U.S. Infrastructure: Agencies' Approaches to Developing
Investment Estimates Vary (20-JUL-01, GAO-01-835).
The federal government has spent an average of $149 billion (in
constant 1998 dollars) annually since the late 1980s on the
nation's infrastructure. A sound public infrastructure plays a
vital role in encouraging a more productive and competitive
national economy and meeting public demands for safety, health,
and improved quality of life. The federal government plays a
prominent role in identifying the nation's infrastructure
investment needs. Little, however, is known about the
comparability and reasonableness of individual agencies'
estimates for infrastructure needs. This report discusses
information on infrastructure investment or "needs" estimates
compiled by seven agencies--the U.S. Army Corps of Engineers,
Environmental Protection Agency (EPA), Federal Aviation
Administration (FAA), Federal Highway Administration (FHWA),
Federal Transit Administration (FTA), General Services
Administration (GSA), and the Appalachian Regional Commission
(ARC). GAO focuses on the following infrastructure areas--water
resources (inland and deep draft navigation, flood control, and
shore protection), hydropower, water supply, wastewater
treatment, airports, highways, mass transit, and public
buildings. For these seven agencies and specified types of public
infrastructure, GAO reviews (1) the agencies' estimates for
infrastructure investment and how the estimates compare in terms
of how they are developed and used and (2) the extent to which
the agencies' procedures for developing the estimates embody
practices of leading government and private-sector organizations.
GAO found that the estimates ranged from GSA's calculation of
$4.58 billion (in current dollars) over one to five years to
repair public buildings to FHWA's estimate of $83.4 billion (in
constant 1997 dollars) per year over 20 years to improve
highways. The estimates prepared by the Army Corps (for water
resources and hydropower) and GSA are for federal spending; the
other estimates are for spending from federal, state, and local
sources. Each of the seven agencies developed their investment
estimate using data from localities, states, or agency regional
offices. The estimates, however, were developed using different
analytical procedures. The investment estimates cannot be easily
compared or simply "added up" to produce a national estimate of
infrastructure investment needs because of differences in the
methods used, time periods covered, and spending sources. Each of
the seven agencies has procedures for developing infrastructure
investment estimates that reflect eight practices used by leading
government and private sector organizations. No agency has
procedures for all eight leading practices. The Army Corps has
the highest conformance to the leading practices, with procedures
that reflect six of the eight practices. Among the agencies, FHWA
and FTA come closest to reflecting an important leading
practice--conducting comprehensive assessments of the investments
needed to meet outcomes by focusing on the amounts needed to
maintain or improve the condition and performance of highways and
transit systems.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-01-835
ACCNO: A01429
TITLE: U.S. Infrastructure: Agencies' Approaches to Developing
Investment Estimates Vary
DATE: 07/20/2001
SUBJECT: Mass transit funding
Public roads or highways
Budget outlays
Federal property management
Comparative analysis
Private sector practices
Future budget projections
Water supply management
Wastewater management
Public works
Land management
Appalachian Highway System
Drinking Water State Revolving Fund
FTA Transit Economic Requirements Model
******************************************************************
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GAO-01-835
Report to the Ranking Minority Member, Subcommittee on Clean Air, Wetlands,
Private Property, and Nuclear Safety
United States General Accounting Office
GAO
July 2001 U. S. INFRASTRUCTURE Agencies? Approaches to Developing Investment
Estimates Vary
GAO- 01- 835
Page i GAO- 01- 835 U. S. Infrastructure Letter 1
Results in Brief 2 Background 4 Agencies? Procedures Reflect Some Leading
Practices, but This
Does Not Guarantee Accurate Estimates 17 GAO Observations 26 Agency Comments
27
Appendix I Objectives, Scope, and Methodology 29
Appendix II Agencies? Infrastructure Investment Estimates 33
Appendix III Comments From the Environmental Protection Agency 57
Appendix IV Comments From the General Services Administration 59
Appendix V GAO Contacts and Staff Acknowledgments 62
Tables
Table 1: Selected Agencies? Infrastructure Investment Estimates 12 Table 2:
Federal Agencies and Types of Infrastructure Included in
the Report 29 Table 3: Investment Estimates for Mass Transit 51
Figures
Figure 1: Selected Agencies? Roles in Developing Infrastructure 6 Figure 2:
Infrastructure Spending for Selected Agencies, Fiscal
Years 1990 Through 1999 9 Contents
Page ii GAO- 01- 835 U. S. Infrastructure
Figure 3: Agencies? Application of Leading Practices For Determining
Investment and Funding Decisions 18 Figure 4: Selected Leading Practices
Related to Infrastructure
Investment Estimates 32 Figure 5: Strengths and Limitations of ARC?s
Investment Estimate
for Highways 34 Figure 6: Strengths and Limitations of the Army Corps?
Investment
Estimate for Water Resources and Hydropower Facilities 37 Figure 7:
Strengths and Limitations of EPA?s Investment Estimate
for Drinking Water Facilities 39 Figure 8: Strengths and Limitations of
EPA?s Investment Estimate
for Wastewater Facilities 42 Figure 9: Strengths and Limitations of FAA?s
Investment Estimate 44 Figure 10: Strengths and Limitations of FHWA?s
Investment
Estimate 46 Figure 11: Strengths and Limitations of FTA?s Investment
Estimates 50 Figure 12: Strengths and Limitations of GSA?s Investment
Estimates 53
Page 1 GAO- 01- 835 U. S. Infrastructure
July 20, 2001 The Honorable George V. Voinovich Ranking Minority Member
Subcommittee on Clean Air, Wetlands,
Private Property, and Nuclear Safety Committee on Environment and Public
Works United States Senate
Dear Senator Voinovich: The federal government has spent an average of $149
billion (in constant 1998 dollars) annually since the late 1980s on the
nation?s infrastructure. 1 A sound public infrastructure plays a vital role
in encouraging a more productive and competitive national economy and
meeting public demands for safety, health, and improved quality of life. For
example, transportation systems directly support the nation?s economy by
facilitating the movement and manufacture of goods. Public office buildings,
courthouses, and other facilities support noneconomic goals and allow
federal agencies to carry out their missions. At least a portion of federal
financed infrastructure has benefits that accrue primarily to the states and
local communities rather than the nation as a whole. In addition, state and
local governments and the private sector play important roles in developing,
operating, and financing significant portions of infrastructure.
The federal government plays a prominent role in identifying the nation?s
infrastructure investment needs. Little, however, is known about the
comparability and reasonableness of individual agencies? estimates for
infrastructure needs. In fact, even the concept of infrastructure ?need? is
difficult to define and to distinguish from ?wish lists? of capital
projects. This report responds to your request for information on
infrastructure investment or ?needs? estimates compiled by six federal
agencies- the U. S. Army Corps of Engineers, Environmental Protection Agency
(EPA), Federal Aviation Administration (FAA), Federal Highway Administration
(FHWA), Federal Transit Administration (FTA), and General Services
1 Infrastructure has been defined in a number of ways. Broadly defined,
infrastructure can include facilities, structures, and land for public use
and for other purposes, such as national defense. See U. S. Infrastructure:
Funding Trends and Opportunities to Improve Investment Decisions (GAO/ RCED/
AIMD- 00- 35, Feb. 7, 2000).
United States General Accounting Office Washington, DC 20548
Page 2 GAO- 01- 835 U. S. Infrastructure
Administration (GSA)- as well as the Appalachian Regional Commission (ARC).
2 As you requested, we focused on the following infrastructure areas- water
resources (inland and deep draft navigation, flood control, and shore
protection), hydropower, water supply, wastewater treatment, airports,
highways, mass transit, and public buildings. For these seven agencies and
specified types of public infrastructure, we agreed to address the
following: (1) What are the agencies? estimates for infrastructure
investment and how do the estimates compare in terms of how they are
developed and used? (2) To what extent do the agencies? procedures for
developing the estimates embody practices of leading government and private-
sector organizations?
We did not independently verify the agencies? investment estimates, but we
did rely on past reviews of these data by us and others that examined the
soundness and completeness of the methodology and/ or data used to develop
the estimates. We incorporated findings from these reviews as appropriate.
The amount of information we present concerning an estimate reflects the
extensiveness of past reviews and does not imply that an estimate is better
or worse than other estimates. For some agencies- ARC, the Army Corps, EPA,
and FTA- we did not have past reviews related to the estimates to draw upon.
We reviewed agencies? documentation of their procedures to develop the
estimates, but we did not verify whether these procedures were followed. We
compared agencies? procedures with some of the capital decisionmaking
practices used by leading government and private sector organizations that
we identified and reported on in 1998. 3 This report focuses on those
leading practices that relate to developing and using investment estimates.
We included practices such as establishing a baseline inventory of assets,
using cost- benefit analysis to identify economically justified investments,
and ranking and selecting projects for funding based on established
criteria. See appendix I for additional information on our scope and
methodology.
The seven agencies we reviewed each estimated billions of dollars for
investment in infrastructure. The estimates ranged from GSA?s calculation of
$4.58 billion (in current dollars) over 1 to 5 years to repair public
2 In this report, we will refer to all seven entities, including ARC, as
agencies. 3 Executive Guide: Leading Practices in Capital Decision- Making
(GAO/ AIMD- 99- 32, Dec. 1998). Results in Brief
Page 3 GAO- 01- 835 U. S. Infrastructure
buildings to FHWA?s estimate of $83.4 billion (in constant 1997 dollars) per
year over 20 years to improve highways. The estimates prepared by the Army
Corps (for water resources and hydropower) and GSA are for federal spending;
the other estimates are for spending from federal, state, and local sources.
Each of the seven agencies developed their investment estimate using data
from localities, states, or agency regional offices and aggregating that
information to produce a national estimate for infrastructure investment.
The estimates, however, were developed using different analytical
procedures. For example, FHWA used benefit- cost analysis for its highway
estimate, while EPA used engineering- based approaches for its drinking
water and wastewater estimates. The investment estimates cannot be easily
compared or simply ?added up? to produce a national estimate of
infrastructure investment needs because of differences in the methods used,
time periods covered, and spending sources. A fundamental reason that the
estimates are prepared differently and lack comparability is that they are
developed and used for different purposes. The Army Corps and GSA use the
information to help determine the financial resources needed to manage and/
or repair their own assets. The other five agencies develop estimates at the
request of the Congress to provide general information to decisionmakers or
to help direct funding to recipients of federal assistance.
Each of the seven federal agencies we reviewed had procedures for developing
infrastructure investment estimates that reflected some practices used by
leading government and private sector organizations. No agency had
procedures for all eight leading practices. Not following a leading practice
does not necessarily represent a deficiency on the part of an agency
because, in some cases- such as ARC?s and EPA?s estimates- those practices
that are not applied by the federal agency may be implemented by state or
local governments. The Army Corps had the highest conformance to the leading
practices, with procedures that reflected six of the eight practices. Among
the agencies, FHWA and FTA came closest to reflecting an important leading
practice-- conducting comprehensive assessments of the investments needed to
meet outcomes by focusing on the amounts needed to maintain or improve the
condition and performance of highways and transit systems. The remaining
five agencies developed estimates that are summations of the costs of
projects eligible to receive federal funding or projects identified by the
Congress and others, rather than comprehensive estimates of investments
needed to achieve outcomes. All seven agencies had procedures that called
for reviewing data developed by states and others, and five agencies
considered alternative noncapital ways to address unmet investment
requirements. By comparison, the agencies were less likely to follow
Page 4 GAO- 01- 835 U. S. Infrastructure
practices such as developing a long- term capital plan, using cost- benefit
analysis as the primary method to compare alternative investments, ranking
and selecting projects for funding based on established criteria, and
budgeting for projects in useful segments.
We make several observations in this report. First, for the most part, these
investment estimates are totals for the entire infrastructure network-
involving all levels of government and the private sector. The federal
government?s role in financing these amounts should be recognized and, in
some cases, this role might be small compared to other levels of government
or the private sector. Second, these investment estimates can change
significantly over time, with changes in the efficiency of delivering
infrastructure services or pricing strategies that alter the demand for
services. Third, these investment estimates focus on the condition of
facilities rather than the performance outcomes that can be expected from
the investments. The passage of the Government Performance and Results Act
signaled a shift in federal focus from inputs (such as the condition of
highways and airports) to outcomes (such as improved mobility). In the
infrastructure area, we caution against relying on measures of need based
primarily on the condition of facilities and instead suggest comparing the
costs and benefits of alternative approaches for reaching outcomes,
including noncapital alternatives.
