Report No.: GAO/OCG-93-14TR Date: December 1992
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Author: United States General Accounting Office
Office of the Comptroller General
Addressee: Transition Series
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CONTENTS
Transportation Issues
Investing Wisely to Rebuild and Enhance Surface Transportation Infrastructure
- Organizing DOT for Modal Trade-Offs
- Optimizing Investment of Available Funding
- Emerging Technologies Offering Opportunities
Modernizing Air Traffic Control and Enhancing Airports
- Key Issues for Air Traffic Control Modernization
- Using Airport Development Funds to Achieve National Goals
Improving Transportation Safety
- Follow-Through Needed
- Better Targeting of Resources Needed
Increasing Airline Competition and Access to International Markets
- Preserving Competition in Domestic Air Travel Markets
- Facilitating Global Competitiveness
Strengthening Coast Guard Acquisition Programs and Environmental Protection
- Attention to Coast Guard Acquisitions Needed
- Environmental Protection a Shared Responsibility
Consolidating Financial Management Systems and Revamping Grant Oversight
- Better Information Needed to Control Programs
- Plan to Revamp Grant Oversight
Related GAO Products
- Surface Transportation Infrastructure
- Airway and Airport Systems
- Improving Transportation Safety
- Increasing Airline Competition
- Coast Guard Programs
- Financial Management and Grant Oversight
- General
Transition Series
- Economics
- Management
- Program Areas
Office of the Comptroller General
Washington, DC 20548
December 1992
The Speaker of the House of Representatives
The Majority Leader of the Senate
In response to your request, this transition series report discusses major
policy, management, and program issues facing the Congress and the new
administration in the area of transportation. The issues include (1) investing
wisely to rebuild and enhance surface transportation infrastructure, (2)
modernizing air traffic control and enhancing airports, (3) improving
transportation safety,
(4) increasing airline competition and access to international markets, (5)
strengthening Coast Guard acquisition programs and environmental protection,
and (6) consolidating financial systems and revamping grant oversight.
As part of our high-risk series on program areas vulnerable to waste, fraud,
abuse, and mismanagement, we are issuing a related report, _Federal Transit
Administration Grant Management_ (GAO/HR-93-16, Dec. 1992).
The GAO products upon which this transition series report is based are listed
at the end of the report.
We are also sending copies of this report to the President-elect, the
Republican leadership of the Congress, the appropriate congressional
committees, and the Secretary-designate of Transportation.
Rebuilding the nation's roads and bridges, managing the $32 billion air
traffic control modernization program, making travel safer, and ensuring a
competitive airline industry are all major transportation issues facing the
new Congress and incoming administration. Resolving these issues will
critically affect the nation's economy: Transportation jobs provide 15 percent
of U.S. employment and account for 18 percent of Americans' purchases, or
about $800 billion annually. Furthermore, investing in transportation will
have a profound effect on the mobility of people, the quality of the
environment, and the competitiveness of the nation in the international
marketplace.
Since 1988, several significant developments have occurred that will shape the
direction of this country's transportation programs far into the future. A
central theme of our 1988 transition report on transportation issues was the
need for a national transportation plan. In 1990, following extensive public
hearings, former Secretary of Transportation Samuel K. Skinner issued the
National Transportation Policy Strategy, which formed a cornerstone for
transportation planning.
Building on this strategy, the Congress enacted the landmark Intermodal
Surface Transportation Efficiency Act of 1991, which authorized an
unprecedented $155 billion over 6 years to implement an integrated, multimodal
solution to the nation's transportation problems. Implementing the
requirements of this legislation and obtaining the funding necessary to do so
will be among the most formidable challenges facing the new Secretary.
Even though the act authorized record funding, the costs of meeting
infrastructure needs are likely to far exceed available resources: The
Department of Transportation (DOT) estimates that merely maintaining the
condition of the nation's highways and bridges at 1989 levels would cost about
$250 billion over the next 6 years; improving conditions would cost about $425
billion. These estimates do not include funds needed for mass transit or rail
systems.
This report discusses these and other major transportation challenges facing
the Congress and the new administration.
