Mass Transit: WMATA Is Addressing Many Challenges, but Capital
Planning Could Be Improved (21-SEP-01, GAO-01-1161T).
In recent years, the Washington Metropolitan Area Transit
Authority's (WMATA) public transit system has experienced safety
and reliability problems, including equipment breakdowns, delays
in scheduled service, unprecedented crowding on trains, and
accidents and tunnel fires. WMATA is examining ways to ease
crowding on the systems rail cars and determining whether and
how to expand Metrorail maintenance and repair shop capacity as
WMATA acquires nearly 200 new rail cars. WMATA has also
undertaken a comprehensive program for infrastructure renewal and
it is now studying improvements or modifications to accommodate
the goal of doubling ridership by the year 2025. WMATA's safety
program has evolved since the mid-1990s, when a series of
accidents and incidents led to several independent reviews citing
the need for program improvements. WMATA monitors safety and
crime statistics and has several ongoing targeted efforts to
reduce safety incidents and deter of crime on its transit
systems. WMATA has adopted several of the best capital investment
practices used by leading public and private sector
organizations, but it could benefit by establishing a more
formal, disciplined framework for its capital decision-making
process. WMATA has used a wide variety of innovative financing
techniques for capital projects, but it has not developed plans
to address large anticipated shortfalls in capital programs. This
testimony summarized the July report (GAO-01-744).
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-01-1161T
ACCNO: A01973
TITLE: Mass Transit: WMATA Is Addressing Many Challenges, but
Capital Planning Could Be Improved
DATE: 09/21/2001
SUBJECT: Budgeting
Mass transit operations
Safety standards
Transportation safety
Program evaluation
Strategic planning
Metrorail System (DC)
WMATA Capital Improvement Program
WMATA Emergency Rail Rehabilitation
Program
WMATA Infrastructure Renewal Program
WMATA Project Development Program
WMATA System Access and Capacity Program
WMATA System Expansion Program
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GAO-01-1161T
MASS TRANSIT WMATA Is Addressing Many Challenges, but Capital Planning Could
Be Improved Statement of JayEtta Z. Hecker Director, Physical Infrastructure
Issues
United States General Accounting Office
GAO Testimony Before the Subcommittee on the District of Columbia
Committee on Government Reform House of Representatives
For Release on Delivery Expected at 10: 00 a. m. EDT on Friday September 21,
2001
GAO- 01- 1161T
1
Madam Chairwoman and Members of the Subcommittee: We appreciate the
opportunity to testify on the challenges faced by the Washington
Metropolitan Area Transit Authority (WMATA). In recent years, WMATA?s public
transit system has experienced problems related to the safety and
reliability of its transit services, including equipment breakdowns, delays
in scheduled service, unprecedented crowding on trains, and some accidents
and tunnel fires. Moreover, WMATA?s ridership is at an all- time high and
WMATA managers expect the number of passengers to double over the next 25
years.
Our statement today is based on a report we issued in July 2001. 1 We will
discuss (1) the challenges WMATA faces in operating and maintaining its
Metrorail system and the steps WMATA is taking to address those challenges;
(2) the efforts WMATA has made to establish and monitor safety and security
within its transit system; and (3) the extent to which WMATA follows
established best practices in planning, selecting, and budgeting for its
capital investments.
In summary, we found:
In operating its Metrorail system, WMATA is examining ways to ease crowding
on the system?s rail cars and determining whether and how to expand
Metrorail?s maintenance and repair shop capacity as WMATA acquires nearly
200 new rail cars to help meet increasing ridership demands. WMATA has also
undertaken a comprehensive program for infrastructure renewal and it is
currently studying what improvements or modifications will be required to
Metrorail?s ?core? capacity to accommodate the agency?s goal of doubling
ridership by the year 2025.
WMATA?s safety program has evolved since the mid- 1990s, when a series of
accidents and incidents led to several independent reviews citing the need
for program improvements. Since then, WMATA has updated its safety and
security plans and upgraded its internal safety organization. Despite a
recent rise in the number of rail and bus safety incidents, WMATA has
experienced low rates of injury and serious
1 Mass Transit: Many Management Successes at WMATA, but Capital Planning
Could Be Enhanced (GAO- 01- 744, July 3, 2001).
