FHWA Stewardship / Oversight Task Force
Final Report -- March 20, 2001

1. Introduction

   As a result of discussions at the Federal Highway Administration's (FHWA) National Business Meeting, the FHWA initiated the Stewardship and Oversight Task Force. The Task Force, formed on July 21, 2000, was charged with re-visiting and re-framing our national guidance on stewardship and oversight of FHWA programs and projects. Executive Director Anthony R. Kane's June 9, 2000, memorandum issuing "Stewardship and Oversight - A Short Statement" was provided to the group as background information. The Task Force included representatives from Infrastructure Operations Core Business Units (CBU), Legal Service Business Unit (SBU), Eastern Resource Center, five Division offices, and one State Transportation Agency (STA). The list of Task Force members can be found in Appendix H.

   The FHWA is the agency within the U.S. Department of Transportation responsible for administering the Federal highway (Federal-aid and Federal Lands) programs authorized by statute. Authority for the FHWA to administer these programs is found in Title 49, United States Code, which organizes the U.S. Department of Transportation and its agencies, and in Title 23, United States Code, which contains the authorization and requirements of the various FHWA programs. As the legislation has evolved, the FHWA responsibility and accountability to Congress and the public have not changed.

   The FHWA relationship with the STA and Federal Agency partners has changed over the years. The FHWA and STA have: increased knowledge of effective highway management programs; evolved processes and procedures from Interstate construction programs; increased Federal and State funding levels; and increased ability to delegate project approval actions to STA. Other changes in the transportation industry that have impacted how the FHWA conducts its stewardship and oversight are: FHWA and STA reducing staff size; the STAs increasing reliance on consultant engineering services to deliver projects; Local Public Agencies (LPA) administering an increasing number of projects; and private entities increasing role in the financing and management of transportation facilities.

   As a result of all these factors, FHWA manages increased program responsibility (size and number of programs) with less staff. FHWA has developed an effective process management approach from experience with implementing the Secondary Road Program, and Certification Acceptance. With the use of the process management approach, the FHWA has transitioned from full project oversight and approval of every project or activities funded with FHWA funds to program oversight of programs, some targeted project level activity, and the STAs assuming the authority for project approvals on significant portions of the most programs. This FHWA transition to program oversight has resulted in confusion and wide variance in the interpretation of FHWA stewardship and oversight roles.

2. Task Force Data Collection / Analysis Processes

   The Task Force agreed to follow the basic process of:

   1. Obtain information about relevant historical and current oversight practices;
   2. Identify critical issues and possible solutions; and,
   3. Identify the best solutions and develop recommendations.

   Information / data gathering processes included soliciting information from FHWA staff, reviewing all existing policy regarding stewardship and oversight, and reviewing pertinent process reviews. The Task Force membership has the years and diversity of experience to track FHWA history and actions. As a result of a brainstorming session, the Task Force identified issues that could be sorted under three focus areas: policy, FHWA / STA roles, and stewardship and oversight tools available for use.

   The Task Force reviewed FHWA input provided in response to the development of the June 9, 2000, statement. In addition, the Task Force canvassed all Field Division Offices, CBUs, and specific SBUs with links to oversight policy for input into the issue through the use of a five-question survey. The outreach exercise verified the diversity of opinion in the FHWA and the importance of addressing stewardship and oversight; verified the previously identified focus areas of policy, roles, and tools; and further defined the details of specific issues in each of these focus areas. As a result of this outreach, the Task Force identified key issues, prioritized these issues, and proceeded with the analysis and identification of possible solutions

   With the prioritized list, the team identified one-to-three person teams to tackle the top issues. The teams researched the issues; provided clear definition of the stewardship and oversight aspects of the issues; documented law, regulations or current policies; and identified possible solutions. The research and recommendations were documented with the preparation of issue papers. After the initial review of these issue papers, the group consolidated all issue papers and focused our efforts on:

   • Preparing a new stewardship and oversight paper that clarified the FHWA policy and the roles of the FHWA and STA;
   • Recommending a stewardship goal in the FHWA National Strategic Plan and Performance Plans; and,
   • Identifying tools to assist the FHWA in implementing the FHWA vision of stewardship and oversight.

   Once the draft policy was prepared, the Task Force circulated the proposed policy and accompanying recommendations to FHWA offices. Overall, the proposed policy and recommendations were well received, with comments including editorial comments on the policy paper, some discussion of the need for outreach, and the need for additional information or tools. The one issue that received strong support but had strong, diverse opinions on implementation was the recommendation to build a stronger connection between FHWA stewardship and oversight responsibilities and the FHWA National Strategic Plan and the FHWA Performance Plan. Comments from field offices, CBUs, selected SBUs, and Directors of Field Services on the proposed policy and other recommendations were considered in preparing the final recommendations and this report.

3. Summary of Recommendations

   The Task Force's recommendations targeted Agency policies and tools. The Task Force retained these two focus areas as a result of the top issues being the need for clarity on the FHWA policy, which includes clarification of the related FHWA / STA roles, and the appropriate use of tools to build understanding and to implement this policy.

   Policy Recommendations

   1. Policy On Stewardship and Oversight

      The Task Force recommends the FHWA update its policy on stewardship, with the proposed policy being included as Appendix A to this report. The proposed policy defines stewardship and oversight, and the relationship between them.

      Name	Definition
      Stewardship:	The efficient and effective management of the public funds that have been entrusted to the Federal Highway Administration.
      Oversight:	The act of ensuring that the Federal highway program is delivered consistent with applicable laws, regulations and policies.

