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Summary

On November 14, 2012, we issued a report on the Federal Highway Administration’s (FHWA) oversight of selected American Recovery and Reinvestment Act of 2009 (ARRA) high dollar bridge and highway projects receiving at least $20 million and $25 million, respectively, in ARRA highway infrastructure investment grants. Our work focused on identifying significant issues that could impact FHWA’s effective oversight of ARRA and to follow up on our June 2010 ARRA Advisory alerting the Department that States were not conducting required value engineering (VE) studies. Accordingly, our objectives were to report on whether (1) projects conducted required VE studies and (2) ARRA funds were obligated based on the States’ best estimate of cost. We found that FHWA missed opportunities to maximize ARRA investments, since one-third of the States in our review did not perform VE studies during the project planning or design phase for at least one ARRA project. Further, FHWA also did not consistently emphasize its cost estimating guidelines designed to help ensure States obligate ARRA funds for projects based on best estimates of project costs. FHWA now faces the challenge to monitor ARRA obligations for any unused or idle funds that result from overestimating or other occurrences, and make certain that the States re-obligate or return ARRA funds before they expire in 2015. The report recommended that FHWA (1) verify that required VE studies were conducted for ARRA projects; (2) identify steps needed to increase States’ awareness of and compliance with VE legislative changes and FHWA’s revised guidance; (3) verify that FHWA Division Offices review each State’s procedures for estimating costs, including procedures to conduct periodic reviews and to address significant changes in market conditions; and (4) develop and implement a plan to make sure controls are in place to effectively manage remaining unexpended ARRA funds. FHWA concurred with three of our recommendations and concurred in part with another. We plan to close three recommendations based on FHWA actions, changes to VE requirements, and our initiation of follow-up audits to further assess FHWA’s actions for a later report. One recommendation will remain open pending receipt of appropriate documentation of actions taken or planned.