To determine what would be sufficient to meet the nation?s demand for
infrastructure services such as efficient and safe mobility and clean water
is not simple. The investment requirements depend on (1) the supply of
service- what facilities exist, their condition and maintenance, how
efficiently they are operated, and how services might be provided other than
through capital spending- and (2) the demand for such services by the
public, which can be influenced, in part by the price charged for
infrastructure services and the state of the economy. Infrastructure
investment estimates can vary greatly depending on the extent to which such
factors are considered in investment calculations. For example, the
investment required to maintain or rehabilitate existing facilities could
differ significantly from the investment required to meet a specified level
of service. Moreover, focusing on the provision of service, rather than the
condition of a structure or facility, can lead to the consideration of less
costly, noncapital alternatives to meeting the demand for infrastructure.
For example, to meet a specified level of service on roads, such as keeping
traffic flowing at the speed limit, decisionmakers might consider changing
the timing of traffic lights rather than building new lanes. Furthermore,
future investment needs are not a predetermined reality and can be affected
by more efficient use of existing infrastructure. For example, Background
Page 5 GAO- 01- 835 U. S. Infrastructure
technological improvements can increase the efficiency of infrastructure. In
addition, pricing strategies can affect the use of infrastructure-
relatively higher fees can encourage users to economize on their
consumption.
The seven agencies we reviewed develop information on infrastructure
investment requirements because of their roles in financing and developing
infrastructure. (See fig. 1.) ARC, the Army Corps, EPA, FAA, FHWA, and FTA
provide funding for transportation, water supply, and wastewater treatment
infrastructure that is owned, operated, and maintained by others. GSA and
the Army Corps are directly responsible for acquiring and maintaining
federal office buildings and dams and floodcontrol structures, respectively.
Selected Federal Agencies?
Roles in Developing Infrastructure
Page 6 GAO- 01- 835 U. S. Infrastructure
Figure 1: Selected Agencies? Roles in Developing Infrastructure
Page 7 GAO- 01- 835 U. S. Infrastructure
a For this report, we excluded bridges from our analysis and included only
FHWA?s estimate for highways. b ARC also provides funds for economic
development, sewer, and education projects.
Page 8 GAO- 01- 835 U. S. Infrastructure
c Appalachia includes all of West Virginia and parts of 12 states; Alabama,
Georgia, Kentucky, Maryland, Mississippi, New York, North Carolina, Ohio,
Pennsylvania, South Carolina, Tennessee, and Virginia. d GSA also leases
facilities for federal agencies.
Sources: ARC, the Army Corps, EPA, DOT, and GSA.
At the request of the Congress, EPA, FAA, FHWA, and FTA periodically prepare
long- term infrastructure investment estimates. Every 5 years, ARC prepares
an estimate of the cost to complete the Appalachian Development Highway
System, which it finances by distributing federal funds to states within
Appalachia. GSA maintains information on the investment needs for public
buildings and the Army Corps maintains information on the investment needs
for water resources (inland and deep draft navigation, flood control, and
shore protection), hydropower, water supply and wastewater treatment.
The investment estimates developed by the seven agencies will be funded, at
least in part, by federal financing. The Army Corps? estimate only includes
the federal portion of investment. GSA?s estimate for investment in public
buildings will be financed entirely with federal funds. Figure 2 shows the
spending trends from fiscal years 1990 to 1999 for the seven agencies.
Spending (in constant 2000 dollars) ranges from an average of $150 million
per year for ARC to an average of $20.6 billion per year for FHWA. Although
these seven agencies have made large investments in public infrastructure,
state and local governments and the private sector play important roles in
financing significant portions of some infrastructure, such as water
treatment and supply and transportation.
Page 9 GAO- 01- 835 U. S. Infrastructure
Figure 2: Infrastructure Spending for Selected Agencies, Fiscal Years 1990
Through 1999
Note: All amounts are in constant 2000 dollars. Source: GAO?s analysis of
OMB?s data.
0 5,000
10,000 15,000
20,000 25,000 Dollars in millions.
GSA EPA
FTA FHWA
FAA Army Corps ARC 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Page 10 GAO- 01- 835 U. S. Infrastructure
Preparing investment estimates is a capital decisionmaking activity by
federal agencies. In 1998, we identified the practices of leading government
and private- sector organizations in capital decisionmaking. 4 During that
review, we found that conducting a comprehensive needs assessment is an
important first step in an organization?s decisionmaking process for
infrastructure because it allows an organization to (1) consider its overall
mission, (2) identify the resources needed to fulfill both immediate
requirements and anticipated future needs on the basis of results- oriented
goals and objectives that flow from the organization?s mission, and (3)
consider both capital and noncapital approaches to addressing these goals.
The following leading practices relate to developing and using investment
estimates:
conduct a comprehensive assessment of the resources needed to meet an
agency?s mission and results- oriented goals and objectives;
establish a baseline inventory of existing assets, evaluate their
condition, determine if they are performing as planned, and identify excess
capacity;
consider alternative ways to address needs, including noncapital
alternatives;
use cost- benefit analysis as a primary method to compare alternatives and
select economically justified investments;
rank and select infrastructure projects for funding based on established
criteria;
budget infrastructure projects in useful segments;
develop a long- term capital plan that defines capital asset decisions;
and
establish procedures to review data developed by others and using
independent reviews of data and methods to further enhance the quality of
estimates. 5
The leading practices we identified reflect requirements that the Congress
and Office of Management and Budget (OMB) have placed on federal agencies
that are aimed at improving federal agencies? capital decisionmaking
practices. These requirements relate to aspects of investment estimates,
such as developing cost information, measuring the benefits of proposed
investments, and using investment estimates as a first
4 Executive Guide: Leading Practices in Capital Decision- Making (GAO/ AIMD-
99- 32,
Dec. 1998).
5 This practice was identified as a result of information collected during
this review. Leading Practices and
Guidance to Improve Infrastructure Planning
Page 11 GAO- 01- 835 U. S. Infrastructure
step toward acquiring infrastructure. These requirements include, for
example, the Chief Financial Officers? Act of 1990, which required the
development of accounting and financial systems to report cost information
and that the principles used in accounting for program costs be consistent
with those used in developing program budgets. In addition, the Government
Performance and Results Act of 1993 (Results Act) required agencies to
develop mission statements, long- range strategic goals and objectives, and
annual performance plans. The Results Act emphasized identifying and
measuring outcomes, including benefits. In addition, the Congress enacted
the Federal Acquisition Streamlining Act of 1994 to improve the federal
acquisition process. Title V of the act was designed to foster the
development of (1) measurable cost, schedule, and performance goals and (2)
incentives for acquisition personnel to reach these goals. To help agencies
integrate and implement these and other requirements, 6 OMB added a section
to its annual budget preparation guidance (Circular A- 11) requiring
agencies to provide OMB with information on major capital acquisitions and
to submit a capital asset plan and justification. This guidance is
supplemented by OMB?s Capital Programming Guide, which provides detailed
steps on planning, budgeting, acquiring, and managing infrastructure and
other capital assets. The steps in OMB?s guide include the concepts covered
by our 10 leading practices.
The seven agencies we reviewed produce investment estimates for water
resources, hydropower, water supply, wastewater treatment, airports,
highways, mass transit, and public buildings. Some estimates- for water
resources, hydropower, and public buildings- are developed for federal
spending; the other estimates are developed for spending from federal,
state, and local sources. The estimates cannot easily be compared because
they were developed using different methods, time periods, and funding
sources. A fundamental reason that the estimates were prepared differently
and lack comparability is that they are developed and used for different
purposes. Some agencies use the information to determine the financial
resources needed to manage and/ or repair their own assets, and
6 In addition, the Clinger- Cohen Act of 1996 was enacted to improve the
implementation and management of information technology projects by
requiring that agencies engage in capital planning and performance and
results- based management. The Statement of Federal Financial Accounting
Standards, No. 6, Accounting for Property, Plant, and Equipment, requires
agencies? financial statements to report deferred maintenance for all
property, plant, and equipment. Agencies Develop and
Use Investment Estimates Differently
Page 12 GAO- 01- 835 U. S. Infrastructure
other agencies develop estimates at the request of the Congress to provide
general information to decisionmakers or to help direct funding to
recipients of federal assistance.
The seven agencies identified investment amounts that vary from GSA?s
estimate of $4.58 billion over 1 to 5 years to repair public buildings to
FHWA?s estimate of $83.4 billion each year over 20 years to preserve and
improve the nation?s highways. The investment estimates are summarized in
table 1.
Table 1: Selected Agencies? Infrastructure Investment Estimates Agency
Activities and assets included in
estimate Activities and assets excluded from estimate Time period
covered Total estimate (in billions)
ARC Construction of highways within portions of 13 states Maintenance,
retrofit, or
improvements to completed highways
1997- completion $8.5 a (1995 dollars)
Army Corps Construction and major rehabilitation of water resources projects
and major rehabilitation of hydropower projects nationwide
Non- construction costs, projects not under construction, and critical
operations and maintenance work
2001- completion $38.0 a EPA Construction and upgrade of drinking
water supply systems nationwide Costs due solely to population growth and
costs not eligible for
federal funding 1999- 2018 $150.9 a
(1999 dollars) EPA Construction and upgrade of
wastewater treatment collection facilities nationwide
Costs due solely to population growth and costs not eligible for federal
funding
1996- 2016 $139.5 a (1996 dollars)
FAA Construction, replacement, and rehabilitation of airport facilities
nationwide
Costs not eligible for federal funding 1998- 2002 $35.1
(constant 1998 dollars) FHWA Improvements to the nation?s
highways based on several scenarios b
Costs to construct new roads 1998- 2017 $50.8 - $83.4 per year for 20 years
b (constant 1997 dollars) FTA Replacement and refurbishing of
mass transit vehicles and facilities nationwide based on four scenarios c
and construction of new systems
1998- 2017 $10.8 - $16.0 per year for 20 years c (constant 1997 dollars) GSA
Repair and alteration of public
buildings Buildings owned by federal agencies other than GSA Up to 5 years
$4.58 a
GSA Construction of border stations, federal office buildings, and
courthouses
Up to 7 years $0.75 to $0. 8 per year for 5 to 7 years a a Current year
dollars.
b FHWA modeled several scenarios- including cost beneficial investments
needed to maintain the current physical condition- that provided a range of
estimates. Source: GAO?s analysis of agencies? data.
Agencies Have Identified Vast Amounts of Investment Estimates
Page 13 GAO- 01- 835 U. S. Infrastructure
c FTA?s analysis included scenarios that produced estimates ranging from
investments needed to maintain current condition and performance of mass
transit to investments needed to improve its current condition and
performance.
Note: Estimates for the Army Corps and GSA are federal investments.
Estimates for the remaining agencies are a combination of federal, state,
and other investment sources.
The investment estimates cannot be easily compared or simply ?added up? to
produce a national estimate of all infrastructure investment needs because
of differences in the methods used, time periods covered, and funding
sources. For example, EPA used engineering- based approaches to develop
costs for its drinking water and wastewater treatment estimates. By
contrast, FHWA developed a computer model to forecast the future condition
of and improvements to highway segments that uses cost- benefit analysis as
the primary criteria for including improvements in its overall investment
estimate. In addition, the estimates involve differing time periods. For
example, FAA?s estimate of airport infrastructure investment covers 5 years,
while ARC and the Army Corps produce estimates of undefined time periods for
highways and water resource projects, respectively. Some agencies prepared
their estimates in constant year dollars- ARC?s estimate is in 1995 dollars-
while other agencies, such as GSA, presented their estimates in current
dollars. The estimates also include differing funding sources: estimates by
the Army Corps and GSA include only the costs to the federal government,
while estimates by the other five agencies include total costs to federal,
state, and local organizations.
Each of the seven agencies used data from various localities, states, or
agency regional offices and aggregated those data to produce a national
estimate for infrastructure investment. Each agency?s process for developing
its investment estimate is summarized below. They are described in detail in
appendix II.
The Army Corps estimated that $38 billion in federal funds was required to
complete water resources and hydropower infrastructure projects already
under construction as of March 30, 2001. Infrastructure projects included in
this estimate were initially identified by local governments, groups, and/
or private citizens, who requested assistance from the local Army Corps
district office. According to an Army Corps official, regional Army Corps
personnel evaluate the requests and determine both the seriousness of the
problems and the need for immediate solutions. Project costs are estimated
by engineers and other professionals using existing industry data. The
agency also uses cost- benefit analysis to determine which projects are
economically justified and would assist the agency in reaching Estimates
Used Data From
Local, State, or Regional Sources
Page 14 GAO- 01- 835 U. S. Infrastructure
its goals, such as environmental protection and flood mitigation. The
evaluation and cost estimate is sent to the agency?s headquarters, and
selected projects are submitted for funding as part of the Department of
Defense?s annual budget.
