  among and the involvement of federal agencies to, for example, provide  permits to impact wetlands. Accordingly, Washington DOT officials may or  may not consider the differences between federal and state environmental  requirements when deciding whether to use nonfederal or federal funds  for a highway project.
In considering prevailing wage requirements, states may choose to use  nonfederal or federal funds for projects when federal Davis-Bacon  prevailing wage rates are higher than the state’s prevailing wage rate. For  example, in an interview, Utah DOT officials told us that Davis-Bacon  prevailing wages are higher than market wages in portions of Utah.  Consequently, Utah DOT tries to fund complete road reconstruction  projects—which are labor-intensive—with nonfederal funds so that state  dollars can be stretched further. Conversely, they use federal funds—and,  therefore, pay the Davis-Bacon prevailing wage rates—for smaller  rehabilitation or preservation projects. This lowers Utah DOT’s overall  costs, but Utah DOT officials were unable to quantify savings. Similarly,  Oregon DOT officials noted that in some areas of Oregon, the federal  Davis-Bacon prevailing wage is higher than the state prevailing wage.  However, the Oregon officials told us that state law requires that—when  federal funds are involved—contractors compare the federal Davis-Bacon  prevailing wage rates and the state prevailing wage rates and pay the  higher of the two.
section_title: The Availability of Nonfederal and Federal Funds Also Influences States’ Funding Decisions
paragraphs: Regardless of whether states decide to use nonfederal or federal funds for  their highway projects, their decisions are generally influenced by the  relative availability of these funds. Officials from many states told us that  their nonfederal funds are more limited than their federal funds. Hence,  the extent to which states use nonfederal funds to avoid the federal  requirements is limited. Our survey responses indicate that 37 states did  not often use nonfederal funds on highway projects to avoid federal  requirements. More specifically, these 37 states reported that they used  nonfederal funds to avoid the federal requirements less than 50 percent of  the time. Officials from one of these 37 states, Hawaii, said that they have  limited nonfederal funds available. As a result, the officials said that they  do not often use nonfederal funds to avoid federal requirements and that  they have to rely on federal funds to finance their highway projects.  Similarly, other states we spoke with also rely on federal funds to finance  their highway projects.
In our interviews, officials from some states that rarely use nonfederal  funds to avoid federal requirements told us that if they had more  nonfederal funds available, they would use those funds for highway  projects more frequently in order to expedite projects. Utah is one state  that has a significant amount of nonfederal funds available for highway  projects, and it uses these funds to expedite projects. Utah obtains about  75 percent of the funds for its highway program from the state and about  25 percent from the federal government. Because Utah has such a high  proportion of state funds available, Utah officials reported on our survey  that they use nonfederal funds to avoid the federal requirements more  than 50 percent of the time, but not always. Officials we spoke with also  told us that because Utah has abundant state funding, the state tries to  fund its smaller projects with federal funds and its larger, more complex  projects with nonfederal funds. Utah officials also noted that using state  funds has the benefit of generally reducing the time and cost to complete a  project, though they have not quantified or tracked this information.
section_title: Government Agencies and Contractors Face Challenges Associated with Federal Requirements, and Some Are Using Strategies to Address These Challenges
paragraphs: The federal, state, and local government agencies and contractors we  interviewed said that they face a number of challenges complying with the  federal requirements associated with federal highway projects and that  these challenges contributed to increased project costs and delays. The  challenges deal with (1) administrative requirements and coordination  with multiple government agencies and (2) provisions that state  transportation officials and contractors say make it difficult for them to  implement the requirements as efficiently as possible. Officials are  implementing a number of strategies to address these challenges,  including federal-level programs that provide states with guidance and  opportunities to participate in streamlining pilot programs, as well as state  initiatives to make their compliance processes more efficient.
subsections: section_title: State Transportation Departments and Highway Contractors Face Challenges Related to Administrative Requirements and Coordination with Stakeholders
paragraphs: Some state and local transportation officials and contractors stated that  the federal requirements we reviewed add to their administrative  requirements, such as preparing detailed documentation, which require  substantial resources, adding to project costs and delays. They also  claimed that coordinating with the multiple stakeholders involved in  planning a highway project can be challenging because agencies may have  competing interests and lack enforceable time frames.
subsections: section_title: Managing Administrative Requirements
paragraphs: Some state and local transportation officials and contractors told us that  the amount of documentation they prepare to comply with federal  requirements can add to their administrative requirements. For example,  state transportation officials we interviewed told us that lawsuits  challenging environmental decisions can cause delays and increase costs,  in part because they sometimes prepare more documentation to satisfy  federal agencies that are taking precautions to avoid lawsuits. FHWA  officials told us that documentation requirements are intended to enable  time savings later in the highway project process. Additionally, at a  September 2008 Transportation Research Board conference, several state  and local transportation planners said that federal agencies encourage  them to develop multiple alternative project designs that they think will  never be selected just to satisfy specific federal agencies and  environmental groups and to avoid lawsuits from opponents of the  project. According to FHWA guidance, however, the identification,  consideration, and analysis of alternatives are important components of  the NEPA process and contribute to objective decision making.  Furthermore, the guidance states that the consideration of alternatives  leads to a solution that satisfies the transportation need, while at the same  time protecting environmental and community resources.
Separately, according to an AASHTO study, most EIS documents exceed  300 pages and some may even exceed 1,000 pages, even though federal  regulations state that this document should normally be no more than 150  pages and those associated with complicated projects no more than 300  pages. Idaho DOT officials said that for some projects designated as  categorical exclusions, where the projects were expected to have no  significant impact, they had to prepare the same amount and level of  documentation as for projects requiring more complex EAs, which  requires a longer and more detailed process than categorical exclusions  because the environmental impact, if any, needs to be determined. FHWA  officials, however, said that they are not aware of any recent changes in  documentation trends for categorical exclusions.
