Statement of Jennifer L. Dorn
Federal Transit Administration
U.S. Department of Transportation
U.S. House of Representatives
Committee on Appropriations
Subcommittee on Transportation and Treasury, and Independent Agencies
Hearing on the Rating and Evaluation of New Fixed Guideway Systems
April 28, 2004
Thank you, Mr. Chairman, for the opportunity to testify today on FTA's New Starts program. We appreciate your continued strong interest in ensuring that the projects funded through this program are appropriately justified and well managed. America's taxpayers have a right to expect that the investments made on their behalf are costeffective, delivered on time and within budget, and produce the benefits that were promised.
I am pleased that FTA has achieved significant progress in recent years to improve the New Starts project evaluation and oversight program. This progress has already earned noteworthy recognition. It has been raised by GAO 1 and cited as an example for other Federal grant programs to follow. 2 In fact, the FTA New Starts Program is one of the few programs across the Federal government that has been removed from the Government Accounting Office's (GAO) "High Risk" list. 3
This progress was also reflected in the ratings received by FTA's New Starts program under Office of Management and Budget's (OMB) Program Assessment Rating Tool (PART). OMB uses PART to assess and evaluate programs across a wide range of issues related to performance, including purpose and design, planning, management, and results. Among the 62 competitive grant programs across the Federal government that were subject to PART ratings last year, the New Starts program achieved the highest score (83 out of a possible 100). Further, the New Starts program was one of only seven competitive grant programs that received a score of 100 in the program management category, which assesses agency management of the program, including financial oversight and program improvement efforts.
Despite this success, FTA continues to focus on finding new and better ways to help project sponsors develop good projects and manage them effectively. I particularly want to thank you, Mr. Chairman, for your continued interest in strengthening FTA's project evaluation and oversight program.
The Fiscal Year 2005 New Starts Budget Request
The President's FY 2005 budget provides $1.5 billion for the New Starts program. This budget is a reflection of the Administration's strong commitment to continued Federal investment in major transit projects that are cost-effective, locally supported, delivered on time and within budget, and achieve their promised transportation benefits. It is a $216 million (16 percent) increase over the FY 2004 enacted level and reflects the specific project funding recommendations found in FTA's Annual New Starts Report for FY 2005.
In addition to funding the 26 existing and one pending full funding grant agreements (FFGA), the budget funds seven additional projects -- five that are expected to be ready for a new FFGA before the end of FY 2005 and two meritorious projects in Raleigh and Charlotte, North Carolina. Although we are not convinced that these two projects will be ready for an FFGA by the end of FY 2005, we believe these meritorious projects should be permitted to use Federal funds to continue advanced design and limited capital acquisition activities.
This is, as you know, not the first time that meritorious projects have been proposed for funding in advance of an FFGA recommendation. In its FY 2003 request, FTA proposed funding for five meritorious New Starts investments. Four of these five projects have subsequently been recommended for or have already been awarded an FFGA; the fifth is recommended in this budget request. Previous budget proposals for FY 2000, 2001 and 2002 also included funding for promising projects in advance of being ready for an FFGA commitment.
The seven "new" projects recommended for funding were among 29 that were evaluated and rated in the FY 2005 Annual New Starts Report. Of the 29 that were rated: 17 received "recommended" ratings (including the seven funded in the President's FY 2005 Budget); 7 received "not recommended" ratings; and 5 were "not rated" because complete, accurate data needed to rate the project was not yet available from the project sponsor.
Improvements to the New Starts Project Evaluation and Oversight Process
FTA has taken very seriously the President's directive to make Federal agencies more citizen-centered and results oriented. In the New Starts arena, this has meant more rigor, consistency, and accountability to ensure that:
Every project's transportation benefits justifies the cost;
Every project is finished on time;
Every project is finished within budget;
And every project delivers the benefits it promises.