FAA estimated that $35. 1 billion in federal and nonfederal funds was
required for airport infrastructure from 1998 to 2002. Data for the
investment estimate come primarily from airport plans- such as airport
master plans and layouts-- which include proposals and cost estimates for
specific infrastructure projects at individual airports. FAA officials in
field offices review each project, and approved projects are entered into a
FAA database. FAA officials in headquarters review the database for
anomalies in the data, then add up the estimated cost of each project to
produce an overall investment estimate. Because this estimate is not a
spending plan, FAA has reported that it makes no attempt to prioritize the
projects or determine if the benefits of specific projects would exceed
their cost. This estimate is prepared and submitted to the Congress
biennially, as required by statute.
FTA also used local sources of data to estimate an investment of $10.8
billion to $16.0 billion per year for mass transit systems (such as buses
and railcars) from 1998 to 2017, depending on whether the condition and
performance of mass transit systems would be maintained or improved. The
estimates cover both federal and nonfederal shares of costs. FTA used data
from local urban transit agencies to determine the age and condition of mass
transit infrastructure and then estimated the cost of either maintaining or
improving that infrastructure. FTA used an estimate developed by its Transit
Economic Requirements Model. The model performed a benefit- cost analysis to
determine if replacing an asset was economically justified. The model then
aggregated the cost of all the infrastructure projects that were justified
by benefit- cost analysis to determine the total investment estimate for the
nation?s mass transit systems. FTA uses this estimate to provide general
support for its budget and information on changes in mass transit systems.
ARC estimated that it would cost $8.5 billion from state and federal sources
to complete the Appalachian Development Highway System. To do this, it
relied on state highway officials within Appalachia, who determined the
estimated cost to complete individual highway corridors within their
particular state that are part of the highway system. These estimates used
engineering structural criteria to estimate the cost of constructing highway
corridors. The estimate included costs for project design, environmental
mitigation, rights of way access, and construction.
Page 15 GAO- 01- 835 U. S. Infrastructure
ARC officials provided instructions to the states for computing this
estimate and reviewed the estimates by comparing the costs to the costs of
similar highway projects within that state and to FHWA?s data on
construction costs. The costs were not adjusted for inflation. ARC then
aggregated the data from each state to produce an overall estimate of the
cost to complete the entire highway system. ARC uses this estimate as the
basis for allocating funds appropriated for the Appalachian Development
Highway System. Specifically, ARC calculates each state?s percentage share
of the total cost to complete the highway system and distributes funding to
each state accordingly.
In May 2001, GSA?s data indicated that $4.58 billion in federal funds was
required over the next 5 years to meet the repair and alteration needs of
public buildings. GSA estimated that an additional $250 million to $300
million was required annually over the next 5 years to construct new border
stations and federal office buildings, and $500 million annually was
required over 5 to 7 years to construct new courthouses. Investment projects
are identified by regional offices, which are expected to determine the best
way to meet the agencies? space requirements. The cost data for projects
that have estimated costs of between $10,000 and less than $1.99 million are
developed using engineering criteria and are derived from various sources,
including contractors, safety inspectors, and seniorlevel building
management staff. Projects that have estimated costs greater than $1.99
million are evaluated by headquarters officials and ranked in order of
priority. GSA?s cost data are used as input in determining funding
priorities.
EPA estimated that $150.9 billion in federal, state, and local funds was
needed for capital investment in drinking water facilities between 1999 and
2018. Only costs eligible for funding under the Drinking Water State
Revolving Fund were included. These costs were not adjusted for inflation.
To develop the estimate, EPA surveyed all of the large water systems in the
United States as well as a sample of the medium water systems. In addition,
EPA conducted site visits to 599 small systems and extrapolated data from
these surveys and site visits to compute the total investment estimate. The
surveys and supporting cost documentation for medium and large systems were
submitted to states for review and were subsequently reviewed by EPA. The
agency uses the results of this estimate to allocate monies to the states
for the Drinking Water State Revolving Fund based on each state?s share of
the total investment amount.
Page 16 GAO- 01- 835 U. S. Infrastructure
In 1996, EPA estimated that $139.5 billion in federal and state funds was
needed between 1996 and 2016 for water pollution control, primarily for
capital investment in already- existing wastewater treatment facilities.
Only costs eligible for funding under Title VI of the Clean Water Act were
included in the estimate. These costs were not adjusted for inflation. EPA
developed the estimate from a nationwide database of wastewater treatment
facilities that is periodically updated by surveying the states. The states
provided revised estimates of capital investment needs from their documented
plans, which were supplemented by costs modeled by EPA when the state lacked
this information. In addition, EPA modeled the costs for each state for
combined sewer overflows and activities to control stormwater runoff and
nonpoint sources of pollution. The Congress has used this information as one
consideration in appropriating funds for capitalization grants to the
states, through the Clean Water State Revolving Fund loan program. According
to EPA, the estimate is also used to assist in program planning and
evaluation.
In May 2000, FHWA issued investment estimates for highways for the years
1998 to 2017. These estimates ranged from $50.8 billion per year for cost-
beneficial improvements that would maintain the current physical condition
of highways to $83.4 billion per year for all improvements that would
improve pavement condition and reduce highway users? travel costs. The
estimates included both federal and nonfederal portions of funding and were
in constant 1997 dollars. To determine the estimates, FHWA used data from a
statistically drawn national sample of 125,000 highway segments as well as
information from the states on forecasts such as travel growth. FHWA
officials reviewed the data submitted by the states, looked for anomalies or
unusual patterns, and asked the states to correct serious flaws and improve
some data submissions. FHWA used a computer model to simulate the effects of
infrastructure improvements on a sample of highway data and used a benefit-
cost analysis to identify economically justified highway improvements.
FHWA?s estimate is used by legislative and executive branch offices to
obtain general information on the nation?s overall need for investment in
highways.
Page 17 GAO- 01- 835 U. S. Infrastructure
The federal agencies we reviewed all had procedures for developing their
infrastructure investment estimates that reflect some leading practices that
we identified, although some agencies followed more leading practices than
others. However, following the leading practices does not ensure a quality
investment estimate and each estimate had limitations associated with the
quality of the data used in developing it. The strengths and limitations of
each investment are summarized in appendix II. 7 Correcting such limitations
will improve the quality and reliability of the agencies? investment
estimates.
None of the agencies we reviewed had procedures for all eight of the leading
practices. Not following a leading practice does not necessarily represent a
deficiency on the part of an agency because, in many cases, when these
practices are not applied by the federal agency, they are implemented at the
state or local level. For example, for EPA?s drinking water investments, six
of eight practices are undertaken at the local or state level, according to
agency officials. The Army Corps had the highest conformance to the leading
practices, with procedures that reflected six of the eight practices, such
as establishing an inventory of assets and their condition and using cost-
benefit analysis to select among investment alternatives. Among the seven
agencies, FHWA and FTA came closest to conducting comprehensive assessments
of the investments needed to meet results- oriented agency goals- the
estimates were results oriented by focusing on the amounts needed to
maintain or improve the performance of highways and transit systems; but the
estimates did not consider alternative, noncapital ways to address
investment needs. The remaining five agencies developed estimates that are
summations of the costs of projects eligible to receive federal funding or
projects identified by the Congress and others, rather than comprehensive
estimates of investments needed to achieve outcomes. All seven agencies had
procedures that called for reviewing data developed by states and others and
four agencies considered alternative noncapital ways to address unmet
investment requirements. By comparison, the agencies were less likely to
follow practices such as developing a long- term capital plan, using cost-
benefit analysis as the primary method to compare alternative investments,
ranking and selecting projects for funding based on
7 We considered agency procedures that reflected leading practices and
factors that enhanced the soundness or completeness of an estimate to be
strengths of an estimate. We considered factors that detracted from the
soundness or completeness of an estimate or its source data to be
limitations of an estimate. Agencies? Procedures
Reflect Some Leading Practices, but This Does Not Guarantee Accurate
Estimates
Page 18 GAO- 01- 835 U. S. Infrastructure
established criteria, and budgeting for projects in useful segments. Figure
3 shows each agency?s level of conformance to the leading practices.
Figure 3: Agencies? Application of Leading Practices For Determining
Investment and Funding Decisions
Source: GAO?s analysis of agencies? procedures for developing investment
estimates. c b
b a b c
a
Page 19 GAO- 01- 835 U. S. Infrastructure
An important first practice of leading organizations is to conduct a
comprehensive assessment or analysis of program requirements by identifying
and documenting the resources needed to meet the organization?s results-
oriented goals and objectives that flow from the organization?s mission.
This type of assessment is results- oriented in that it determines what is
needed to obtain specific outcomes- such as improved mobility on highways or
reduced flight delays at airports- rather than identifying the resources
needed on a project- by- project basis. Furthermore, placing the focus on
results drives an organization to consider alternative, noncapital ways to
fulfill program requirements. Until recently, agencies have not been
required to relate their planned infrastructure spending to their missions
and goals, so evaluating these plans has presented a challenge to agencies
and the Congress. This situation changed with the enactment of the
Government Performance and Results Act of 1993 and corresponding revisions
to OMB Circular A- 11. Since then, federal agencies- including the seven we
reviewed- were required to develop mission statements, long- range strategic
goals and objectives, and annual performance plans and to link annual
performance plans to capital planning efforts. The benefit of conducting a
needs assessment linked to achieving objectives is that managers will be
able to determine what is needed to obtain specific outcomes rather than
what is needed to maintain or expand existing capital stock.
Although each agency we reviewed prepared estimates directly related to
their mission, no agency prepared a comprehensive assessment of the
resources (and strategies) to achieve mission- focused outcomes. For
example, an evaluation of the effectiveness of ARC?s highway construction
estimate is directly related to its mission, which is to enhance economic
development in Appalachia. 8 However, ARC?s investment estimate is a
compilation of cost estimates to construct specific highway corridors,
rather than a comprehensive determination of the resources needed to meet
its mission.
The investment estimates by FTA and FHWA come closest to being comprehensive
assessments of resources needed to meet results- oriented goals. Both
agencies focus on the resources needed to achieve specific outcomes-
maintaining or improving the performance of the nation?s
8 ARC evaluated the effectiveness of its highway construction program
towards meeting its mission and concluded that the program (1) enabled the
region to be better able to compete for economic opportunities; (2) created
thousands of jobs; and (3) increased population, wages, and travel
efficiencies in that area. Practice 1: Conduct a
Comprehensive Assessment of the Resources Needed to Meet Mission and
ResultsOriented Goals
Page 20 GAO- 01- 835 U. S. Infrastructure
mass transit systems and highways. Performance includes factors related to
the quality of service such as congestion on highways and waiting times and
reliability of transit service. FTA examines how these outcomes could be
achieved by maintaining or improving existing transit facilities and assets
and by constructing new systems to meet forecasted capacity needs. FHWA?s
estimate models improvements to maintain or improve existing highways- it
excludes new construction. However, these estimates do not comprehensively
consider alternatives to meeting investment needs- for example, neither
estimate considers alternative, noncapital ways to address investment needs.
The remaining agencies do not prepare estimates to achieve outcomes. Rather,
they prepare investment estimates that are summations of projects? costs:
projects eligible to receive federal funding (EPA and FAA) and projects
identified by others, including the Congress, local communities, and other
federal agencies (ARC, the Army Corps, and GSA).
Leading organizations establish an inventory of current assets and their
condition and determine if the assets are performing as planned. By
routinely assessing the condition of assets and facilities, decisionmakers
can evaluate the capabilities of current assets and plan for their
replacement. In addition, OMB?s Capital Programming Guide instructs agencies
to evaluate the capacity of their existing assets for major programs, to
determine if they are performing as planned. OMB?s instructions cover assets
funded by federal grants for capital investment as well as those owned by
federal agencies.