According to many state transportation officials, redundancy in the  requirements also increases the amount of documentation they must  prepare. For example, Florida DOT officials told us that when states have  requirements similar to the federal requirements, officials frequently must  prepare separate documentation for both sets of requirements, raising  administrative costs. However, Maryland DOT officials told us that their  state and federal requirements are combined into one process in order to  meet both obligations and are supportive of each other. As a result,  Maryland DOT officials indicated that there did not appear to be project  delays or increased project costs due to redundancies. Separately, state  DOT officials said that redundancies in the federal requirements can  increase their administrative costs. For instance, officials from two states  told us that the documentation required for a section of the National  Historic Preservation Act is very similar to documentation for the  requirement aimed at protecting parklands and recreational areas, but the  paperwork prepared for one does not always satisfy the other, potentially  increasing the states’ administrative responsibilities.
According to federal, state, and local transportation officials we spoke  with, requirements related to the Davis-Bacon prevailing wage  requirement can also impose administrative responsibilities on states and  contractors that can raise costs. For example, the Davis-Bacon prevailing  wage requirement requires contractors to submit all weekly payrolls for all  employees and any requests for new job classifications to their state DOTs  and ultimately to DOL. Contractors that we spoke with submit both by  hard copy because they were under the impression that DOL requires a  manual signature for payroll certification. As a result, according to  officials from some state DOTs, states handle a large amount of related  paperwork, which may add to project costs. Texas DOT, for example,  estimates that they receive over 4,000 certified payrolls each week from  their active contractors and subcontractors, and is responsible for  reviewing 10 percent of all payrolls submitted for each contract. State and  local transportation officials said that electronic submission of weekly  payroll statements and certifications would make Davis-Bacon prevailing  wage paperwork processing more efficient and more thorough and would  decrease administrative responsibilities. Recognizing that online  processing would be useful, DOL created a pilot program for selected  contracting agencies and contractors to submit Davis-Bacon prevailing  wage payroll statements and certifications online, and FHWA encouraged  contracting agencies, such as state DOTs, to participate in the program.  (See app. III for more information.)
Additionally, some state transportation officials told us that the Davis- Bacon prevailing wage classifications have not been established for  common highway jobs, which contributes to additional paperwork.  These  officials and contractors also told us that even though the Davis-Bacon  prevailing wage tables are outdated, they must still complete paperwork to  comply with the requirement. For example, in the wage table for Tampa,  Florida, heavy construction does not include wages for two basic classes  of jobs for bridge construction, concrete finisher and pile driver operator.  Some state transportation agency officials said that if a job classification is  not listed on the wage tables, contractors submit requests for a wage  determination to DOL for each contract that involves that type of work.  State transportation officials said that this requirement increases their  paperwork responsibilities, which in turn increase costs because fulfilling  these responsibilities requires an extensive amount of staff resources. For  example, officials at Florida DOT said that when a new classification is  added on a contract, it is only good on that particular contract and that  they process hundreds of these requests each year. In general, DOL  officials stated that the job classifications are sufficient. Regarding the  wage tables, officials from Florida also said that the Davis-Bacon  prevailing wage surveys that DOL uses to develop the wage tables are  outdated. For example, DOL bases Davis-Bacon prevailing wages for  highway construction in some counties in Florida on 1993 wage surveys.  As a result of the outdated surveys, Florida DOT officials said that  contractors typically pay higher wages than the federal Davis-Bacon  prevailing wages to attract and keep employees. The Florida officials said  that although contractors pay higher wages than the Davis-Bacon  prevailing wage, they still must show compliance to the Davis-Bacon  prevailing wage requirement on federal projects. As such, Florida officials  stated the compliance process is an “exercise in paperwork.” Contractors  in Idaho agreed with Florida DOT officials, stating that although they pay  employees the market rate (which is higher than the Davis-Bacon  prevailing wage rate), they still have to adhere to Davis-Bacon prevailing  wage paperwork requirements, which is costly and time-consuming to  complete and submit. DOL officials stated that the process they use for  updating wage tables is appropriate. These officials also said that they  update the wage tables at their discretion, but not on a set schedule, and  that they take into account the age of the previous survey, anticipated  construction volume in a state, and other factors in deciding when to  update a wage table.
section_title: Managing Multiple Project Stakeholders
paragraphs: Some state DOT officials said that interagency coordination is a challenge  in the NEPA process—both in getting all the government agencies to  coordinate on a project’s design and obtaining necessary permits. FHWA,  along with federal agencies with environmental review responsibilities  (known as resource agencies), relevant state agencies, and other  planning stakeholders participate in and review detailed assessments of  environmental impacts, in accordance with their responsibilities under  federal or state laws. Florida DOT officials noted that they may coordinate  with as many as 23 different entities in planning, reviewing, and  constructing highway projects. The Safe, Accountable, Flexible, Efficient  Transportation Equity Act: A Legacy for Users (SAFETEA-LU) amended  the law to require transportation agencies to engage government agencies  and other planning stakeholders to collaborate during the initial project  planning and throughout the NEPA process. However, numerous federal,  state, and local transportation officials said that it is challenging to  coordinate these government agencies and planning stakeholders because  these entities (1) have limited funding and staff, (2) have responsibilities  and priorities beyond transportation projects, and (3) may have competing  interests and missions that can be difficult to resolve. Our previous report  on highways and the environment also found similar challenges. More  specifically, this report found that resource agency officials viewed their  core regulatory duties as their main responsibility and that resource  constraints, according to these officials, hampered the resource agencies’  ability to take on extra responsibilities. These constraints may limit their  ability to fully participate in the early stages of environmental reviews.  Furthermore, competing interests and missions can increase the time  frame of a project. For example, Florida DOT officials said that on a  historic bridge project, the Coast Guard wanted to build a new bridge for  navigational purposes, but other federal and state agencies who were  responsible for historic bridges wanted to save the historic integrity of the  bridge by rehabilitating it rather than constructing a new one. The  disagreement between the two parties caused delays in the development  of the EIS, causing the EIS to take about 5 years to complete.
