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entitled 'Public Transportation: Use of Contractors is Generally 
Enhancing Transit Project Oversight, and FTA is Taking Actions to 
Address Some Stakeholder Concerns' which was released on September 14, 
2010. 

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Report to Congressional Committees: 

United States Government Accountability Office: 
GAO: 

September 2010: 

Public Transportation: 

Use of Contractors is Generally Enhancing Transit Project Oversight, 
and FTA is Taking Actions to Address Some Stakeholder Concerns: 

GAO-10-909: 

GAO Highlights: 

Highlights of GAO-10-909, a report to congressional committees. 

Why GAO Did This Study: 

Many states, cities, and localities are building or planning mass 
transit projects to meet the nation’s transportation needs. The New 
Starts program-—administered by the U.S. Department of 
Transportation’s (DOT) Federal Transit Administration (FTA)-—is an 
important source of new capital investment in mass transportation, 
providing grants to project sponsors (e.g., state and local government 
authorities), for the construction of major transit facilities. FTA 
uses contractors-—known as project management oversight contractors 
(PMOC) and financial management oversight contractors (FMOC)—-to help 
oversee the planning, construction, and financing of major capital 
projects, including those funded under the New Starts program. This 
report, as mandated by law, discusses (1) how FTA uses PMOCs and FMOCs 
to oversee New Starts projects and how the agency procures, monitors, 
and evaluates the contractors’ services; and (2) the benefits of FTA’s 
oversight approach and the challenges FTA faces in conducting its 
oversight. GAO reviewed applicable statutes, FTA guidance, 
regulations, and budget data, and interviewed DOT officials, project 
sponsors, contractors, and industry stakeholders. GAO is not making 
any recommendations in this report. DOT officials generally agreed 
with GAO’s findings and provided technical comments, which we 
incorporated as appropriate. 

What GAO Found: 

FTA procures PMOC and FMOC services to provide critical input into 
FTA’s decisions regarding New Starts projects. Specifically, the 
reviews that PMOCs conduct keep FTA informed of a project’s status and 
support the agency’s decision on whether to advance or fund the 
project. Separately, financial assessments conducted by FMOCs help the 
agency ensure that project sponsors—which can be state or local 
government authorities that implement New Starts projects—have 
sufficient financial capacity to build and operate their projects. 
Although PMOCs and FMOCs have different oversight roles, services for 
both are procured in accordance with the Federal Acquisition 
Regulation (FAR). FTA recently changed how it procures PMOC services. 
Prior to 2009, FTA awarded PMOC contracts only to architectural and 
engineering firms for their services using specialized procedures in 
the FAR; however, in part to expand the pool of available PMOCs, FTA 
revised its procurement approach and now uses the competitive 
negotiation procedures in the FAR which permit cost and noncost 
tradeoffs. Using competitive negotiations has increased the pool of 
contractors available for FTA projects, and while some PMOC officials 
expressed concerns that the changes have affected the quality of staff 
provided for FTA work and put more emphasis on cost, FTA officials 
said that they have not observed any negative effects. FTA monitors 
PMOCs and FMOCs by setting performance expectations and using a 
multilayered system to evaluate their performance. Recently, FTA has 
taken steps to improve its contractor performance evaluation system to 
help ensure that its regional offices conduct evaluations consistently. 

FTA officials, contractors, and project sponsors identified benefits 
of FTA’s oversight approach. For example, FTA officials and project 
sponsors said that FTA’s oversight approach has improved project 
management, supplemented existing FTA staff, and provided insights 
through technical assistance and expertise from PMOCs and FMOCs. 
However, FTA’s oversight program faces some challenges, including 
balancing project management oversight and advancing projects, 
managing the larger, more complex projects entering the New Starts 
portfolio, and communicating with project sponsors. FTA has taken some 
actions to address these challenges. To more effectively balance 
oversight and project advancement, FTA developed procedures to assist 
PMOCs with their oversight responsibilities and issued an Advance 
Notice of Proposed Rulemaking on, among other things, the extent to 
which the level of its oversight should be based on risk. As part of 
FTA’s effort to oversee larger, more complex projects, FTA has 
directed its PMOCs and FMOCs to conduct oversight activities earlier 
in project development, helping identify potential problems earlier. 
To improve communications, FTA developed checklists which project 
sponsors found helpful in understanding FTA’s oversight requirements. 
However, some project sponsors we spoke with said that FTA’s 
communications were not consistently timely or clearly documented, 
thus delaying sponsors’ responses and, sometimes, project time frames. 
FTA recognizes that the New Starts process can be lengthy, but 
officials indicate that project sponsors do not always provide FTA 
needed information. 

View [hyperlink, http://www.gao.gov/products/GAO-10-909] or key 
components. For more information, contact David J. Wise at (202) 512-
2834 or wised@gao.gov. 

[End of section] 

Contents: 

Letter: 

Background: 

FTA Procures Contractor Services to Provide Input into Its Decisions 
and Monitors These Contractors through Various Methods: 

Stakeholders Identified Benefits of and Challenges to FTA's Oversight, 
and FTA Is Taking Actions to Address Some Stakeholder Concerns: 

Agency Comments and Our Evaluation: 

Appendix I: Objectives, Scope, and Methodology: 

Appendix II: List and Description of Project Management Oversight 
Contractor Reviews: 

Appendix III: Funding Obligated for Project Management Oversight and 
Financial Management Oversight, Fiscal Years 2000-2009: 

Appendix IV: GAO Contact and Staff Acknowledgments: 

Tables: 

Table 1: Description of Main PMOC Oversight Reviews: 

Table 2: New Starts Projects Selected: 

Table 3: List and Description of Project Management Oversight 
Contractor Reviews: 

Table 4: Funding Obligated for Project Management Oversight and 
Financial Management Oversight for FTA Grant Programs, Fiscal Years 
2000-2009[A]: 

Figures: 

Figure 1: PMOC and FMOC Input into the New Starts Project Development 
Process: 

Figure 2: FTA's Performance Evaluation Approach for PMOCs: 

Abbreviations: 

ANPRM: Advance Notice of Proposed Rulemaking: 

APTA: American Public Transportation Association: 

AQL: acceptable quality levels: 

CPS: Contractor Performance System: 

DCAA: Defense Contract Audit Agency: 

DOD: Department of Defense: 

DOT: Department of Transportation: 

FAR: Federal Acquisition Regulation: 

FFGA: full-funding grant agreement: 

FMOC: financial management oversight contractor: 

FTA: Federal Transit Administration: 

GSA: General Services Administration: 

ISTEA: Intermodal Surface Transportation Efficiency Act of 1991: 

LPA: locally preferred alternative: 

NEPA: National Environmental Policy Act of 1991: 

PMOC: project management oversight contractor: 

PMO rule: Project Management Oversight rule: 

PMP: Project Management Plan: 

PPIRS: Past Performance Information Retrieval System: 

SAFETEA-LU: Safe, Accountable, Flexible, Efficient Transportation 
Equity Act: A Legacy for Users: 

SBA: Small Business Administration: 

SSMP: Safety and Security Management Plan: 

STURAA: Surface Transportation and Uniform Relocation Assistance Act: 

[End of section] 

United States Government Accountability Office:
Washington, DC 20548: 

September 14, 2010: 

The Honorable Christopher J. Dodd: 
Chairman: 
The Honorable Richard C. Shelby: 
Ranking Member: 
Committee on Banking, Housing, and Urban Affairs: 
United States Senate: 

The Honorable James L. Oberstar: 
Chairman: 
The Honorable John L. Mica: 
Ranking Member: 
Committee on Transportation and Infrastructure: 
House of Representatives: 

Many states, cities, and localities are building or planning mass 
transit projects to replace aging infrastructure or add new capacity 
to meet the nation's transportation needs. The federal government 
contributes funding to a number of major mass transit projects each 
year, primarily by covering a share of the capital costs through the 
Federal Transit Administration's (FTA) New Starts grant program. 
[Footnote 1] Under the New Starts program, FTA identifies and 
recommends new fixed guideway transit projects or extensions to 
existing projects to Congress for grants, and provides such grants to 
project sponsors, which can be state or local government authorities, 
including transit authorities.[Footnote 2] Many New Starts projects 
require large federal investments, take years to construct, and can be 
complex because of unique design or construction elements. 

To strengthen the management and monitoring of major capital transit 
projects, in 1987, the Surface Transportation and Uniform Relocation 
Assistance Act of 1987 (STURAA) authorized FTA's project management 
oversight program.[Footnote 3] Furthermore, in 1990, Congress 
authorized, and in 1991 FTA established, the financial management 
oversight program to help mitigate the financial risks associated with 
transit projects.[Footnote 4] FTA's project and financial management 
programs use contractors--known as project management oversight 
contractors (PMOC) and financial management oversight contractors 
(FMOC)--to help FTA oversee the planning, construction, and financing 
of major capital projects, including those projects funded under the 
New Starts program.[Footnote 5] 

In response to a requirement in the Safe, Accountable, Flexible, 
Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU) 
that we review FTA's New Starts program annually,[Footnote 6] this 
report discusses (1) how FTA uses contractors to oversee New Starts 
projects and how the agency procures, monitors, and evaluates the 
contractors' services; and (2) the benefits of FTA's oversight 
approach and the challenges FTA faces in conducting its oversight. 