      Previous policy was written to emphasize the delegation of project authorities to the STAs. The emphasis of policy and past outreach created questions as to whether the FHWA had oversight responsibilities on "exempt" projects. The proposed policy makes clear that the FHWA has stewardship and oversight responsibilities on all Federally funded programs. The proposed policy also clarifies and emphasizes that the FHWA and the STA roles in the implementation of Federal highway funding.

      FHWA has stewardship and oversight responsibilities for all FHWA programs. While STAs may assume certain project approval authorities in accordance with 23 USC 106, FHWA is ultimately accountable for ensuring that the Federal highway program is delivered consistent with the established requirements.

      In addition to the clarity on FHWA stewardship roles, the proposed policy also highlights the need for FHWA Offices to conduct program oversight, and to manage oversight responsibilities by including the major activities in their unit plans.

   2. Stewardship Goal in National Strategic Plan and Performance Plans

      The Task Force recommends that the FHWA provide a stronger link between FHWA oversight responsibilities in National Strategic Plan and Performance Plans. The Task Force reviewed the 1998 FHWA National Strategic Plan, the 1999 Performance Plan and the Draft 2001 Performance Plan. These documents had brief narratives linking the Agency's stewardship roles to achieving identified business goals and the implementation of strategies. The missing link the Task Force identified is Agency accountability to Congress and the public in administering these programs since there are no direct links between FHWA stewardship activities and performance. The Task Force understands the importance of linking our activities to the accomplishment of identified business goals to benefit the public, but recommends emphasizing the importance of staff conducting appropriate oversight of the Federal highway programs to ensure these programs comply with the program requirements and provide effective transportation products and services.

      Appendix B includes further discussion of this subject, and the recommendation for a stronger discussion of oversight in the FHWA National Strategic Plan when that plan is updated. The Task Force has referred this issue to Policy and its future activities to update the National Strategic Plan.

   3. Update of Agency Regulations

      The Task Force recommends that FHWA update all its policies and guidance material to be consistent with the updated FHWA stewardship policy. In reviewing past Agency policies and guidance, the Task Force identified that there are numerous FHWA documents that include discussion of "exempt" projects and imply FHWA does not have an oversight role on "exempt" projects. Appendix C includes a list of identified regulations that need to be updated.

   Tools

   1. Integrated Information System

      The Task Force recommends the FHWA develop an integrated information system on the FHWA Home Page, linking legislation, regulation, and policy memoranda. It is also recommended that when documents are not synchronized, the home page should identify documents and procedures FHWA uses to implement the Federal highway program.

      One of the first issues identified was that FHWA has regulations and policies that are out of date with the legislative changes authorized in TEA-21. The Task Force recognizes that the FHWA is in this position because of the number and scope of the legislative changes authorized in 1998, coupled with other Department of Transportation or Federal government changes that the Agency has had to implement concurrently. Employees with some years of service in FHWA have knowledge of the changes and can identify the most current "Agency position" on an issue. However, newer, less experienced employees struggle with knowing all sources of information and the identification of the Agency's position on a topic. This proposal has been forwarded to the FHWA "FAPG" team and is being considered.

   2. Expand The Use Of Information Sharing Mechanisms

      The Task Force recommends all offices use their information processes to share best practices, and innovative processes and procedures they use in conducting their stewardship and oversight responsibilities. The Task Force noted that one of the keys to our future success is the sharing of information, innovation, and "lessons learned" with our peers in other FHWA offices. This sharing of information primarily would build knowledge and experience. There are several program offices or activities that are currently using methods such as newsletters, websites, and conference calls to share information with others.

      Appendix D includes an example of a Division Office "required actions" list. This list is provided as an example of information sharing that Divisions might find useful. An outgrowth of the risk / benefit analysis could be the identification of additional opportunities for the STA to assume a broader range of responsibilities.

   3. Task Force Outreach Plan

      The Task Force recommends a coordinated outreach plan. The need for this coordinated outreach is to continue the discussion of the policy and uniformly address issues and concerns in the implementation of the policy. The plan involves top FHWA management communication with STA executives as well as communication to FHWA and STA employees at all levels of the organization. The intent of this plan is to take advantage of currently planned meetings in calendar year 2001, and to add opportunities for discussion if necessary. The Task Force has developed a "Question " Answer" document to assist in the outreach effort. Appendix E includes an outline of the proposed outreach plan, and a "Powerpoint" presentation to highlight the important facets of the proposed policy and key implementation issues, and the "Question " Answer" document.

   4. Risk / Benefit Analysis Tool

      The proposed stewardship policy expects that all FHWA offices assess the implementation of the FHWA program in its responsibility, and to prioritize the use of their limited resources. The Task Force recognizes that many FHWA offices currently conduct an assessment and prioritization process, and that there is a range of formality and documentation in the processes used. The Task Force recommends that the assessment / prioritization process be conducted in cooperation with the STA / Federal Agency involved in implementing the FHWA program.

      The risk / benefit analysis tool included in Appendix F is a conceptual framework of how an office could assess the implementation of the FHWA programs and the determination of the most effective use of its personnel resources for the next fiscal year. The Task Force recommends that FHWA conduct further review of available processes.

   5. Agreement Required by Title 23 of United States Code ("Agreement")

      The administration of the Federal highway programs has evolved from 100% Federal project level involvement and approval mechanisms to a mixture of program oversight and project level involvement. Secondary Road Plans and Certification Acceptance Agreements were the earliest program oversight mechanisms the FHWA used to delegate project approvals to a STA.

      As a result of Section 106 of Title 23, United States Code, the STA or Federal Agency assumes some of the responsibilities of the Secretary. It is also a requirement that the STA or Federal Agency and the FHWA reach agreement on each agency's roles and responsibilities, and how those responsibilities will be managed.

