Federal assistance for highway and bridge infrastructure—about $40 billion each year—is distributed through multiple formula and discretionary grant programs collectively known as the federal-aid highway program. The federal-aid highway program is financed through the Highway Trust Fund, a dedicated source of federal revenue based on the “user-pay principle”—that is, users of transportation systems pay for the systems’ construction through the federal tax on motor fuels, tires, and trucks. FHWA uses a decentralized organizational structure to administer the federal-aid highway program, meaning that decision-making authority is largely delegated to FHWA’s 52 division offices. FHWA division offices have 10 to 61 staff each, depending on the size of the state’s highway program. While there are variations in division office organizational structures, each typically has teams that cover areas such as planning, environment, engineering, technical services, finance, and civil rights. As of February 2012, FHWA had 2,960 staff—1,962 in the field and 998 at headquarters. FHWA’s responsibilities for the federal-aid highway program fall into two broad categories: (1) advancing the program and (2) ensuring compliance with federal law and regulations. To advance the program, FHWA engages in a range of activities to encourage the effective and efficient use of federal-aid highway funding and assist states in progressing projects through construction to improve the highway system. To accomplish these tasks, FHWA works with states to identify issues, develop and advocate solutions, approve and obligate project funding for eligible activities, and provide technical assistance and training to state DOTs. To ensure that states comply with federal laws and regulations, FHWA, through its division offices, conducts oversight of federally funded projects and reviews state DOT capacity and systems used to administer approved projects. Actual project-level oversight is divided or shared between FHWA and the state. FHWA oversees major interstate highway projects. FHWA division offices and states jointly decide how to divide oversight responsibility for other National Highway System projects. States assume oversight responsibility for projects that are not on the National Highway System. These can include locally administered projects, which are projects in which a state DOT has given approval to a local public agency (e.g. a city or county) to administer a project or phase of a project such design, property acquisition, or construction. For those projects where both FHWA and the state make decisions about oversight responsibilities, the respective responsibilities are generally mapped out in a “stewardship agreement.” This agreement defines which projects will receive “full” oversight, in which FHWA oversees most aspects of the construction process, or projects in which states assume oversight responsibility (we refer to these as “delegated” projects). Figure 1 describes aspects of oversight that are led by FHWA or the state depending on the status of the project. To evaluate state DOTs’ systems and capacity to administer approved projects, FHWA division offices assess internal controls and processes across programmatic areas such as construction, finance, property acquisition, and locally administered projects. A common tool for this type of oversight is a “process review,” which involves an analysis of key program components and processes employed by the state DOT. Typically, this includes a file review of a sample of projects, interviews with relevant state DOT staff, and field reviews when applicable. In addition, FHWA, in conjunction with the Federal Transit Administration, performs a federal certification review of Metropolitan Planning Organizations (MPO), which are responsible for transportation planning in urban areas with populations larger than 50,000 every 4 years,that periodically FHWA determines if the organization complies with applicable federal requirements. FHWA division offices have a range of corrective actions they can use if a state does not comply with federal requirements. Among other things, it may withhold funding from all or part of a project, deobligate inactive funds, withhold approval until an issue is resolved, or require corrective action plans. Over the years, the federal-aid highway program has grown to encompass broader goals, more responsibilities, and a variety of approaches; however, the concept of a federal-state partnership has been an integral feature of the highway program since it was established by the Federal Aid Road Act of 1916.legislation established federal-state responsibilities, wherein states select the placement of roads, construct, and maintain them, and the federal government sets standards and provides a portion of the funding. The Federal-Aid Highway Act of 1973 further refined the federal-state relationship by stating that “the authorization of the appropriation of Federal funds…shall in no way infringe on the sovereign rights of the States to determine which projects shall be federally financed” and defined the federal-aid highway program as a “federally assisted State This and other early highway program.” This language helped shape FHWA’s interpretation of the federal-state relationship, leading to an understanding of its role that anchors FHWA’s approach to oversight in partnership and is cited today in FHWA’s policy documents. Almost all the division administrators we surveyed described their work with