2
crimes over the years. WMATA monitors safety and crime statistics and has a
number of ongoing targeted efforts to reduce safety incidents and deter
specific types of crime on its transit systems. WMATA also has formal
protocols in place for responding to accidents, natural disasters, and acts
of terrorism, but we did not evaluate the adequacy of these protocols.
WMATA has adopted several of the best capital investment practices used by
leading public and private sector organizations, but it could benefit by
establishing a more formal, disciplined framework for its capital decision-
making process. We note that although WMATA has articulated a goal of
doubling ridership by the year 2025, it has not fully developed a strategic
planning process that defines long- term, multiyear goals and objectives and
clearly links its capital projects to achieving them. We also note that
WMATA has incorporated some elements of an investment approach- that is, one
that builds upon an assessment of where an agency should invest its
resources for the greatest long- term benefit- when evaluating and selecting
its capital improvement projects. However, it does not have a formal
framework for periodically reviewing, prioritizing, and deciding on capital
investments; and it has not developed a long- term capital plan that defines
its capital decisions. Finally, WMATA has used a wide variety of innovative
financing techniques for capital projects, but it has not developed plans
that describe how it would address large anticipated shortfalls in its
capital programs. Our report contained several recommendations to strengthen
WMATA?s strategic and capital planning processes and WMATA agreed with most
of them.
Background
WMATA was created in 1967 by an interstate compact that resulted from the
enactment of identical legislation by Virginia, Maryland, and the District
of Columbia, with the concurrence of the U. S. Congress. 2 WMATA began
building its Metrorail system in 1969, acquired four regional bus systems in
1973, and began operating the first phase of Metrorail operations in 1976.
In January 2001, WMATA completed the originally planned 103- mile Metrorail
system that now includes 83 rail stations on 5 rail lines. 3
2 Washington Metropolitan Area Transit Authority Compact, Public Law No. 89-
774 (1966). 3 WMATA operates five rail lines: red, blue, orange, green, and
yellow.
3
WMATA operates in a complex environment, with many organizations influencing
its decision- making and funding and providing oversight. WMATA is governed
by a Board of Directors, which sets policies and oversees all of WMATA?s
activities, including budgeting, operations, development and expansion,
safety, procurement, and other activities. In addition, a number of local,
regional, and federal external organizations affect WMATA?s decision-
making, including (1) state and local governments, which subject WMATA to a
range of laws and requirements; (2) the Tri- State Oversight Committee,
which oversees WMATA?s safety activities and conducts safety reviews; (3)
the National Capital Region Transportation Planning Board (TPB) of the
Metropolitan Washington Council of Governments (COG), which develops the
short- and long- range plans that guide WMATA?s capital investments; (4) the
Federal Transit Administration (FTA), which provides oversight of WMATA in
many areas; and (5) the National Transportation Safety Board, which
investigates accidents on transit systems as well as other transportation
modes.
WMATA estimates that its combined rail and bus ridership will total 324.8
million passenger trips in fiscal year 2001, making it the second largest
heavy rail rapid transit system and the sixth largest bus system in the
United States, according to WMATA officials. WMATA experienced dramatic
ridership growth over the past year, with systemwide ridership increasing by
7 percent from July 2000 to July 2001. WMATA?s proposed fiscal year 2002
budget totals nearly $1.9 billion. Of the total amount, about 56 percent, or
$1.06 billion, is for capital improvements; 42 percent, or $796.6 million,
is for operations and maintenance activities; and the remaining 2 percent,
or $37 million, is for debt service and other projects.
WMATA?s funding comes from a variety of federal, state, and local sources.
Unlike most other major urban transit systems, WMATA does not have dedicated
sources of tax revenues, such as local sales tax revenues, that are
automatically directed to the transit authority. WMATA receives grants from
the federal government and annual contributions by each of the local
jurisdictions that WMATA serves, including the District of Columbia and the
respective local jurisdictions in Maryland and Virginia. For example, in its
fiscal
4
year 2002 proposed operating budget totaling $796.6 million (for rail, bus,
and paratransit 4 services), WMATA projects that approximately 55 percent of
its revenues will come from passenger fares and other internally generated
revenues, and 45 percent will come from the local jurisdictions served by
WMATA. In its capital program for infrastructure renewal, WMATA projects
that about 47 percent of its proposed 2002 budget will come from federal
government grants, 38 percent from federally guaranteed financing, and 15
percent from the local jurisdictions and other sources. WMATA has also
received funding directly through the congressional appropriations process
over the past 30 years- totaling about $6.9 billion- for construction of the
originally planned subway system. WMATA did not have to compete against
other transit agencies for this funding, which ended in fiscal year 1999.
