Beginning in 1930, the Congress established the first transportation discretionary program under which the executive branch could select specific transportation projects for federal funding, thus providing the executive branch with some latitude in allocating federal funds to the states. In that year, the Public Lands Program was established to pay for road work on the nation’s public lands. In 1978, the Congress set up the Discretionary Bridge and Discretionary Interstate programs. The Discretionary Bridge Program was established to replace or rehabilitate high-cost bridges while the Discretionary Interstate Program aimed to accelerate the construction of the Interstate Highway System. When the Interstate 4R Discretionary Program was begun in 1982, its goal was to resurface, restore, rehabilitate, and reconstruct the Interstate Highway System. Finally, the Ferry Boats and Facilities Program, begun in 1991, was intended to construct ferry boats and ferry terminal facilities. (See apps. I-V for additional information on ISTEA’s provisions and eligibility requirements for each of the discretionary programs discussed in this report.) The Secretary of Transportation is responsible for selecting projects under the discretionary programs. The Secretary has delegated this responsibility to the FHWA Administrator. FHWA’s Office of Engineering administers the programs, solicits applications from states, and compiles the applications and information for selection. States submit applications to FHWA’s division offices, which either send the applications to FHWA’s regional offices for compilation with other states’ applications or to FHWA’s headquarters, as they do for Interstate Discretionary and 4R programs. Regional offices then send the applications to FHWA’s Washington, D.C., headquarters. As table 1 shows, since fiscal year 1992, the five discretionary programs we reviewed received over $2.7 billion in federal funds—ranging from about $99 million provided for the Ferry Boats and Facilities Program to almost $1.6 billion provided for the Interstate Discretionary Program. The states’ requests for discretionary funds have generally exceeded the amounts available for funding. For example, in fiscal year 1997, the states submitted almost $682 million in requests for about $61 million in discretionary bridge funds. Similarly, the states submitted nearly $1.3 billion in requests for about $66 million available in fiscal year 1997 from Interstate 4R funds. Although the states have been able to build specific transportation projects and facilities through discretionary funding, the amounts available through these five programs represent only a small portion of the highway funds that the states receive annually. For example, in fiscal year 1997, FHWA’s Office of the Administrator provided the states with $213.7 million in discretionary funding for the five programs we reviewed—about 1 percent of the estimated $20 billion that FHWA provided the states with for that year. FHWA uses a two-phase selection process involving both program staff and the Office of the Administrator. As displayed in figure 1, the first phase begins when program staff in the Office of Engineering send a solicitation notice out to FHWA’s regions calling for project candidates from the states. Project candidates are compiled by the regions and divisions and forwarded to the headquarters staff offices. The headquarters staff with specific expertise in the various discretionary program areas compile the regional submissions and review and analyze each candidate. By applying program-specific statutory and administrative criteria, program staff screen and prioritize project applications for each discretionary program. FHWA program staff use both statutory and administrative criteria and other factors to identify and prioritize projects for each discretionary program. As displayed in table 2, the criteria are program specific and differ among the five discretionary programs. For example, by using data to determine the physical condition of a bridge, Discretionary Bridge Program staff calculate a numerical score or rating factor for each candidate project. The rating factor allows FHWA to prioritize the projects eligible for funding. In contrast, Public Lands Program staff use factors, such as whether a project is located in a state with 3 percent or more of the nation’s public lands, to screen and prioritize projects. Interstate Discretionary and 4R Program staff consider whether other sources of funding, such as unobligated Interstate Construction and National Highway System funds, are available for projects, while Ferry Boats and Facilities Program staff evaluate factors, such as a project’s benefits and the ability of federal funds to leverage private funds, when they prioritize the candidate projects. After applying the criteria, program staff identify ineligible projects and group the eligible projects into four priority categories—most promising, promising, qualified, and not qualified. The second phase of the selection process begins after FHWA’s Office of Engineering provides the Office of the Administrator with a report for each discretionary program that lists the eligible projects and includes other information, such as what funding the states received in prior years through the discretionary programs and any congressional interest or support for specific projects. The Office of the Administrator receives the reports for all of the programs simultaneously—generally in the fall—and begins the final selection process at that time. Using the discretion granted to the