Several state transportation officials and FHWA officials told us that while  they collaborate with each other and the resource agencies to set  deadlines, once they identified the agencies that will need to be involved in  the project, approval and permitting agencies routinely miss deadlines,  often delaying projects. For example, a project must receive a permit from  USACE if the project involves the discharge of dredged or fill material into  water. Several state DOT officials told us that this permitting process can  be particularly time-consuming. One Idaho transportation official told us  that for a bridge project in Idaho, Three Cities Rivers Crossing, it took an  additional 1.5 years to review the EIS, partly due to USACE missing its  deadline for issuing comments. FHWA officials said that there is no  consequence to resource agencies or relief to transportation agencies if  the resource agencies fail to meet the deadline. USACE officials said that  requests for highway project reviews are evaluated in a timely manner,  given that USACE has many applicants requesting authorization to impact  U.S. waters, including other state and federal agencies and the general  public.
section_title: State Government Agencies and Contractors Face Challenges Complying with Some Provisions of Federal Requirements
paragraphs: According to some state transportation officials and contractors, certain  provisions within the federal requirements we reviewed appear to be  outdated, narrowly defined, or unclearly defined, resulting in difficulties in  implementing the requirements, and potentially increasing project costs  and delays. In general, FHWA or other federal government officials did not  agree with the state officials’ assessment that the provisions are outdated,  narrowly defined, or unclearly defined.
Several state DOT officials told us that, in their opinion, the $2,500  regulatory cost threshold for compliance with the Buy America program  and the $750,000 regulatory personal net worth ceiling for the DBE  program were outdated. FHWA established the Buy America threshold to  avoid burdening states with administrative responsibilities for small  projects but has not revised the threshold since 1983. FHWA officials said  that they have not revised the threshold because limited staff resources  and other potential statutory program changes have delayed scheduled  revisions. State DOT officials said that the cost of steel for most projects,  even small ones, falls above this threshold, given recent increases in steel  prices. As a result, states may not obtain the administrative relief the law  intended for small projects. FHWA officials agreed that the threshold  should be re-evaluated or updated, and officials at one state DOT  suggested that the threshold be adjusted for inflation.
Additionally, according to some state transportation officials we met with,  the DBE program’s $750,000 ceiling on personal net worth is outdated.  According to the state DOT officials, the ceiling does not meet current  economic standards and has not kept up with current inflation rates. U.S.  DOT established this ceiling in 1999 to ensure that wealthy individuals are  not allowed to participate in the program. U.S. DOT established the  $750,000 limit based on what they believed to be a well-established and  effective part of the Small Business Administration’s (SBA) assistance  programs for small disadvantaged businesses and because the $750,000  figure provided for a reasonable middle ground in view of the wide range  of suggestions calling for higher or lower ceilings. However, U.S. DOT  officials said that they have not revised this ceiling since 1999 because  SBA has not adjusted the thresholds for its SBA programs. Furthermore,  according to a U.S. DOT official, since courts look closely at whether the  DBE program is “over-inclusive” (i.e., serving people that it is not intended  for), the ceiling has become important to the constitutional defense of the  program as several federal court decisions have cited the existence of the  ceiling as one of the factors leading them to uphold the program’s  constitutionality. California transportation officials said that one challenge  with an outdated personal net worth ceiling for the DBE program is that  the low ceiling makes it difficult to recruit new DBEs for certification and  retain them in the DBE program. U.S. DOT reviewed the ceiling in 2005  when they reviewed the DBE airport concessions rule. At that time, the  U.S. DOT concluded that the $750,000 cap was appropriate, as it ensured  that wealthy individuals did not participate in the program. FHWA officials  agreed, however, that the personal net worth ceiling should be adjusted  for inflation.
According to officials at some state government agencies and contractors,  the Buy America program’s definition of foreign steel may be too narrowly  defined, which they say has caused delays or has increased project costs.  More specifically, FHWA regulations for the Buy America program state  that all manufacturing processes that modify a product’s physical size,  shape, or chemical content must occur in the United States. For example,  if steel materials are sent to a foreign country to be rolled or if a piece of  machinery includes one small component of foreign steel, that product is  considered to be foreign made and is not in compliance with Buy America.  Florida DOT officials said one challenge with this definition is that it is  difficult for them to find domestic manufacturers of mechanical systems  for certain movable bridges. Florida DOT officials and contractors told us  that the time they spend searching or waiting for domestic materials to be  produced adds to project delays. State DOT officials also said that the Buy  America provision can cause construction delays if it is discovered that  the requirement is not being met after construction begins. Construction  delays are generally the result of the domestic product not being available  in sufficient quantities to meet project schedules or if the domestic  product is not regularly produced. Furthermore, Florida DOT officials also  told us that for the movable bridges, there are many components that  require some level of work in a foreign manufacturing shop that then  renders the entire component as foreign, even though the majority was  domestically produced. In such cases, a waiver can be requested from  FHWA. However, FHWA officials said that domestic suppliers are found  for the majority of waiver applications.  If FHWA does not grant a waiver,  the design of the project needs to be corrected or the foreign components  need to be replaced with domestic components.
Lastly, some state transportation agency officials also said that the waiver  provisions in the Buy America program are not clearly defined, and as a  result, the waiver process may be inconsistently interpreted or applied at  the federal level. Some state transportation agency officials told us that  they often do not apply for Buy America waivers because the process  lacks defined criteria and has led to inconsistent FHWA approvals.  According to state transportation officials, waivers could help state  transportation agencies reduce project costs by using potentially less  expensive foreign steel. FHWA recently started posting notice of waiver  requests on its Web site for public comment for a 15-day period and also  published notices of findings on waiver requests in the Federal Register.  These notices include more detailed justification for approving the waiver.  Officials from the American Iron and Steel Institute, an industry trade  association, told us they think these changes will result in more  transparent approvals; however, FHWA officials said these new  notification processes will add more time to projects because additional  time is needed to receive and respond to public comments, especially  when there are potential domestic manufacturers of products that oppose  the waiver. In addition, FHWA officials said that the process of publishing  a notice of findings in the Federal Register requires additional time and  could delay a project if a waiver is requested after construction has  already begun.