In the FY 2004 New Starts rating process, FTA implemented a measure of "travel time saved" to replace "number of new riders" in the calculation of costeffectiveness, making certain that taxpayers get value for their investment in New Starts projects by utilizing a measure that more fully captures the transportation benefits of each project, including congestion relief. Unlike "number of new riders," which assumed that congestion relief is the same for each new rider everywhere, "travel time saved" credits projects with reducing travel time for current transit users and more accurately credits the project for congestion relief attributable to new transit riders based upon the length of the trip and whether the rider had used congested roadways. For the FY 2005 process, FTA made no additional changes in measures, break-points for ratings, or weightings among measures in the determination of ratings. However, with FTA's new reporting and analysis software - Summit - we have been able to assist the industry and improve our own efforts to verify that the local forecasting models that produce estimates of both "number of new riders" and "travel timed saved" are reasonable, consistent, and up-to-date.
In years past, FTA's ability to assess the accuracy of local forecasting models was limited, and the ability of a project sponsor to identify potential flaws in the technical analysis was limited, as well. The Summit reporting and analysis software produces a computation of user benefits from locally developed forecasts, as well as standardized analytical summaries of both the forecasts and user benefits. These reports and summaries have provided both FTA and transit agencies a means to identify and diagnose travel forecasting problems related to assumptions regarding fare and service policies, regional transportation networks, land use, and economic conditions, as well as model coding and other attributes of forecasting procedures. They also help ensure that the local forecast is utilizing comprehensive and up-to-date data on travel behavior and local transportation systems. Most importantly, these reports and summaries give transit agencies and communities an invaluable tool to compare mode, alignment, and other system options - a tool that supports better decision-making, especially during early stages of the project development process. The bottom line: FTA is now demanding much more accurate benefit projections, resulting in more reliable project justification measures, including cost-effective projections.
As noted, five projects were not rated this year because local forecasting model issues could not be resolved prior to publication of the New Starts Report. However, to understand the magnitude of the impact that this tool is having on the program, it should be noted that, over the last two years, FTA has required 22 of the 29 projects that were rated in this report to correct flaws in their underlying local forecasting models.
These corrections produced more accurate estimates of transportation benefits, bringing more discipline and rigor to the project evaluation process, and helping to ensure that FTA can objectively and consistently apply the project evaluation criteria established in law. Most importantly, by improving the analytical tools and capacity of local agencies, we enable the public and local decision-makers to better understand the impacts of alternative approaches to solving transportation problems, so they can make better decisions.
In our continuing effort to ensure that every project produces a good return on investment, FTA has also placed increased attention on reducing project costs. We remind project sponsors that their project's cost-effectiveness measure can be improved not only by improving transportation benefits, but also by reducing the cost of the project. Last year, proactive project cost management by FTA and project sponsors resulted in a total savings of $673 million for seven proposed New Starts investments, with no significant diminution of project benefits. We know that generating accurate benefit estimates is important; keeping costs as low as possible is equally important.
It has been said by some that FTA's evaluation process does not disqualify poor projects. This erroneous claim is often supported by pointing to projects that were not even funded by FTA, such as South Jersey's River Line, or by saying that FTA never turns down a project. A review of what has happened to the 257 projects that were authorized under ISTEA or TEA-21, or which otherwise have been appropriated New Starts funding, tells a different story. Of those 257 projects:
23 projects (approximately 10 percent) were not subject to FTA's evaluation and rating process. This included 19 projects that moved forward as projects seeking less than $25 million in New Starts funds and 4 were constructed with no New Starts funds.
Only 86 projects (about one-third) were approved by FTA into preliminary engineering, which is the first hurdle in the project development process that requires an FTA evaluation and rating. However, 18 (21 percent) of the projects approved into preliminary engineering were subsequently discontinued by the project sponsor, as they were unable to meet FTA's financial or project justification standards for later project development stages.
Only 40 projects (about 15 percent) have, thus far, merited a full funding grant agreement.
Another 28 projects remain in the project development process, with 9 in final design and 19 in preliminary engineering. Even if every one of these projects succeeds in its quest for an FFGA, only 68 (about one-fourth) of the original 257 authorized projects will have met the rigorous standards established by Congress and the FTA to qualify for a full funding grant agreement.