      The Task Force recommends that the FHWA office discuss the implementation of the Federal highway programs with the STA or Federal Agency that shares the implementation of the program with FHWA. There needs to be agreement on the Agency that will have the project level approval authority. The FHWA and the STA or Federal agency need to continually: (1) evaluate its stewardship and oversight mechanisms, and (2) work to improve the efficiency and effectiveness of the FHWA highway programs. Appendix G is an example of how the Agreement can be used to assist the FHWA and STA or Federal Agency in managing these delegated authorities. Another option is for these discussions to occur with the development and approval of individual processes and procedures.

4. Conclusion

   The message that this Task Force and the FHWA management, through approval of these recommendations, want to convey is that (1) FHWA has been directed to delegate these project level authorities to the STAs, and (2) FHWA has a responsibility to conduct program oversight of all programs to ensure the effective delivery of the programs. Through the issuance of the updated Stewardship and Oversight Policy, the updating of related policies and guidance material, and the appropriate use of oversight tools, the FHWA can improve its management of the Federal highway programs while allowing STAs the maximum delegated authority and flexibility available.

Appendix A - A Policy on Stewardship & Oversight of the Federal Highway Program

1. Background

   Federal funding is provided to assist States and Federal Agencies in providing transportation services through the various Federal Highway Administration programs. By law, the nature of the majority of these Federal programs is Federal assistance for State administered programs. The Intermodal Surface Transportation Efficiency Act of 1991 (ISTEA) and the Transportation Equity Act for the 21st Century (TEA-21) increased the role of State Transportation Agencies (STA) in project approvals. These changes did not alter the fact that the FHWA is the Federal agency responsible for ensuring compliance with Federal requirements in the delivery of the Federal highway program. These changes did affect how FHWA implements this responsibility. The flexibility afforded in the ISTEA and the TEA-21 allowed STAs to assume the Secretary's responsibilities for design, plans, specifications, estimates, contract awards and inspection of many Federal-aid projects. Policy, guidance, training, and other FHWA material implementing the oversight provisions of ISTEA were written to initiate change within the agency regarding our approach to the oversight component of the stewardship of the Federal highway program. However, the implementation of the policies and guidance resulted in inconsistent interpretations of the FHWA responsibility for ensuring compliance on "exempt" projects.

   The purpose of this document is to restate the FHWA responsibilities in the delivery of the Federal highway programs.

2. Terminology

   In order to ensure that this policy statement is consistently interpreted, the following definitions have been established.

   Name	Definition
   Stewardship:	The efficient and effective management of the public funds that have been entrusted to the Federal Highway Administration.
   Oversight:	The act of ensuring that the Federal highway program is delivered consistent with laws, regulations and policies.

   Stewardship reflects our responsibility for the development and implementation of the Federal highway programs. It involves all FHWA activities in delivering the Federal highway program, such as leadership, technology deployment, technical assistance, problem solving, program administration and oversight.

   Oversight is the compliance or verification component of FHWA stewardship activities. Narrowly focused, oversight activities ensure that the implementation of these Federal highway programs is done in accordance with the applicable laws, regulations, and policies. More broadly focused, oversight activities enable the FHWA to ensure the effective delivery and operation of the transportation system envisioned in our base statutes.

   In short, it must be recognized that Congress and the public hold the FHWA accountable for ensuring that the Federal highway programs are both efficient and effective, and are consistent with applicable laws, regulations and policies.

3. Policy

   The policy applies to all organizational elements of the FHWA and all FHWA programs. FHWA has stewardship and oversight responsibilities for all FHWA programs, and these program responsibilities include Title 23 and non-Title 23 program areas. While STAs may assume certain project approval authorities in accordance with Section 106, Title 23, United States Code, the FHWA is ultimately accountable for ensuring that the Federal highway program is delivered consistent with established requirements. The FHWA responsibility is the same when Federal Agencies assume authorities for the implementation of Federal Lands Highway Program. FHWA has program oversight responsibilities regardless of project approval authorities assumed by the STA or Federal Agency. FHWA oversight is conducted through a wide range and variety of mechanisms. These include process reviews, program evaluation, program management activities, and project involvement activities. FHWA stewardship activities, beyond oversight, include continuous process improvement initiatives, technical assistance, technology deployment, performance measurement, project involvement activities, and sharing best practices.

   FHWA unit offices (Headquarters and Divisions) will evaluate the risks / benefits in the implementation of FHWA programs and establish activities to develop confidence that the STA or Federal Agency mechanisms and activities are sufficient. Oversight activities will be included in the unit's annual performance plan.

   When a STA or Federal Agency assumes project approval responsibilities, it must have mechanisms in-place to assure that all project actions will be carried out according to laws, regulations, and policies. This applies to projects administered by the STA or local public agencies (LPA). These mechanisms include the agreement required under Section 106, Title 23, United States Code, processes, procedures, and program manuals. The FHWA must conduct verification activities to assure that the STA or Federal Agency implementation of the Federal highway programs conform with laws, regulations and policies and the STA or Federal Agency is carrying out its roles and responsibilities according to the law, regulations, policies, and any established agreement with the FHWA. The FHWA oversight and independent verification activities are similar to the quality assurance portion of quality control / quality assurance programs prevalent in many construction and materials programs.

4. Implementation

   The National Strategic Plan sets strategic goals for FHWA stewardship activities. The FHWA Performance Plan identifies key stewardship initiatives that will be conducted nationally for the immediate fiscal year. Each office must develop annual unit performance plans that guide its stewardship efforts. These plans must be aligned with the FHWA Annual Performance Plan. The FHWA must balance its activities to achieve strategic goals while reaching a level of confidence that Federal requirements are being met. As a result, each office is expected to include some level of oversight activities in its unit performance plan.