To address how FTA uses and monitors PMOCs and FMOCs to oversee New 
Starts projects and the benefits and challenges to oversight, we 
reviewed relevant legislation establishing project management 
oversight responsibilities and the funding available for these 
oversight activities. Additionally, we reviewed applicable federal 
statutes and regulations for the procurement of oversight contractors, 
and FTA procedures and guidance for PMOCs and FMOCs. We focused our 
review on the oversight activities that informed FTA's recommendation 
for federal funding for 10 New Start projects.[Footnote 7] We 
judgmentally selected these 10 projects to include a range in (1) 
transit mode (i.e., heavy rail, light rail, commuter rail, or bus), 
(2) the total project cost, (3) the amount of federal funding, and (4) 
geographic areas. Our sample also includes project sponsors who have 
been recommended for multiple full-funding grant agreements (FFGA) by 
FTA. For each of these 10 projects, we interviewed New Starts project 
sponsors, PMOCs, FMOCs, and FTA headquarters and regional officials. 
The information from the interviews is intended to provide views on 
oversight from stakeholders involved in a range of New Starts projects 
and is not generalizable to all New Starts projects. Appendix I 
contains additional information on our scope and methodology. 

We conducted this performance audit from January to September 2010 in 
accordance with generally accepted government auditing standards. 
Those standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe 
that the evidence obtained provides a reasonable basis for our 
findings and conclusions based on our audit objectives. 

Background: 

Project sponsors can begin constructing and operating New Starts 
projects upon the successful completion of specific project 
development milestones and upon obtaining an FFGA from FTA.[Footnote 
8] To obtain an FFGA, project sponsors are required by law to go 
through a planning and project development process, which is divided 
into three phases: alternatives analysis, preliminary engineering, and 
final design, followed by construction. In the alternatives analysis 
phase of the New Starts process, project sponsors identify the 
transportation needs in the corridor and evaluate a range of modal and 
alignment alternatives to address the locally identified problems in a 
specific corridor.[Footnote 9] Project sponsors complete the 
alternatives analysis phase by selecting a locally preferred 
alternative (LPA), which is the New Starts project that FTA evaluates 
for funding. During the preliminary engineering phase, project 
sponsors refine the design of the LPA, taking into consideration all 
reasonable design options and estimating each option's costs, 
benefits, and impacts (e.g., financial or environmental). When the 
preliminary engineering phase is completed and federal environmental 
requirements are satisfied, FTA may approve the project's advancement 
into final design, after which FTA may recommend the project for an 
FFGA. To help inform administration and congressional decisions about 
which projects should receive federal funding, FTA distinguishes among 
proposed projects by evaluating and assigning ratings to various 
statutorily prescribed evaluation criteria--including both project 
justification and local financial commitment criteria--and then 
assigning an overall project rating.[Footnote 10] Once a project 
obtains an FFGA, the project sponsor can begin constructing and, 
subsequently, operating it. 

PMOCs oversee project sponsors' management of New Starts projects, 
starting when a project prepares to enter the preliminary engineering 
phase and continuing through the beginning of operations. The main 
oversight reviews that a PMOC conducts before FTA recommends a project 
for an FFGA include an evaluation of the project's risk, scope, cost, 
schedule, and project management plan, as well as the project 
sponsor's technical capacity and capability. (See table 1.) In 
addition, PMOCs conduct monthly and quarterly oversight reviews. For 
some reviews that PMOCs conduct, such as real estate reviews, PMOCs 
retain the services of subcontractors with specific industry 
experience. 

Table 1: Description of Main PMOC Oversight Reviews: 

Main PMOC oversight review: Project management plan review; 
Description of review: Assesses the adequacy and soundness of the 
project management plan, which is the project sponsor's overarching 
implementation plan for the entire project. 

Main PMOC oversight review: Technical capacity and capability review; 
Description of review: Evaluates the project sponsor's organization, 
personnel qualifications, and experience, as well as the sponsor's 
policies, procedures, and implementation methods. 

Main PMOC oversight review: Capital cost estimate review; 
Description of review: Assesses the soundness of the project sponsor's 
cost-estimating methods and processes; 
confirms that the cost estimate adequately reflects the project's 
scope, schedule, and anticipated market conditions; 
and reviews the reliability of the cost estimate for procurements and 
contracts. 

Main PMOC oversight review: Project schedule review; 
Description of review: Reviews the completeness and reliability of the 
project sponsor's schedule, assesses the schedule's usefulness as a 
management tool, and assesses the extent to which the schedule 
reflects the project's scope, cost, management practices, and method 
of project delivery. 

Main PMOC oversight review: Risk assessment review; 
Description of review: Evaluates the reliability of the project 
sponsor's project scope, cost estimate, and schedule, focusing 
specifically on the uncertainty associated with project implementation 
and surrounding project conditions. 

Main PMOC oversight review: Readiness reviews; 
Description of review: Integrates findings and recommendations from 
other PMOC reviews to determine whether a project is ready to enter 
into the next project phase, such as the preliminary engineering, 
final design, or FFGA phase. 

Source: GAO analysis of FTA information. 

[End of table] 

PMOCs perform many of these reviews repeatedly throughout the New 
Starts process, tailoring them to the stage of a project's 
development. For example, FTA directs PMOCs to review a project 
sponsor's technical capacity and capability three times--before the 
project enters the preliminary engineering phase, enters the final 
design phase, and again when the sponsor requests an FFGA. According 
to FTA guidance, some reviews, such as the technical capacity and 
capability review, require more detail during the early stages of a 
project (i.e., during preliminary engineering); however, during later 
stages of a project (i.e., during final design or FFGA) these same 
reviews may only require an update of earlier findings. See appendix 
II for a full list and description of the reviews PMOCs conduct. 

In contrast to PMOCs, who focus on project management oversight, FMOCs 
oversee how project sponsors will fund the capital and operating costs 
of the proposed project as well as the existing systems. FMOCs conduct 
two types of financial assessments: 

* Local financial commitment assessments are short, less detailed 
reviews which evaluate whether a project is supported by a stable and 
reliable capital financial plan and whether the project sponsor can 
fund the operations and maintenance of an existing transit system once 
the new transit project is built. These assessments also review the 
amount of funding that comes from sources other than New Starts, such 
as federal formula grants and state and local funding. 

* Financial capacity assessments, which are more detailed reviews, 
analyze a project sponsor's financial condition and capability to 
fulfill its current and future financial obligations.[Footnote 11] 

While PMOCs provide continuous oversight of projects, FMOCs have 
oversight responsibilities at defined points in the project 
development process. Specifically, FMOCs conduct financial assessments 
before a project enters preliminary engineering and final design 
stages and before an FFGA is awarded.[Footnote 12] Figure 1 
illustrates the New Starts project development process and shows when 
PMOCs and FMOCs conduct their oversight. 

Figure 1: PMOC and FMOC Input into the New Starts Project Development 
Process: 

[Refer to PDF for image: illustration] 

Alternatives analysis: 

Alternatives analysis[A]: 
Project Sponsor selects LPA[B]; 
FTA decision on entry into preliminary engineering[B]. (FMOC 
oversight[C]); (PMOC oversight). 

Preliminary engineering: 

Preliminary engineering[A]:
FTA decision on entry into final design[B]; (FMOC oversight[C]); (PMOC 
oversight)[A]. 

Final design: (PMOC oversight)[A]. 

Final design[A]: FFGA; (FMOC oversight[C]); (PMOC oversight)[A]. 

Construction: 

Construction. (PMOC oversight). 

Source: GAO and FTA. 

[A] Project sponsor or FTA decision point. 

[B] Project development stage. 

[C] In addition to conducting oversight assessments prior to entry 
into the preliminary engineering and final design stages, and at the 
time an FFGA is awarded, FMOCs also conduct annual assessments for 
FTA's Annual Report on Funding Allocations. 

[End of figure] 

FTA Procures Contractor Services to Provide Input into Its Decisions 
and Monitors These Contractors through Various Methods: 

PMOCs and FMOCs Provide Critical Input to FTA on Decisions to Advance 
and Fund New Starts Projects: 

FTA officials rely on PMOCs and FMOCs to provide critical input into 
FTA's decisions on project advancement and funding. This input-- 
including the PMOCs' and FMOCs' findings, recommendations, and 
professional opinions--comes through reports that PMOCs and FMOCs 
submit to FTA on the results of their reviews, as well as through 
discussions that these contractors have with FTA officials on these 
results. 