WMATA Is Addressing Significant Metrorail Operations and Maintenance
Challenges
One of the key operating challenges facing WMATA?s Metrorail system has been
the increasing problems caused by the advancing age of its existing
infrastructure. The system has experienced vehicle, escalator, elevator, and
other system equipment and infrastructure problems over the past several
years. These problems have resulted in, among other things, a 64- percent
increase in the number of train delays-- from 865 in fiscal year 1996 to
1,417 in fiscal year 2000. 5 WMATA attributes these problems primarily to
its aging rail equipment and infrastructure. For example, 39 percent of
Metrorail?s 762- car fleet has been operating since 1976; another 48 percent
went into service during the 1980s.
WMATA is addressing Metrorail?s equipment and infrastructure problems
through a number of projects in its capital- funded Infrastructure Renewal
Program (IRP). Under one key IRP project- the Emergency Rail Rehabilitation
Program- WMATA has made significant progress in implementing many rail
system improvement projects. For example, by August 2000, WMATA had
completed almost all of the program?s accelerated 4 WMATA coordinates a
regional paratransit system called ?MetroAccess? that provides public
transit services to individuals with disabilities who either reside in or
are visiting the WMATA service area. 5 According to WMATA officials, non-
equipment- related train delays accounted for about 14 percent of the delays
in fiscal year 1996 and 18 percent in fiscal year 2000. Such delays
increased by 108 percent, from 121 in fiscal year 1996 to 252 in fiscal year
2000. Officials attributed these delays to an increase in ridership and rail
fleet miles.
5
car maintenance projects on such critical components as brakes and doors on
over 600 rail cars. In addition, WMATA?s statistics show that for the period
covering July 2000 through January 2001, the number of passenger offloads
had decreased by 15 percent, compared with the same period in the previous
year. Furthermore, by June 2000, work was under way to maintain and
rehabilitate 170 station escalators.
Metrorail also faces another significant operating challenge brought about
by everincreasing ridership. Metrorail is now operating at near capacity
during peak demand periods, causing some uncomfortably crowded trains.
WMATA?s recent studies on crowding found that demand has reached and, in
some cases, exceeded scheduled capacity- an average of 140 passengers per
car- during the peak morning and afternoon hours. For example, of the more
than 200 peak morning trips that WMATA observed over a recent 6- month
period, on average, 15 percent were considered ?uncomfortably
crowded? (125 to 149 passengers per car); and 8 percent had ?crush loads?
(150 or more passengers per car). Metrorail?s overcrowded conditions are
primarily the result of the substantial growth in ridership it has
experienced over the last several years, an insufficient number of rail cars
to operate more and longer trains on a regular basis, and system and other
constraints on expanding trains to eight cars- the maximum size that station
platforms can accommodate.
WMATA has several actions under way to ease Metrorail?s overcrowded
conditions. Most notably, the agency ordered 192 new rail cars that it began
deploying in August 2001. Over the next year or so, WMATA plans to deploy
the majority of these cars where and when the heaviest ridership is
occurring, allowing for adjustments to train sizes. For example, on some
lines, the train size will change from four cars to six cars.
WMATA is also studying what improvements or modifications will be required
to Metrorail?s ?core? capacity to accommodate the agency?s goal of doubling
ridership by the year 2025. Metrorail?s core consists of 29 stations located
in downtown Washington, D. C., and some of its immediate suburbs in
Virginia. Although these core stations serve nearly 60 percent of all
systemwide passengers, they contain only 17 to 36 percent of the total
system?s infrastructure. 6 In the study, WMATA is projecting the extent to
which
6 For example, the core stations have 17 percent of the total system?s
station interchanges, 19 percent of total trackage, and 36 percent of the
total platforms.