INVESTING WISELY TO REBUILD AND ENHANCE SURFACE TRANSPORTATION INFRASTRUCTURE
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Federal, state, and local governments are faced with rebuilding an aging
infrastructure--highways and bridges--while simultaneously improving air
quality, meeting mobility needs of people who are disabled, optimizing limited
resources, reducing traffic congestion, and investing in new technologies to
enhance existing transportation systems. Our reports have pointed to signs of
the aging infrastructure--the ride on over 40 percent of the nation's
interstate highway system is barely tolerable, and about 40 percent of the
nation's bridges need repair and rehabilitation. DOT estimates that during the
next 6 years nearly one-half trillion dollars will be needed to improve these
conditions.
To guide and pay for these tasks, the Congress in 1991 enacted landmark
surface transportation legislation. Because of the funding flexibility and
intermodal concepts embodied in it, this legislation will alter the landscape
for transportation decision-making throughout the 1990s. In doing so, it will
give rise to a host of new challenges, including
-- developing an organizational structure that facilitates investment
trade-offs among aviation, mass transit, highways, and rail;
-- optimizing the use of funds because needs far outweigh available resources;
and
-- capitalizing on new technologies, such as high-speed rail and intelligent
vehicle/highway systems.
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ORGANIZING DOT FOR MODAL TRADE-OFFS
The 1991 legislation encourages using a total systems approach to select among
transportation alternatives rather than focusing on only one form of
transportation at a time to solve the problem at hand. However, DOT is
organized into separate modal agencies, and this structure is not an optimum
one to effectively implement the policy objectives of the new act.
To compensate for this shortcoming, the 1991 legislation created the Office of
Intermodalism and the Bureau of Transportation Statistics. These offices will
need to (1) help define the federal role in transportation problem-solving,
(2) provide technical assistance to states and localities, and (3) develop and
disseminate transportation data. Depending on the success these new offices
have in fostering the intermodal approach and assisting states and local
governments as they decide on critical infrastructure investments, DOT may
need to consider other organizational changes that coordinate the planning and
financing arms of the separate modal administrations. One such change,
suggested by the National Academy of Public Administration, would create a
Surface Transportation Administration to encompass the missions currently
performed by separate rail, highway, and transit agencies.
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OPTIMIZING INVESTMENT OF AVAILABLE FUNDING
Although the new act's $155 billion authorization over 6 years is
unprecedented, infrastructure needs will continue to far exceed available
resources. According to DOT estimates, the total federal, state, and local
cost just to maintain highways and bridges over the 6-year period, without any
improvements over 1989 levels, would be about $250 billion. Moreover, the
total cost to improve the condition of highways and bridges during the 6 years
is nearly double that amount--$425 billion. Neither of these estimates
includes funds needed for mass transit and rail systems. Budgetary pressures
and projected revenue shortfalls from fuel taxes compound the difficulties in
meeting the enormous need for infrastructure improvements. For example,
although about $26 billion was authorized for surface transportation programs
in 1993, obligation limitations limited the amount available to about $22
billion. Also, given current revenue estimates, even more reductions may be
needed in the future because anticipated fuel tax revenues are projected to be
nearly $6 billion short of supporting the full highway authorization.
To get the greatest return from the funds available to them, state and local
governments need additional help from DOT. As we noted in our April 1992
report on transportation planning, DOT could assist state and local
governments by developing a common basis for evaluating projects in various
transportation modes--highway, mass transit, rail line, or some combination.
These projects compete on their ability to meet critical objectives such as
protecting the environment, meeting travelers' mobility needs, conserving
energy, and staying within budgetary limits. Our report said that methods for
comparing such projects were not well developed at any level of government. A
compelling need also exists for DOT to develop methodologies for data
collection and analysis that state and local analysts can use to compare
projects. With better data and analytic tools to assess these trade-offs,
state and local governments will be in a better position to make well-informed
choices among projects.