PMOC oversight efforts help FTA ensure that a federally funded transit 
project's scope, schedule, and cost are well developed and that the 
project's design and construction conform to applicable statutes, 
regulations, and guidance. Furthermore, these efforts keep FTA 
informed of a project's status and support FTA's decision on whether 
to advance the project to the next phase of development or recommend 
the project for an FFGA. For example, FTA officials said that based on 
a PMOC's technical capacity and capability review, they determined 
that a project sponsor did not have sufficient staff--such as 
engineers and senior project managers--with the requisite 
qualifications and experience to advance the project from the 
preliminary engineering to the final design phase. 

Separately, FMOCs help ensure that project sponsors have sufficient 
financial capacity to build and operate the proposed project as well 
as the existing system. Specifically, FTA uses the analyses and 
reports that FMOCs prepare, such as local financial commitment 
assessments, to develop each project's local financial commitment 
rating[Footnote 13]. FTA also uses FMOCs' financial assessments to 
anticipate financing problems and to foster dialog with project 
sponsors about their ability to carry out planned projects. For 
example, one FMOC we interviewed said its cash flow analysis of a 
project found that the sponsor's forecast of the project's schedule 
and cost would result in a cash flow shortfall. As a result, the 
relevant FTA regional office had an early indication of possible 
problems, and both FTA and the sponsor were able to proactively 
address the project's financing issue[Footnote 14]s. In another 
instance, the FMOC determined that the project sponsor, as part of the 
review of one of the 10 projects in our sample, did not have the 
financial capacity to move forward on a project, and because of this 
FMOC's recommendation to FTA, FTA did not advance the project to the 
next phase of development. 

FTA Procures PMOC and FMOC Services Using Federal Acquisition 
Regulation Procurement Procedures, and Recently Revised Its 
Procurement Approach: 

FTA procures project management and financial management oversight 
services in accordance with the Federal Acquisition Regulation (FAR), 
which prescribes uniform policies and procedures for all executive 
agencies to acquire goods and services. Under these contracts, PMOCs 
and FMOCs provide oversight services, such as those described earlier, 
to support FTA's oversight of a number of grant programs, including 
New Starts. FTA awards contracts for PMOC oversight services for 5 
years and for FMOC oversight services for a base year, with four 1-
year options to extend, for a maximum of 5 years.[Footnote 15] Funding 
for these contracts is provided through statutory set-asides made 
available annually for specific FTA grant programs.[Footnote 16] FTA 
is currently authorized to use up to 1 percent of section 5309 capital 
investment program funds for oversight, which includes PMOC and FMOC 
activities.[Footnote 17] 

Federal agencies have discretion to determine what services they need 
to procure and, based on the services being procured, what procurement 
procedures are appropriate. One of the guiding principles of the FAR 
is to deliver products or services that represent the "best value"--
that is, the acquisition outcome that provides the greatest overall 
benefit in response to the agency's requirements. An agency can obtain 
"best value" by using, for example, the General Services 
Administration's (GSA) Multiple Award Schedule program[Footnote 18] or 
using competitive negotiations.[Footnote 19] 

To acquire the services of FMOCs, FTA follows procedures prescribed in 
the FAR. For local financial commitment assessments, it uses GSA's 
Multiple Award Schedule, as described in the FAR, and for financial 
capacity assessments, FTA uses eligible firms certified under the 
Small Business Administration's (SBA) 8(a) Business Development 
Program.[Footnote 20] 

FTA recently revised its approach to procuring PMOC services for two 
primary reasons, the first of which was to expand the pool of 
available PMOCs. Prior to 2009, FTA awarded contracts for PMOC 
services to architectural and engineering firms in accordance with the 
Brooks Act and its implementing regulations in the FAR, which 
prescribe specialized policies and procedures for procuring "architect-
engineer services."[Footnote 21] However, during the August 2004 
through September 2009 contract period, a growing number of mergers 
and acquisitions reduced the pool of available architectural and 
engineering firms from 16 to 13. Partly in response to this decrease 
in the number of contractors, FTA officials reviewed the services its 
PMOCs were providing and determined that they did not constitute 
"architectural and engineering services" within the meaning of the 
Brooks Act and the FAR. Accordingly, FTA stopped using Brooks Act 
procedures and, in 2009, began using the competitive negotiation 
procedures described in the FAR.[Footnote 22] Negotiated acquisitions 
allow trade-offs between cost or price and noncost factors and allow 
the government to accept other than the lowest priced proposal, 
provided that each factor's relative importance is clearly stated in 
the contract solicitation. As part of the 2009 procurement process, 
FTA officials said, they separately evaluated the technical and cost 
proposals of potential contractors and considered both qualifications 
and cost before starting negotiations, whereas under the Brooks Act 
and its implementing regulations, they had ranked competing firms on 
the basis of their qualifications and then started negotiations on 
cost. 

FTA's second primary reason for changing its procurement procedures 
was to reduce the potential for conflicts of interest. Many of the 
contractors who FTA could potentially use as PMOCs have the knowledge 
and skills not only to oversee transit projects for FTA, but also to 
support project sponsors directly through an independent contract 
between the contractor and a project sponsor. When a project sponsor 
contracts directly with a contractor for work, this contractor becomes 
ineligible to oversee that sponsor's project for FTA as a PMOC, since 
this dual role working for the project sponsor and providing oversight 
of the project for FTA would constitute a conflict of interest. 
[Footnote 23] As a result, FTA identifies conflicts of interest among 
its PMOCs before assigning a PMOC to a New Starts project by analyzing 
whether a PMOC has contracted to work for a project sponsor. According 
to FTA officials, FTA's flexibility in assigning PMOCs to New Starts 
projects was increasingly limited as mergers and acquisitions reduced 
the pool of available firms during the 2004 through 2009 contract 
period. However, FTA officials indicated that their flexibility with 
assigning contractors has increased with this new group of contractors. 

The change in FTA's PMOC procurement procedures has increased the 
number of available contractors. In 2009, when FTA first used the 
FAR's competitive negotiation procedures to procure PMOCs, the pool of 
available contractors increased from 13 to 19, an increase of over 46 
percent. According to FTA officials, this increase in the size of the 
PMOC pool has helped increase competition when the contractors in the 
pool compete for assignment to a New Starts project.[Footnote 24] FTA 
officials noted further that the change in procurement procedures did 
not exclude professional architectural and engineering firms from 
competing for the contracts, but rather opened the competition to a 
wider group of contractors. According to FTA officials, of the 19 
contractors in the 2009 pool, 11 are contractors who worked as PMOCs 
during the 2004 through 2009 contract period,[Footnote 25] and 8 are 
project management contractors who are participating for the first 
time as prime contractors. 

Additionally, the change in FTA's PMOC procurement procedures has had 
the benefit of expanding small businesses' participation in the PMO 
program, according to FTA officials. They noted that during the 2004 
through 2009 contract period, one PMOC was a small business and one 
additional small business participated in the PMO program as part of a 
mentor/protégé program. But as part of the change in its procedures, 
FTA reduced the minimum number of hours required of PMOCs over the 5- 
year contract period, which encouraged participation from small 
businesses. Under the most recent procurement, conducted using 
competitive negotiations, 3 PMOCs were small businesses. 

However, the change in FTA's procurement procedures may have some 
negative effects, according to PMOCs. In their view, the competitive 
negotiation process has affected their staffing for FTA work and puts 
more emphasis on cost than did the Brooks Act process. For example, 
two contractors we spoke with said PMOCs may have to use less 
experienced personnel to provide oversight, and spend more time and 
money training them, because they perceive that FTA now places 
increased emphasis on cost as an evaluation factor during its 
procurement process. According to these contractors, the most recent 
contract awards resulted in ceiling prices for hourly compensation 
that were both lower than expected and lower than the rates under the 
previous contracts. With the lower ceiling prices, they said, some 
contractors may have to provide less experienced staff to FTA to avoid 
exceeding the ceiling price per hour. For example, officials from one 
PMOC noted that under the previous contract, the firm regularly used a 
leading industry expert to perform New Starts risk management reviews. 
However, under the new contract, the expert's hourly labor rate 
exceeded FTA's ceiling price and the PMOC had to use a different 
consultant from the same firm who was less qualified and could not 
provide the same level of quality. In addition, PMOC officials stated 
that more documentation is required under the new procedures but the 
additional requirements have not added value to the process. For 
example, they said that FTA asked the PMOCs to propose prices and 
identify staff for 44 labor categories, but noted that 95 percent of 
PMOC activities are completed using only a handful of the 44 labor 
categories. Finally, two of the contractors we spoke with speculated 
that FTA's use of competitive negotiations could discourage some 
contractors from offering proposals for future PMOC solicitations. 