section_title: Project Stakeholders Have Developed and Are Using Strategies to Address Challenges, with Varying Success
paragraphs: Congress and federal and state government agencies have developed  strategies to address many of the challenges federal and state  transportation agencies and contractors face in completing highway  projects and complying with federal requirements. According to various  agency officials and highway contractors, some of these initiatives are  resulting in decreased project costs and delays, though they could not  quantify the cost savings or delay reductions. Specifically, Congress has  attempted to improve project delivery time frames. As we have previously  reported, with SAFETEA-LU, Congress made a number of changes to the  environmental review processes required of state and local transportation  agencies. For example, SAFETEA-LU Section 6004 amended title 23 of the  U.S. Code to allow state DOTs to assume FHWA’s responsibility for  determining whether certain highway projects can receive categorical  exclusions, in accordance with criteria to be established by FHWA. If a  state assumes this responsibility, FHWA would no longer approve  categorical exclusions and serve more in a monitoring role. This change  made by SAFETEA-LU was intended to facilitate more efficient reviews of  transportation projects, expediting completion without diminishing  environmental protections. Additionally, in 2002, the President issued an  executive order for expedited environmental reviews. This executive  order directs executive departments and agencies to accelerate their  environmental reviews for permits and approvals for transportation  infrastructure projects designated by the Secretary of Transportation to be  “high priority.” FHWA and state transportation agency officials said that  the executive order has helped expedite the NEPA process. Separately,  FHWA has taken initiatives to provide guidance and opportunities to  better streamline compliance with the federal requirements. For example,  FHWA has developed a database—the State Environmental Streamlining  and Stewardship Practices Database—that provides opportunities for  states to share examples of streamlining and stewardship practices. This  database is available to all state DOTs through FHWA’s Web site. EPA is  also using electronic or online processes to assist them in streamlining  projects. For example, they are using systems to allow stormwater  permittees to electronically file permitting information, which reduces the  amount of time that EPA needs to receive and process this information.  Separately, in 2003, DOL created, and FHWA is facilitating, a pilot program  for selected state DOTs to test software that provides for a Web-based  format for the submission of Davis-Bacon prevailing wage payroll  statements and weekly contractor certifications. The software was  designed to eliminate the paperwork burden associated with labor  compliance requirements for contractors and state DOTs. Other federal  agencies, together with industry associations, have also offered guidance  and training to state and local transportation officials and contractors to  help them build better practices to streamline compliance activities.  According to some state transportation officials, some of these federal  efforts have helped states reduce project costs and delays.
FHWA has recognized that project delays impede transportation system  improvements and that streamlining environmental reviews and  documentation is essential to mitigate the delays and implement highway  projects more quickly and cost-effectively. Accordingly, FHWA has  developed a performance measure—known as the Vital Few  Environmental Streamlining and Stewardship Goal (Environment VFG)— to track the time it takes for projects to go through EAs and EISs, so that  FHWA can improve the timeliness of environmental review processes, and  ultimately, reduce project delays. Furthermore, by tracking time frames  for environmental reviews, FHWA should be able to develop a better  understanding of the key impediments to, or shortcomings in, the  environmental review process, and address congressional, state, and other  concerns about the process. In fiscal years 2007 and 2008, the goal of the  Environment VFG was to decrease the median time to complete EAs and  EISs to 12 and 36 months, respectively. In developing these goals, FHWA  advised state DOTs to establish deadlines, through negotiation with FHWA  division offices and resource agencies, and track data to measure success  through FHWA’s Environmental Document Tracking System (EDTS).
Despite this framework, FHWA has not met its goals for the Environment  VFG performance measure. As figure 3 illustrates, since fiscal year 2004,  the median time for completing EISs has increased by almost 26 percent,  while FHWA’s goal for completing EISs has decreased. Furthermore, in  fiscal year 2007, the median time to complete EISs reached 68 months—  almost 89 percent above FHWA’s goal of 36 months.  The median time to  complete EAs in the same fiscal year was about 67 percent greater than  FHWA’s goal of 12 months. FHWA officials told us that progress in  meeting their goals has been slow because delays arise from federal and  state governments’ need to address issues that emerge during project  development, such as those issues that are mentioned in this report. Some  state DOT officials also said that environmental issues that are discovered  during the environmental review or changes in environmental rules  established by EPA or at other federal agencies also contribute to delays.  Furthermore, according to FHWA, the federal environmental review  process, as well as state and local impediments such as funding and local  controversy, can cause project delays. Additionally, as noted earlier,  FHWA officials noted that there are no legal consequences for missing  deadlines. Nonetheless, to improve the time frames, FWHA has analyzed  the reasons for why environmental time frames have not been met and is  attempting to improve the time frames by improving the environmental  review process, as required by section 139, 23 U.S.C., since modified by  SAFETEA-LU Section 6002, and by developing additional streamlining  initiatives.
In addition to the federal government, several state transportation  agencies are implementing strategies to expedite compliance with the  federal requirements we are reviewing. These initiatives include  streamlining agreements, called programmatic agreements, that state  DOTs have reached with federal government agencies responsible for  environmental approvals and permits. For example, Texas DOT has a  programmatic agreement with FHWA, the Texas State Historic  Preservation Officer, and ACHP to ensure that compliance with the  National Historic Preservation Act is streamlined. Under this agreement,  Texas DOT acts as FHWA’s agent to carry out its responsibilities under the  National Historic Preservation Act, allowing the state to make findings and  determinations on whether there is an adverse effect to historic properties  and to complete the consultation requirements required by the act. Some  state transportation officials told us that they can save time by entering  into agreements with FHWA and resource agencies to spell out broad  categories of projects that can be advanced under preagreed conditions,  with little or no need for individualized review. Separately, to help resolve  staffing shortages at resource agencies, some state DOTs fund positions  for additional staff at federal and state agencies to perform environmental  review activities, including approval and permitting actions for  transportation projects. As we have previously reported, while some  states approve of the practice of funding positions at federal and state  resource agencies for environmental reviews, other states believe the  resource agencies should fund their own activities. USACE officials said  that it is helpful to them to have stable positions at their office, funded by  a state, to focus specifically on transportation issues and permitting  because such a strategy helps the permitting process move more quickly  and consistently. Finally, some state DOTs have developed ways to  streamline the processing of the federal requirements. For example,  Florida DOT officials developed the Efficient Transportation Decision  Making process to address challenges they were facing in coordinating  resource agencies during the NEPA process. This process seeks input  from the resource agencies through an online interactive database for  major projects throughout the NEPA process. According to a Florida DOT  review of the Efficient Transportation Decision Making process, the  process has yielded improved decision making and improved interagency  relationships, among other benefits. See appendix III for more information  on the initiatives mentioned in this section.