In addition, DOT will need to champion other efforts that will directly
contribute to maximizing available funds. For example, ensuring that research
is given appropriate priority and that its results are disseminated and
promoted will foster state-of-the-art testing methods and better road
materials. The Transportation Research Board estimates that reducing the cost
of asphalt paving by 1 percent through research efforts would save as much as
$100 million per year. In addition, supporting innovative highway contracting
practices could encourage greater use of new methods and materials, promote
contractor accountability, and result in higher quality transportation
projects.
New and emerging technologies, such as high-speed rail and intelligent
vehicle/highway systems, could in some instances benefit the nation's overall
transportation system by reducing pollution, energy usage, and congestion, and
by making more efficient use of the transportation infrastructure. Although
the benefits of introducing these technologies have been discussed
extensively, DOT and the Congress must resolve important issues before these
technologies can be successfully implemented.
For high-speed rail, two key issues require resolution. The first of these is
how to finance high-speed rail development. Several alternative systems have
been proposed, but none has obtained private funding to begin construction,
and federal funding has been relatively small. Our work suggests that it is
very unlikely that a development strategy relying primarily on private
financing will be successful. As with all other transportation modes in their
developmental stages, and regardless of which high-speed rail technology is
adopted, a federal financial commitment will be necessary to leverage private
financing.
The second key issue is ensuring that the full range of available technologies
is considered. High-speed rail technologies include magnetic levitation trains
(or maglev), which are relatively expensive but can attain speeds up to 300
miles per hour; advanced steel-wheel/steel-rail systems (speeds up to 200
miles per hour); and relatively inexpensive upgrading of existing
passenger-rail systems (speeds up to 150 miles per hour). The best technology
for a particular route depends on such features as the length of the route and
the level of traffic. For example, maglev may be best suited to (1) long-haul
routes (up to 600 miles), where its higher speeds may compete with air travel
and (2) high-traffic routes with sufficient volume to recover maglev's higher
costs. Upgrading existing rail systems, on the other hand, may be the most
cost-effective strategy on shorter routes.
Intelligent vehicle and highway systems are a family of technologies ranging
from centralized traffic control centers to in-vehicle driver information
systems to fully automated freeways that are designed to make more efficient
use of the nation's roads. We reported in 1991 on the promise and problems of
such technologies. The Congress enacted into law much of what we recommended,
including a requirement that DOT develop a program of operational field tests
in accordance with a strategic research plan. DOT needs to develop such a plan
because it would be a necessary step toward enabling intelligent vehicle and
highway systems to fulfill their promise.
MODERNIZING AIR TRAFFIC CONTROL AND ENHANCING AIRPORTS
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The nation's air traffic control and airport systems must be upgraded to
accommodate the growth in air travel that has occurred since the early 1980s
and the forecasted future growth. In addition, maintenance of the existing
aviation infrastructure is needed to stem deterioration. Reflecting these
needs, federal capital investments in air traffic control and airports
increased from $600 million in 1982 to $4.3 billion in 1992. To make the best
use of these funds, the Federal Aviation Administration (FAA) needs to (1)
address key issues related to air traffic control modernization and (2)
strengthen its approach to airport development.
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KEY ISSUES FOR AIR TRAFFIC CONTROL MODERNIZATION
Our 1988 transition report noted that the costs of air traffic control
modernization were much higher than FAA had projected and that schedule delays
were common. These problems continue. FAA estimates that it will spend $32
billion between 1982 and 2000 to modernize air traffic control--about $7
billion more than it estimated 4 years ago. Of the more than 200 projects in
FAA's modernization effort, only 36 are completed, accounting for just 3
percent of the $32 billion. Ongoing major projects are well over budget and
years behind schedule. Twelve major projects, which account for a third of the
cost of modernization, have an average schedule delay of 5 years. FAA
acknowledges that these problems were not caused by a lack of funding.
The following key issues are critical to the success of FAA's modernization
program: acquisition reform, facility consolidation, application of emerging
technologies, and continuity of leadership.
-- FAA has taken steps to strengthen its process for procuring costly and
complex equipment (radars and computers) so that future cost overruns and
schedule delays are minimized. A more stringent process for top management
review and approval of new projects and operational testing is now in
place. However, FAA still must resolve issues related to developing
software and identifying users' requirements. Also, FAA continues to invest
in equipment without adequately analyzing the agency's needs.