Despite these concerns, FTA officials maintain that the use of 
competitive negotiations has not affected staffing or put greater 
emphasis on a contractor's price. FTA officials stated that there 
should be no decline in the quality of the personnel provided by PMOCs 
because prior to any change in the personnel assigned to a contract, 
FTA officials review the résumés of the incoming and outgoing staff to 
ensure any personnel changes will meet FTA's qualification 
requirements. For example, an FTA official noted that, for one PMOC 
contract, FTA recently rejected 20 percent of the proposed changes to 
contractor staff because the proposed personnel did not meet the 
qualifications specified in the contract that was awarded. 
Additionally, although FTA officials acknowledged that cost was an 
evaluation factor reviewed in the award of the 2009 PMOC contracts, 
they noted that it was weighed fifth among the eight factors and 
subfactors considered during the evaluation of proposals. Furthermore, 
despite contractors' concerns about ceiling prices, FTA officials 
explained that the ceiling prices were negotiated and agreed to by the 
PMOCs and FTA, and were based on rates that had been audited by the 
Defense Contract Audit Agency (DCAA).[Footnote 26] FTA officials also 
noted that if a PMOC's overhead rates increase, the contractor may 
have an opportunity to negotiate new contract rates, subject to a 
review by DCAA. 

FTA Sets Contractor Expectations, Uses a Team Approach to Monitor 
Contractor Activities, and Evaluates Contractor Performance through an 
Improved System: 

FTA sets expectations for contractors through contracts, task orders, 
and written guidance. After signing a contract with a contractor, FTA 
issues task orders[Footnote 27] which it expects the contractor to 
complete over the term of the contract. FTA provides guidance for 
PMOCs--known as Project Management Oversight Procedures--and guidance 
for FMOCs to assist the contractors in the oversight reviews that they 
are required to conduct.[Footnote 28] FTA further defines its 
expectations for PMOCs through work orders, which identify shorter-
term products and deadlines, along with expected labor hours. For 
example, one task order covering 5 years directed the PMOC to deliver 
up to three project management plan (PMP) reviews, among other 
reviews, in accordance with the Project Management Oversight 
Procedures. The related work order refines this expectation by 
directing the PMOC to complete one of these reviews within the first 
12 months and estimates the number of labor hours needed to do so. The 
scope of the work defined in the work order depends on the phase of 
the sponsor's project development, prior oversight work done, and 
other factors. 

Both FTA regional and headquarters project management officials are 
involved in monitoring PMOCs, while the FTA Office of Planning and 
Environment at headquarters monitor FMOCs. The regional Task Order 
Manager has the day-to-day responsibilities for overseeing PMOC 
products and activities. For example, the Task Order Manager regularly 
reviews contractor vouchers and invoices and monitors the status of 
PMOC activities. Furthermore, both headquarters and regional 
officials, including planners and engineers, review the reports for 
accuracy and approve the reports that PMOCs develop to document the 
results of their oversight activities. FTA program management 
officials at headquarters also ask specialists within FTA, such as 
officials from FTA's Office of Civil Rights, the Office of the Chief 
Counsel, and other offices as needed, to review PMOC reports. 
Separately, for FMOCs, FTA's Office of Planning and Environment 
officials are responsible for monitoring FMOC work and use monthly 
FMOC status reports to do so. These reports include information on 
work completed and scheduled, problems encountered, FMOC labor hours, 
and items requiring FTA action. FTA officials provide feedback to 
PMOCs and FMOCs on these work products, including edits, questions, 
and corrections to reports provided to FTA. 

In addition to reviewing reports, FTA officials meet with PMOCs and 
FMOCs to monitor their performance. According to FTA officials, these 
meetings keep FTA informed of PMOCs' findings, issues of concern, and 
recommendations for FTA or project sponsor action. For example, FTA 
meets quarterly with the PMOCs as a group for a briefing on major 
issues of concern and provides an opportunity for PMOCs to ask 
questions. FTA regional officials and PMOCs indicate that in addition 
to these meetings, FTA regional staff talk with PMOCs as needed. 
Several FTA regional managers we spoke with hold scheduled biweekly 
teleconferences and monthly meetings with the PMOCs, and according to 
FTA officials, many PMOCs participate in the biweekly calls between 
FTA and the project sponsors. FTA officials discuss a project's 
progress and items to keep it on track, and review PMOC reports with 
PMOCs prior to project sponsor meetings. For example, FTA officials 
noted that PMOCs may contact the FTA task order manager for 
clarification of an oversight requirement. In addition, according to 
FTA officials, FTA provides training to PMOCs on FTA's expectations 
and the administration of the oversight contracts usually through 
annual PMOC conferences, quarterly PMOC conference calls, webinars, 
and the annual engineers' meeting. Furthermore, according to FTA 
officials, some regions provide additional training during meetings 
with PMOCs. Because of the periodic nature of FMOC oversight, FTA 
holds meetings with FMOCs, as needed, when the FMOC is performing a 
specific task. FTA indicated that if FMOCs have questions they can e-
mail or phone FTA. 

FTA officials have recently taken steps to improve their multilayered 
performance evaluation system for PMOCs. FTA annually evaluates its 
PMOCs on four criteria--cost, quality, timeliness, and business 
relations. In the past, FTA found that the performance levels for 
these four criteria were not defined with enough specificity and were 
not applied consistently to PMOCs. To improve the application of these 
criteria, FTA headquarters officials organized a team from the 
regional offices and developed a worksheet in 2008 that defined these 
four criteria and related levels of performance to help improve 
consistency in the application of the criteria. For example, prior to 
this improvement, a "good rating" for timeliness of performance was 
defined simply as "there are no, or minimal, delays that impact 
achievement of contract requirements." With the enhancements due to 
the worksheet, FTA could evaluate, among other things, the extent to 
which the PMOC identified problems early, the PMOC provided the 
project sponsor with timely technical assistance that added value to 
the project, and the PMOC met the original completion date for task 
assignments or deliverables. In addition, for the 2009 contract, FTA 
developed Acceptable Quality Levels (AQL) to improve the objectiveness 
of the quality criterion. FTA applies AQLs to evaluate the quality of 
PMOC reports against FTA's Oversight Procedures. According to FTA 
officials, the AQLs are a means of documenting FTA's quality 
expectations for reports and oversight activities. FTA incorporates 
the results of the AQLs into its worksheet and uses the results of the 
worksheet and the AQLs to assign a numerical rating for each of the 
four evaluation criteria. FTA contracting officials have indicated 
that if there is a performance issue with a contractor, the contractor 
is notified, either by phone or by letter, and that such action has 
resulted in rectification of the performance issue. 

FTA also informally obtains feedback on contractor performance from 
project sponsors. While some project sponsors provided both solicited 
and unsolicited feedback, others indicated they would like to have a 
more formal mechanism for evaluating contractor performance. 

Once FTA officials have gathered performance information and evaluated 
a contractor, using the AQLs and the internally developed worksheet, 
they annually place the evaluation and supporting information into the 
Contractor Performance System (CPS)--a multiagency system used to 
collect, maintain, and disseminate contractor performance evaluations 
for federal departments and agencies. According to FTA officials, 
contractors are forwarded a copy of the completed evaluation form. 
[Footnote 29] A contractor has 30 days to respond to or appeal an 
evaluation, whereupon FTA again reviews the evaluation. After 30 days, 
the evaluation is considered official and CPS delivers the finalized 
evaluation into the Past Performance Information Retrieval System 
(PPIRS)--a federal system that collects information on contractor 
performance across all federal agencies.[Footnote 30] See figure 2 for 
FTA's current performance evaluation approach for PMOCs. 

Figure 2: FTA's Performance Evaluation Approach for PMOCs: 

[Refer to PDF for image: illustration] 

Evaluation: 
FTA Regional Manager: Acceptable Quality Level (AQL) tables for each 
oversight procedure (Recent addition to FTA’s evaluation of PMOC 
performance); 
* FTA headquarters organizations; 
* Informal feedback from project sponsors. 

FTA-developed worksheet (Recent addition to FTA’s evaluation of PMOC 
performance). 

CPS: 
Multi-agency system used to collect, maintain, and disseminate 
contractor performance evaluations based on the following criteria: 
cost, quality, timeliness, and business relations. 

PPIRS: 
Federal system that collects information on contractor performance 
across all federal agencies. 

Source: GAO. 

[End of figure] 

In general, PMOCs considered the reviews, evaluations, and feedback 
provided by the FTA as positive and helpful in improving their ability 
to carry out their oversight responsibilities. The evaluation and 
feedback process is still new and implementation is still underway 
and, as such, two regional managers noted they had not yet used AQLs 
to evaluate PMOCs. Similarly, one PMOC indicated that FTA had not gone 
over AQLs with them. 

FTA's Office of Planning and Environment directs and evaluates FMOC 
work. FTA indicated that because there are fewer reports and the FMOC 
work is periodic and not continuous, the Office of Planning and 
Environment handles all contractor assignments and performance 
evaluations. According to the FTA's Office of Planning and 
Environment, it has determined that the use of an AQL worksheet for 
consistency in evaluations is not necessary since one office reviews 
all of the FMOCs' work. The Office of Planning and Environment 
provides the contractor evaluation form to the Office of Procurement, 
which enters the data into CPS. 