section_title: Conclusions
paragraphs: As the demand for highway capacity has increased and as project costs  have risen, the demand for nonfederal and federal highway funds has  grown, making it essential that states and localities use these funds as  efficiently as possible. The four federal requirements we reviewed have  important economic and environmental benefits, but the steps involved in  compliance may add time and costs to projects. Federal and state  strategies have helped to address some of the challenges involved in  compliance. However, quantitative information is limited. For example, we  found little information quantifying the benefits, delays, and costs of the  requirements we reviewed, though some states are beginning to track  environmental costs incurred during highway projects. Without  quantitative information, agencies cannot compare costs and benefits or  assess the impact of their actions on project time and costs. With state and  local governments constructing and expanding roads at a time when  transportation dollars are limited, it is critical that states use federal  dollars efficiently to finance their highway projects.
In addition, some outdated provisions in the federal requirements we  reviewed can limit states’ ability to spend transportation dollars as  effectively as possible. The $2,500 regulatory threshold for the Buy  America requirement no longer serves its original purpose of exempting  states from the administrative burden associated with this requirement for  small projects. This administrative burden may increase the costs of small  projects, and it reduces the resources available for other projects. Finally,  the $750,000 regulatory personal net worth ceiling of the DBE program has  not changed since 1999, and according to state transportation officials,  increasing this threshold could facilitate the hiring of minority- and  women-owned firms.
section_title: Recommendations for Executive Action
paragraphs: To address the challenges associated with the federal requirements we  reviewed, to better ensure that federal funds are used as efficiently as  possible, and to assist states in minimizing project delays and costs  associated with federal requirements, we recommend that the Secretary of  Transportation re-evaluate the $2,500 regulatory threshold for the Buy  America program and the $750,000 regulatory personal net worth ceiling of  the DBE program, and modify them, if necessary, through appropriate  rulemaking.
section_title: Agency Comments and Our Evaluation
paragraphs: We provided a draft of this report to USACE, ACHP, DOL, U.S. DOT, and  EPA for their official review and comment.  USACE, ACHP, U.S. DOT, and  EPA provided technical comments, which we incorporated into the final  report where appropriate.  U.S. DOT took no position on our  recommendation regarding the Buy America program threshold and DBE  personal net worth ceiling.  DOL officials notified us that they had no  comments on this report.
We are sending copies of this report to interested congressional  committees, the Secretaries of Transportation and Labor, the  Administrator of EPA, the Chief of Engineers at USACE, and the Executive  Director of ACHP. The report is also available at no charge on the GAO  Web site at http://www.gao.gov.
If you or your staffs have any questions, please contact me at (202) 512- 2834 or wised@gao.gov. Contact points for our Offices of Congressional  Relations and Public Affairs are on the last page of this report. GAO staff  who made contributions to this report are listed in appendix IV.
section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: The objectives of this report were to review (1) the types of benefits and  costs associated with selected federal requirements for federal-aid  highway projects; (2) the influence of these federal requirements on states’  decisions to use nonfederal or federal funds for highway projects; and (3)  the challenges associated with the federal requirements and strategies that  federal, state, and local government agencies and contractors have used or  proposed to address these challenges.
Although many requirements apply to federally funded highway projects,  our review focused on four federal requirements: the National  Environmental Policy Act (NEPA), the Davis-Bacon prevailing wage  requirement, the Disadvantaged Business Enterprises (DBE) program, and  the Buy America program. We selected these four requirements for our  review on the basis of (1) initial interviews with officials in the  headquarters offices of the Federal Highway Administration (FHWA), the  U.S. Army Corps of Engineers (USACE), the Environmental Protection  Agency (EPA), the Department of Labor’s Wage and Hour Division, and  the Advisory Council on Historic Preservation’s Office of Federal Agency  Programs; and (2) interviews with experts at industry associations,  including the National Conference of State Legislatures, the American  Highway Users Alliance, the American Association of State Highway and  Transportation Officials (AASHTO), the Associated General Contractors of  America, the American Road and Transportation Builders Association, and  the American Iron and Steel Institute. Furthermore, rather than focusing  our review on broader requirements associated with transportation  planning, such as requirements for developing a transportation  improvement program, we focused our review on project-specific  requirements.
To identify the types of costs and benefits associated with these  requirements for federal-aid highway projects, we reviewed published  research and studies. We identified 30 relevant studies by searching  bibliographic databases, using as our criteria studies or reports that  identified benefits, costs, challenges, and strategies used to address the  challenges of complying with the federal requirements. After identifying  the studies, we reviewed each one to determine its relevance and  applicability to our objectives. The studies we reviewed included reports  on highway requirements issued by the Congressional Research Service  and the Congressional Budget Office, as well as studies issued by state  departments of transportation (DOT), AASHTO, and the National  Cooperative Highway Research Program. We also reviewed GAO reports  that addressed agencies’ tracking of costs and benefits of certain federal  regulations. Finally, we reviewed an FHWA report entitled, The Costs of  Complying with Federal-aid Highway Regulations. For each of the  studies we identify in this report, we reviewed its methodology, including  the study’s datasets, sample size, and data collection techniques, and  concluded that the methodology is sufficiently reliable for the purposes of  our report; however, we did not independently verify the results of these  studies.