   Each office is expected to use a risk / benefit analysis or similar prioritization process to identify the appropriate oversight initiatives and effectively allocate personnel resources based on risks and benefits. The process should consider items such as strategic goals, mutual FHWA and STA or Federal Agency initiatives to improve quality, cost, and the FHWA level of confidence in oversight mechanisms and activities. Ideally, this prioritization process would be conducted in cooperation with the STA or Federal Agency. This process should result in a mixture of initiatives to achieve strategic goals, meet customer needs and expectations, yield high benefits or pay-offs, result in systemic improvement, deploy innovative technology, provide technical assistance, and to ensure that the Federal highway program is being delivered consistent with laws, regulations, policies and strategic goals. The process should also result in reviews that include project and program verification so that FHWA has confidence in the quality of the delivery of the Federal highway programs.

   Stewardship and oversight initiatives that focus on broad program areas must play a prominent role in the plan since these reviews are more likely to yield systemic improvements and a resultant higher pay-off for the effort invested. Project level verification may also be included depending on several factors such as level of Federal interest, technical complexity, statutory requirements, and partner capabilities. Program reviews should include a sampling of Interstate, NHS, and non-NHS projects for verifying adequate STA / Federal implementation of the program and making program or project improvement recommendations.

   Actions:

   • Activities and initiatives must be considered during the development of the annual performance plan that achieve initiatives in the FHWA Strategic Plan and Performance Plan and assure the Federal highway program is delivered consistent with laws, regulations, policies and strategic goals.
   • Each office is expected to use a prioritization process to allocate its resources in the development of its annual performance plan.
   • Program reviews, process reviews / product evaluations, program evaluation techniques and continuous process improvement initiatives should play a prominent role in FHWA stewardship and oversight activities.
   • Program reviews, process reviews / product evaluations and continuous process improvement initiatives should include a sampling of Interstate, NHS, and non-NHS projects.
   • FHWA oversight approaches and mechanisms should be developed in cooperation with the STA or Federal Agency.

Appendix B - Acknowledgement of FHWA Stewardship in FHWA Strategic Plan and Performance Plans

The U.S. Department of Transportation, through the Federal Highway Administration (FHWA) is charged with the administration of the Federal highway programs. Section 101 (b)(1) of Title 49, United States Code, states the Department is to "ensure the coordinated and effective administration of the transportation programs of the United States Government". The current FHWA Strategic Plan identifies the business goals we hope to obtain with the "coordinated and effective administration" of these programs and the plan discusses that it is through the stewardship and oversight of the Federal highway programs that we achieve the identified business goals. The current plan does not discuss the important accountability role the FHWA staff has in administering these same programs.

A unique aspect of the Federal highway programs is that, by law, the FHWA shares the administration of these programs with our STA and Federal agency partners. The FHWA retains the ultimate responsibility for all activities funded with FHWA funds, with the STA or Federal agency partners frequently being the implementing entity. The degree that the STA or Federal Agency has assumed project approval authority varies with each STA and Federal Agency. The FHWA stewardship and oversight activities for each program and each partner vary in a direct relationship to the project approval authorities assumed by the STA or Federal Agency and the results of the implementation of the program. This project administration, program oversight relationship is analogous to quality control and quality assurance processes. The agency with the oversight responsibility needs to structure their activities in direct response to the quality control, process management activities, and capabilities of the implementing agency.

While everyone agrees that the FHWA has oversight and accountability responsibilities, there is the question of whether and how our oversight activities and our effectiveness and efficiency in conducting oversight should be reflected in the FHWA National Strategic Plan and Performance Plan. Currently, the National Strategic Plan has reflected the FHWA stewardship role in a paragraph discussing that the FHWA ability to achieve the identified goals is through our ability to influence other agencies since it is these other agencies that actually determine the priority of transportation needs, scope of improvements, etc. There is no direct connection or reference to the FHWA oversight role in the National Strategic Plan. The strength of this approach is that it conveys that our staff's stewardship responsibilities are intricately linked to the accomplishment of these business goals and the interrelationship of daily business and the agency strategic goals is important in implementing quality in an organization. The FHWA employees struggle with this approach because (1) a one paragraph reference to a thirteen page report does not convey a lot of importance, and (2) there are important activities in our daily business (i.e. program and project oversight activities) that are not linked to the improvement strategies and initiatives tracked as part of the Strategic Plan and Performance Plan processes.

Discussion in the FHWA Performance Plans offers some improvement in that there are efforts underway to include some related performance measures in the Department and Agency Performance Plans and some Divisions already include oversight activities in their Unit Plans.

Options for Strengthening the Link between Oversight and the FHWA Strategic Plan:

Options for Strengthening the Link between Oversight and the FHWA Performance Plans:

Appendix C - List of Regulations Subject to Revision as a Result of the Restated Policy

The word "exempt" appears in numerous sections of Title 23, Code of Federal Regulations. The following sections should be revised to eliminate reference to "exempt" term and reflect restated policy:

• 230.403, 407(m), 415(c)(4), 450.424(b), 635.124(b), 637.207(c)(iv)(3), 640.109(a)(2), and 668.113(b)(1).

The phrase "project oversight exceptions" appears in 23 CFR 668.113(b)(1). This section should be revised to reflect restated policy.

References to (construction) inspections should be reviewed and revised in light of the program efficiencies (Section 1016) contained in ISTEA. Inspections are referenced in the following sections of Title 23, Code of Federal Regulations:

• 140.607, 640.113(d), 712.204(f), and 771.109(b).