With the full support of Secretary Mineta, one of my primary objectives as Administrator during the past three years has been to ensure that FTA's project rating system is as objective and transparent as possible. Objectivity and transparency are essential to ensuring the credibility of the New Starts evaluation process, and improving the ability of sponsors to develop projects that meet the high standards established by Congress. FTA's project rating should not come as a surprise to a transit agency when it is published in the New Starts report. To that end, FTA has worked proactively to educate the transit industry about the New Starts planning, project development, and evaluation processes. Since the New Starts final rule was issued in December 2000, FTA (either on its own or in conjunction with the American Public Transportation Association) has sponsored 24 national workshops on the planning and evaluation of major transit investments, with several more planned before the end of the year.
FTA has also participated in a number of locally-sponsored workshops on New Starts. These events are intended to not only assist project sponsors in meeting FTA requirements, but also to help improve local planning processes and techniques, which will ultimately result in better transit investments. In early April, for example, FTA staff participated in a Florida Department of Transportation seminar for transit planners and travel forecasters from throughout the State about technical methods, data needs, and the critical steps in producing reliable ridership forecasts. More recently, at an event cohosted by the Massachusetts Bay Transportation Authority, FTA met with New Starts project managers from over 20 transit systems for three days to discuss a variety of project planning issues, including improved travel forecasting tools, alternatives analysis, and the integration of project planning with the NEPA process. This "New Starts Roundtable" will be repeated for a west coast audience in May, marking the fifth consecutive year FTA has sponsored these twice-yearly industry functions.
Written guidance and technical tools are also updated and electronically published on a regular basis. The FTA public website addresses such topics as the development and evaluation of alternatives to meet locally-identified corridor transportation problems, cost estimation, benefit calculation, financial planning, and project management.
In addition, the Deputy Administrator and I have made it a priority to communicate directly with the general managers of transit agencies about specific problems and concerns throughout project planning, development and construction. Too often in the past, FTA technical staff talked with project technical staff, and little information about significant issues was communicated openly and unambiguously to the general manager. Ratings at the end of each year sometimes came as a bolt from the blue, and there was little a manager could do to fix whatever problems had been identified. I know that general managers don't always enjoy receiving these calls, but I believe they appreciate them. As the transparency of the process increases and project sponsors become more aware of the requirements, these calls will become less necessary and those that are necessary can be made earlier in the project development cycle.
Developing and applying the New Starts criteria and policies to every project, every time is key to an objective and consistent evaluation and rating process. Occasionally, FTA is charged with "changing the rules" - and it is true that we do sometimes change the manner in which we implement the regulations. That is how we apply the lessons learned in past projects - some of which have been troubled projects - in a consistent manner to new projects. Among the policies that have been adopted in the last several years as a result of past experience are FTA's requirements that:
The project sponsor must have the requisite technical capacity in place to manage the project prior to entering each new stage of the development process (i.e., preliminary engineering, final design, and award of an FFGA) to avoid problems like those we have seen in the Tren Urbano project.
The terms of all major 3rd party agreements must be finalized prior to final recommendation for an FFGA, to avoid unexpected schedule and cost delays like those experienced with respect to railroad rights-of-way in the Tri-Rail project (Fort Lauderdale, FL), and utility relocation in the Hiawatha project (Minneapolis, MN) project.
The significant risks related to all critical path elements of the project schedule and budget (e.g., real estate acquisition) must be identified, and mitigation measures or appropriate contingencies must be in place to ensure that the overall budget and schedule is achievable.
Every project must be justified based on merit, in order to avoid situations like extending BART to the airport, where, in 1997, the project was exempted from evaluation based on project justification criteria because it was part of a set of projects that, considered together, had a proposed high local share. Every project must now prove its individual worth based on transportation benefits, cost-effectiveness and land use criteria, as well as the financial criteria, in order to advance through development and be awarded an FFGA.