To determine the influence of these federal requirements on states’  decisions to use nonfederal or federal funds for highway projects, we  surveyed state DOT officials in all 50 states and the District of Columbia.  In the survey, which appears in appendix II, we asked the officials how the  selected federal requirements factored into their funding decisions for  highway projects eligible for federal aid. After we drafted the survey, we  pretested it in one state to ensure that the questions were clear and  unambiguous, the terminology was used correctly, the survey did not  place an undue burden on agency officials, the information could be  feasibly obtained, and the survey was comprehensive and unbiased. We  found the results of the pretest sufficient to administer the survey to the  other states. To administer the survey, we obtained from FHWA the  appropriate points of contact for transportation officials at each state  DOT. Beginning on March 31, 2008, we e-mailed the survey to these  transportation officials. We received a survey response from every state  DOT, thereby achieving a 100 percent response rate. Because this was not  a sample survey, it has no sampling errors. However, the practical  difficulties of conducting any survey, such as problems in interpreting a  response to a particular question or entering data into a spreadsheet, may  introduce nonsampling errors. To minimize such errors, we pretested the  survey, as noted, and verified the accuracy of the data keyed into our data  collection tool by comparing the data with the corresponding survey. The  survey used for this study is reproduced in appendix II.
To supplement the survey, and to give respondents an opportunity to  elaborate on their survey responses, we selected 10 states for follow-up  telephone interviews. In determining which states to select for interviews,  we excluded the 5 states we used as case studies—California, Florida,  Idaho, Maryland, and Texas—and chose our sample from the remaining  states. We also based our selection of these 10 states on their responses to  the survey, their funding levels, and geographic dispersion. The 10 states  we selected for follow-up interviews with DOT officials were Hawaii,  Illinois, Maine, Massachusetts, New Hampshire, Ohio, Oregon, Utah,  Virginia, and Washington.
To identify the challenges associated with the federal requirements and  strategies that various highway project stakeholders have used or have  proposed to address these challenges, we visited and interviewed officials  in California, Idaho, Maryland, and Texas, and interviewed officials in  Florida by telephone. To select these states, we considered a number of  factors. We identified a nongeneralizable sample based on whether a state  (1) participated in the Surface Transportation Project Delivery Pilot  Program, which allowed states to assume NEPA review authority, or (2)  had projects designated for streamlined environmental review, pursuant to  Executive Order No. 13274. In addition, we interviewed officials from  federal agencies and representatives from industry associations such as  AASHTO. These agency officials and industry association representatives  identified states that had initiated notable streamlined transportation  planning and project development processes. Finally, we included in our  sample states that had received varying levels of federal funding. At the  five states in our sample, we interviewed officials from FHWA division  offices; other federal organizations, such as USACE and EPA division  offices; state and local transportation offices; and metropolitan planning  organizations, as well as private industry contractors and consultants who  worked on federally funded highway projects. To understand the  strategies used to address challenges, we reviewed public and private  sector research, studies, agreements, and proposals on methods and  programs to streamline strategies at the federal, state, and local levels.
We conducted this performance audit from October 2007 through  November 2008 in accordance with generally accepted government  auditing standards. Those standards require that we plan and perform the  audit to obtain sufficient, appropriate evidence to provide a reasonable  basis for our findings and conclusions based on our audit objectives. We  believe that the evidence obtained provides a reasonable basis for our  findings and conclusions based on our audit objectives.
section_title: Appendix II: GAO Survey of State Departments of Transportation
section_title: Appendix III: Strategies Used or Proposed by Federal and State Agencies to Address Challenges Associated with Federal Requirements
paragraphs: Federal and state agencies have implemented or proposed the following  strategies to address the challenges associated with federal requirements  for highway projects.
The 2002 executive order authorizes the Secretary of Transportation to  designate infrastructure projects for expedited environmental reviews. Since  these reviews were authorized, 19 projects have been selected for expedited  review, including 15 highway or bridge projects. Three of our case study  states—California, Texas, and Maryland—have had projects designated for  expedited reviews and placed on the order’s project list.
State officials in California, Maryland, and Texas reported mixed results on  the effectiveness of the executive order in expediting environmental reviews.  Maryland transportation officials told us that placing their Inter-County  Connector (ICC) project on the executive order’s project list helped move the  project forward. Previously, during the 1980s and 1990s, the project was  stalled by high levels of controversy over environmental issues, lack of  support for the project from state government leaders, and difficulty in getting  stakeholders to collaborate on the project. Putting the ICC on the project list  in 2003 enabled Maryland DOT to build on renewed support for the project  from state government leaders by formalizing a collaborative process among  stakeholders that sped up the project’s delivery. This collaborative process  involved the creation of an interagency workgroup through which staff-level  stakeholders resolved disagreements over environmental issues before the  issues were elevated to higher-level government agency authorities. Once  placed on the executive order project list, the ICC moved from the planning  stage to a final Record of Decision in 2006 for environmental issues in 3  years. By contrast, California DOT officials said that the executive order  raised agency awareness for the projects placed on the list in their states.
The task force, which formulated in 2002, is comprised of representatives  from a variety of different federal agencies, such as the Environmental  Protection Agency (EPA) and the U.S. Forest Service. This task force  reviews current National Environmental Policy Act (NEPA) implementing  practices and procedures and recommends improvements to make NEPA  more effective, efficient, and timely. The task force developed several  products, including a handbook, Collaboration in NEPA – A Handbook for  NEPA Practitioners, published in October 2007, to improve the NEPA  process through collaboration. State DOT officials were familiar with this task  force; however, we heard varied responses from these officials on whether  the products produced by the task force helped streamline environmental  review processes.
SAFETEA-LU Section 6002 (23 U.S.C. §139) established a new process to  promote efficient project management by federal agencies and enhanced  opportunities for coordination with the public and other agencies. Several  changes were made to the environmental review process, including a new  requirement for a coordination plan for public and agency participation. We  previously reported that changes in the review process can result in better  project decisions; however, some state transportation officials told us that the  process may not necessarily be more efficient, since extra steps required to  comply with the provision adds time to environmental review. Section 6002  also changed the law to allow a 180-day limit on lawsuits challenging final  federal agency environmental decisions—such as the approval of an  environmental impact statement—on highway projects, when notices of  those decisions are published in the Federal Register. We previously  reported state transportation officials’ opinions that this could lead to cost  savings because it limits lawsuits to a period when it would not cost as much  to change project plans and, after this period, work can proceed on a project  without the risk of a lawsuit.