Inventory information on infrastructure assets- including their condition
and performance- can assist decisionmakers in identifying excess
infrastructure capacity that is draining its resources. This is particularly
important for federal buildings and facilities. For example, in 1998, the
National Research Council reported that the number of excess federal
facilities appeared to be increasing as agencies realigned their missions in
response to changing circumstances. 9
Of the agencies we reviewed, the Army Corps, FTA, and GSA maintain inventory
and evaluation information on assets. For example, the Army Corps collects
information on the condition of equipment at hydropower
9 See Stewardship of Federal Facilities: A Proactive Strategy for Managing
the Nation?s Public Assets, National Research Council (Washington, D. C.:
1998). Practice 2: Inventory
Existing Assets and Identify Their Condition and Performance and Excess
Capacity
Page 21 GAO- 01- 835 U. S. Infrastructure
plants, particularly turbines, and uses this information to determine repair
and rehabilitation needs. GSA maintains an inventory that identifies the
location, type, and availability of its buildings. According to agency
officials, GSA maintains separate information on the condition of these
buildings. In addition, GSA has programs that oversee the disposal of excess
and surplus real property. In contrast, ARC, EPA, FAA, FHWA do not maintain
inventories, but some of them rely on inventories kept by state or local
agencies. For example, states maintain highway inventories and provide input
to FHWA?s investment estimate. According to EPA officials, local communities
maintain inventories of their water and wastewater infrastructure. 10 Over
the next few years, new financial reporting standards released by the
Government Accounting Standards Board will require the financial statements
of state and local governments to disclose information on capital
infrastructure assets, such as their physical condition.
Leading organizations consider a wide range of alternative approaches to
satisfy their needs, including noncapital alternatives, before choosing to
purchase or construct facilities or other capital assets. OMB incorporated
this practice in its Capital Programming Guide, which suggests that federal
agencies select alternatives to acquiring new capital assets to achieve the
same programmatic goals whenever practicable and more cost beneficial. OMB
also suggests that agencies consider options such as meeting objectives
through regulation or user fees, using human capital rather than capital
assets, and applying grants or other means beyond a direct service provision
supported by capital assets.
Army Corps, EPA (wastewater), FAA, and GSA indicated that efforts are made
at their agencies to identify noncapital solutions to some of their
investment needs and, where feasible, to implement those rather than
acquiring new capital assets. However, it is not clear how routinely
agencies follow this practice or, in some cases, what value is added by this
practice. For example, according to EPA officials, decisions on pursuing
noncapital ways to address infrastructure needs are often conducted at the
local level. For example, a public water system may choose to implement a
water conservation plan as an alternative to adding additional storage and
treatment capacity to a system.
10 EPA maintains a database of cost and technical information on publicly-
owned wastewater facilities. Practice 3: Consider
Alternative Ways to Address Investment Needs, Including Noncapital
Approaches
Page 22 GAO- 01- 835 U. S. Infrastructure
Some leading organizations use cost- benefit analysis as a tool to ensure
that the organization?s investment will obtain the greatest benefits for the
least cost. A cost- benefit analysis, which OMB suggests for federal
agencies, compares the costs and benefits of alternative investments in
order to identify those investments that are economically justified
(greatest net benefits) and achieve agency goals at the least cost. The
types of analysis can range from a complete cost- benefit analysis- which
includes full life- cycle costs, estimating and discounting cash flows, and
determining the return on the investment based on a specified discount rate-
to an analysis that compares alternatives and recommends the most cost-
effective (least- cost) option for achieving a specific goal.
Three agencies we reviewed- Army Corps, FHWA, and FTA- conduct cost- benefit
analyses of proposed projects and use the results as a main factor in
developing their investment estimates. For example, FHWA?s computer model,
which is used to determine future investment requirements, simulates the
effects of infrastructure improvements for highway segments and compares the
relative benefits and costs associated with alternative improvement options.
Only improvements for which the benefits exceed the cost are included in the
overall estimate. According to EPA officials, cost- benefit analyses are
done at the local level for drinking water and wastewater investment, as
utility managers consider projects needed for public health and water
quality purposes. In addition, according to an ARC official, states conduct
cost- benefit analyses to help determine the routes of new highways.
Leading organizations have defined processes for ranking potential
infrastructure investments in order to find those that are the most cost
effective for achieving organizational goals over the long- term, and for
selecting and budgeting those projects for full up- front funding or funding
in useful segments. The organizations implement these practices by
establishing a framework for reviewing and approving decisions concerning
infrastructure and other capital assets, ranking and selecting projects on
the basis of established criteria and technical analyses, and preparing
long- term plans for infrastructure and capital development. OMB?s guidance
to federal agencies on the ranking and selecting of infrastructure
investments advises them to consider the availability and affordability of
the investment, and whether the costs and benefits of the new asset will
merit their inclusion in the agency?s portfolio of proposed assets that are
considered for funding. For the agencies that we reviewed, the Army Corps,
FAA, and GSA have processes in place to rank and select investment projects
for funding. For example, GSA staff assess the merits Practice 4: Use
CostBenefit
Analysis to Identify Economically Justified Investments
Practice 5: Rank and Select Projects For Funding Based on Established
Criteria
Page 23 GAO- 01- 835 U. S. Infrastructure
of proposed projects with the aid of computer- based software that uses five
weighted criteria- including economic return, project risk, and project
urgency- to rank projects that are competing for funding.
In some cases- ARC, EPA, FHWA, and some FTA projects- state, local or other
federal entities are responsible for determining which investment projects
to fund. For example, officials with ARC and EPA told us that capital
projects funded by their agencies are ranked and selected by the state
agency or entity in charge of a particular project. Hence, while ARC
provides funding for highways, the state departments of transportation
prioritize and rank the highway investment needs for their particular state.
Similarly, individual states rank drinking water projects that are funded
through EPA based on a priority system that focuses on public health,
compliance, and the economic needs of the community. FHWA and FTA projects
that are funded by formula grants are also prioritized at the state or local
level.
A strategy that has proven useful to organizations in dealing with the
problems posed by full funding in a capped budget environment is to budget
for projects in useful segments. This means that when a decision has been
made to undertake a specific capital project, funding sufficient to complete
a useful segment of the project is provided in advance. OMB has defined a
useful segment as a component that either (1) provides information that
allows the agency to plan the capital project, develop the design, and
assess the benefits, costs, and risks before proceeding to full acquisition
(or canceling the acquisition) or (2) results in a useful asset for which
the benefits exceed the costs even if no further funding is appropriated.
For the agencies we reviewed, investment estimates, particularly those that
involve the construction or rehabilitation of an asset, are often based on
the full cost of projects. In two cases- FTA and GSA projects that exceed a
dollar threshold- the projects are funded based on their full costs and the
funds are spent over a period of years. However, funding for other federal
agencies? investment projects are often made for only part of the estimated
cost or part of a usable asset- a part that would not be usable if no
further funding were provided. Such incremental funding is usually
sufficient to cover obligations estimated to be incurred in one fiscal year.
Incrementally funding infrastructure projects could affect the quality and
reliability of investment estimates if the full estimated costs of projects
are Practice 6: Budget for
Projects in Useful Segments
Page 24 GAO- 01- 835 U. S. Infrastructure
not made apparent at the time that initial funding decisions are made. For
example, most of the Army Corps? multiyear water resource projects are
funded at each phase. For instance, in fiscal year 1986, the Army Corps
estimated the federal share of work it intended to do on a water resources?
project in Petersburg, WV at $14 million. The estimate did not include over
$600,000 appropriated to the Army Corps between fiscal years 1986 and 1989
to study the proposed project. The agency requested and received funds each
fiscal year for various phases of the work until fiscal year 1997, by which
time the total federal share of the work had increased to $20.4 million, due
to inflation and cost overruns. As another example, ARC officials told us
that prior to fiscal year 1999, it had been difficult for the agency to
develop realistic estimates for the cost of completing the highways under
its jurisdiction because funding was limited and was only sufficient to
construct a few sections each year. Although ARC?s funding for fiscal year
1999 was revised to guarantee a minimum level of funds each year, the amount
does not fully fund the states? highway investment estimates. 11
Leading organizations use capital plans, which generally cover multiyear
periods, to establish priorities for implementing organizational goals and
objectives and to manage resources and debts over the long- term. The
capital plans are updated either annually or biennially, depending on the
changing needs of the organizations or, in the case of federal agencies,
legislative and/ or executive requirements. Developing a long- term capital
plan enables an organization to review and refine a proposed project?s scope
and cost estimates over several years, which helps to reduce cost overruns.
While out- year cost estimates are preliminary, they help to provide
decisionmakers with an overall sense of a project?s funding needs. As a
project moves closer to the year of implementation, its scope becomes more
clearly refined and cost estimates also can be refined to more accurately
reflect actual project costs.
Among the agencies we reviewed, the Army Corps prepares a long- term capital
plan to document specifically planned projects, plan for resource use over
the long- term, and establish priorities for implementation. FAA prepares a
long- term plan that is an aggregate of local airport plans; priorities for
implementation are established during the annual budget
11 In some cases, states prefinance segments of the ADHS and are reimbursed
over time by funds distributed by ARC. Practice 7: Develop a LongTerm
Capital Plan That Defines Capital Asset Decisions
Page 25 GAO- 01- 835 U. S. Infrastructure
process and are not part of the long- term capital plan. In the case of GSA,
its long- term capital plan for courthouse construction is prepared by the
Judicial Conference of the United States. 12 However, the Conference?s role
in this process is limited because it does not have independent authority to
lease, construct, plan, or design space. In addition, we reported in 2000
that GSA lacks a multiyear capital plan for repairs and alterations. 13 For
the other agencies we reviewed, capital plans may be developed at the state
or local levels or by other federal entities. For example, in the case of
ARC and FHWA, the states are responsible for developing long- term capital
plans for their highway and other transportation needs. According to EPA
officials, local water and wastewater utilities develop capital improvement
plans for infrastructure needs, the results of which are used by EPA in
developing its estimates.
The agencies we reviewed use data from a variety of sources, including
states, municipalities, and contractors, to determine how much it will cost
to acquire, construct, repair, or maintain federal and public
infrastructure. The quality of the cost estimates prepared by federal
agencies depends heavily on the quality of this data. By reviewing capital
investment data prepared by others, agencies can enhance the quality of
their investment estimates. In addition, an independent review of the data
and methods used to develop the estimates can further enhance quality and
help ensure that investment decisions are supported by quality information.
All agencies we reviewed have procedures for reviewing the data provided by
outside sources. FHWA also had independent reviews to critique and refine
the methods used to produce the estimate. For example, FHWA?s computer model
for developing its estimate was reviewed by transportation and economic
experts to both assess and improve it. In June 1999, the experts found that
FHWA has strengthened the model over time and that recent refinements have
increased its applicability and credibility. In addition, FTA has under way
a review of its methodology for determining transit investment estimates.
12 The Judicial Conference of the United States is composed of the Chief
Justice of the United States and other federal judges who consider policy
and legislative and administrative issues affecting the federal courts.
13 GSA told us that by the end of December 2001, it will establish a 3- to
5- year capital plan for repair and alteration investments. That plan must
then be coordinated with the Administration. Practice 8: Establish
Procedures to Review Data Developed By Others, and Use Independent Reviews
of Data and Methods to Further Enhance the Quality of Estimates
Page 26 GAO- 01- 835 U. S. Infrastructure
Nonetheless, officials at ARC, EPA, FAA, FHWA, FTA, and GSA acknowledged
that the data used to develop their investment estimates might not have been
sufficiently comprehensive or accurate. For example, EPA reported that its
most recent investment estimates for drinking water supply, issued in
February 2001, were derived from a 1999 nationwide survey of the documented
needs of community water systems. However, EPA officials stated that the
estimates might understate water supply needs because some water systems
submitted cost estimates covering a 2to 5- year period, rather than the 20-
year period requested by EPA.
Inaccurate data and assumptions can affect the quality of investment
estimates. For example, the National Academy of Sciences found that flawed
data created unsound economic assumptions in the Army Corps? draft
feasibility study for the navigation system infrastructure on the Upper
Mississippi River and Illinois Waterway. This resulted in inadequate
forecasts of future events, such as the level of barge shipping rates and
grain demand, which compromised the integrity of analysis and led to an
overstatement of the level of investment. Since this project is not yet
under construction, it is not part of the Army Corps? $38 billion investment
estimate.
In addition to promoting inaccurate estimates of investment needs, erroneous
data can affect agencies? assessments of repair and maintenance needs for
existing infrastructure. For example, in March 2000, we reported that GSA?s
database of needed repairs and alterations had numerous problems, such as
repairs that were not included in the database, some repairs that were
included but were already in progress or completed, some incorrect reporting
of data, and some cost estimates for repairs that were not current. Since
the review, GSA has taken steps to improve the quality of the data used to
manage its inventory of buildings.