TEA-21 deleted all discussion of Certification Acceptance from Title 23, United States Code. The following sections of Title 23, Code of Federal Regulations, should be revised accordingly:

• 172.1, 200.13, 630.203, 633.102(c), 635.102, 635.124(b), 635.202, 635.303, 635.405, and 640.

The "Combined Road Plan" was a limited demonstration program in the 1980s. Similar to Certification Acceptance, the Program Efficiencies authorized in ISTEA and TEA-21 effectively eliminated the need for this program. 23 CFR 172.1 should be revised accordingly.

There are a number of references in Title 23, Code of Federal Regulations, to the Secondary Road Plan (SRP). The Federal-aid Secondary System was repealed by ISTEA. These following references should be removed:

• 1.2, 172.1(b), and 630.203

In addition, Section 106, Title 23 of the United States Code, 106 Project Approval and Oversight, as amended by Section 1305 of TEA-21, STAs assume certain project activities related to design; plans, specifications, and estimates (PS&Es); contract awards; and inspection of projects. The following sections of Title 23, Code of Federal Regulations, should be revised accordingly:

• Design - 646.214
• PS&E Submittals - 635.205(c), 771.109(b)
• Contract Awards - 635
• Inspections - see above

Appendix D - Example of Division "Required Actions" List

Illinois Division Policy

SUBJECT: REQUIRED ACTIONS LIST
OWNER: DIVISION ADMINISTRATOR
MANAGER: ASSISTANT DIVISION ADMINISTRATOR (ADA)

EFFECTIVE DATE: April 13, 2000 (revised May 1, 2000)

AUTHORITY: ILLINOIS DIVISION

POLICY:
This policy establishes the Illinois Division Required Actions List including responsibilities and standard operating procedures for the updating / revising of the List.

The Illinois Division Required Actions List includes all the activities that the Division Office is required to perform throughout the year(s). Responsibilities of the Program Manager and / or Team Leader include knowing what is required and when; performing those functions on time; knowing where to obtain the most current information on the action; and reviewing / revising / updating the items for which they are responsible as set forth below.

Revisions / updates to the Required Actions List are the responsibility of the Program Manager and / or the Team Leader. The Program Manager and / or Team Leader are expected to be familiar with federal law, regulations, policies, etc., as well as those of the State for their area(s) of responsibility. The Program Manager and / or Team Leader are also expected to be aware of any changes at the federal and State levels that occur to their area(s) of responsibility and these changes should be communicated to appropriate Division Office and State personnel and reflected in the Required Actions List. As a minimum, the Required Actions List will be reviewed once each year (by July 31) by each Program Manager and / or Team Leader to ensure it is current and accurate.

Proposed revisions / updates will be identified and discussed with the ADA. The ADA will ensure the appropriate revisions / updates are made to the list within 3 weeks after the review date.

Illinois Division

Appendix E - Outreach Process

Executive/Management National Outreach

Internal Outreach - The memorandum distributing the Task Force report to the FHWA offices will indicate management commitment. This memorandum needs to be followed inclusion of stewardship into the strategic planning process including implementation in annual performance plans.

The implementation of this policy and performance plan recommendations should also be discussed at Division Administrator meetings held nationally and at the local meetings with the Director of Field Services. Tri-Regional Forums, discussions with STA Transportation Agencies and via 60 minute calls / video conferences are also opportunities to clarify mutual understanding of the policy

External Outreach - Management needs to have discussions with appropriate AASHTO Committees and at Regional AASHTO meetings concerning this Task Force and implementation of recommendations. Initial discussion will occur at the AASHTO Standing Committee on Highways meeting December 8, 2000.

When the new policy becomes official, it should to be emphasized to the STA from the top (Administrator) down with emphasis at national meeting discussions etc of what the FHWA role is. It should not be left largely to the Divisions to emphasis it from the bottom up.

FHWA Office Outreach
The FHWA policy paper, talking points and power point presentation are included in this report and will be made available electronically to the DAs so that they can discuss the stewardship and oversight issues with their STA and Federal Agency partners and their FHWA staff. This outreach should begin at the upper management at the STA or Federal Agency, and continue to the other levels of the organization to implement understanding of these recommendations and maintain effective relationship with STA.

Members of the Stewardship Task Force are available upon request to make presentations on stewardship and oversight.

FHWA Stewardship Policy
Question & Answer Paper

1) QUESTION: Does the Policy Statement conflict with previously issued guidance - most notably guidance contained in the Executive Director's March 11, 1992-memorandum in which it is stated that "FHWA has no responsibility for insuring compliance with any Federal or State requirements regarding design or construction of (Non-NHS) projects?"

ANSWER: The guidance in the policy statement replaces earlier guidance regarding oversight. The policy statement acknowledges FHWA has overall responsibility for the entire Federal Highway program. As FHWA discharges that responsibility it must focus its activities in high priority/high risk areas. Whether or not detailed project related oversight activities are conducted on non-NHS projects depends on the FHWA / STA agreement reached in accordance with 23 U.S.C.106(c)(3) and whether or not non-NHS projects constitute high priority/high risk areas.

2) QUESTION: Why is FHWA assuming new oversight responsibilities?

ANSWER: FHWA is not assuming new responsibilities. The policy statement acknowledges FHWA has overall responsibility for the Federal highway program, which must be exercised within the parameters of 23 U.S.C.106. FHWA will not exercise project level oversight responsibilities that go beyond 23 USC 106 and the agreement required by 23 USC 106(c)(3). FHWA may include assessments of projects for which the STA has project level oversight responsibility in program level reviews.

3) QUESTION: The FHWA restated policy on stewardship and oversight does not use the term "exempt". Why not?