SAFETEA-LU Section 6004 (23 U.S.C. §326) changed the law to allow state  DOTs to assume responsibility for determining whether certain highway  projects can receive categorical exclusions, in accordance with criteria to be  established through a Memorandum of Understanding between the U.S.  Department of Transportation’s Federal Highway Administration (FHWA) and  the state. If a state assumes this responsibility, FHWA does not approve  categorical exclusions but does monitor whether the state is adequately  applying FHWA’s criteria. A state can assume this responsibility after waiving  its sovereign immunity. To date, only two DOTs, California DOT and Utah  DOT, have assumed this authority, and only Alaska DOT is seeking it. Some  state transportation officials we spoke with told us that they did not pursue  this approval authority because they already have agreements in place with  FHWA that streamline approvals for categorical exclusions. State officials  also identified the requirement to waive sovereign immunity as an obstacle to  their taking advantage of the categorical exclusions approval authority.
California DOT reported to FHWA that, as a result of Section 6004, they  saved a median of about 28 days and a mean of 7 days for categorical  exclusion determinations statewide due to administrative efficiencies and  time savings associated with consultations and coordination with federal  resources agencies. FHWA officials said that, in general, agreements  between state DOTs and FHWA Division Offices are valuable and they can  entail shorter or defined time frames for reviews and responses. However,  we previously reported that, according to one resource agency, the state  assumption of responsibility for categorical exclusion reviews could decrease  the input from resource agencies in addressing environmental issues.  Although overall interest in Section 6004 is limited, states may be  experiencing similar time savings with their own streamlining agreements  with FHWA.
SAFETEA-LU Section 6005 (23 U.S.C. §327) established a pilot program  that gave five states—Alaska, California, Ohio, Oklahoma, and Texas—the  opportunity to assume FHWA’s environmental responsibilities for highway  projects under NEPA and other federal environmental laws, after waiving  sovereign immunity and entering into a Memorandum of Understanding with  FHWA. FHWA continues to provide oversight. This program is designed to  provide information on whether delegating these responsibilities to the state  will result in more efficient environmental reviews, while meeting all federal  requirements for these reviews. California, whose state DOT assumed this  responsibility in July 2007, is the only state participating in the program,  although Alaska has expressed interest to FHWA in applying for this in the  future. The other three states declined the opportunity for various reasons,  including the restriction on using state funds to acquire right-of-way for  highway projects prior to the NEPA decision and the inability of the states to  obtain approval from their legislatures to waive sovereign immunity, which is  required for the program. Furthermore, as we previously reported, states are  concerned about the amount of work required to set up such a program and  want to see how the program works in California.
California DOT officials told us that the time to conduct environmental  reviews has decreased for the projects that have undergone the NEPA  process since California assumed this authority. They told us that the median  review and approval times for draft environmental documents and final  environmental documents was shorter for pilot program projects compared to  prepilot program projects. For example, they said it took prepilot program  projects a median time of 6.1 months to complete draft environmental  documents, while it took pilot program projects a median of 1.6 months, a  savings of 4.5 months, to complete. Additionally, they said it took a median  time of 2.0 months to complete final environmental documents for prepilot  program projects and 0.8 months for pilot program projects, a savings of 1.2  months. Part of the time savings, they say, occurs because FHWA has  reduced its review. FHWA published its first audit on September 23, 2008.  The audit reviewed fundamental processes and procedures the state put in  place to carry out the assumptions of the roles and responsibilities, but it did  not report on the program’s impact on environmental review time frames  because it was the first audit that FHWA has conducted. Overall, FHWA  found that the California DOT has made reasonable progress in  implementing the startup phase of Pilot Program operations and is learning  how to operate the program effectively. FHWA’s second audit was held in  July 2008, and the results are forthcoming in the Federal Register. In this  audit, FHWA examined performance measures.  Specifically, FHWA  examined changes in the time states spent on completing environmental  documents.
SAFETEA-LU Strategic Highway  Research Program 2 (SHRP 2)
SAFETEA-LU authorized funding for SHRP 2, a research program that  FHWA, AASHTO, and the Transportation Research Board jointly conduct to  obtain information on highway safety, renewal, reliability, and capacity. Some  of the research focuses on approaches and tools for systematically  integrating environmental considerations into project analysis and planning.  One project involves developing a collaborative decision-making framework  for transportation planners to use to enhance collaboration from project  planning through project development. The study includes 25 case studies of  the challenges faced by state and local transportation officials when trying to  manage multiple stakeholders. The report is currently in draft.
Refocus. Reform. Renew.: A  New Transportation Approach  for America (Proposed)
To better streamline federal requirements, in 2008, U.S. DOT has proposed  to (1) allow state requirements to satisfy “substantially similar” federal  requirements, (2) exempt projects with less than 10 percent federal funding  from federal requirements, and (3) pilot a project for some states to opt out of  federal requirements under titles 23 and 49 (except the Davis-Bacon  prevailing wage requirement) in exchange for a reduction in the percentage  of federal funding they would otherwise receive. The proposal also includes  several specific reforms to the NEPA process: clarifying what constitutes a  reasonable alternative, reducing FHWA documentation requirements by  allowing the final environmental impact statements to be combined with the  Record of Decision into one document to simplify the process, and  broadening categorical exclusion assignment authority to states. This  proposal has not been finalized.
This database contains information on streamlining and stewardship  practices used by states as ways to efficiently and effectively fulfill their  NEPA obligations. FHWA officials said that they regularly update the  database with state-nominated practices and all are available to the public  on the Internet. For example, for Maryland, FHWA has 30 practices listed,  including a workshop to address working relationships between participating  agencies in environmental reviews, various copies of programmatic  agreements (described later in this appendix), and templates for evaluating  categorical exclusions. FHWA officials said that this database provides  states with examples and enables states to share practices for streamlining  the environmental review process.
Maryland DOT officials said that this database is helpful in that it helps them  acquire information more efficiently and that it expands their thinking in the  development of their environmental streamlining agreements—which can  ultimately reduce project costs and delays. Officials at California DOT said,  however, that it is difficult for them to implement solutions from another state  that does not have to comply with as many state environmental laws and  regulations as California. Other states say that the database has not helped  them decrease projects costs or delays.