Some perspective is called for in reviewing the investment estimates by the
seven agencies. First, for the most part, these investment estimates are
totals for the entire infrastructure network- involving all levels of
government and the private sector. The federal government?s role in
financing these amounts should be recognized; and, in some cases, this role
might be small compared to other levels of government or the private sector.
Second, these investment estimates can change significantly over time with
changes in the efficiency of delivering infrastructure services or pricing
strategies that alter the demand for services. For example, the
consolidation of smaller water systems or the introduction of user charges
can reduce the need to expand or replace infrastructure. Third, these
investment estimates focus on the condition of facilities rather than the
GAO Observations
Page 27 GAO- 01- 835 U. S. Infrastructure
performance outcomes that can be expected from the investments. The passage
of GPRA signaled a shift in federal focus from inputs (such as the condition
of highways and airports) to outcomes (such as improved mobility). In the
infrastructure area, we caution against relying on measures of need based
primarily on the condition of facilities and instead suggest comparing the
costs and benefits of alternative approaches for reaching outcomes,
including noncapital alternatives.
We provided a draft of this report to ARC, EPA, DOT, GSA, and the Department
of Defense (DOD) for review and comment. EPA said that the report clearly
distinguishes between federal agencies that directly invest in
infrastructure and agencies, such as EPA, that manage programs to fund
infrastructure. GSA stated that the database used to derive the estimate for
public building repair and alteration costs is continually changing as work
items are tracked from identification to completion and that the database
does not represent investment needs, rather it provides input to decisions
that determine funding priorities. We revised this report to indicate that
the data are used as input to funding decisions. GSA also stated that the
draft report did not acknowledge that the agency uses costbenefit analysis
as one criterion in making investment decisions and that GSA has made
progress in improving the accuracy of its data. We did not make any changes
to this report based on these comments because both items were already
included. Written comments by EPA and GSA and our responses to GSA?s
comments appear in appendices III and IV. ARC, EPA, DOT, and GSA provided
technical clarifications, which we included in this report where
appropriate. DOD had no comments on this report.
We conducted our review between December 2000 and July 2001 in accordance
with generally accepted government auditing standards. Agency Comments
Page 28 GAO- 01- 835 U. S. Infrastructure
We are sending copies of this report to the Secretaries of the Departments
of Transportation and Defense; the Administrator, EPA; the Commissioners of
GSA and ARC; and the Director, Office of Management and Budget. Copies will
also be made available to others upon request. If you or your staff have any
questions about this report, please call me at (202) 512- 2834. Key contacts
and major contributors to this report are listed in appendix V.
Sincerely yours, Peter F. Guerrero Director Physical Infrastructure
Appendix I: Objectives, Scope, and Methodology
Page 29 GAO- 01- 835 U. S. Infrastructure
Our report focuses on infrastructure investment estimates compiled by six
federal agencies- the U. S. Army Corps of Engineers, Environmental
Protection Agency (EPA), Federal Aviation Administration (FAA), Federal
Highway Administration (FHWA), Federal Transit Administration (FTA), and
General Services Administration (GSA)- and the Appalachian Regional
Commission (ARC). For these agencies and selected types of infrastructure
(see table 2), we addressed the following objectives: (1) What are the
agencies? estimates for infrastructure investment and how do the estimates
compare in terms of how they are developed and used? (2) To what extent do
the agencies? procedures for developing the estimates embody practices of
leading government and private- sector organizations?
Table 2: Federal Agencies and Types of Infrastructure Included in the Report
Federal agency Infrastructure area ARC Army
Corps EPA FAA FHWA FTA GSA Highways X X Water resources X Hydropower X Water
supply X Wastewater treatment X Airports X Mass transit X Public buildings X
To identify agencies? infrastructure investment estimates, we obtained and
analyzed the most recent estimates reported by ARC, EPA, FAA, FHWA, and FTA.
For the Army Corps, we used estimates for water resources and hydropower
that the agency prepared in March 2001. The Army Corps does not develop
investment estimates for water supply and treatment. For GSA, we obtained
information from the Inventory Reporting Information System (IRIS)- a
computerized database of information on building repairs and alterations.
According to GSA database managers, the data we used were representative of
the repair and alteration needs contained in IRIS as of May 2, 2001. GSA?s
estimate for building construction was developed by GSA staff for the
building priorities identified by the Judicial Conference of the United
States and other federal agencies. We did not independently verify the
agencies? investment estimates, but we did rely on past reviews by us and
others that examined the soundness and completeness of the methodology and/
or data used to develop the estimates. We incorporated findings from these
reviews as appropriate. Appendix I: Objectives, Scope, and
Methodology
Appendix I: Objectives, Scope, and Methodology
Page 30 GAO- 01- 835 U. S. Infrastructure
To obtain information on the procedures agencies used to develop these
investment estimates and how agencies used the estimates, we interviewed
officials from ARC; the Army Corps? Planning and Policy Division, and
Programs, Formulation and Evaluation Branch; EPA?s Office of Ground Water
and Drinking Water and Office of Wastewater Management; the Department of
Transportation?s FAA, FHWA, and FTA; and GSA?s Office of Portfolio
Management. We reviewed agencies? documentation of the procedures used to
develop the estimates, but we did not verify whether these procedures were
followed. We also relied on our past reviews of FAA, FHWA, and GSA for
information on how these agencies develop and use the investment estimates.
To accomplish our second objective, we used leading practices contained in
our report Executive Guide: Leading Practices in Capital DecisionMaking.
We also reviewed laws and related guidance issued by the Office of
Management and Budget (OMB), including the Government Performance and
Results Act of 1993, the Federal Acquisition Streamlining Act of 1994, the
Clinger- Cohen Act of 1996, OMB?s Executive Order 12893 (Jan. 26, 1994), OMB
Circular A- 11, and OMB?s Capital Programming Guide. In addition, we
reviewed the Statement of Federal Financial Accounting Standards, No. 6,
Accounting for Property, Plant, and Equipment. We also reviewed reports by
the U. S. Advisory Commission on Intergovernmental Relations, National
Council on Public Works Improvement, the President?s Commission on Capital
Budgeting, and the National Academy of Sciences. We compared the procedures
used by each agency to develop infrastructure investment estimates with the
leading practices, which are listed in figure 4. The first seven practices
were identified in our executive guide.
The eighth practice- establish procedures to review data developed by others
and use independent reviews of data and methods to further enhance the
quality of estimates- was identified as a result of information collected
during this review. We found that each estimate relied to some extent on
data provided by others, such as the states. In past reviews, we have noted
problems with the consistency of data that is collected from states and
other sources. For example, DOT collects information on pavement condition
from the states. Our review of the statistic used to indicate pavement
condition demonstrated that states reported no information on 7 percent of
the miles on the National Highway System, varied in their approaches to
measuring and reporting the statistics, and
Appendix I: Objectives, Scope, and Methodology
Page 31 GAO- 01- 835 U. S. Infrastructure
did not follow uniformly DOT?s guidance for making these measurements. 14
The independent review of data and analytical methods can enhance the
quality of estimates. For example, given the uncertainty associated with
predicting future impacts of regulatory alternatives, we recommended
rigorous and independent peer review to enhance the analyses. 15
Furthermore, it has been noted by others that over time FHWA has
continuously improved its model to estimate investment needs. 16 FHWA has
used an independent review of the model to help make improvements.
14 Transportation Infrastructure: Better Data Needed to Rate the Nation?s
Highway Conditions (GAO/ RCED- 99- 264, Sept. 27, 1999). According to DOT,
the states reported pavement condition data for all of the sample pavement
sections included in the department?s investment estimate. Therefore, the
missing data on pavement condition did not effect DOT?s calculations.
15 Regulatory Reform: Agencies Could Improve Development, Documentation, and
Clarity of Regulatory Economic Analyses (GAO/ RCED- 98- 142, May 26, 1998).
16 Highway Performance Public Works: A New Federal Infrastructure Investment
Strategy for America, U. S. Advisory Commission on Intergovernmental
Relations (Nov. 1993).
Appendix I: Objectives, Scope, and Methodology
Page 32 GAO- 01- 835 U. S. Infrastructure
Figure 4: Selected Leading Practices Related to Infrastructure Investment
Estimates
Appendix II: Agencies? Infrastructure Investment Estimates
Page 33 GAO- 01- 835 U. S. Infrastructure
In 1997, the Appalachian Regional Commission (ARC) estimated that it would
cost $8.5 billion (in current 1995 dollars) to complete the Appalachian
Development Highway System (ADHS), a 3,025 mile system of highways that is
designed to bring economic development to Appalachia. 17 The amount is for
initial construction only- it does not include maintenance, retrofits, or
safety improvements to completed segments of the highway system. According
to ARC officials, this estimate is probably understated due to the limited
amount of detailed information available in 1997 and because the estimate
was prepared before obtaining public input or identifying and addressing
environmental or historic preservation concerns about specific highway
corridors. ARC plans to issue an updated estimate in 2002.
The major strengths and limitations of ARC?s estimate are summarized in
figure 5. We have not done prior work related to ARC?s investment estimate
or data used for the estimate. The amount of information we present
concerning the estimate does not imply that it is better or worse than
others.
17 Appalachia includes all of West Virginia and parts of 12 states: Alabama,
Georgia, Kentucky, Maryland, Mississippi, New York, North Carolina, Ohio,
Pennsylvania, South Carolina, Tennessee, and Virginia. Appendix II:
Agencies? Infrastructure
Investment Estimates ARC?s Investment Estimate for the Appalachian
Development Highway System
Appendix II: Agencies? Infrastructure Investment Estimates
Page 34 GAO- 01- 835 U. S. Infrastructure
Figure 5: Strengths and Limitations of ARC?s Investment Estimate for
Highways
Note: We considered procedures that reflected leading practices and factors
that enhanced the soundness or completeness of an estimate to be strengths
of an estimate. We considered factors that detracted from the soundness or
completeness of an estimate or its source data to be limitations of an
estimate. a Reflects a leading practice.
To produce an estimate for the highway system, each of the 13 states within
Appalachia estimated the cost to complete the system within their state, and
ARC aggregated the estimates. ARC and the Federal Highway Administration
(FHWA) distributed an instruction manual to each state that detailed the
methods and criteria for arriving at the estimate. Each state?s department
of transportation, in conjunction with the local FHWA office, then prepared
a detailed estimate of the cost to complete the unfinished portions of the
highway system within their state. The states produced these cost estimates
using preliminary or final plans, specifications, and estimates to the
extent they were available. At a minimum, ARC?s instructions indicated that
the states should have preliminary layouts of the proposed road and all
major structures and interchanges so that reasonably accurate estimates
could be made for items such as construction and paving. In addition,
qualified appraisers were used to help determine the cost of rights- of- way
and any relocation expenses. ARC and FHWA reviewed states? estimates to
ensure uniformity and accuracy. They assessed the reasonableness of the cost
estimates by comparing them to the costs of similar highway projects within
the state and FHWA?s data on construction costs. In addition, major changes
to the scope and location of highways and the amount of the estimate had to
be reviewed and approved by ARC, according to agency officials. ARC then How
the Estimate Was
Developed
Appendix II: Agencies? Infrastructure Investment Estimates
Page 35 GAO- 01- 835 U. S. Infrastructure
totaled the estimates from each state and calculated the total cost to
complete the highway system.
Many of the estimates were made before the highway segments had undergone
the planning process mandated by the National Environment Policy Act and,
therefore, may be understated. This planning process includes obtaining
input from the public, federal and state agencies, and historical societies
and assessing any environmental or historic preservation concerns. Some
states will not go through this planning process until a particular highway
corridor is the next construction project. As a result, many of the highway
estimates that ARC relied upon were made before this planning process
occurred. As states go through this process, construction costs can rise
dramatically if new concerns, such as environmental issues and historic
preservation, result in changes to highway routes or even legal cases to
determine the routes.
ARC uses the estimate to distribute funding made available through the
Highway Trust Fund to each state based on each state?s percentage share of
the remaining highway system. For example, according to the latest estimate,
15.3 percent of the cost to complete the highway system is for highways
within West Virginia. As a result, ARC gives 15.3 percent of its annually
appropriated monies for the highway system to West Virginia. Each state sets
its priorities for completing the highway system within its state with the
funds received from ARC.
Appalachian Development Highway System: 1997 Cost to Complete Report,
Appalachian Regional Commission, Aug. 1997.
Appalachian Development Highways: Economic Impact Studies., Wilbur Smith
Associates, July 1998.