Stakeholders Identified Benefits of and Challenges to FTA's Oversight, 
and FTA Is Taking Actions to Address Some Stakeholder Concerns: 

Stakeholders Cited Benefits of FTA's Use of PMOCs and FMOCs, Including 
Improved Management and Access to Additional Expertise and Technical 
Assistance: 

FTA officials, contractors, and project sponsors cited numerous 
examples of how FTA's use of oversight contractors has improved 
project and financial management. For example, one project sponsor 
noted that feedback from the PMOC on the project management plan 
helped ensure that the plan documents were complete and covered 
project costs adequately. On a different project, officials from the 
project sponsor noted that the PMOC's risk management review helped 
identify program risks that might have affected the project's budget. 
These stakeholders also noted that the FMOC's financial oversight has 
helped improve projects. For example, an FMOC's independent assessment 
of a New Starts project confirmed that the project sponsor had the 
resources to construct and operate the project, despite a complex 
financing approach. In another case, an FMOC determined that the New 
Starts project did not have the financial capability to continue and 
recommended to FTA that the project not advance to the next project 
development stage. Furthermore, we have previously reported on how 
FTA's use of PMOCs and FMOCs has benefited both project sponsors and 
FTA.[Footnote 31] Specifically, we observed that FTA's oversight 
program has helped improve project sponsors' controls over project 
costs, schedules, quality, and safety. We noted that the PMO program 
has provided FTA with a better understanding of the issues surrounding 
complex construction projects and an increased awareness of potential 
problems that could lead to schedule delays or cost increases. 

PMOCs and FMOCs also provide FTA with additional expertise. Since the 
inception of its Project Management Oversight program, FTA has 
supplemented its own staff as well as used the expertise of PMOC 
staff, and later, FMOC staff, who have specialized areas of expertise 
beyond that of most FTA staff, to help oversee New Starts projects. 
Since the New Starts program has grown significantly while FTA's staff 
size has stayed the same, FTA officials have used these oversight 
contractors to help compensate for this human resource gap. For 
example, FTA officials noted that while PMOCs are not FTA employees, 
the PMOCs help serve as FTA's "eyes and ears" at project sites. 

Finally, in addition to oversight services, PMOCs occasionally provide 
technical assistance on behalf of FTA to project sponsors. Such 
assistance may include providing information and instruction in 
project management and project analysis practices, or sharing 
technical expertise in transit project design and construction. In the 
course of providing oversight, PMOCs are to notify FTA about any 
opportunities for project sponsors to benefit from technical 
assistance. FTA officials stated that New Starts projects have 
benefited from the technical assistance that PMOCs and FMOCs provided 
to project sponsors. However, while PMOCs and FMOCs can provide 
technical assistance in the form of examples or best practices, 
project sponsors are responsible for deciding how to proceed. For 
example, FTA assigned a PMOC to provide guidance to a project sponsor 
to help clarify safety requirements. As part of this process, the PMOC 
provided the project sponsor with examples of best practices used to 
meet safety requirements. The project sponsor used these best 
practices to resolve its safety issues and noted that having access to 
the PMOC and its specialized skills provided clarity and helped 
resolve the safety issue quickly. 

Finding the Appropriate Balance between Oversight and Advancing 
Projects Is Challenging; FTA Is Taking Actions to Help Address This 
Challenge: 

Finding the right balance between protecting federal investments 
through project management oversight and advancing projects through 
the project development process is challenging. As noted above, FTA's 
project management oversight program is intended to strengthen the 
management and monitoring of major transit projects. However, 
determining the appropriate level of oversight that is needed for a 
project is a delicate task, since in certain cases, too much or too 
detailed oversight could slow a project's progress. We have previously 
reported that one option FTA could consider to reduce the burden 
placed on project sponsors and move projects more quickly through the 
New Starts project development process is to tailor the level of 
oversight to the risks of a New Starts project (indicated, for 
example, by the project's cost or complexity).[Footnote 32] 

FTA has developed procedures to assist PMOCs in ensuring that a 
project's scope, schedule, and cost are in balance and that the 
project follows applicable federal requirements, but FTA has indicated 
that it also tailors PMOC oversight to each project. Specifically, 
FTA's Oversight Procedures for PMOCs serve as guidance on how PMOCs 
should conduct their work; however, according to FTA officials, the 
Oversight Procedures are written to allow flexibility in the 
assignment of task and work orders based on the specific needs of a 
project. According to FTA officials, while some reviews in the 
Oversight Procedures are conducted for all projects that undergo PMOC 
oversight, such as project management plan reviews, FTA officials may 
decide not to have a PMOC conduct certain reviews or may ask the PMOC 
to conduct a more detailed review than is described in the Oversight 
Procedures. For example, FTA officials in an FTA region told us that 
they did not require the PMOC working on a project in their region to 
conduct a technical capacity and capability review because the PMOC 
was familiar with the project sponsor's technical capacity and 
capability, the project sponsor had recently completed three other New 
Starts projects on time and within budget, and there was no change in 
project sponsor staff. In another example, an FTA official in another 
region asked the PMOC overseeing one of the projects in that region to 
conduct a real estate review that was not completely specified at that 
time in the Oversight Procedures because of concerns about the project 
sponsor's real estate management approach. FTA officials noted that it 
is impossible to anticipate all requirements and cover them all in the 
Oversight Procedures. Therefore, FTA officials stated, it is possible 
to deviate from the Oversight Procedures if the deviations are clearly 
documented in the work order. 

Despite FTA's efforts to tailor its oversight, four project sponsors 
we spoke with said that the level of oversight and PMOC involvement in 
a project sometimes seem excessive or detailed, making it difficult 
for them to spend time developing the project. For example, one 
project sponsor we interviewed said that FTA has layered additional 
oversight on projects in response to problems that FTA faced in other 
projects in other regions. In this case, project sponsor officials 
said that some of the additional oversight was not applicable to its 
project and that the project ended up spending time and resources 
addressing additional oversight requirements rather than developing 
the project. In addition, this project sponsor said that the level of 
PMOC involvement on their projects is also excessive because PMOC 
oversight is detailed. For example, rather than providing broad 
oversight over the project's schedule, the project sponsor officials 
said that the PMOC requested very detailed information regarding the 
schedule. According to the project sponsor, as a result of this level 
of oversight, they had to hire more staff, which increases project 
costs. 

FTA currently oversees project sponsors in accordance with the Project 
Management Oversight Rule (PMO rule).[Footnote 33] In September 2009, 
FTA issued an Advance Notice of Proposed Rulemaking (ANPRM) to obtain 
public comment on proposed modifications to the rule intended to 
increase the effectiveness of its oversight approach.[Footnote 34] As 
part of the ANPRM, FTA is considering changes to the PMO rule that 
could potentially base the level of oversight on risk.[Footnote 35] 
According to FTA officials, amending the rule to emphasize its risk- 
informed process would formalize and standardize FTA's current 
practice of tailoring its PMOC oversight to each project. A few 
project sponsors who provided comments to FTA on the ANPRM said that 
the level of oversight could be tailored to the experience of the 
project sponsor, with sponsors with more experience in the New Starts 
process undergoing less detailed oversight. Two of these project 
sponsors also suggested that oversight could be tailored to the level 
of federal investment. FTA is currently evaluating comments it 
received from stakeholders on this ANPRM, and expects to issue the 
Notice of Proposed Rulemaking in late 2010.[Footnote 36] 

FTA Is Taking Actions to Address Challenges Related to Projects' 
Growing Complexity and Is Seeking Stakeholder Input on Other Potential 
Changes to the PMO Program: 

FTA faces challenges in ensuring that it has specialized expertise and 
staff to oversee the growing number of complex capital projects, 
including New Starts projects. FTA, in its 2009 ANPRM, noted that the 
agency is participating in a larger number of megaprojects.[Footnote 
37] These megaprojects often involve technology, design, or 
construction elements, such as tunnels, that make a project more 
complex. For example, one megaproject that is currently seeking New 
Starts funding from FTA requires the construction of two new tunnels 
under a river. To ensure that technologies, design, or construction 
elements, such as tunnels, do not increase the costs and schedules of 
the complex projects, FTA requires oversight by individuals who have 
specialized knowledge and experience in these areas. Furthermore, FTA 
officials said that the number of projects in FTA's Small Starts 
program is growing and some Small Starts are fairly large, complex 
projects, particularly those nearing the $250 million total capital 
cost threshold of the program.[Footnote 38] Thus, demand for FTA 
oversight resources is growing. The challenges associated with the 
growing number of large projects and the additional demands they place 
on FTA's oversight are particularly significant given that FTA's 
staffing levels have remained about the same since 1982. 

The financing of New Starts projects has also become more challenging. 
To cover the large dollar amounts of some New Starts projects, 
particularly the megaprojects, project sponsors are borrowing more 
money to finance their projects and are increasingly relying on 
innovative financing methods, such as public-private partnerships and 
value capture strategies.[Footnote 39] In addition, because of the 
current economic climate, state finances are stretched, forcing state 
project sponsors to finance these projects through multiple sources or 
less traditional means. For example, another New Starts project we 
reviewed is using an innovative approach to finance an extension of an 
existing system. This project is funded through a variety of new 
revenue sources, including bonds backed by future revenue collections 
from a toll road. As states use such new funding methods for projects, 
the financial capacity oversight work that FMOCs conduct for FTA also 
becomes more involved, requiring more effort and time to understand 
the funding approaches and ensure that project sponsors can 
sufficiently fund their proposed projects, and also maintain and 
preserve their current transit systems. 