ANSWER: After the passage of the Intermodal Surface Transportation Efficiency Act, FHWA introduced the term "exempt" to refer to projects for which FHWA was not going to be involved in project level review and oversight. The term was sometimes misinterpreted to mean that FHWA does not have program or project oversight responsibility. In reality, FHWA has program level responsibility for all projects, even those for which a STA has assumed project responsibilities in accordance with 23 USC 106. In order to alleviate the confusion that has arisen regarding the term "exempt", a conscious decision was made to avoid the use of the term when the restated policy was developed.

4) QUESTION: What role does FHWA play in "problem solving," if any?

ANSWER: 49 U.S.C.101(b)(5) indicates USDOT [and modal agencies] must "provide general leadership in identifying and solving transportation problems. The reference to problem solving in the policy paper is in the context of FHWA stewardship responsibilities. Helping our partners solve problems has been a long-standing function of FHWA.

5) QUESTION: As a result of the restated policy, will it be necessary to renegotiate the agreement with the STA required by 23 USC 106(c)(3)?

ANSWER: Not necessarily. The agreement should result from a dialogue between the FHWA and the STA about how oversight of the Federal-aid program in the state is managed. The agreement should be seen as an opportunity to identify and document program oversight efficiencies that reflect strengths and other unique characteristics that exist within the state. While a periodic agreement review and update cycle is not specified it makes sense to assess and reconfirm the agreement as changes occur in issues or programs.

6) QUESTION: Does the restated policy signal a return to business prior to 1991, i.e., project oriented oversight?

ANSWER: ABSOLUTELY NOT. The policy statement emphasizes the point that FHWA has overall responsibility for the Federal Highway program, and acknowledges that, in accordance with 23 USC 106, STAs are to act for the Federal government in certain project related activities. The policy statement provides flexibility to implement a balanced set of program and project-based activities, consistent with the requirements of 23 U.S.C 106(c)(3). The agreement as to these activities should provide reasonable assurance that the Federal Highway program is implemented effectively and efficiently and in compliance with all applicable laws, regulations and policies.

7) QUESTION: The policy statement suggests that review activities are to include verification activities. What does this mean, particularly in regard to the agreement required by 23 U.S.C.106(c)(3)?

ANSWER: The policy discusses FHWA verification activities in a number of areas. The FHWA is held accountable for the expenditure of public funds and the implementation of the Federal highway programs. This accountability includes The FHWA confirmation that there are processes and procedures in place, as may be described in the agreement required by 23 U.S.C.106(c)(3) and elsewhere, to assure compliance with applicable laws and policies.

8) QUESTION: Is the risk assessment or prioritization process a formal or informal process?

ANSWER: The FHWA Office, in conjunction with the STA or Federal Agency, have the flexibility to determine how they will conduct the risk assessment/prioritization process and the format used to document the analysis and conclusions.

9) QUESTION: The policy statement does not deal with the differences in oversight for Interstate, NHS, and non-NHS projects. Why not?

ANSWER: The statement emphasizes the FHWA overall responsibility for the Federal Highway program. The FHWA overall program remains the same across funding categories. It is the mechanisms that we use to manage our oversight responsibility at the project level that change based on the program and the role the STA has in managing the project level activities. It is expected that the differences in FHWA involvement for Interstate, NHS and non-NHS projects will be documented in each agreement required by 23 USC 106(c)(3) agreement.

10) QUESTION: For projects administered by Local Public Agencies (LPA) what is the oversight role for both STA and FHWA?

ANSWER: FHWA has oversight responsibility for the Federal-aid program. Nothing in the policy statement changes the provisions of 23 CFR, Section 635.105 that establishes STA responsibility for projects constructed by LPAs. FHWA holds the STA accountable for LPA administered projects and may conduct verification activities to assure that the STA and LPA's, are carrying out its roles and responsibilities according to laws, regulations and policies.

11) QUESTION: Is it expected that the policy statement will result in increased staffing needs?

ANSWER: No. It is expected that FHWA managers will, as they have always done, develop approaches to address program needs within their current resource allocations. Risk/benefit considerations will need to be made to select high priority to effectively manage resources. It is envisioned that implementation of this policy will result in increased staff efficiencies.

12) QUESTION: Are there any new tools for use in working with oversight?

ANSWER: FHWA needs to do more work in this area. There are program review techniques that have been in existence for several years, and we are gaining more experience with Continuous Process Improvement (CPI) techniques. FHWA needs to develop risk benefit analysis from a conceptual framework to a workable tool that can be used in establishing priorities for oversight activities.

Briefing Paper - FHWA 2000 Stewardship Task Force

Background:

ISTEA and TEA 21 authorized the FHWA to allow the States to assume authority for specific project approval actions. ISTEA and TEA 21 did not alter FHWA responsibility for the overall implementation of the Federal highway programs; it did allow delegation of project approval authorities. Since the implementation of these provisions, there has been continual discussion and questions as to the FHWA role when States assume these authorities. In May 2000, there was a commitment made to organize a Stewardship and Oversight Task Force to reframe our agency policy and guidance on Stewardship and Oversight.