Instruction Manual for Preparation and Submission: 1997 Estimate of Cost to
Complete the Appalachian Development Highway System,
Appalachian Regional Commission, Sept. 1996. How the Estimate is Used
Related Reports
Appendix II: Agencies? Infrastructure Investment Estimates
Page 36 GAO- 01- 835 U. S. Infrastructure
The U. S. Army Corps of Engineers estimated that, as of March 30, 2001, it
had about $38 billion in unmet water resources (inland and deep draft
navigation, flood control, and shore protection) and hydropower
infrastructure investment requirements for its civil works program. This
estimate includes only projects that are already under construction. Of that
amount, about $37 billion is for the construction of new water resource
projects, $217 million is for the major rehabilitation of water resource
projects, $400 million is for the major rehabilitation of hydropower plants,
and $182 million is for other work at hydropower plants. In addition to the
$38 billion, the Army Corps estimated that in fiscal year 2002, it would
require $835 million to perform critical operations and maintenance work on
water resources and related land projects, and $80 million in critical
maintenance on the Mississippi River and tributaries? projects. The Army
Corps does not develop an investment estimate for water supply and
wastewater treatment requirements. Instead, the Congress and local interests
estimate water supply requirements for individual projects, and local
governments are responsible for determining wastewater investment
requirements.
According to Army Corps officials, the amount estimated for water resources
and hydropower investments might be inadequate because it does not consider
increases in the cost of completing a project over time due to changing
economic conditions. Those officials stated that it takes an average of 12
years for the Army Corps to complete most projects. During this time,
increases in inflation and the costs of labor and material could result in
higher project costs than anticipated. In addition, their are concerns that
the quality of the estimate may be affected by inaccurate data and
assumptions. For example, the National Academy of Sciences found that flawed
data created unsound economic assumptions in the Army Corps? draft
feasibility study for the navigation system infrastructure on the Upper
Mississippi River and Illinois Waterway. This resulted in inaccurate
forecasts of future events, such as the level of barge shipping rates and
grain demand, which compromised the integrity of analysis and led to an
overstatement of the level of investment needed. As a result of problems
with this draft feasibility study, the Army Corps plans to redo it. Since
this project is not yet under construction, it is not part of the Army
Corps? $38 billion investment estimate.
The major strengths and limitations of the Army Corps? estimate are
summarized in figure 6. We have not done prior work related to the Army
Corps? investment estimate or data used for the estimate. The amount of
information we present concerning the estimate does not imply that it is
better or worse than others. U. S. Army Corps of
Engineers? Investment Estimate for Water Resources and Hydropower
Appendix II: Agencies? Infrastructure Investment Estimates
Page 37 GAO- 01- 835 U. S. Infrastructure
Figure 6: Strengths and Limitations of the Army Corps? Investment Estimate
for Water Resources and Hydropower Facilities
Note: We considered procedures that reflected leading practices and factors
that enhanced the soundness or completeness of an estimate to be strengths
of an estimate. We considered factors that detracted from the soundness or
completeness of an estimate or its source data to be limitations of an
estimate. a Reflects a leading practice.
The water resources and hydropower estimates were developed by aggregating
the funds required to construct and rehabilitate specific projects.
Initially, Army Corps? district offices submit lists of proposed water
resource problems (projects) in their area- including those identified by
local governments, organizations, and private citizens- to division
commanders who assess the projects based on several criteria. 18 The
criteria include (1) whether a project is in accord with the agency?s
current policy; (2) the urgency of resolving the problem; (3) geographic
18 The Army Corps refers to activities that are studied and/ or investigated
before construction as ?problems.? For this report, we will use ?project.?
How the Estimate Was Developed
Appendix II: Agencies? Infrastructure Investment Estimates
Page 38 GAO- 01- 835 U. S. Infrastructure
distribution; (4) the economic viability of the recommended plan; (5) local
support for the project; (6) the possibility of nonfederal participation in
the project; (7) the scheduled project completion date; and (8) the impact
on fish, wildlife, and/ or wetlands. A prioritized list of projects is
submitted to the Assistant Secretary of the Army for Civil Works, who
further screens the projects based on conformance to the administration?s
priorities and political sensitivity. The projects selected by the Assistant
Secretary are included in the Department of Defense?s budget submission to
OMB and, if approved, in the President?s budget submission to the Congress.
Ultimately, the Congress determines which projects to fund. Funded projects
undergo several lengthy reviews by the Army Corps, including a feasibility
study to investigate and recommend solutions to water resources problems.
The costs of such studies and other nonconstruction costs are not part of
the Corps? overall investment estimate.
The estimate for hydropower investment is based on the Army Corps?
inspections, tests, and evaluations of that equipment to determine service
condition. If the results of those assessments show trends of unexpected
deterioration, management decides whether the problem can be corrected by
routine repairs or whether it is a capital need that requires rehabilitation
or major repairs.
The investment estimate for water supply is derived by local interests who
engage the services of architectural and/ or engineering firms to determine
the costs for water supply projects. The local interests can also request
assistance from an Army Corps? field office in establishing a project?s
cost. The local interests, rather than the Army Corps, relay that figure to
the Congress.
The Army Corps uses the water resources and hydropower investment estimates
to determine the financial resources needed to manage, repair, and
rehabilitate the assets under its jurisdiction and for new construction. The
Army Corps uses the water supply estimate to provide planning, design, and
construction assistance to projects sponsored by local interests when
specifically directed, authorized, and funded by the Congress.
Inland Navigation System Planning: The Upper Mississippi RiverIllinois
Waterway, Report of the National Research Council (Feb. 28, 2001). How the
Estimate is Used
Related Reports
Appendix II: Agencies? Infrastructure Investment Estimates
Page 39 GAO- 01- 835 U. S. Infrastructure
The Congress required the Environmental Protection Agency (EPA) to survey
public water systems that are eligible for assistance from the Drinking
Water State Revolving Fund (DWSRF) about their capital investment needs
every 4 years. EPA?s second survey, issued in February 2001, estimated that
$150.9 billion (in current 1999 dollars) was needed from 1999 to 2018. Of
that amount, $31.2 billion was needed to comply with existing and proposed
regulations of the Safe Drinking Water Act. The major strengths and
limitations of EPA?s estimate are summarized in figure 7. We have not done
prior work related to EPA?s investment estimate or data used for the
estimate. The amount of information we present concerning the estimate does
not imply that it is better or worse than others.
Figure 7: Strengths and Limitations of EPA?s Investment Estimate for
Drinking Water Facilities
Note: We considered procedures that reflected leading practices and factors
that enhanced the soundness or completeness of an estimate to be strengths
of an estimate. We considered factors that detracted from the soundness or
completeness of an estimate or its source data to be limitations of an
estimate. a Reflects a leading practice.
In contrast to EPA?s estimate, the Water Infrastructure Network (WIN)- a
consortium of 21 industry, municipal, and nonprofit associations- EPA?s
Investment
Estimate for Drinking Water Facilities
Appendix II: Agencies? Infrastructure Investment Estimates
Page 40 GAO- 01- 835 U. S. Infrastructure
estimated that investment needs for drinking water will average about $24
billion per year through 2019 (expressed in constant 1997 dollars). Of the
$24 billion estimated by WIN, $19 billion is for capital investment and $5
billion represents financing costs.
EPA?s estimate was derived from a nationwide survey mailed to medium and
large- sized water systems. All of the nation?s largest systems (serving
more than 40,000 people) and a random sample of medium systems (serving more
than 3,300 people and fewer than 40,000 people) were included in the survey.
The water systems were asked to submit documentation of the purpose and
scope of each project so that EPA could verify that the projects met the
eligibility criteria for funding by the DWSRF. EPA also required that each
project cost be supported by documentation indicating that the cost had
undergone an adequate degree of professional review. The systems returned
the completed questionnaires and supporting documentation to the states for
review. The states had the option of providing supplemental documentation on
the project or its cost. The states then forwarded the completed
questionnaires to EPA for review. EPA reviewed the project components that
were included in cost estimates, modeled costs for projects that lacked cost
documentation, and deleted projects that were ineligible for funding under
the DWSRF. The infrastructure demands of small systems were obtained through
site visits to approximately 599 systems, with at least 6 systems selected
in each state. EPA conducted an additional 100 site visits to assess the
demands of not- for- profit noncommunity water systems. The survey was
designed to provide state- level estimates of medium and large systems and
national- level estimates of small systems with a precision target of 95
percent +/- 10 percent. A precision target of 95 percent +/- 30 percent was
established for the not- for- profit noncommunity water systems.
The estimates, however, might understate water supply needs because some
systems submitted cost estimates covering 2 to 5 years rather than the 20-
year period requested by EPA. Further uncertainties exist with the estimate
because the water supply survey excluded costs arising solely from
population growth.
EPA uses the results of the most recent survey to allocate monies from the
DWSRF to the states, basing each state?s allocation on its share of the
total national investment amount, with a minimum allotment of 1 percent of
available funds. Each state develops a priority system for funding projects
How the Estimate Was
Developed How the Estimate is Used
Appendix II: Agencies? Infrastructure Investment Estimates
Page 41 GAO- 01- 835 U. S. Infrastructure
based on public health criteria specified in the 1996 Safe Drinking Water
Act. In addition, EPA uses the survey as a tool for allocating the Tribal
SetAside (up to 1.5 percent of the DWSRF annual appropriation) to American
Indian and Alaskan native village water systems.
Congressional Budget Office, Statement of Perry Beider before the
Subcommittee on Environment and Hazardous Materials, Committee on Energy and
Commerce, U. S. House of Representatives (Mar. 28, 2001).
EPA Office of Water, Drinking Water Infrastructure Needs Survey: Second
Report to Congress (EPA 816- R- 01- 004, Feb. 2001).
Water Infrastructure Network, Clean & Safe Water for the 21st Century: A
Renewed National Commitment to Water and Wastewater Infrastructure (undated,
available from the American Water Works Association).
EPA periodically reports to the Congress on the nation?s investment needs
for municipal water pollution control facilities, primarily wastewater
treatment facilities. In the 1996 clean water needs survey report, EPA
estimated that $139.5 billion (in current 1996 dollars) was needed over the
years 1996 to 2016 to satisfy water pollution control needs. The total
included $44.0 billion for wastewater treatment, $10.3 billion for upgrading
existing wastewater collection systems, $21.6 billion for new sewer
construction, and $44.7 billion for controlling combined sewer overflows.
The investment estimate included costs for facilities used in conveyance,
storage and treatment, and recycling and reclamation of municipal
wastewater. In addition, the estimate included the costs for structural and
nonstructural measures to develop and implement stormwater and nonpoint
source pollution programs. The overall investment estimate did not include
costs that were ineligible for federal assistance under Title VI of the
Clean Water Act, such as house connections to sewers and costs to acquire
land that is not a part of the treatment process. The estimate did not
include information on private wastewater treatment facilities and those
serving Indian tribes and Alaskan native villages. More recently, EPA
estimated that the amount may be closer to $220 billion because some needed
work probably had not been documented and reported by the states. EPA
expects to submit its next clean water needs survey report to the Congress
in August 2002. Related Reports
EPA?s Investment Estimate for Wastewater Facilities
Appendix II: Agencies? Infrastructure Investment Estimates
Page 42 GAO- 01- 835 U. S. Infrastructure
The major strengths and limitations of EPA?s investment estimate for
wastewater facilities are summarized in figure 8. We have not done prior
work related to EPA?s investment estimate or data used for the estimate. The
amount of information we present concerning the estimate does not imply that
it is better or worse than others.
Figure 8: Strengths and Limitations of EPA?s Investment Estimate for
Wastewater Facilities
Note: We considered procedures that reflected leading practices and factors
that enhanced the soundness or completeness of an estimate to be strengths
of an estimate. We considered factors that detracted from the soundness or
completeness of an estimate or its source data to be limitations of an
estimate. a Reflects a leading practice.
EPA maintains a database of cost and technical information on publicly owned
wastewater treatment facilities, which is used to develop the investment
estimate. The database included about 16,000 wastewater treatment facilities
and 21, 000 sewage collection systems in 1996, when the last estimate was
made. The database includes information on individual facilities? projects
and programs that target documented water quality or public health problems.
EPA periodically requests information from the states to update this
database. In the 1996 clean water needs survey, the states were asked to
identify projects to build or expand treatment facilities to accommodate the
capacity required by the existing How the Estimate Was
Developed
Appendix II: Agencies? Infrastructure Investment Estimates
Page 43 GAO- 01- 835 U. S. Infrastructure
population over the next 20 years. EPA also requested the states to update
the documentation for projects already in the database with estimated costs
greater than $5 million if the documentation was dated prior to 1990. EPA
reviewed all documentation submitted by the states to ensure compliance with
its established criteria. Generally, documentation- such as capital
improvement plans- was acceptable if it included details concerning the
proposed project, such as a definition of the problem, a description of the
solution, and cost estimates. If the documentation lacked cost estimates,
EPA estimated the cost using models. However, the documentation provided to
EPA sometimes covered only a 5- year period- not the 20- year period asked
for. Therefore, EPA officials believe the estimates are conservative.