-- FAA faces a critical decision in consolidating air traffic control
facilities. This decision will have far-reaching implications for its
modernization plan. A central underpinning of the plan is that the number
of facilities will be reduced from over 200 to 23. We have raised concern
about this assumption, and FAA now acknowledges that at least another 30
facilities will be needed, each costing millions of dollars to rehabilitate
and equip. Not consolidating facilities as planned could profoundly affect
the modernization plan's centerpiece--the $5 billion Advanced Automation
System project for replacing controllers' work stations and computers,
already 6 years behind and about $2.5 billion over the initial 1983
schedule and cost projections. In November 1992, major development problems
led the contractor to announce an additional schedule delay of 1 year. FAA
subsequently directed the contractor to submit a plan for resolving the
problems. Indecision about consolidation makes this project vulnerable to
even further delays and cost increases because the number and size of the
facilities are key variables in the design of the new computer systems.
-- Advances in technology are causing FAA to reconsider elements of its
modernization plan. For example, with satellite-guided advanced precision
approaches to airports, the need for FAA to spend $2.6 billion on 1,280
microwave landing systems that perform a similar function may be
significantly reduced. Furthermore, with satellite-based navigation and
surveillance, costly navigation aids and radars could be phased out.
-- FAA leadership has changed frequently. Over the past 11 years, FAA has had
eight different administrators and acting administrators. Strong,
continuous attention from the highest levels of the agency is needed to
follow through on FAA's acquisition reforms, which have been in effect only
during the last 2 years. Also, past administrators have deferred resolution
of difficult issues, such as facility consolidation, to their successors.
Leadership stability is essential for FAA to deal effectively with these
issues, carry out its revised plans, and adjust its plans as necessary.
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USING AIRPORT DEVELOPMENT FUNDS TO ACHIEVE NATIONAL GOALS
We have identified the need for FAA to strengthen its approach to airport
development. FAA's national plan for airport development has no measurable
goals, such as keeping total flight delays nationwide from rising. And many
view FAA's plan as a "wish list" because it includes low-priority projects at
small airports that FAA ultimately will never rank high enough to fund or that
the sponsoring airport cannot afford, even with federal assistance.
On the basis of our work on major airport development projects at Denver,
Detroit, and Chicago, we are concerned about FAA's process for allocating the
limited funds available through the Airport Improvement Program. FAA has the
opportunity to leverage the program's $2 billion in federal grant funds by
favoring projects that best achieve national goals, such as reducing flight
delays and increasing airport capacity, while at the same time preserving
environmental quality. However, to compare the ability of competing projects
to achieve such goals, FAA needs better data and analytical methods. Over the
next few years, we plan to evaluate the airport development program and
suggest ways for FAA to better achieve the objectives set forth by the
Congress.
Over the last several years, DOT has focused on strengthening and rebuilding
its work forces, including FAA air traffic controllers and safety inspectors
at the Federal Highway Administration, the Federal Railroad Administration,
and FAA. After some success, the key challenge now is to effectively deploy
these resources to help reduce the many thousands of lives lost on highways
and to increase the margin of safety in other transportation modes.
To meet this challenge, the Department must ensure that (1) each modal
administration effectively follows through on safety initiatives begun in
recent years and (2) resources are targeted to areas of highest safety risk.
We have reported frequently on the strengths and weaknesses in DOT's
regulation and enforcement of safety standards and recommended actions to
reduce safety risks, including requiring air bags in light trucks and vans,
encouraging states to pass laws for safety belt and motorcycle helmet use, and
requiring improvements in hazardous material movements. DOT has responded
favorably to many of our recommendations.
Notwithstanding DOT's positive actions to improve safety, additional
management commitment is needed because follow-through by some individual
agencies has been inconsistent or in some cases has stalled. Some agencies do
not have current and reliable information to allow effective oversight of
safety compliance. FAA does not have an effective system to monitor inspection
findings and ensure that airlines take appropriate corrective actions. This
monitoring is especially important for the approximately 1,400 aging
aircraft--one-third of the fleet--subject to new regulations to ensure
continued aircraft safety. Similarly, DOT's highway agencies lack data on
heavy truck travel and accidents to determine safety trends and accident
causes that would guide actions to improve safety.
