Audit Reports

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March 6, 2019

FHWA Needs To Clarify Roles and Processes for Approving and Monitoring Public-Private Partnerships

Self-initiated
Project ID: 
ST2019019
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What We Looked At
Rising demands on the transportation system and constraints on public resources have led to greater private sector involvement in constructing highway infrastructure through public-private partnerships (P3s). The use of P3s marks a shift away from traditional ways of procuring and financing highway projects solely with Government funding. However, P3s must conform to the same Federal requirements as other Federal-aid projects. The Federal Highway Administration (FHWA) is responsible for stewardship and oversight of Federal-aid highway, bridge, and tunnel projects where P3s are being considered or implemented. We initiated this audit to determine whether FHWA is providing adequate oversight of P3 highway projects. Our specific objectives were to assess FHWA’s (1) approval process for P3 highway and bridge projects that include Federal investments and (2) monitoring of P3s once approved.
 
What We Found
FHWA has not followed its procedures for ensuring compliance with a P3-related requirement. Specifically, FHWA has not followed its procedures to ensure project financial plans assess the appropriateness of a P3 for project delivery, as required by law. In addition, FHWA is not following its current guidance for approving P3 projects, which notes that P3 projects warrant additional stewardship considerations to address unique risks. Once P3 projects have been approved, FHWA enhances monitoring of P3 projects during construction when the project has been designated as a Major Project. However, FHWA has not established processes for providing additional monitoring of P3s that are not Major Projects, even though they may also pose risks. In addition, although FHWA’s guidance states that P3s that remain funded by Federal loans warrant additional oversight during the Operations and Maintenance phase, we found that the Agency is not fully carrying out this guidance and has not clearly defined roles and responsibilities for this oversight.
 
Our Recommendations
FHWA concurred with all five of our recommendations to improve its processes for approving P3 projects and monitoring projects once approved. We consider all five recommendations resolved but open pending completion of planned actions.

Recommendations

Open

Closed

Closed on 12.09.2021
No. 1 to FHWA

Require FHWA Headquarters and Division Offices to follow established procedures for reviewing and approving initial financial plans to ensure they include an assessment of the appropriateness of a P3 for project delivery.    

No. 2 to FHWA

Revise and issue guidance to communicate to FHWA staff and stakeholders the processes FHWA will use to take Federal stewardship considerations into account in approving P3 projects. This guidance should address FHWA's role, if any, in the assessment of traffic and revenue assumptions.

Closed on 11.01.2022
No. 3 to FHWA

Develop and issue Agencywide guidance identifying risks specific to P3 projects that Division Offices should consider in their risk assessments of State and local transportation agencies’ Federal-aid construction programs.        

Closed on 12.15.2022
No. 4 to FHWA

Consult with the Build America Bureau to define FHWA’s and the Bureau’s roles and responsibilities during the Operations and Maintenance phase for P3 projects.      

No. 5 to FHWA

Develop and issue guidance to internal and external stakeholders communicating the processes FHWA will use to oversee P3 projects, including during the Operations and Maintenance phase for P3 projects that remain funded by Federal loans.