states as a partnership and in ways that emphasized the importance of partnership in carrying out FHWA’s mission to advance the transportation program. In addition, as we previously reported, both FHWA and state officials believe that over the years the partnership has helped to build trust and respect between state transportation agencies and FHWA, ensuring that as partners they can accomplish tasks such as planning and building projects more efficiently and effectively. The goals and scope of the federal-aid highway program expanded during much of the 20th century, as did the roles and responsibilities of FHWA. Initially, the highway program was administered by the Department of Agriculture through the Bureau of Public Roads, a predecessor to FHWA. The bureau focused oversight at the project level to ensure that materials and construction methods met federal standards. The bureau also brought engineering expertise to the states, many of which either lacked skilled engineers or were not ensuring that federal dollars were being used to produce quality construction. The Defense Highway Act of 1941 extended the 1916 act to fund a strategic network of highways, including secondary and feeder routes. Eligibility was extended again in 1944 to include an array of other secondary roads, including rural farm-to-market roads, rural mail and bus routes, county roads, and others that became eligible for post-war federal aid. In 1950, Congress made additional roads—including county, township, and urban roads—eligible for aid. By then, however, the focus of the highway program was turning increasingly to constructing the Interstate Highway System. Designated as mandated in 1944, construction of the system began in earnest with passage of the Federal-Aid Highway Act of 1956 and establishment of the Highway Trust Fund, a dedicated funding source deriving revenue primarily from taxes on motor fuels, tires, and trucks to finance the construction of the Interstate system. Construction of the Interstate remained the focus of the federal-aid highway program in the years that followed, and Congress continued to expand the types of projects eligible for federal funds. In the 1970s, Congress expanded the federal role in bridge infrastructure by making highway bridges located on public roads and longer than 20 feet eligible for federal funds. Congress also expanded the eligibility of federal aid beyond initial construction. Under the 1916 Act and Interstate authorizations, the federal government was to fund the construction of highways while maintenance was the states’ responsibility. However, as the Interstate began to age, Congress allowed states to use federal funds for road maintenance on Interstate highways and all eligible bridges by redefining certain activities—such as resurfacing, rehabilitation, and reconstruction—as capital investments rather than maintenance. By 1991, as a result of changes over the years, use of highway funds was authorized to fund a wide range of transportation enhancement activities, including activities connected with highway beautification, historic preservation, and the establishment of bicycle and pedestrian trails. In addition to expanding the types of projects eligible for federal highway funds, over time Congress adopted legislation to achieve social goals such as advancing civil rights and environmental protection, and enhancing urban planning and economic development, which affected the federal-aid highway program and FHWA’s role and responsibilities. For example, the National Environmental Policy Act of 1969 recipients to comply with federal environmental requirements by conducting environmental reviews for federally funded transportation projects. The Federal-Aid Highway Act of 1962 established urban transportation planning as a matter of national interest and required all construction projects to be part of a continuing, comprehensive, and cooperative planning process. Other federal requirements have included requiring compliance with prevailing wage standards applicable to federal contracts under the Davis-Bacon Act, a Disadvantaged Business Enterprise program to enhance participation of women- and minority- owned businesses, and Buy America provisions for acquiring steel and other materials. As the goals of the highway program expanded, FHWA added expertise in its division offices beyond civil engineers and hired economists, right-of-way specialists, planners, historians, ecologists, safety experts, civil rights experts, and others. Pub. L. No. 91-190, 83 Stat. 852 (1970) (codified as amended at 42 U.S.C. ch. 55). in 1998 to 2,960 in February 2012. Recognizing its changing roles, responsibilities, and decline in staff levels, FHWA continued to adapt its oversight approach. In 2006, it began adopting a risk management approach to its oversight, recognizing in part that, while its role had expanded, its resources had not. FHWA has adapted to changes in demands for its oversight, but its role and responsibilities are complicated by the fact that the current federal approach to surface transportation in general—and to highways in particular—is not working well. The expansion of the program did not result from a specific rationale or plan, but rather an agglomeration of policies and programs since the 1950s without a well-defined overall vision of the national interest and federal role in our surface transportation system. Federal goals and programs are now numerous and sometimes conflicting, and federal roles are unclear.