To reduce paperwork burdens described earlier in this report, in 2003, the  Department of Labor (DOL) created and FHWA is facilitating this pilot  program for selected state DOTs to submit Davis-Bacon prevailing wage  weekly payroll statements and contractor certifications on the Internet.  Software automatically downloads information from payroll processors and  performs diagnostics (including issuing an alert if an employee rate is  incorrect).
Officials from the two participating state DOTs that we contacted—Arizona  DOT and Wisconsin DOT—told us that the new process provided automatic  electronic approval of payrolls and eliminated the need for staff to manually  review payrolls. An Arizona DOT official told us that it reduced the amount of  paperwork and repetitive steps and created consistency for payroll  submission across contractors. Both state DOT officials told us that they  have received positive feedback from some contractors. Although, the  Wisconsin DOT official told us that large contractors had challenges  formatting their payroll systems to input data into the software and that small  contractors had problems if they did not have access to computers. Other  challenges both states mentioned focused on programming the software and  educating contractors. Neither state DOT has tracked cost savings.
In consultation with FHWA, AASHTO developed the Center for  Environmental Excellence to help streamline environmental review and  transportation delivery processes and encourage environmental stewardship.  It provides transportation professionals with guidance, training, and access  to environmental tools, among other types of information. The center also  provides practitioners with technical assistance, including on-call help.
State DOTs have taken the lead to enter into these formal agreements with  FHWA and federal and state agencies to establish actions and processes for  streamlining compliance with environmental regulations. The agreements  often identify categories of projects that can be advanced under preagreed  conditions, with little or no need for individualized review by those agencies.  Agreements address a number of issues, such as compliance with the  National Historic Preservation Act, NEPA, the Endangered Species Act, and  other requirements. For example, the Texas DOT entered into an agreement  with FHWA and the State Historic Preservation Office (SHPO) in Texas.  Under this agreement, Texas DOT acts as FHWA’s agent to carry out  responsibilities under the National Historic Preservation Act, allowing the  state to make findings and determinations on whether there is an adverse  effect to historic properties and to complete the consultation requirements  required by the act.
According to FHWA officials, programmatic agreements have helped  streamline the environmental review process. Officials at the Advisory  Council on Historic Preservation also indicated that programmatic  agreements have improved project delivery time frames.
To help resolve staffing shortages at resource agencies, state DOTs began  in the early 1990s to fund positions for additional staff at federal and state  agencies to perform environmental review activities, including approval and  permitting actions for transportation projects. Previous transportation  legislation, the Transportation Equity Act for the 21st Century, gave states  the option of using a portion of their federal-aid highway funds to pay for the  positions to conduct environmental reviews and expedite NEPA activities.  State DOTs must obtain the approval of FHWA division offices for such uses  of these funds. According to a 2005 AASHTO survey, 68 percent of state  DOTs (34 states) fund positions. Two-thirds of these positions were at state  agencies and the remainder were at federal agencies. SAFETEA-LU  amended the law to allow states to pay for positions whose activities  extended beyond NEPA, including planning activities that precede NEPA.
As we have previously reported, states have mixed views on using state  funds for positions at federal agencies. While some states fund positions at  the federal agencies for environmental reviews, other states believe the  federal agencies should fund their own activities. USACE officials told us that  it is helpful to them to have stable positions at their office—funded by a  state—to focus specifically on transportation issues and permitting.
Efficient Transportation Decision  Making (ETDM)
ETDM, established in 2004, provides an interactive online database for  government agencies to provide and review environmental and other  information on a project. Florida DOT and multiple federal and state  agencies developed ETDM to address difficulties in getting involved federal  and state agencies to coordinate and provide timely responses for highway  projects. The database provides information that these agencies need to  make decisions, such as project descriptions and geographic information  system maps showing locations of resources. ETDM asks agencies to  concur at certain points in the process to help ensure their involvement  throughout the process and reduce the likelihood that they will challenge the  project later. Since its implementation, 332 transportation projects have been  screened through EDTM.
Florida DOT conducted a review of how ETDM was functioning. District  officials at Florida DOT reported several benefits using ETDM, including that  ETDM (1) provided them with better understanding of environmental issues  early in planning and project development, (2) improved decision making  throughout the process, (3) improved interagency relationships, and (4)  improved agency responsiveness. They also estimated that between  October 2004 and March 2008, over 3 years, they have saved 600 months  to complete NEPA-related review activities and around $16 million in project  costs for all of their projects combined. However, they said since ETDM has  not been in place long enough and most projects have not been through the  full project development cycle, project cost and time savings may not be fully  realized. District officials also reported some challenges with ETDM. For  example, they reported that some agencies commented on environmental  reviews outside their jurisdictional areas and that ETDM increased project  scrutiny. Other government agencies have also reported ETDM’s benefits.  For example, in 2004, the U.S. Fish and Wildlife Service and EPA reported  that since the implementation of ETDM, they have been able to review more  projects and at a higher level of review. USACE reported in 2006 that ETDM  improved their staffs’ knowledge of all the various pieces of the  transportation and planning process, and as a result, removed one of the  barriers of communication between USACE and Florida DOT. However,  some Florida contractors told us that ETDM is not as beneficial as it could be  because not all Florida government agencies participate as actively as  others.
The Standard Environmental Reference is an online guidance document  available for California transportation agencies to help them comply with  NEPA and the California Environmental Quality Act. The document provides  users with information on what documentation is needed in a user-friendly  format.
California DOT officials told us that the Standard Environmental Reference  enables local transportation agencies to focus their resources on necessary  elements and helps them to avoid any potential revisions later in the NEPA  process.
section_title: Appendix IV: GAO Contact and Staff Acknowledgments
subsections: section_title: Staff Acknowledgments
paragraphs: In addition to the contact named above, Kate Siggerud (Managing  Director), Ray Sendejas (Assistant Director), Tim Bober, Roshni Davé,  Anne Dilger, Bess Eisenstadt, Denise Fantone, Dave Hooper, Bert Japikse,  Alex Lawrence, Ashley McCall, Patricia McClure, Elizabeth McNally,  Amanda Miller, SaraAnn Moessbauer, Revae Moran, Josh Ormond, and  Amy Rosewarne made key contributions to this report.