6
passenger demands will exceed the capacity of critical Metrorail elements
(e. g., stations, platforms, rail line capacity, etc.) in the coming years
and exploring alternative solutions for addressing those capacity
constraints. WMATA expects to complete the study by the end of 2001.
Finally, Metrorail?s maintenance and repair shop capacity could be
challenged as early as the fall of 2001 with the scheduled delivery of the
first group of new rail cars. Depending on the number of cars that can be
repaired outside of the shops, WMATA could need up to 126 repair shop
spaces, or 12 more than the 114 spaces that would be available for scheduled
maintenance and unscheduled repairs at that time. Furthermore, Metrorail?s
repair shop capacity may be exhausted and could become even more of a
problem after the fall of 2002, when delivery of the remaining new cars is
expected to be completed. In addition, WMATA plans to acquire a total of at
least 94 additional rail cars to accommodate new revenue service on the
Largo extension to the Blue Line in Maryland (which is currently under
construction); increased demand on the Orange Line in Virginia due to
service expansion; and service growth on other existing rail lines, thus
adding to the maintenance and repair shop capacity problem.
WMATA officials pointed out that they are taking steps to ease the capacity
problem. For example, in the near term, WMATA has four ?blow down pits?-
spaces in its largest shops used to clean the underside of a car prior to
its scheduled maintenance- that can also be used for maintenance and repair.
In addition, WMATA plans to open a new facility in 2002 that will expand its
current shop capacity to accommodate 126 rail cars. At the same time,
however, WMATA recognizes that it currently does not have the capacity to
maintain and repair the additional cars for the Largo extension. WMATA is
taking two actions to address this problem. First, WMATA is surveying its
existing shops to determine whether their capacity can be expanded. The
agency expects to complete the survey in the fall of 2001, possibly
beginning expansion efforts as early as 2002. Second, WMATA plans to build a
new repair shop in the Dulles Corridor. However, this facility would not be
available until about 2010, when construction of the Dulles Corridor
extension is to be completed.
7
WMATA Has Established Safety and Security Programs
WMATA has established programs to address safety and security risks that
affect its rail and bus systems. WMATA?s safety program has evolved since
the mid- 1990s, when a series of rail accidents and incidents led to several
independent reviews that cited the need for program improvements. For
example, in 1997, FTA reported the results of a safety review it performed
of WMATA?s rail activities in response to several serious accidents and
incidents that occurred in 1996. The review concluded that WMATA had not
adequately maintained a planned approach to safety program tasks or
dedicated appropriate financial and personnel resources to accomplish these
tasks. In addition, FTA found that WMATA?s safety efforts had been weakened
by frequent changes in the organizational reporting level of its safety
department and a deemphasis of safety awareness in public and corporate
communications. The review also found that WMATA?s safety department had
been moved from place to place in the organization, making its work
difficult, its priorities uncertain, and its status marginal.
WMATA?s newly- appointed General Manager responded to these criticisms by
upgrading and enhancing the agency?s safety activities. For example, the
General Manager made safety a priority by reviewing the transit authority?s
safety function and revising its system safety program plan, which contains
detailed protocols for identifying and assessing hazards. WMATA?s safety
plan also includes requirements for identifying, evaluating, and minimizing
safety risks throughout all elements of the WMATA rail and bus systems. The
plan also identifies management and technical safety and fire protection
activities to be performed during all phases of bus and rail operations. In
addition, WMATA?s General Manager delegated specific safety responsibilities
to the transit agency?s Chief Safety Officer, who reports directly to the
General Manager and is now responsible for (1) managing system safety,
occupational safety and health, accident and incident investigation, and
fire protection; (2) overseeing construction safety and environmental
protection; and (3) monitoring the system safety program plan. By elevating
its internal safety organization and increasing its emphasis on safety
activities, WMATA has given safety a higher degree of attention and
priority.