One new tool we are using to help ensure that projects meet their cost, schedule and transportation benefit expectations is a quantitative risk assessment. These risk assessments help FTA and project sponsors identify the issues that could affect schedule or cost, as well as the probability that they will do so. Developed, in part, to help manage the Federal Government's risk with regard to the 100 percent Federally funded Lower Manhattan Recovery projects, this risk assessment tool has given both FTA and project sponsors a new quantitative means to manage risk more explicitly and reduce the likelihood of cost and schedule overruns. FTA's Project Management Oversight Contractors (PMOCs) have already completed a risk assessment or have one currently underway for all of the projects expected to be ready for a new FFGA and/or recommended for funding in FY 2005. The assessment tool examines risks that are specific to each project, and assesses the probability and magnitude of the effect on cost, contingency requirements, and schedule. In addition, it supports the development of mitigation measures to reduce or eliminate risks before they become reality. Used at the beginning of a project, it provides an overview of the level of risk involved in the project, including the project's budget and schedule projections. Used over time, the tool can be used to track the success of mitigation measures and assess trends with respect to project execution, so that any necessary intervention measures can be taken as early as possible. We believe the risk assessment tool will improve project management, as well as project oversight.
Currently, we are focusing risk assessments on those projects that are further along in project development, but will eventually use this important tool to assist sponsors with projects in preliminary engineering. Ultimately, we would like to be in a position to offer risk assessments to project sponsors during the alternatives analysis stage of project development. We know that the earlier project sponsors identify and understand the ramifications of alignment, design, engineering, and other decisions, the better our projects will be, and the fewer undesirable "surprises" communities will face in later stages of development. I want to emphasize that a risk assessment is not a "test"; there is no single threshold or passing score. It is a tool to assist both FTA and project sponsors in identifying project uncertainties and developing a plan for managing those uncertainties within the total project cost and schedule. We believe this approach will be particularly useful as FTA responds to Congress's request that we become more involved in project assessment during the alternatives analysis stage.
Improved Accountability for Results
Over the last three years, the discussion of results in the transit industry has changed dramatically. No longer is it common for transit systems to define their success by the number of buses or railcars they own; no longer do New Starts project sponsors define success as simply obtaining Federal funds or completing construction. "Transit success" now means "transit riders."
Starting in 2001, FTA has required, as part of every new Full Funding Grant Agreement, a rigorous and statistically valid assessment of the ridership results achieved by the project. Project sponsors must perform a detailed analysis of their travel forecasts throughout the planning and project development process, and compare the forecasts to observed ridership shortly after the project has opened for service. These "Before and After" studies are intended to not only focus attention on this important outcome, but also to provide insight into the variables which most impact the accuracy of travel forecasts, capital and operating cost estimates, operating plans, and ridership results.
In addition, FTA is currently reviewing travel forecasts and evaluating the actual ridership performance of projects that opened for revenue service in the last ten years. In addition to assessing how well the projects met local goals and ridership estimates, we expect to gain additional insight into the factors that influence demand and utilize that insight to improve the reliability of forecasting procedures. Preliminary work in this area suggests that actual ridership compared to forecasted ridership has improved over the decade. Still there is much room for improvement. FTA is continuing its analysis of travel demand models, procedures, and assumptions to help identify the causes of overly optimistic forecasts, to correct deficiencies, and, ultimately, to improve the reliability of local travel forecasts throughout the country. This will help ensure that New Starts projects deliver the benefits they promise.
We are not putting the accountability burden solely on project sponsors, however. Last year, FTA implemented a unique performance accountability pilot program for its senior executives. For the first time, FTA senior executives were held jointly accountable for four core performance accountabilities. These accountabilities focus on key results that are important to our customers - grantees, transit riders, and taxpayers. One of the unique features of our core accountabilities is that the results are not all under the direct control of FTA, and certainly not under the direct control of any single member of our Senior Executive Service (SES) team. Despite this, our SES team agreed that, if we did not collectively achieve at least two of the four core accountabilities, no SES bonuses would be awarded for FY 2003.
The four joint core accountabilities were:
Transit Ridership Growth: Ridership in the largest 150 transit systems will increase an average of 2 percent over the prior year, controlling for changes in employment in the local area.
Safety and Security Readiness: 100 percent of the 30 largest transit agencies will accomplish at least 80 percent of the items on FTA's Top 20 Security Action Item List.
Major Project Cost Control: 100 percent of New Starts projects with FFGA's will not exceed their current baseline cost estimate by more than five percent.