Talking Points:

• FHWA has stewardship and oversight responsibility on all Federal highway programs.
• FHWA will implement 23 USC 106, which allows States to assume specific project approval authorities, to its fullest extent.
• Implementation of 23 USC 106 does not alter FHWA responsibility for stewardship and oversight of these programs. It does affect the way FHWA manages these responsibilities.
• The goal of FHWA oversight strategy is for FHWA to have confidence that the Federal highway programs are being implemented in accordance with the agreements existing between the FHWA and the State, and in compliance with applicable laws, regulations, and policies.
• FHWA will implement its oversight role through program oversight activities, some project oversight, and through knowledge and involvement in projects.
• FHWA must conduct independent verification of the activities implementing the Federal highway programs as part of its oversight strategy.
• States are responsible for administering the Federally assisted highway program activities, including projects and activities administered by local public agencies. States are to have sufficient procedures and processes for the management of the highway programs.
• Implementation of 23 USC 106 requires FHWA and State to reach agreement prior to the State assuming any project responsibilities. Discussions, whether as part of this agreement or the daily coordination and implementation of the FHWA highway programs, should include agreement on delegations of authority, and a process for the FHWA and State to assess the implementation of the FHWA programs.
• FHWA and States are encouraged to look for opportunities to streamline the management of an activity through the delegation of authority to State and FHWA use of program and process management reviews.

Appendix F - Example of Risk/Benefit Assessment

Background: There has been considerable discussion on where FHWA, particularly the Division Offices should expend its resources, i.e., where are those areas where the agency might be at risk if Federal requirements are not adhered to, and conversely, where can we add value. This paper is based on some earlier work by Mr. Leon Witman, former Director of Field Services - West.

Introduction: The following is intended as a guide to assist Division Offices in determining and selecting the most appropriate process to carry out its stewardship and oversight responsibilities. For purposes of this discussion, stewardship is defined as the efficient and effective management of the public funds which have been entrusted to the Federal Highway Administration, whereas oversight is defined as the act of ensuring that the Federal highway program is delivered consistent with laws, regulations and policies.

Approach: The suggested approach takes into consideration the qualifications and technical competencies of the state highway agency; the level of trust that exists with our State partner based on historical relationships, shared expectations, and mutually agreed upon procedures and processes; and importantly, the risk involved from the FHWA perspective. This is the risk element. The second part addresses the question of whether there is an opportunity to make a difference or add value (the benefit). Before proceeding with this approach, the issue of whether FHWA has responsibility in a particular area must be clearly established. The Federal interest and FHWA responsibility is derived from Federal laws and/or regulations which require FHWA oversight or from executive-level policy statements. Once this is established, a determination can then be made as to where FHWA is at risk and where there might be a benefit in FHWA's involvement from both the Division Office's and the State highway agency's perspective. The following matrix helps define what is important and where the Division may want to place its resources.

Defining Risk: If there is a Federal responsibility, then a risk assessment can be performed to determine where the Division may want to place its emphasis. This could be done on a programmatic basis. A positive answer to one or more of the following questions can help determine areas where there is a potential high risk.

• Is there significant potential for waste, fraud, or abuse (involving substantial amounts of money)?
• Is there a overriding Federal interest as defined in legislation, regulations, our Strategic Plan, or agency policy?
• Is there a potential to adversely affect the safety of the traveling public?
• Are there significant environmental impacts which require comprehensive or complex mitigation treatments which are controversial, precedent setting, unusual, or extremely costly in relation to project cost?
• Will the proposal or action significantly affect the protected rights of, or intended benefits to, individuals?
• Are there high levels of controversy from the Federal or congressional level, the public, or constituency groups?
• Are National policy issues involved?

Consistent with law and regulation, the Division can make decisions regarding how they will conduct their oversight and the level of energy/resources depending on the risk. The FHWA may delegate some of its responsibilities, depending on risk, based on a demonstration that the State has in place laws, regulations, directives, standards and/or procedures that either separately or collectively will accomplish the policies and objectives contained in Title 23. In addition, there should be a finding that the state highway/ transportation agency has the capability to carry out project responsibilities in accordance with such requirements. Capability is defined as having an suitably equipped organization with adequate staff and authority to carry out delegated oversight responsibilities. This approach, modeled after 23 CFR 640 (Certification Acceptance), should be based on previous process reviews or a formal finding that the State has adequate internal controls to ensure that the Federal interest is protected.

Defining Benefit: A positive answer to one or more of the following questions can help determine areas where there are opportunities that would benefit one or both parties. This is typically done on a project or new program basis. The issues to review include:

• Are there issues that significantly affect the quality of the system (e.g., pavement structure, traffic congestion, or operations)?
• Are there issues that significantly affect the service life of the facility?
• Is there a potential to stop or substantially delay the overall program in a State or area of the State?
• Is this an area where the State DOT has limited experience?
• Does the proposal involve technical complexities, state-of-the-art technologies, or other innovations?
• Is there potential to save money or are there more cost-effective solutions available?
• Is there a potential to increase funding levels in state or leverage additional funds?

The assessment described above should be conducted in cooperation with our partners, considering the risk(s) and benefit(s) involved.

Appendix G - Sample Memorandum of Agreement

State Department of Transportation and FHWA Division Office
Oversight and Administration of Federal-Aid Highway Projects

Purpose:

To set forth agreement between the State Department of Transportation and the Federal Highway Administration on the respective roles and responsibilities of each party in administering the Federal-aid Highway Program in the State of __________.

Scope:

Whereas, Section 106 of Title 23 - United States Code (USC), as amended by Section 1305 of the Transportation Equity Act for the 21st Century (TEA-21) of 1998, provides considerable flexibility to individual States and FHWA Division offices in reaching agreement on "responsibilities" for design, plans, specifications, estimates, contract awards, and inspection of Federal-aid highway projects. While the State DOT may assume certain project approval and authorities in accordance with 23 USC 106, FHWA is ultimately accountable for ensuring that the Federal-Aid Highway Program is delivered consistent with established requirements.