More recently, following a serious tunnel fire in 2000, WMATA created a
safety task force to review its Operations Control Center?s handling of the
incident. In addition, WMATA?s
8
General Manager asked the American Public Transportation Association (APTA)
to conduct a comprehensive peer review of the transit agency?s emergency
procedures for handling tunnel fires. APTA?s findings and recommendations,
in several ways, confirmed the findings identified in WMATA?s internal
investigation. For instance, both investigations supported the need for
efforts to formalize and strengthen training for Operations Control Center
personnel and ensure that emergency procedures are addressed in the training
and certification of operations staff. The two reviews made 32
recommendations concerning, among other things, communications policy and
training. At the time of our review, WMATA had taken actions to implement 30
of the 32 recommendations, including providing training to its staff on
communicating more effectively with fire authorities and opening a fire
training center for WMATA employees and local firefighters. WMATA is in the
process of addressing the other two recommendations.
Despite a recent rise in the number of rail and bus safety incidents, which
WMATA attributes to the large increase in rail and bus ridership and the
recent hiring of many new bus drivers, APTA and FTA now believe that WMATA
has a ?very good? safety program as evidenced by the low injury rates on
both its rail and bus systems. For example, WMATA has experienced low injury
rates in its rail stations over the last 5 years- on average, only .37
injuries per 1 million passenger miles. Very few of these injuries were
serious or fatal. However, the absolute number of rail station injuries
increased from 366 in fiscal year 1999 to 474 in fiscal year 2000, and the
rail station injury rate increased slightly during those years. WMATA
documents also show that about 50 percent of all rail injuries occurred on
escalators. According to WMATA?s Chief Safety Officer, the root cause of the
majority of these incidents is passenger behavior, not equipment failure,
employee performance, or unsafe conditions. In fiscal years 1999 and 2000,
for example, WMATA?s records show that no escalator incidents were caused by
electrical or mechanical failure or unsafe conditions. WMATA is promoting
escalator safety by conducting public awareness campaigns and adding safety
devices.
Similar to his initiatives affecting WMATA?s safety program and plan,
WMATA?s General Manager has delegated authority to WMATA?s Chief of Police
to plan, direct, coordinate, implement, and evaluate all police and security
activities for the transit agency. WMATA?s Chief of Police heads the Metro
Transit Police Department, which has an
9
authorized strength of 320 sworn and 103 civilian personnel. The Department
has jurisdiction and arrest powers on WMATA property throughout the 1,500
square mile transit zone that includes Maryland, Virginia, and the District
of Columbia. WMATA?s Metro Transit Police Department addresses security
through its system security program plan, participates in external security
reviews, and collects and evaluates crime statistics. To emphasize the
importance of system security, the Department established a set of
comprehensive security activities in its system security program plan. The
plan is designed to maximize the level of security experienced by
passengers, employees, and other individuals who come into contact with the
transit system; to minimize the cost associated with the intrusion of
vandals and others into the system; and to make the transit system more
proactive in preventing and mitigating security problems.
WMATA has also participated in FTA?s voluntary transit security audit
program, and FTA officials have concluded that WMATA?s overall security
program demonstrates a high level of attention to passenger and employee
security. WMATA statistics indicate that serious crimes such as homicide and
rape occur rarely on the transit system. During the period from 1996 through
2000, no rapes occurred, and there were two murders in the system. Most of
the crimes committed in the transit system are far less serious, such as
disorderly conduct and trespassing. More of the crimes are committed in the
system?s parking lots than on the rail and bus systems, and more crimes are
committed on the rail system than on the buses. Some crimes, such as motor
vehicle theft and robbery, increased somewhat from 1999 to 2000. To address
those increases and the problem of crime in its parking lots, WMATA has
increased undercover patrols of parking lots and rail stations.
WMATA?s Chief of Police and Chief Safety Officer also have protocols and
procedures in place for mitigating and responding to disasters and other
emergencies involving mass casualties. For example, WMATA has entered into
written agreements with local police, fire, and rescue departments to
coordinate each organization?s roles and responsibilities and define the
procedures for responding to incidents. When an incident occurs, WMATA?s
role is generally one of ?crisis management,? identifying the level of
threat, securing the scene and performing vital first response procedures
until the local authorities arrive, and gathering evidence. WMATA officials
also participate in numerous local committees and joint training exercises
with local authorities and other
10
transportation providers in the metropolitan Washington region for the
purpose of preparing for natural or man- made disasters and emergencies. In
addition, WMATA is participating in a joint project with the U. S.