As noted earlier, PMOCs and FMOCs provide FTA with access to 
specialized experience and knowledge and additional staff support, and 
FTA has taken actions to use these contractors to a greater extent to 
address the challenges related to the growing size and complexity of 
New Starts projects. For example, FTA is involving PMOCs and FMOCs 
earlier in the project development process. FTA, beginning in 2006, 
began to assign PMOCs to oversee New Starts projects when the sponsor 
applies to enter into preliminary engineering, rather than waiting 
until the project is already in that stage.[Footnote 40] FTA officials 
said that identifying and addressing problems at an earlier stage has 
helped them ensure that the projects are more likely to stay within 
budget and on schedule. According to project sponsors we spoke with, 
ensuring that a project is on schedule is important because delays can 
significantly increase project costs. Minimizing the potential for 
increased project costs and delays is particularly relevant for large 
projects that present greater risks of project cost increases or 
schedule delays because they use unique technology, design, or 
construction elements. Additionally, in 2008, FTA began to ask its 
FMOCs to conduct financial capacity assessments before projects 
entered into final design (with an update performed at the FFGA 
stage), rather than waiting until the projects were at the FFGA stage. 
FTA officials told us that this change helps them identify financing 
problems earlier, allowing project sponsors more time for corrective 
actions. Specifically, FTA officials stated that a project sponsor may 
need additional time to identify additional sources of funding if 
FTA's review found that there was insufficient funding or financial 
capacity to undertake the project. 

In addition, FTA noted in its 2009 ANPRM that it is considering a 
potential revision to the PMO rule that would better reflect the 
current environment of a larger federal transit program and an 
increased number of larger, more complex projects. Specifically, 
through this ANPRM, FTA is seeking comments from stakeholders on how 
FTA should best use its PMOCs to provide specialized expertise when 
needed; how the agency should use PMOCs to supplement its limited 
staff in overseeing increasingly complex, major capital projects; 
whether the use and role of PMOCs should be expanded to overseeing 
projects other than major capital projects; and at what stage FTA 
should assign PMOCs to New Starts projects, among other things. 
[Footnote 41] FTA is also considering whether it should expand the PMO 
rule to include a focus on project management, in addition to its 
current focus on project oversight. FTA officials explained that the 
expanded focus would establish performance expectations for project 
sponsors on certain project management areas. For example, the PMO 
rule could be expanded to include a requirement that project sponsors 
have sufficient staff in place to demonstrate that they have the 
capacity and capability to develop their project.[Footnote 42] FTA 
officials explained that by ensuring that project sponsors have the 
appropriate project management skills, the sponsors can better control 
their project costs and schedules. 

FTA and PMOCs Have Multiple Ways to Communicate with Project Sponsors 
during the Oversight Process, but Project Sponsors Say Communication 
Challenges Still Exist: 

Effective oversight management of FTA's New Starts program and project 
sponsors' advancement of transit projects through the New Starts 
program depend, in part, on effective communication. We have noted 
that an effective communication strategy should facilitate an honest 
two-way exchange with, and allow for feedback from, stakeholders. Such 
communication is central to forming the effective internal and 
external partnerships that are vital to a program's success.[Footnote 
43] GAO has also noted that relevant and timely information is needed 
for an agency to achieve its objectives.[Footnote 44] 

FTA has multiple avenues through which it communicates with project 
sponsors about its oversight activities. Among its efforts, FTA 
informs project sponsors of the steps they need to take in the New 
Starts funding process; addresses New Starts issues through training 
workshops, guidance letters, circulars, and quarterly meetings with 
the project sponsor and the PMOC in attendance; and provides feedback 
on PMOCs' reports on sponsors' projects. Furthermore, in 2008, FTA 
developed checklists to provide detailed information to project 
sponsors on the submittals required for each project development 
phase. Sponsors have indicated they found this tool and the meetings 
to be very helpful in understanding FTA's and PMOC's oversight 
requirements. 

However, three project sponsors we spoke with stated that 
communications with FTA and PMOCs were not consistently timely, which 
delayed their response to FTA's concerns. For example, one project 
sponsor we interviewed noted that during final design the sponsor was 
informed of a level boarding issue pertaining to the Americans with 
Disabilities Act, which negatively affected the project's schedule and 
cost. The project sponsor said that these effects might have been 
avoided if FTA had raised the issue with the project sponsor earlier 
in the preliminary engineering stage. In addition, another project 
sponsor we interviewed said that waiting for FTA to approve its 
readiness reviews led to additional costs, since the project 
consultants were idle during this time. Some of the consultants cost 
the project up to $50,000 to $200,000 per month and the project 
sponsor risked losing these consultants to other projects. A third 
sponsor indicated that it gets final reports months later, by which 
time the reports can be outdated. This practice can raise issues that 
may have already been addressed, can affect relations with other 
funding sources, and can result in late project delivery. 

These apparent delays may occur for a number of reasons. FTA officials 
noted that project sponsors sometimes provide information that is 
incomplete or inaccurate, resulting in additional review time and 
delays. An FTA headquarters official explained that they may delay 
providing sponsors with final oversight reports until they make a 
decision, positive or negative, to move to the next phase of project 
development. Similarly, an FTA regional official we spoke with stated 
that they have delayed sharing reports with project sponsors when the 
reports included sensitive information, such as the impact of risk 
assessment on cost estimates used as the basis for FTA funding 
decisions, which affect ongoing funding negotiations between the 
project sponsor and FTA. In addition, an FTA regional official and a 
PMOC noted that because FTA uses a team approach to oversee the New 
Starts program, there are many people involved in reviewing these 
final reports, which might increase the time needed for reviews. For 
example, after the FTA regional office initially reviews a report 
focused on a capital cost estimate review, the report is reviewed by 
FTA headquarters officials, including those from the program 
management office who supervise the regional officials and PMOC 
technical work. Furthermore, FTA's Office of Planning and Environment 
as well as other officials, including representatives from the Office 
of Chief Counsel and Office of Civil Rights, also review PMOC reports 
as needed. FTA has acknowledged that its current New Starts process 
can be lengthy and frustrating. In an October 2009 speech, the FTA 
administrator stated that FTA currently has a decision-making process 
that is frustrating, lengthy, and incomprehensible, and that FTA is 
working on a streamlined decision-making process; he cautioned 
however, that the decision may not always be to approve a project. 
[Footnote 45] Finally, as noted previously, FTA officials said that 
they are involving PMOCs earlier in the project development process to 
avoid problems. 

In addition to communication delays, three project sponsors we spoke 
with said that they provide a considerable amount of documentation to 
the PMOCs and FTA and do not get clear written reactions to this 
information. Five out of the six FTA regions we interviewed indicated 
that they do not consistently provide project sponsors with draft PMOC 
reports. FTA's oversight procedures for PMOCs direct the PMOCs to 
discuss draft report findings with project sponsors before finalizing 
reports. FTA officials stated that PMOCs are expected to confirm the 
facts of the draft report with project sponsors. An FTA official 
indicated that the PMOCs are expected to share the facts with the 
project sponsor, and that project sponsors are "generally aware" of 
the issues identified in the oversight reports because of its 
communications with PMOC and FTA officials. Project sponsors believe 
getting draft reports could help them (1) ensure that PMOCs and FTA 
have the proper, most up-to-date information, and (2) understand the 
context of concerns or requests for more information. 

Agency Comments and Our Evaluation: 

We provided a draft of this report to DOT for its review and comment. 
DOT officials generally agreed with our findings and provided 
technical comments, which we incorporated as appropriate. 

We are sending copies of this report to interested congressional 
committees and the Secretary of Transportation. In addition, this 
report will be available at no charge on GAO's Web site at [hyperlink, 
http://www.gao.gov]. 

If you or your staff have any questions about this report, please 
contact me at (202) 512-2834 or wised@gao.gov. Contact points for our 
Offices of Congressional Relations and Public Affairs may be found on 
the last page of this report. GAO staff who made major contributions 
to this report are listed in appendix IV. 

Signed by: 

David J. Wise: 
Director, Physical Infrastructure Issues: 

[End of section] 

Appendix I: Objectives, Scope, and Methodology: 

Under the Safe, Accountable, Flexible, Efficient Transportation Equity 
Act - A Legacy for Users (SAFETEA-LU), we are required to report 
annually on the Federal Transit Administration's (FTA) New Starts 
process.[Footnote 46] Accordingly, the objectives of this report were 
to review (1) how the FTA uses contractors to oversee New Starts 
projects and how the agency procures, monitors, and evaluates the 
contractors' services, and (2) the benefits of FTA's oversight 
approach and the challenges FTA faces in conducting its oversight. Our 
review focused on oversight activities that project management 
oversight contractors (PMOC) and financial management oversight 
contractors (FMOC) conduct between the preliminary engineering stage 
of the New Starts project development process and the full-funding 
grant agreement (FFGA) stage that inform FTA's recommendations for New 
Starts funding. Furthermore, we focused on New Starts projects, and 
not on Small Starts or Very Small Starts projects, since FTA does not 
generally assign PMOCs to Small or Very Small Starts projects. 