Administrator under each of the programs, the Office of the Administrator can apply additional considerations to the information received from the program staff before making final selections. For example, according to FHWA’s acting Deputy Administrator, the Office of the Administrator may try to spread the discretionary funds among as many states as possible to ensure geographic equity. As a result, the final selections could differ from the staffs’ groupings if these groupings provided the bulk of funding for only a few states in a given program. The official also said that the Office of the Administrator, in consultation with the Secretary, also pays close attention to requests from Members of Congress in making the final project selections. In addition, congressional legislation, in the form of earmarks, may require the Secretary to fund a particular project through a discretionary program. Other considerations may include whether the requesters would be willing to accept partial funding, whether conditions pertaining to the project have changed since the state originally requested funding, and other factors, such as whether states have received an equitable share of funding over time. The process is concluded when the Office of the Administrator sends out the list of its selections. The two phases differ in the extent of documentation available to explain how decisions are made—that is, how program staff apply the criteria to group the projects and how the Office of the Administrator makes the final selections. Specifically, program staff provide written documentation of the statutory and administrative criteria used to screen candidate projects, as well as the project’s descriptions, the amounts of funding requested, prior allocations to states, and congressional interest. In contrast, officials in the Office of the Administrator could verbally describe the additional factors they have considered in making the final project selections but could not provide any written documentation that either explained the additional selection factors they used or how they applied these factors to each candidate project. In addition, the final selection list that the Office of the Administrator issues at the conclusion of the selection process does not explain or justify why each project was selected. The current process to select projects under the discretionary programs has been in place since fiscal year 1995. In general, under the current process, the Office of the Administrator relies more on its discretion in making the selections than it did under an earlier process that relied almost entirely on program staffs’ analyses and recommendations. We found that under the current process, there were differences in the projects selected by the Office of the Administrator and those given higher priority by the FHWA staff responsible for evaluating and prioritizing the projects. Our analysis of the discretionary program’s selection process revealed that two distinct processes existed during our review time frames. During fiscal years 1992-94, program staff for each of the discretionary programs we reviewed recommended specific projects and funding amounts after ranking projects in order of priority. As displayed in figure 2, the Office of the Administrator selected over 98 percent of all the projects that the program staff recommended in fiscal years 1992-94 (180 projects selected from 183 staff recommendations). For example, the Office of the Administrator selected 15 of the 17 public lands projects recommended by FHWA program staff in fiscal year 1992. Similarly, the Office of the Administrator selected all of the six Interstate 4R projects recommended by FHWA program staff for funding in fiscal year 1992. The high level of consistency between the staffs’ recommendations and the Office of the Administrator’s selections changed after fiscal year 1994. For the fiscal year 1995 funding cycle, the Office of the Administrator directed the program staff to group the projects into four categories—most promising, promising, qualified, and not qualified—rather than provide specific project and funding recommendations. According to FHWA’s Acting Deputy Administrator, the Office of the Administrator found it difficult to make equitable decisions using the rank order lists and thus made the change to the groupings. The official also said that the process did not give the Office of the Administrator enough flexibility to take into account other equally important considerations, such as the geographic distribution of funding. As figure 2 shows, beginning in fiscal year 1995, the Office of the Administrator selected a declining proportion of projects from the higher-priority categories. In fiscal year 1995, 92 percent of the projects that the Office of the Administrator selected were projects that staff had categorized as “promising” or “most promising”; 69 percent in fiscal 1996; and 59 percent in fiscal 1997—about 73 percent overall for the 3-year period. This tendency was particularly evident in comparing the staffs’ groupings and the final project selections in three of the five programs we reviewed—Public Lands, Interstate 4R, and Discretionary Bridge. For example, in fiscal year 1997, while the Office of the Administrator selected 9 of the 36 public lands projects categorized as “most promising,” it also selected 16 of 59 projects categorized as “qualified”—the lowest-priority category for the public lands program that year. Half of all public lands projects that the Office of the Administrator selected that year came from the qualified category.