Departments of Transportation and Energy to develop and install sensors that
can detect and mitigate the release of chemical and biological agents in the
Metrorail system.
WMATA Is Addressing its Major Capital Requirements but Could Benefit From a
More Formal Capital Planning Process
WMATA operates in a complex environment that makes capital decision- making
difficult. For example, unlike most other major urban transit systems, WMATA
does not have a dedicated revenue source to fund its capital programs, thus
subjecting the agency to the appropriations processes of the federal, state,
and local governments that fund its programs. In addition, WMATA?s General
Manager and staff must achieve consensus and obtain final approvals for the
agency?s capital projects from many organizations and government levels,
including its own Board of Directors; numerous local and state jurisdictions
within the District of Columbia, Maryland, and Virginia that the transit
agency serves; the Transportation Planning Board of the Metropolitan
Washington Council of Governments; the Federal Transit Administration; and
the U. S. Congress, which has provided WMATA with funding over the years to
build its Metrorail system. While WMATA has incorporated some of the best
capital investment practices followed by leading public and private sector
organizations, we believe that WMATA could benefit by building on these
practices by formalizing some aspects of its capital decision- making
process and expanding its strategic and capital planning efforts.
WMATA created a Capital Improvement Program in November 2000 to consolidate
its ongoing and planned capital improvement activities. This program has
three elements to address all aspects of the agency?s capital investments,
including (1) an Infrastructure Renewal Program (IRP) for system
rehabilitation and replacements, (2) a System Expansion Program (SEP), and
(3) a System Access and Capacity Program (SAP). First, IRP is designed to
rehabilitate or replace WMATA?s existing assets, including rail cars, buses,
maintenance facilities, tracks, and other structures and systems. WMATA
officials have estimated that IRP will cost $9.8 billion over the next 25
years. Second, SEP is
11
designed to expand fixed guideway services, 7 selectively add stations and
entrances to the existing Metrorail system, and improve bus service levels
and expand service areas. WMATA has not yet estimated the total costs
associated with its planned SEP projects. Third, SAP- which WMATA estimates
will cost about $2. 5 billion over the next 25 years- was established to
improve access to and the capacity of the transit system by providing
additional rail cars and buses, parking facilities, and support activities
to accommodate ridership growth. Under SAP, WMATA is also studying the
modifications needed to Metrorail?s core capacity to sustain current and
future ridership volumes; WMATA expects to complete the study by the end of
December 2001. Estimated costs for SAP could significantly increase as a
result of this study.
GAO issued a report in December 1998 8 that identified capital decision-
making principles and practices used by outstanding state and local
governments and private sector organizations. In order to evaluate the
extent to which WMATA followed best practices in planning, selecting, and
budgeting for its capital investments, we compared WMATA?s practices with
those of leading public and private organizations that we studied in 1998.
In July 2001, we reported on the extent to which WMATA (1) integrates its
organizational goals into the capital decision- making process through
structured strategic planning and needs determination processes, (2) uses an
investment approach to evaluate and select capital assets, and (3) maintains
budgetary control over its capital investments. Appendix I describes the
best practices that were applied within each of these three areas.
Strategic Planning and Needs Determination Processes We have found that
leading organizations begin their capital decision- making process by
defining their overall mission in comprehensive terms and multiyear goals
and objectives. This enables managers to identify the resources needed to
satisfy the organization?s program requirements on the basis of the
program?s goals and objectives. To do this, an organization must have
identified its mission and goals through a strategic planning process. To
assist with identifying any gap between an organization?s resource needs and
7 Fixed guideway services use and occupy a separate right- of- way for the
exclusive use of public transportation services. They include fixed rail,
exclusive lanes for buses and other high- occupancy vehicles, and other
services.
8 Executive Guide: Leading Practices in Capital Decision- Making (GAO/ AIMD-
99- 32, December 1998).
12
its existing capital capabilities, leading organizations maintain systems
that capture and report information on existing assets and facilities. This
information is frequently updated and accessible to decisionmakers when
needed. Leading organizations also consider a full range of possible ways to
achieve the organization?s goals and objectives, including examining both
capital and noncapital alternatives.