Grant Processing Efficiency: 80 percent of all grants processed by FTA will be awarded within 60 days after submission of a complete grant application.
We successfully achieved our objectives on three of the four core accountabilities. We fell short of a perfect record by achieving a 1.2 percent average increase in ridership, rather than our 2 percent target. At the same time, we exceeded our goals for both Safety and Security Readiness and Grant Processing Efficiency. In fact, the time for processing grants, including FFGAs that require a 60-day Congressional review period, was reduced from an average of 67 days in 2001 to 39 days in 2003. I believe our success demonstrates not only that action is driven by measurement and monitoring, but also that joint accountability promotes teamwork and inspires greater personal effort, and I am extremely pleased that Secretary Mineta has approved the continuation of FTA's SES performance accountability pilot project for FY 2004.
While we believe that considerable progress has been made, FTA continues to pursue methods to better account for the full range of project benefits in the project evaluation and rating process, and we fully support this Committee's desire to have FTA more directly involved as communities consider and analyze alternative solutions to their transportation problems. Further, as the Committee is aware, we seek to modify our organizational structure to improve customer service and increase accountability for project success within FTA.
In addition, this Administration believes it is critical that the surface transportation reauthorization legislation include some modest, but important changes in the New Starts program. We are pleased that the House and Senate have both adopted some of the provisions proposed by the Administration. We are eager to work with Congress to ensure their adoption in the enacted legislation. In particular, we encourage Congress to adopt the following provisions.
First, we ask that the current exemption from project evaluation and rating for projects seeking less than $25 million in New Starts funds be eliminated, as in the Senate bill. We have learned from experience that this exemption encourages project sponsors to artificially define projects into smaller segments in order to avoid being subject to FTA assessment, and can lead to the expenditure of Federal taxpayer dollars on projects that would not meet minimum financial or project justification standards. Under TEA-21, approximately $360 million of Federal New Starts funds have been spent on projects that were exempt from FTA's project evaluation and rating system.
Second, we request that FTA be permitted to utilize a simplified project assessment and rating system for projects that cost less than $75 million, as included in both bills, but without creating a separate program account for such projects, as the House bill would create. As Secretary Mineta has often noted, the creation of separate programs with separate pots of money encourages communities to design projects based on their perception of where they have the best chance of getting money, rather than the merits of the proposed solution. Our New Starts program should not presume that there is a pre-determined mix of appropriate solutions to transportation problems nationwide.
Third, we request that non-fixed guideway corridor projects be made eligible under the New Starts program, with no requirement that a specific percentage of the project to be fixed guideway, as proposed by the Administration. Creating artificial constraints on local decisions concerning the best way to address transportation problems drives up costs and will likely result in less than optimal transportation solutions. There is no evidence suggesting, for example, that every bus rapid transit solution will be most appropriately constructed and delivered at the best price if every bus rapid transit system is required to operate on a fixed guideway for at least 50 percent of its route.
Finally, the Administration encourages the Congress to make projects that have not yet been evaluated and rated by FTA (i.e., projects still in alternatives analysis) ineligible for New Starts funds for planning purposes, as the Senate bill provides. Under TEA-2l, at least $80 million of Federal New Starts funds have been spent on planning and early project development activities that have not produced viable New Starts investments. We believe these explorations of local interest and support should be funded exclusively with local monies.
Mr. Chairman, we look forward to working with this Committee to continue to improve the New Starts program, as well as FTA's processes for evaluating, rating and overseeing New Starts projects. Thank you again for the opportunity to testify on these important issues. I would be happy to respond to questions from the Committee.
Hecker, JayEtta Z., Director of Physical Infrastructure Issues, GAO. "Transportation Programs: Opportunities for Oversight and Improved Use of Taxpayer Funds." Testimony Before the Committee on Transportation and Infrastructure, House of Representatives, July 22, 2003, p. 20.
Intercity Passenger Rail: Amtrak's Management of Northeast Corridor Improvements Demonstrates Need for Applying Best Practices. GAO-04-94, February 2004, p. 46.
GAO High Risk Series, An Update. GAO-03-119, January 2003, p. 3.