To address our two objectives, we reviewed relevant legislation and 
FTA documents. Specifically, we reviewed SAFETEA-LU[Footnote 47] and 
other relevant legislation, such as the Surface Transportation and 
Uniform Relocation Assistance Act (STURAA), which authorized the 
project management oversight program and provided funding for these 
oversight activities.[Footnote 48] In addition, we reviewed and 
analyzed FTA documents, including procedures, guidance, and 
performance evaluation criteria for PMOCs and FMOCs. We also reviewed 
FTA's 1989 project management oversight rule;[Footnote 49] FTA's 
Advanced Notice of Proposed Rulemaking (ANPRM), which seeks public 
comment on a proposed amendment to this rule,[Footnote 50] and FTA 
information on the agency's budget for its project and financial 
management oversight programs.[Footnote 51] 

In addition to these efforts, to determine how FTA procures oversight 
contractors, we reviewed FTA's procurement solicitations for PMOCs and 
FMOCs, reviewed GAO bid protest decisions, and interviewed FTA 
procurement officials in headquarters. Furthermore, we reviewed 
procedures for acquisition under the Brooks Act[Footnote 52] and the 
Federal Acquisition Regulation (FAR), including procedures for 
competitive negotiations.[Footnote 53] 

We also conducted interviews on topics related to our two objectives. 
In particular, we interviewed FTA officials in headquarters who are 
responsible for managing and planning New Starts projects, as well as 
officials familiar with the budget for FTA's project and financial 
management oversight programs. Furthermore, we interviewed 
representatives from associations familiar with the New Starts 
program, such as the American Public Transportation Association and 
the New Starts Working Group. 

Finally, we focused our review on 10 New Starts projects that FTA 
recommended for FFGAs between fiscal year 2006 to fiscal year 2011. 
For each of these 10 projects, we conducted semistructured interviews 
with the project sponsors responsible for implementing the projects 
and the PMOCs, FMOCs, and FTA regional officials responsible for 
overseeing the projects. We judgmentally selected the 10 projects to 
include a range in (1) transit mode (i.e., heavy rail, light rail, 
commuter rail, or bus); (2) total project cost (from $117 million to 
$8.7 billion);[Footnote 54] (3) amount of federal funding (from 26.7 
percent to 80 percent of total project costs); and (4) geographic 
area. Our sample also includes project sponsors who have been 
recommended for multiple FFGAs by FTA. We interviewed all of the 
project sponsors by telephone except the sponsor for the Dulles 
Corridor Metrorail project, which is located near enough to 
Washington, D.C., for us to interview the sponsor in person. Because 
the projects were selected as a nonprobability sample, the results 
cannot be generalized to all projects or the New Starts oversight 
process as a whole.[Footnote 55] Table 2 lists the 10 New Starts 
projects we focused on for our review. 

Table 2: New Starts Projects Selected: 

Name of New Starts project: New Britain-Hartford Busway; 
Location: Hartford, Connecticut. 

Name of New Starts project: Second Avenue Subway Phase I; 
Location: New York, New York. 

Name of New Starts project: Access to the Region's Core; 
Location: Northern New Jersey, New Jersey. 

Name of New Starts project: Dulles Corridor Metrorail Extension; 
Location: Northern Virginia, Virginia. 

Name of New Starts project: North Shore LRT Connector; 
Location: Pittsburgh, Pennsylvania. 

Name of New Starts project: North Corridor LRT; 
Location: Houston, Texas. 

Name of New Starts project: Southeast Corridor LRT; 
Location: Houston, Texas. 

Name of New Starts project: Weber County to Salt Lake City Commuter 
Rail; 
Location: Salt Lake City, Utah. 

Name of New Starts project: Central Subway LRT; 
Location: San Francisco, California. 

Name of New Starts project: South Corridor Phase 2; 
Location: Sacramento, California. 

Source: GAO. 

[End of table] 

We conducted this performance audit from January to September 2010 in 
accordance with generally accepted government auditing standards. 
Those standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe 
that the evidence obtained provides a reasonable basis for our 
findings and conclusions based on our audit objectives. 

[End of section] 

Appendix II: List and Description of Project Management Oversight 
Contractor Reviews: 

Table 3 describes the oversight reviews conducted by PMOCs and 
described in the Federal Transit Administration's (FTA) Project 
Management Oversight Procedures, which were most recently revised by 
FTA in May 2010. According to FTA officials, the procedures described 
in this guidance were new to the project management oversight 
contracts awarded in 2009 contracts, but are based on the program 
guidance instructions for project management oversight contractors 
(PMOC) used in prior contracts. 

Table 3: List and Description of Project Management Oversight 
Contractor Reviews: 

Type of oversight review: Project Management Reviews: Project 
Management Plan Review; 
Description of review: Assesses the adequacy and soundness of the 
project management plan, which is the project sponsor's overarching 
implementation plan for the entire project. 

Type of oversight review: Project Management Reviews: Technical 
Capacity and Capability Review; 
Description of review: Evaluates the project sponsor's organization, 
personnel qualifications, and experience, as well as the sponsor's 
policies, procedures, and implementation methods. 

Type of oversight review: Project Management Reviews: Safety and 
Security Management Plan (SSMP) Review; 
Description of review: Assesses whether the project sponsor is 
adequately performing the required safety and security management 
activities. 

Type of oversight review: Project Management Reviews: Real Estate 
Acquisition and Management Review; 
Description of review: Evaluates the real estate acquisition and 
management plan, including acquisition of real estate and its related 
schedule and cost estimate, as well as the project sponsor's 
compliance with all regulatory requirements. 

Type of oversight review: Project Management Reviews: Quality 
Assurance/Quality Control Review; 
Description of review: Assesses the adequacy and soundness of the 
project sponsor's planning, implementation, verification, and 
documentation of quality management activities over the course of the 
project. 

Type of oversight review: On-Site Monitoring and Reporting: Recurring 
Oversight and Related Reports; 
Description of review: Describes the meetings conducted as well as the 
type and quality of reports expected as part of the PMOC recurring 
oversight activities. 

Type of oversight review: On-Site Monitoring and Reporting: Lessons 
Learned; 
Description of review: Describes the process for documenting and 
sharing lessons learned on major capital projects, including New 
Starts projects. 

Type of oversight review: On-Site Monitoring and Reporting: Before and 
After Study Review; 
Description of review: Evaluates the project sponsor's plan for the 
documentation and analysis of cost and scope forecasts prepared during 
project development phases. 

Type of oversight review: Scope, Cost, Schedule Characterization 
Review: Annual New Starts Review; 
Description of review: Assesses the reliability of the project 
sponsor's scope, capital cost, and schedule estimates as submitted to 
FTA for inclusion in its annual New Starts Report to Congress. 

Type of oversight review: Scope, Cost, Schedule Characterization 
Review: Project Transit Capacity Review; 
Description of review: Assesses the physical capacity of the project 
to accommodate the forecasted ridership and level of service; 
trade-offs resulting from capacity choices; 
and, if applicable, the project's impact on the capacity of the 
existing transit system. 

Type of oversight review: Scope, Cost, Schedule Characterization 
Review: National Environmental Policy Act (NEPA) and Design Document 
Comparative Review; 
Description of review: Characterizes the extent to which the project 
design documents reflect NEPA findings and recommendations for the 
protection of the environment. 

Type of oversight review: Scope, Cost, Schedule Characterization 
Review: Project Scope Review; 
Description of review: Assess the project sponsor's definition of the 
project's scope for, among other things, adequacy, completeness, 
biddability, and constructability, as well as compliance with 
applicable laws and regulations. 

Type of oversight review: Scope, Cost, Schedule Characterization 
Review: Project Delivery Method Review; 
Description of review: Verifies that the project sponsor has developed 
a plan for project delivery that is based on, among other things, the 
unique characteristics of the project, reflects the current and 
expected conditions of the construction market, and takes into account 
the project sponsor's technical capacity and capability. 

Type of oversight review: Scope, Cost, Schedule Characterization 
Review: Capital Cost Estimate Review; 
Description of review: Assesses the soundness of the project sponsor's 
cost-estimating methods and processes; 
confirms that the cost estimate adequately reflects the project's 
scope, schedule, and anticipated market conditions; 
and reviews the reliability of the cost estimate for procurements and 
contracts. 

Type of oversight review: Scope, Cost, Schedule Characterization 
Review: Project Schedule Review; 
Description of review: Reviews the completeness and reliability of the 
project sponsor's schedule, assesses the schedule's usefulness as a 
management tool, and assesses the extent to which the schedule 
reflects the project's scope, cost, management practices, and method 
of project delivery. 