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BETTER TARGETING OF RESOURCES NEEDED
In our 1987 comprehensive review of DOT's management and in several reports
since that time, we have recommended that DOT develop early warning indicators
of safety risks and measures of safety program performance to help target its
limited resources. This would help agencies like FAA that cannot reasonably be
expected to have sufficient resources to conduct the thousands of inspections
of aircraft, repair stations, and pilots that comprise its work load. DOT has
been slow, however, in implementing this recommendation.
For example, in response to our recommendation that FAA develop criteria for
targeting aircraft inspections on the basis of risk analysis, the agency plans
to evaluate a prototype targeting system in 1993; however, FAA does not plan
to fully implement it for several years. We also have recommended that to
better isolate and manage areas of greatest aviation risk, FAA should correct
long-standing problems in its Safety Indicators Program, including unreliable
data and limited user involvement in designing the data collection and
analysis system. Finally, the Federal Railroad Administration only recently
adopted measures that would overhaul its inspection and hazardous materials
programs.
INCREASING AIRLINE COMPETITION AND ACCESS TO INTERNATIONAL MARKETS
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Dramatic changes in the U.S. airline industry threaten the benefits of lower
air fares and more choices that consumers realized as a result of the
industry's deregulation. Recent bankruptcies and mergers in combination with
long-standing barriers to entering the industry have reduced competition and
led to a decline in the number of major U.S. airlines. With fewer firms
comprising the industry and serving key airports, the competition that can
promote low fares and better service may erode. The Congress and DOT need to
take actions to solve the underlying problems that threaten domestic
competition and to facilitate U.S. airlines' competitiveness in international
markets.
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PRESERVING COMPETITION IN DOMESTIC AIR TRAVEL MARKETS
We have reported on barriers that deter competition in the U.S. airline
industry, including certain aspects of airline computer reservation systems,
frequent flyer programs, travel agent/air carrier relationships, and the
limited access to key airport facilities for potential new entrants. These
deterrents can effectively lock out potential competitors, especially at
airports where one or two airlines have established dominant positions.
To address these problems, we have reported on numerous occasions that DOT
needs to address practices that affect competition, such as long-term,
exclusive-use leases of gates, the allocation of takeoff and landing slots at
key congested airports, and various features of computer reservation systems
that are owned by the largest airlines.
In addition to overcoming practices that make market entry difficult, the U.S.
airlines in the weakest financial condition need greater access to capital to
enhance their ability to compete effectively. Poor earnings and high debt make
it difficult for these airlines to finance capital needs from earnings or from
traditional domestic sources. Although several foreign airlines are currently
offering to provide investment capital, existing federal law limits the
proportion of voting stock that foreigners can hold in U.S. airlines and the
amount of influence that they can exert as a result of their investment.
Although relaxing the law would give financially struggling U.S. airlines
greater access to needed capital, it could have implications for national
security, domestic and international competition, and domestic employment. DOT
may ask the Congress to consider relaxing restrictions on foreign investment.
If restrictions are relaxed, the timing and extent of DOT's review process
will need to be changed to ensure that foreign investments do not diminish the
competitiveness of U.S. airlines or threaten national security.
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FACILITATING GLOBAL COMPETITIVENESS
Tomorrow's aviation industry will be dominated by airlines whose routes span
the globe, and such international markets offer U.S. airlines the greatest
potential for growth. However, U.S. airlines may be constrained from entering
international markets by agreements between the United States and other
countries that limit the number of airlines that can be designated to serve
specific routes. As these agreements are renegotiated, the Congress and DOT
will need to respond to protectionist forces abroad that seek to restrict the
ability of the nation's airlines to compete. Because of the United States'
position as the world's most attractive air travel market, DOT could, if
necessary, use foreign airlines' desire to serve the United States as leverage
for gaining better access for U.S. airlines to overseas markets.