WMATA has articulated an overall organizational mission statement and a goal
of doubling ridership by the year 2025 and is beginning to develop a
business planning process. It has not, however, developed a formal strategic
plan that defines multiyear goals and objectives for the agency, nor does it
have annual performance plans that explain the specific ways in which WMATA
will attempt to achieve those goals and objectives.
WMATA has completed a comprehensive assessment of its infrastructure renewal
requirements, and it is in the process of assessing its system capacity
requirements. With regard to its System Expansion Program, however, it has
not conducted a comprehensive needs assessment, although it does consider
regional transportation needs, costs, and benefits before deciding to
support proposed expansion projects. For example, WMATA has established a
?Project Development Program? to develop conceptual designs, ?order
of magnitude? cost estimates, and other information on some of the proposed
projects contained in the expansion program.
WMATA plays a limited role in analyzing and evaluating alternatives for
meeting its system expansion needs. This limited role stems from its
relationships with (1) the Transportation Planning Board, which plays a key
role in developing, coordinating, and approving plans for all regional
transportation needs and alternatives, including transit, highways, and
other transportation modes; and (2) the state and local jurisdictions served
by WMATA, which have the lead role in identifying and evaluating transit
expansion alternatives within a specific ?corridor? or section of the
Washington metropolitan area.
Investment Approach to Evaluating and Selecting Capital Assets After leading
organizations identify their strategic goals and objectives and assess
alternative ways of meeting their capital needs, they go through a process
of evaluating
13
and selecting capital assets using an investment approach. An investment
approach builds on an organization?s assessment of where it should invest
its resources for the greatest benefit over the long term. Establishing a
decision- making framework that encourages the appropriate levels of
management review and approval is a critical factor in making sound capital
investment decisions. These decisions are supported by the proper financial,
technical, and risk analyses. Leading organizations not only establish a
framework for reviewing and approving capital decisions, they also have
defined processes for ranking and selecting projects. Furthermore, they also
develop long- term capital plans that are based on the long- range vision
for the organization embodied in its strategic plan.
WMATA has incorporated several elements of an investment approach to
evaluating and selecting capital improvement projects, but the agency could
benefit from a more formal, disciplined decision- making framework. With
regard to its program for infrastructure renewal, WMATA officials told us
that all appropriate managers were involved in deciding which projects
should be selected after a comprehensive needs assessment was performed in
March 1999. WMATA also performed a one- time ranking of those projects on
the basis of preestablished criteria, including asset function, condition,
and other factors. However, WMATA has not established a formal executive-
level review group within the agency for making decisions on capital
projects, nor does it have formal procedures or a standard decision package
for considering the relative merits of its capital projects each year. Also,
WMATA officials told us that they play a relatively small role in proposing,
evaluating, and selecting system expansion projects. They said that the
decisions on such projects are generally driven by the state and local
jurisdictions sponsoring the projects. WMATA has contacted state and local
transportation executives from Maryland, Virginia, and the District of
Columbia to explore ways to increase WMATA?s involvement in conducting
alternatives analyses for system expansion projects, thereby increasing its
influence on those decisions.
Furthermore, although WMATA has performed a comprehensive assessment of
infrastructure renewal requirements and has taken a first step in outlining
system expansion needs, it has not developed a comprehensive long- term
capital plan that defines and justifies its internal capital asset decisions
for all of the capital projects falling within WMATA?s Capital Improvement
Program. Such a plan would allow WMATA
14
to define its strategy and justification for selecting each capital project
and would provide baseline information on each project?s life- cycle costs
and schedules, performance requirements, benefits, and risks. A more formal
long- term capital planning process allows an organization to establish
priorities and assist with developing current and future budgets. A well-
thought- out review and approval framework can also mean that capital
investment decisions are made more efficiently and are supported by better
information. Furthermore, were WMATA to develop a more disciplined decision-
making framework- with documented support for the alternatives that WMATA
favors- the agency could potentially have more influence with the federal
government and state and local jurisdictions that ultimately decide whether
to provide funding for projects.