In addition, EPA modeled states? costs for combined sewer overflows
(releases of raw sewage from systems that convey sewage and stormwater in
the same pipes) and activities to control stormwater runoff and nonpoint
sources of pollution. Furthermore, EPA reported that it believes the
investment estimates were understated for sanitary sewer overflows (releases
of raw sewage from sanitary sewer collection systems) and that it was
developing updated cost estimates separately from the 1996 clean water needs
survey.
According to EPA, the clean water needs survey is also used to assist the
federal government and the states in program planning, policy evaluation,
and program management and to inform the Congress of the magnitude of the
needs. Private firms, public interest groups, and trade associations use the
survey information in marketing, cost estimating, and policy formation.
EPA 1996 Clean Water Needs Survey (CWNS) Report to Congress (EPA 832- R- 97-
003, Sept. 1997).
In 1999, the Federal Aviation Administration (FAA) submitted to the Congress
its most recent investment estimate for the nation?s airports- $35.1 billion
(in constant 1998 dollars) for the years 1998 to 2002. A significant portion
of this estimate is for projects that will bring existing airports up to
current design standards (37 percent), develop passenger terminal buildings
(16 percent), or add capacity to congested airports (13 percent) at 3,561
airports and proposed airports in the United States. The estimate only
includes projects that are eligible for funding under FAA?s Airport
Improvement Program. The major strengths and limitations of the How the
Estimate is Used
Related Reports FAA?s Investment Estimate for Airports
Appendix II: Agencies? Infrastructure Investment Estimates
Page 44 GAO- 01- 835 U. S. Infrastructure
estimate are summarized in figure 9. In a previous report, we reviewed the
database used to develop the estimate, and we have included the results of
that review in our analysis. The amount of information we present concerning
the estimate does not imply that it is better or worse than others.
Figure 9: Strengths and Limitations of FAA?s Investment Estimate
Note: We considered procedures that reflected leading practices and factors
that enhanced the soundness or completeness of an estimate to be strengths
of an estimate. We considered factors that detracted from the soundness or
completeness of an estimate or its source data to be limitations of an
estimate. a Reflects a leading practice.
FAA determined its investment estimate using the National Plan of Integrated
Airport Systems (NPIAS) database. NPIAS includes the estimated cost of
individual infrastructure investment projects requested by airports. The
projects originate primarily from airport plans, including master plans.
Airport officials may consider noncapital alternatives to address unmet
infrastructure requirements when producing these plans. For example,
officials may consider altering operational procedures or practices to allow
more airplanes to use one runway instead of requesting funds for an
additional runway. If noncapital alternatives do not exist, airport
officials request funding for a capital project within their plans, which
contain specific proposals and cost estimates for each project. FAA How the
Estimate Was
Developed
Appendix II: Agencies? Infrastructure Investment Estimates
Page 45 GAO- 01- 835 U. S. Infrastructure
officials in field offices review each project within each airport plan to
determine if the project is eligible and justified. A project is eligible if
it qualifies for federal funds under the Airport Improvement Program. 19 A
project is justified based on a judgmental decision by FAA district
officials. For example, one airport in central Texas proposed adding four
new runways to the airport, which FAA officials considered unjustified
because the amount of air traffic served by the airport was insufficient to
merit the additional runways. Projects and plans that are approved by FAA at
the district level are then entered into the NPIAS database, along with the
estimated costs. FAA officials in Washington then review the data in NPIAS
and ensure that district officials have included only projects that are
eligible for federal funding and are justified. FAA officials add up the
estimated cost of these projects and produce an overall investment estimate.
FAA submits the estimate to the Congress, as required by statute.
Report to Congress: National Plan of Integrated Airport Systems (NPIAS)
(1998- 2002). U. S. Department of Transportation, Federal Aviation
Administration (Mar. 12, 1999).
Airport Development Needs: Estimating Future Costs (GAO/ RCED- 97- 99, Apr.
7, 1997).
Airport Financing: Funding Sources for Airport Development
(GAO/ RCED- 98- 71, Mar. 12, 1998). In May 2000, FHWA submitted to the
Congress its most recent biennial estimate of a range of investment needs
for the nation?s highway and bridge investment needs. First, it estimated
that $83.4 billion 20 per year over 20 years (1998 to 2017) in highway
investment would be economically justified based on the benefits of the
investment exceeding the cost. Second, it estimated that $50.8 billion per
year over 20 years would be
19 Generally, the Airport Improvement Program allows for all types of
airport development except for automobile parking structures, hangars, air
cargo buildings, or the revenue producing areas of large terminals.
20 FHWA?s estimate is in constant 1997 dollars. How Estimate is Used
Related Reports FHWA?s Investment Estimate for Highways
Appendix II: Agencies? Infrastructure Investment Estimates
Page 46 GAO- 01- 835 U. S. Infrastructure
needed to maintain the current physical condition of the nation?s highways.
Third, it estimated that $53.9 billion a year over 20 years would be needed
to maintain the current cost to users (such as travel- time costs, vehicle-
operating costs, and crash costs). These estimates of highway investment
cover all public road mileage- 3.95 million miles in 1997. 21 The major
strengths and limitations of FHWA?s investment estimate are summarized in
figure 10. In a June 2000 report, we reviewed FHWA?s model used to develop
these estimates, and we have included the results of that review in our
analysis. The amount of information we present concerning the estimate does
not imply that it is better or worse than others.
Figure 10: Strengths and Limitations of FHWA?s Investment Estimate
Note: We considered procedures that reflected leading practices and factors
that enhanced the soundness or completeness of an estimate to be strengths
of an estimate. We considered factors that detracted from the soundness or
completeness of an estimate or its source data to be limitations of an
estimate. a Reflects a leading practice.
21 While FHWA also includes bridge investment requirements in the report to
Congress, we have only included FHWA?s estimate for highways in this
analysis.
Appendix II: Agencies? Infrastructure Investment Estimates
Page 47 GAO- 01- 835 U. S. Infrastructure
FHWA developed the estimate using data from a statistically drawn national-
level sample of about 125,000 highway segments throughout the United States.
This sample included data on a variety of highway conditions, including
pavement roughness, traffic levels, and lane width. The states also provided
FHWA with forecasts on such matters as travel growth. FHWA staff reviewed
the data submitted by the states and looked for anomalies or unusual
patterns. FHWA asked the states to correct serious flaws and improve data
submission for minor flaws. Finally, FHWA division offices periodically
reviewed state data collection procedures to ensure consistency among
states. The corrected information was inputted into FHWA?s Highway
Performance Monitoring System.
FHWA primarily used the Highway Economic Requirements System (HERS) model to
determine future investment requirements. It assessed the current condition
of the sample highway segments and then projected future condition and
performance of the segments based on expected changes in factors such as
traffic volume. Based on this information, the model simulated the effects
of infrastructure improvements for the highway segments and compared the
relative benefits and costs associated with alternative improvement options.
While FHWA?s model analyzes these sample sections individually, the model is
designed to provide estimates of investment requirements valid at the
national level and does not provide improvement recommendations for
individual highway segments. FHWA acknowledges that some HERS data,
particularly emissions data, varies in quality.
To reach a total estimate for highway investment requirements, FHWA
supplements results of this model with external adjustments to account for
(1) classes of highways not included in either the statistical sample or the
model 22 and (2) certain types of capital investment. FHWA acknowledges that
the estimates are not based on benefit- cost analysis and are less rigorous
than the HERS results. The model currently does not directly consider new
roads or system enhancements- improvements primarily related only to safety,
traffic operations, or environmental enhancements- as part of its analysis.
According to FHWA?s most recent estimate, FHWA assumed those types of
improvements will consume the
22 Rural minor collectors, rural local roads, and urban local roads are the
three classes of highways not included in the statistical sample, and their
future needs are not estimated by the model. How the Estimate Was
Developed
Appendix II: Agencies? Infrastructure Investment Estimates
Page 48 GAO- 01- 835 U. S. Infrastructure
same overall percentage of highway capital investment as they have in the
past.
FHWA has had transportation and economic experts review the model to assess
and improve it. In June 1999, the experts found that FHWA has strengthened
the model over time and that recent refinements have increased its
applicability and credibility. Also, FHWA staff and consultants continually
look for ways to improve the model. For example, FHWA officials told us they
plan to eliminate a computational shortcut for their next estimates, which
they plan to issue in 2002. FHWA used this shortcut to approximate the
lifetime benefits associated with an improvement. In addition, the National
Cooperative Highway Research Program is reviewing FHWA?s methodology for
determining its investment estimate.
We found the model was reasonable despite some limitations. First, the model
cannot completely reflect changes occurring among all highways in the
transportation network at the same time, since the model analyzes each
highway segment independently. Second, the model cannot estimate the full
range of uncertainties within which its estimates vary because it is not
designed to completely quantify the uncertainties associated with its
methods, assumptions, and data. In making estimates, the model relies on a
variety of estimating techniques and hundreds of variables, all of which are
subject to some uncertainties. For example, we have reported that pavement
roughness data reported by the states to FHWA are not completely comparable,
partly because the states use different devices to measure roughness. Third,
FHWA uses two different approaches in compiling the estimate. The benefit-
cost analysis used in the HERS model is not comparable to the analysis used
to estimate investment needs for roads outside the sample and other kinds of
road projects. Nevertheless, FHWA combines these estimates and characterizes
both as economically justified.
The highway estimate provides federal officials a source of information for
decisionmaking concerning investments. In particular, legislative and
executive branch officials use the estimate to obtain general information on
the nation?s need for infrastructure investments. Also, some groups may use
the estimate in discussions about the level of federal funding for highways.
How the Estimate is Used
Appendix II: Agencies? Infrastructure Investment Estimates
Page 49 GAO- 01- 835 U. S. Infrastructure
1999 Status of the Nation?s Highways, Bridges, and Transit: Conditions &
Performance. U. S. Department of Transportation, Federal Highway
Administration and Federal Transit Administration (May 2, 2000).
Highway Infrastructure: FHWA?s Model for Estimating Highway Needs Is
Generally Reasonable, Despite Limitations (GAO/ RCED- 00- 133, June 5,
2000).
In May 2000, the Federal Transit Administration (FTA) submitted its biennial
estimate to the Congress on the nation?s mass transit systems, including
buses, rail cars, and ferries. The report covered 1998 to 2017 and estimated
investment requirements under four scenarios, depending on whether the
condition and/ or the performance of existing mass transit systems was
maintained or improved. FTA estimated that the average cost for these four
scenarios ranged from $10.8 billion to $16.0 billion per year (in constant
1997 dollars). This estimate is based on incomplete data and imprecise
predictions, which limit the usefulness of the estimate. The major strengths
and limitations of FTA?s investment estimates are summarized in figure 11.
We have not done prior work related to FTA?s investment estimate or data
used for the estimate. The amount of information we present concerning the
estimate does not imply that it is better or worse than others. Related
Reports
FTA?s Investment Estimate for Mass Transit Systems
Appendix II: Agencies? Infrastructure Investment Estimates
Page 50 GAO- 01- 835 U. S. Infrastructure
Figure 11: Strengths and Limitations of FTA?s Investment Estimates
Note: We considered procedures that reflected leading practices and factors
that enhanced the soundness or completeness of an estimate to be strengths
of an estimate. We considered factors that detracted from the soundness or
completeness of an estimate or its source data to be limitations of an
estimate. a Reflects a leading practice.
FTA?s first scenario-? Maintain Conditions and Performance?- estimates the
capital investment needed to maintain the average condition of mass transit
assets over the 20- year period and add new capacity to maintain current
vehicle usage levels as passenger travel increases. The second scenario-?
Maintain Conditions and Improve Performance?- estimates the investment
needed to maintain the average existing conditions of mass transit assets
and to improve the service coverage and/ or frequency of mass transit
service. The third scenario-? Improve Conditions and Maintain Performance?-
estimates the investment needed to bring the average condition for each
major asset type to ?good? while maintaining current vehicle usage levels as
transit passenger travel increases. The fourth scenario-? Improve Conditions
and Improve Performance?- estimates the investment needed to bring the
average condition for each major asset type to ?good? and also improve
service quality by increasing the area covered by mass transit and/ or
increasing the frequency of mass transit service. The estimates for these
four scenarios taken from the Department of Transportation?s 1999 Conditions
and Performance report, are shown in table 3.