State Responsibilities:

Under Title 23, FHWA is ultimately accountable for all Federal-Aid highway programs, however, the State may assume responsibility for project-level activities associated with 23 USC 106 on certain National Highway System (NHS) projects and all non-NHS projects. The State's responsibilities for the following types of projects are as follows:

1. Projects on Non-NHS Federal-aid highways and eligible projects on public roads which are not Federal-aid highways - The State DOT assumes the responsibilities of the FHWA for all reviews and approvals associated with the design, construction, award, and final inspection of Federal-aid projects off the NHS. Projects are not required to meet Federal-aid requirements contained in Title 23 except as noted under Federal Responsibilities, paragraph 6.
2. Projects on the NHS, but not on the Interstate System - The State DOT assumes the responsibilities of the FHWA for all reviews and approvals associated with the design and construction, including final inspection, of Federal-aid projects. Projects must comply with all Federal-aid requirements contained in Title 23 CFR.
3. Local Transportation Facilities - When a unit of local government becomes the implementing agency of a construction project in which State DOT participates in the funding by allocation of Federal-Aid highway funds, the State DOT will review and assure local action for compliance with all requirements of Federal and State laws in accordance with Title 23. The State DOT is not relieved of its responsibilities even though the project may be under the supervision of a public agency or organization. In accordance with 23 CFR 1.11, the State DOT will ensure that the agency is well-qualified and suitably equipped to perform the work.
4. Compliance with Federal Requirements - Certain Title 23 requirements dealing with transportation planning, procurement of professional services, disadvantaged business enterprise, wage rates, advertising and award of bids, convict produced materials, and Buy America provisions and all non-Title 23 requirements apply to all Federal-aid projects.

Federal Responsibilities

1. Projects on the Interstate System - The FHWA will continue to be responsible for the oversight of all Title 23 aspects of these projects including location and design, right-of-way and construction phases. On Interstate projects, [define types of projects or dollar threshold] FHWA Division Office personnel will review and approve project designs, approve Plans, Specifications and Estimates, concur in award, approve changes in contract (change orders, supplemental agreements, time extensions, claims, etc.) and conduct project inspections.
2. Non-Interstate Projects - [describe agreement reached with state] FHWA oversight responsibilities will be limited to ensuring compliance with non-Title 23 requirements and certain Title 23 requirements. FHWA will monitor project compliance through program reviews, process improvement studies, etc.
3. Other Project Involvement - The FHWA Division Office in consultation with the State DOT may become actively involved with any Federal-aid transportation project, including those for which the State has assumed FHWA's responsibilities, when unique circumstances arise or when program or process reviews are being conducted.
4. Technical Assistance - The FHWA Division Office is prepared to provide technical assistance to the State DOT or local transportation agencies on any aspect of an eligible Title 23 project including intermodal transportation projects. Technical assistance activities will be decided on a case-by-case basis in consultation with the State, other partners and the division office. The FHWA Division Office will continue to focus their time and effort on improving processes and procedures, in cooperation with the State DOT.
5. Non-Title 23 Responsibility - FHWA will continue to assume responsibility for Federal actions required under laws outside of Title 23, such as:
   • Activities for compliance with Section 102 (2)(c) of the National Environmental Policy Act (NEPA) of 1969 (42 USC 4321 et.seq.) and 23 CFR 771.
   • Activities for compliance with Section 4 (f) of the Department of Transportation Act of 1966, P.L. 89-665, 49 USC 303.
   • Civil Rights Act of 1964, 42 USC 2000 (d) et. seq. and 23 CFR 200 (Title VI), and 23 CFR 230 (EEO).
   • Uniform Relocation Assistance and Real Properties Acquisition Policies Act of 1970, 42 USC 4601, et. seq. 23 CFR Parts 710-740 and 49 CFR Part 24.

Implementation of Oversight Agreement:

State and FHWA agree to manage the implementation of this agreement by:

1. Annually/biannually reviewing implementation of Federal-aid program and identifying successes and issues;
2. Mutually develop and approve improvement actions to further the efficiency and effectiveness of the Federal highway programs; and,
3. Agree to taking appropriate actions on specific projects, regardless of the previous assignment of project authority, to ensure the effective implementation of the Federal highway programs.

This agreement does not preclude FHWA access to and review of Federal-aid projects at any time, and it does not replace the fundamental provisions of law in Title 23 with respect to the basic structure of the Federal-aid program. FHWA will exercise its stewardship and oversight through product evaluations/process reviews, continuous process improvement initiatives, program management activities, and other project involvement activities.

FHWA may at any time have access to and review project phases and records under this agreement. In accordance with 23 CFR 17.5, records will be retained for a minimum of 3 years or until litigation, claims, or audit findings initiated before the expiration of the 3-year period have been resolved.

Appendix H - FHWA Stewardship/Oversight Task Force Members

• Carol Jacoby, Contract Administration Group Leader, Infrastructure CBU - Team Leader
• James Sorenson, Construction and System Preservation Team Leader, Infrastructure CBU - Team Leader
• Clara Conner, Office of Corporate Management - Facilitator
• Robert Callan, Manager, Eastern Resource Center
• Larry Dywer, Assistant Division Administrator, Vermont Division
• C. Frank Gee, Chief of Construction/Acting Chief Engineer - Virginia Department of Transportation
• Michael Graf, Assistant Division Administrator, Delaware Division
• Mark Kehrli, ITS Deployment Team Leader, Operations CBU
• Kevin Kliethermes, Operations Engineer, Minnesota Division
• Vanessa Lemmie, Legal Counsel, Eastern Resource Center
• John Perry, Asset Management, Infrastructure CBU
• David Reilly, Assistant Division Administrator, Oregon Division
• John Sullivan, Assistant Division Administrator, South Carolina Division