Budgetary Control Over Capital Investments Finally, officials at leading
organizations that we studied agreed that good budgeting requires that the
full life- cycle costs of a project be considered when an organization is
making decisions to provide resources. This practice permits decisionmakers
to compare the long- term costs of spending alternatives and to better
understand the budgetary and programmatic impact of decisions. Most of those
organizations make a commitment to the full cost of a project up front and
have developed alternative methods for maintaining budgetary control while
allowing flexibility in funding. One strategy they use is to budget for and
provide advance funding sufficient to complete a useful segment of a
project. A useful segment is defined as a component that (1) provides
information that allows an agency to fully plan a capital project before
proceeding to full acquisition or (2) results in a useful asset for which
the benefits exceed the costs even if no further funding is appropriated.
Another strategy used by some leading organizations is to use innovative
financing techniques that provide new sources of funding or new methods of
financial return.
WMATA uses many of the funding strategies followed by leading organizations.
For example, to comply with requirements imposed by FTA and its predecessor
agencies, WMATA completed its Metrorail system by negotiating for funding in
useful or ?operable?
segments. Furthermore, the agency has used a wide variety of innovative
capital financing techniques to fund its Capital Improvement Program (CIP)
and operations activities and to leverage its capital assets to generate
additional income. However,
15
WMATA faces a number of uncertainties in obtaining the funding it believes
it needs to meet its capital requirements, and the agency has not developed
plans that describe how it would address large anticipated funding
shortfalls in its programs for infrastructure renewal and system capacity.
For example, WMATA has not developed alternate scenarios of how such funding
shortfalls would be absorbed by the various asset categories under the
Infrastructure Renewal Program or by the projects identified under the
System Access and Capacity Program. The funding shortfalls are anticipated
to total $3.7 billion over the next 25 years and represent an average annual
shortfall of about $150 million for both programs. Furthermore, the budget
shortfall could significantly increase when WMATA completes its ongoing
assessment of Metrorail?s core capacity by the end of 2001.
In our July 2001 report, we recommended that WMATA?s General Manager and
Board of Directors take several actions to improve the agency?s strategic
planning and capital investment practices. These included (1) developing a
long- term strategic plan and annual performance plans that clearly define
the agency?s multiyear goals and objectives and its specific plans for
achieving those goals and objectives, (2) developing a long- term capital
plan, (3) formalizing WMATA?s capital decision- making process by
establishing standard procedures and decision packages for analyzing and
deciding on projects, and (4) developing a process and procedures for taking
a more active role in identifying, analyzing, and evaluating alternatives
for expanding WMATA?s transit system. WMATA concurred with all of our major
recommendations and indicated that it has already taken steps to begin
implementing them.
- - - - In summary, we found that WMATA has identified its operational and
safety challenges and established sound policies, programs, and practices to
meet those challenges. WMATA has also incorporated some of the best capital
investment practices in its Capital Improvement Program and it plans to
strengthen its capital and strategic planning by implementing our
recommendations. In our view, WMATA?s General Manager and other senior
officials have adapted to changing circumstances by taking positive steps to
address the challenges they face and they have created an organizational
climate that is receptive to change.
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Madam Chairwoman, this concludes my prepared statement. I would be happy to
respond to any questions you or other Members of the Subcommittee may have
at this time.
Contacts and Acknowledgements
For further information on this testimony, please contact JayEtta Z. Hecker
at (202) 5122834 or heckerj@ gao. gov. Individuals making key contributions
to this testimony include Jack Bagnulo, Rita Grieco, and Ronald Stouffer.
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Appendix I Principles and Practices for Planning, Selecting and Budgeting
for Capital
Investments Principles Practices
Integrate organizational goals into the capital decision- making process.
Conduct comprehensive assessment of needs to
meet results- oriented goals and objectives. Identify current capabilities,
including the use of an inventory of assets and their condition, and
determine if there is a gap between current and needed capabilities.
Decide how best to meet the gap by identifying and evaluating alternative
approaches (including noncapital approaches). Evaluate and select capital
assets using an investment approach. Establish review and approval framework
supported by analyses. Rank and select projects on the basis of established
criteria.
Develop a long- term capital plan that defines capital asset decisions.
Maintain budgetary control over capital investments. Budget for projects in
useful segments.
Consider innovative approaches to full up- front funding. Source: Executive
Guide: Leading Practices in Capital Decision- Making (GAO/ AIMD- 99- 32,
December 1998).
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