Appendix II: Agencies? Infrastructure Investment Estimates
Page 51 GAO- 01- 835 U. S. Infrastructure
Table 3: Investment Estimates for Mass Transit Scenario Average annual cost
(billions of dollars)
Maintain conditions and maintain performance $10.8 Maintain conditions and
improve performance $14.4 Improve conditions and maintain performance $11.1
Improve conditions and improve performance $16.0
FTA developed its investment estimates using the National Transit Asset
Inventory. This inventory includes information on the age of buses and
railcars and on maintenance facilities. FTA estimates the condition of buses
and rail cars based on their age, using data gathered by the agency over
time from surveys of the condition of vehicles. The information for this
database is collected by every transit agency in an urbanized area that
receives federal assistance, according to an agency official.
FTA used the Transit Economic Requirements Model to determine the future
infrastructure and asset needs for transit. This computerized model predicts
the changes that will occur to transit infrastructure and vehicles over time
and the investments needed to maintain or improve current conditions and
performance of mass transit systems. To forecast needs for the condition of
assets, the model includes aggregate data on the condition of assets based
on a 1 to 5 scale and uses a benefit- cost analysis to determine if the
benefit of replacing an asset (and thus improving its condition) outweighs
the cost of the replacement. If the benefit outweighs the cost, the project
is added to the final cost as reported by the model. To forecast needs for
the performance of assets, FTA uses predictions of the number of future
passengers developed by Metropolitan Planning Organizations (MPO). FTA uses
this information to determine future capacity needs. Capacity needs are
expressed as either more frequent service or a new system. The Transit
Cooperative Research Program 7 is reviewing FTA?s methodology for
determining its investment estimates. According to FTA, the results of this
review will be considered in developing FTA?s next estimates in 2002.
Missing data and imprecise predictions limit the accuracy of the investment
estimates. For example, the database lacks future travel
7 The Transit Cooperative Research Program is a cooperative effort of FTA,
the Transportation Research Board, the Transit Development Corporation, and
the American Public Transportation Association that conducts and
disseminates transit information. How the Estimates Were
Developed
Appendix II: Agencies? Infrastructure Investment Estimates
Page 52 GAO- 01- 835 U. S. Infrastructure
forecasts for the New York City area. In addition, according to FTA, some
MPOs submit data that vary in quality. According to FTA, the agency also
does not have complete information on the condition of fare collection
systems, stations, and maintenance facilities that are part of the mass
transit systems. Finally, according to FTA, it is difficult to predict the
growth in travel over time.
According to FTA, the investment estimate is used to provide broad, general
support for FTA?s budget and to help tie the budget to the levels of
performance discussed in the estimate. The estimate provides information to
FTA and the Congress on changes in the condition and performance of mass
transit. Finally, the estimate serves as a baseline for performance goals
mandated under the Government Performance and Results Act and identifies the
performance goals FTA is likely to achieve in the future.
1999 Status of the Nation?s Highways, Bridges, and Transit: Conditions and
Performance, U. S. Department of Transportation: Federal Highway
Administration and Federal Transit Administration (May 2, 2000).
GSA?s data indicated that, as of May 2, 2001, it would cost $4.58 billion
for repairs and alterations of public buildings. This estimate included both
items currently needed and future work items to be undertaken over the next
5 years. Examples of repairs and alterations include repairs to major
building components, such as electrical, heating, ventilation, and air
conditioning systems; fire alarm and sprinkler systems; and other fire and
life safety items. In fiscal year 2001, GSA estimated that an additional
$250 million to $300 million was needed annually over the following 5 years
for new building construction for border stations and federal office
buildings. In addition, in fiscal year 2001, the Judicial Conference
estimated $500 million was needed annually over the following 5 to 7 years
to construct new courthouses. 9 The major strengths and limitations of these
investment estimates are summarized in figure 12. In previous reports, we
reviewed the database used to develop the estimate of repairs and
alterations, and we have included the results of that review in our
analysis.
9 The estimate for courthouse construction comes from the Judicial
Conference of the United States? 5 to 7 year courthouse project plan. The
Judicial Conference is composed of the Chief Justice of the United States
and other federal judges who consider policy and legislative and
administrative issues affecting the federal courts. How the Estimate is Used
Related Reports GSA?s Investment Estimate for Public Buildings
Appendix II: Agencies? Infrastructure Investment Estimates
Page 53 GAO- 01- 835 U. S. Infrastructure
The amount of information we present concerning the estimate does not imply
that it is better or worse than others.
Figure 12: Strengths and Limitations of GSA?s Investment Estimates
Note: We considered procedures that reflected leading practices and factors
that enhanced the soundness or completeness of an estimate to be strengths
or an estimate. We considered factors that detracted from the soundness or
completeness of an estimate or its source data to be limitations of an
estimate. a Reflects a leading practice.
GSA develops cost estimates when it determines that repairs and alterations
are needed. 10 GSA?s overall estimate for repairs and alterations was
derived from information contained in the Inventory Reporting Information
System (IRIS), a database of projects. The projects are identified and
entered into the database at the regional level. The projected cost data are
derived from various sources, including contractors, safety inspectors, and
building engineers. The database includes current and future projects. Work
items in the database may be updated daily by regional office staff as new
work is identified and completed work is deleted.
10 GSA manages its infrastructure needs through the Capital Investment and
Leasing Program. Under this program, it works with other agencies to
determine space needs and then determines the best way to meet these needs
within anticipated budget levels. How the Investment
Estimates Were Developed
Appendix II: Agencies? Infrastructure Investment Estimates
Page 54 GAO- 01- 835 U. S. Infrastructure
GSA?s process for developing investment estimates for new construction
projects also begin, with evaluations at the regional level. GSA regional
staff evaluate existing facilities, the availability of sites for new
construction, and the disposition of old facilities. Using a computer model,
GSA?s regional staff compare the cost of construction to the cost of leasing
space. The computer model uses cost estimates based on benchmark values that
are specified for locations around the country. The regional offices submit
their recommendations for construction projects along with the computer
analysis and other data to GSA headquarters for review.
GSA identifies projects that make up its overall investment estimate as
prospectus- level or nonprospectus- level: prospectus- level projects have
estimated costs of $1.99 million or more, and nonprospectus- level projects
have estimated costs greater than $10,000 and less than $1.99 million. 11
GSA prioritizes prospectus- level investment projects as preparation for the
annual budget process. The regions identify proposed projects and submit the
proposals, along with supporting data, to GSA headquarters for review and
funding consideration. There, headquarters staff and the capital investment
panel 12 assess the merits of each proposed project and rank the projects
with the aid of computer- based software called ?Expert Choice.? The model
uses five weighted criteria to rank the projects that are competing for
funding. These criteria consider, in weighted order, (1) economic return-
whether the project will generate additional revenue for the Federal
Building Fund, the source of funds for GSA?s repair and alterations and
construction projects; (2) project risk- whether the project will begin in
the planned fiscal year and use the authorized funding; (3) project urgency-
whether the project will correct building conditions that are unsafe or
involve severe deterioration; (4) community planning- whether the project
will protect the building?s historic significance and positively impact the
local community; and (5) customer urgency- the project will have a positive
impact on the tenant agencies? operations or mission. GSA officials,
however, stated that the Expert Choice model is not the sole basis for
decisions; the model is not intended to replace the professional judgment
and knowledge of staff. During the
11 GSA?s Administrator is authorized to annually adjust the dollar threshold
that defines prospectus- level projects. The threshold was $1. 99 million
for fiscal year 2001 projects. GSA must provide detailed support for each
prospectus- level project that it plans to undertake and have OMB approve
and the Congress fund these projects before starting work.
12 The members of the capital investment panel vary from year to year, but
the panel always includes senior managers from GSA headquarters and regional
offices.
Appendix II: Agencies? Infrastructure Investment Estimates
Page 55 GAO- 01- 835 U. S. Infrastructure
assessment process, each project is assigned a numerical score and then
ranked in order of priority. The projects with the higher scores usually
became candidates for funding. For fiscal year 2001, GSA assessed the merits
of 27 repair and alterations design projects proposed by its regional staff
and selected 12 to recommend for funding.
In 2000, we reported problems with the quality of data contained in IRIS.
For example, we found that not all repairs were included, some repairs that
were included were already in progress or completed, some data were
incorrectly reported, and some cost estimates for repairs were not current.
In addition, the projects that make up the estimate for repairs and
alterations are expressed in unadjusted dollars; in some cases the year that
the estimate was made is not included in the database. We have also reported
that the lack of a multiyear plan for repairs and alterations affects the
agency?s ability to make investment decisions.
In response to recommendations made in our previous reports, GSA is engaged
in several activities intended to improve its IRIS database and enhance the
management of its inventory of buildings. For example, the agency is
undertaking efforts to validate the quality and consistency of IRIS, such as
revising work item codes to be more descriptive. In addition, the agency has
significantly reduced the number of overdue work items in the database,
thereby improving the quality of the database, according to GSA officials.
GSA is also implementing a building condition assessment survey, which
provides automated cost estimates using industry- accepted software. GSA
began a pilot program in one region in 2000 and has expanded the program to
its other 10 regions. The agency expects to complete initial building
condition assessments on the entire inventory of buildings by the end of
September 2001. It plans to review information gathered in these assessments
and enter new work items into the IRIS database. Existing work items will be
updated with the results of the condition assessments.
GSA?s IRIS database is used as input in determining funding priorities. For
prospectus- level projects, GSA?s headquarters staff review the estimates
submitted by the regions, apply the Expert Choice model and professional
judgment, and then select projects for inclusion in the agency?s budget
proposal that is sent to OMB. For nonprospectus- level repairs and
alterations projects, GSA?s headquarters staff allocate a portion of all
funds for repairs and alterations to each regional office based on regional
priorities. How the Estimate Is Used
Appendix II: Agencies? Infrastructure Investment Estimates
Page 56 GAO- 01- 835 U. S. Infrastructure
Federal Buildings: Funding Repairs and Alterations Has Been A Challenge-
Expanded Financing Tools Needed (GAO- 01- 452, Apr. 12, 2001).
Federal Buildings: Billions Are Needed for Repairs and Alterations
(GAO/ GGD- 00- 98, Mar. 30, 2000).
General Services Administration: Many Building Security Upgrades Made but
Problems Have Hindered Program Implementation (GAO- TGGD- 98- 141, June 4,
1998).
Federal Buildings: Actions Needed to Prevent Further Deterioration and
Obsolescence (GAO/ GGD- 91- 57, May 13, 1991). Related Reports
Appendix III: Comments From the Environmental Protection Agency
Page 57 GAO- 01- 835 U. S. Infrastructure
Appendix III: Comments From the Environmental Protection Agency
Appendix III: Comments From the Environmental Protection Agency
Page 58 GAO- 01- 835 U. S. Infrastructure
Appendix IV: Comments From the General Services Administration
Page 59 GAO- 01- 835 U. S. Infrastructure
Appendix IV: Comments From the General Services Administration
Note: GAO comments supplementing those in the report text appear at the end
of this appendix.
See comment 3. See comment 2. See comment 1.
Appendix IV: Comments From the General Services Administration
Page 60 GAO- 01- 835 U. S. Infrastructure
Appendix IV: Comments From the General Services Administration
Page 61 GAO- 01- 835 U. S. Infrastructure
The following are GAO?s comments on GSA?s letter dated July 6, 2001. 1. We
revised the report to indicate that the database is used as input to
funding decisions. 2. We note in the report that GSA uses economic benefits
as one criterion
ranking and selecting projects for funding. 3. We note in the report that
GSA is engaged in activities intended to
improve the quality and consistency of its database on repairs and
alterations and provide examples of those activities. GAO Comments
Appendix V: GAO Contacts and Staff Acknowledgments
Page 62 GAO- 01- 835 U. S. Infrastructure
Peter F. Guerrero (202) 512- 2834 Teresa F. Spisak (202) 512- 2834
Other key contributors to this report were Phillis Riley, Sharon Dyer, John
Shumann, Christine Bonham, Catherine Colwell, Michael Curro, William Dowdal,
Timothy Guinane, Trina Lewis, Lisa Turner, and Alwynne Wilbur. Appendix V:
GAO Contacts and Staff
Acknowledgments GAO Contacts Acknowledgments
(395000)
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