STRENGTHENING COAST GUARD ACQUISITION PROGRAMS AND ENVIRONMENTAL PROTECTION
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In recent years, the Coast Guard has proposed numerous major acquisitions for
planes, vessels, and on-shore facilities. At the same time, the Coast Guard's
mission has broadened considerably to include, for example, a key role in
environmental protection. Ensuring that the Coast Guard adequately manages its
major acquisition programs and effectively implements recently enacted oil
spill legislation will be a major challenge.
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ATTENTION TO COAST GUARD ACQUISITIONS NEEDED
Our work has shown that the Coast Guard's acquisition process has systemic
problems. In one case, these problems led to the cancellation of a major
acquisition: The Coast Guard canceled its $329 million purchase of Heritage
class patrol boats after we reported in July 1991 that the project was not
adequately justified. Although the Coast Guard is implementing procurement
reforms, the adequacy of its justifications for and management of future major
acquisitions will be a continuing concern.
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ENVIRONMENTAL PROTECTION A SHARED RESPONSIBILITY
Our work on oil pollution has shown a continuing need for the Coast Guard to
improve its oversight of the industry's efforts to prevent environmentally
dangerous accidents. The 1989 _Exxon Valdez_ oil spill helped produce
legislative and regulatory changes to protect the environment.
Although government and industry will share the cost of these changes, many
concerns are still outstanding. Among these concerns are whether (1) insurance
to cover all costs related to cleaning up an oil spill will be available for
shippers, (2) the industry can comply with new requirements for providing
equipment to respond to a spill and for improving oil tanker design, and (3)
the Coast Guard will be able to effectively monitor the industry's compliance
with the many new regulations.
CONSOLIDATING FINANCIAL MANAGEMENT SYSTEMS AND REVAMPING GRANT OVERSIGHT
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DOT needs to continue improving its financial management systems and oversight
mechanisms for reducing the risk of fraud, waste, and abuse. In response to
our recent reports on DOT's financial management and on the Federal Transit
Administration's (FTA) grant oversight, DOT has stated its commitment to take
substantive actions on our recommendations.
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BETTER INFORMATION NEEDED TO CONTROL PROGRAMS
DOT has embarked on a project to consolidate 14 separate accounting systems
into a single Departmental Accounting and Financial Information System. To
date, estimates of this project's costs exceed $26 million. We found that
while DOT has made progress in developing a consolidated accounting system,
action is now needed to provide managers and the Congress with better
financial information to oversee programs and operations.
The new consolidated system is currently of limited value as a managerial tool
because it does not maintain detailed financial information from prior years
on long-term projects. It also cannot generate timely spending reports for
project management. We have recommended that, to realize the full potential of
its financial management system, the Department develop a plan containing
clear objectives, resource estimates, and timetables for strengthening the
system's value as a management tool.
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PLAN TO REVAMP GRANT OVERSIGHT
In a series of reports issued since June 1991, we documented FTA's
laissez-faire approach to overseeing transit grants, grantees' deficient
internal controls, and the resulting mismanagement of hundreds of millions of
federal grant dollars. In response to these and similar concerns raised by
DOT's Office of Inspector General, FTA's Administrator approved a plan to
revamp grant oversight, including fully implementing most of our
recommendations. Although efforts to improve oversight are under way, FTA will
have to be persistent to ensure that implementation of the new initiatives
does not lose momentum. Besides the $35 billion in active grants that are
currently at risk of mismanagement, the 1991 surface transportation
legislation substantially increases authorized annual transit funding from
$3.2 billion to $5 billion and allows the use of up to $70 billion in highway
funds for transit needs over the next 6 years.
The current focus on expanding federal investment in infrastructure, including
mass transit, increases the need for wise allocation and careful oversight of
federal funds. Until recently, FTA focused its resources on awarding grants
rather than on ensuring their proper use. Successful implementation of FTA's
plan to change its focus ultimately will depend on the support that the
administration and the Congress give to the agency's efforts to exercise
strong oversight of grant funds. If fully implemented, the new oversight
strategy should better safeguard future transit funds from the risk of fraud,
waste, and abuse.