Type of oversight review: Scope, Cost, Schedule Characterization 
Review: Americans with Disabilities Act Review; 
Description of review: Evaluates whether the project sponsor is in 
compliance with the Americans with Disabilities Act of 1990 which 
requires that station platforms be coordinated with the level of the 
floor and the entry doors of the railcars used in the system. 

Type of oversight review: Vehicle Review: Buy America Review; 
Description of review: Confirms that the project sponsor is in 
compliance with FTA's Buy America requirements for procurements of bus 
and rail vehicles in excess of $100,000. 

Type of oversight review: Vehicle Review: Fleet Management Plan Review; 
Description of review: Assesses whether the Fleet Management Plan, 
which includes current and anticipated vehicle requirements, is 
feasible, sustainable, comprehensive, and demonstrates a plan for the 
overall management of the entire vehicle fleet. 

Type of oversight review: Vehicle Review: Bus and Rail Vehicle 
Technical Review; 
Description of review: Evaluates vehicle procurements to ensure that 
they are made in accordance with applicable regulations and guidance 
and to ensure that timely corrections are made to vehicle 
specifications to meet program requirements. 

Type of oversight review: Risk Assessments and Contingency Review: 
Risk and Contingency Review; 
Description of review: Evaluates the reliability of the project 
sponsor's project scope, cost estimate, and schedule, focusing 
specifically on the uncertainty associated with project implementation 
and surrounding project conditions. 

Type of oversight review: Readiness Review: Readiness to Enter 
Preliminary Engineering; 
Description of review: Integrates findings and recommendations from 
other PMOC reviews to determine the reliability of the scope, cost, 
and schedule estimates for the project; 
the ability of the project sponsor to perform and manage the project's 
design and construction, and the project's readiness to enter into the 
preliminary engineering phase. 

Type of oversight review: Readiness Review: Readiness to Enter Final 
Design; 
Description of review: Integrates findings and recommendations from 
other PMOC reviews to determine the completeness, quality, and 
accuracy of cost, schedule, budget, and design as well as the 
readiness of the project to enter the final design phase. 

Type of oversight review: Readiness Review: Readiness To Execute Full 
Funding Grant Agreement (FFGA); 
Description of review: Integrates findings and recommendations from 
other PMOC reviews to confirm that all technical aspects of the FFGA 
are complete and accurate, validates that all required plans and 
analysis have been satisfactorily prepared and implemented, and 
determines the readiness of the project to enter into an FFGA with FTA. 

Type of oversight review: Readiness Review: Readiness to Bid 
Construction Work; 
Description of review: Integrates findings and recommendations from 
other PMOC reviews to confirm that the project sponsor has developed 
the design documents to an appropriate level of completion; 
bid packages are complete, accurate, and align with project management 
plans; the procurement plan follows best industry practices; and the 
project sponsor is prepared to manage procurement and construction. 

Type of oversight review: Readiness Review: Readiness for Revenue 
Operations; 
Description of review: Assesses whether the system conforms to 
contract documents, operates as an integrated whole, and is capable of 
functioning effectively to provide dependable service. 

Type of oversight review: Other Reviews: Small Starts Readiness Review; 
Description of review: Integrates findings and recommendations from 
other PMOC reviews to evaluate the reasonableness, quality, 
completeness and reliability of a Small Starts project's scope, cost, 
and schedule as well as the technical capacity and capability of the 
project sponsor to execute the project. 

Type of oversight review: Other Reviews: American Recovery and 
Reinvestment Act (Recovery Act) Project Implementation Review; 
Description of review: Verifies, for Recovery Act capital construction 
and vehicle procurement projects, that the project sponsor's 
management and staff have the capability, policies, procedures, and 
project management plans in place to successfully complete these 
projects. 

Source: GAO analysis of FTA information. 

[End of table] 

[End of section] 

Appendix III: Funding Obligated for Project Management Oversight and 
Financial Management Oversight, Fiscal Years 2000-2009: 

Funding for PMOC and FMOC activities is provided through statutory set-
asides made available annually for specific FTA grant programs. 
[Footnote 56] Federal law currently authorizes FTA to use up to 1 
percent of amounts made available for its major capital investments, 
including New Starts, for project management oversight, to fund the 
oversight activities of both PMOCs and FMOCs.[Footnote 57] According 
to FTA, this funding is pooled with funding that is authorized for 
FTA's other oversight activities and then allocated across FTA's grant 
programs. 

FTA obligates funding upon award of a contract to a PMOC or FMOC. 
Table 4 describes obligations made for project management oversight 
and financial management oversight activities for the New Starts 
program, as well as other FTA grant programs. According to FTA 
officials, the funding amounts obligated for oversight activities 
varies annually. FTA officials stated that this funding is allocated 
for program management oversight and financial management oversight 
activities based on where each capital project, including New Starts 
projects, is in the project development process and the oversight 
activities anticipated for each project in the coming budget year. 
[Footnote 58] 

Table 4: Funding Obligated for Project Management Oversight and 
Financial Management Oversight for FTA Grant Programs, Fiscal Years 
2000-2009[A]: 

Project management 0versight: 
Fiscal year: 2000: $26.6 million; 
Fiscal year: 2001: $23.9 million; 
Fiscal year: 2002: $29.3 million; 
Fiscal year: 2003: $13.3 million; 
Fiscal year: 2004: $33.6 million; 
Fiscal year: 2005: $37.7 million; 
Fiscal year: 2006: $31.2 million; 
Fiscal year: 2007: $52.9 million; 
Fiscal year: 2008: $26.0 million; 
Fiscal year: 2009: $39.3 million. 

Financial and other New Starts oversight[B]: 
Fiscal year: 2000: $5.3 million; 
Fiscal year: 2001: $3.7 million; 
Fiscal year: 2002: $4.9 million; 
Fiscal year: 2003: $5.9 million; 
Fiscal year: 2004: $0.9 million; 
Fiscal year: 2005: $4.0 million; 
Fiscal year: 2006: $4.8 million; 
Fiscal year: 2007: $4.2 million; 
Fiscal year: 2008: $8.7 million; 
Fiscal year: 2009: $2.1 million. 

Source: GAO summary of FTA data. 

[A] FTA provided us with the agency's budget for its project and 
financial management oversight programs from fiscal year 2000 through 
fiscal year 2009. We did not independently verify this budget 
information. Furthermore, this budget information is in current 
dollars, not adjusted for inflation. 

[B] This category contains funding for the agency-wide financial 
management oversight program, as well as other New Starts specific 
oversight reviews. According to FTA officials, these other New Starts 
oversight reviews include financial evaluations performed when a 
project seeks entry into preliminary engineering and annually for the 
Annual Report on Funding Recommendations. The reviews also include 
FTA's review of project sponsor operating and maintenance cost 
estimates, alternatives analyses, and travel forecasts. FTA officials 
noted these reviews inform FTA's evaluation and ratings of New Starts 
projects. 

[End of table] 

[End of section] 

Appendix IV: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

David Wise, (202) 512-2834 or Wised@gao.gov: 

Staff Acknowledgments: 

In addition to the contact named above, Catherine Colwell, Assistant 
Director; Eli Albagli; Lauren Calhoun; Roshni Davé; Elizabeth 
Eisenstadt; Brandon Haller; Kristine Hassinger; Matthew Voit; and 
William Woods made significant contributions to this report. 

[End of section] 

Footnotes: 

[1] 49 U.S.C. § 5309(d). 

[2] Fixed guideway systems use and occupy a separate right-of-way for 
the exclusive use of public transportation services. These fixed 
guideway systems include fixed rail, exclusive lanes for buses and 
other high-occupancy vehicles, and other systems. 

[3] Pub. L. No. 100-17, § 324, 101 Stat. 132, 235 (1987), codified as 
amended at 49 U.S.C. § 5327. 

[4] Department of Transportation (DOT) and Related Agencies 
Appropriations Act, 1990, Pub. L. No. 101-164, § 340, 103 Stat. 1069, 
1099 (1989). The act amended the project management oversight funding 
provision to authorize FTA to use project management oversight funds 
to contract for safety, procurement, management, and financial 
compliance reviews. 

[5] FTA defines a major capital project as a capital project expected 
to have a total estimated net capital cost of more than $100 million. 
See 49 C.F.R. § 633.5. 

[6] Pub. L. No. 109-59, § 3011, 119 Stat. 1144, 1585, codified at 49 
U.S.C. § 5309(k)(2). 

[7] During the preliminary engineering phase, project sponsors refine 
the design of the project proposal, taking into consideration all 
reasonable designs. When this phase is completed, FTA may approve the 
project's advancement into final design, where a project sponsor works 
on right-of-way acquisition and prepares final construction plans and 
cost estimates. Following the final design phase, FTA may approve the 
project for New Starts funding. 

[8] An FFGA establishes the terms and conditions for federal funds 
available for a project, including the maximum amount of government 
financial assistance. An FFGA also defines a project's scope, 
including the length of the system and the number of stations; its 
schedule, including the date when the system is expected to open for 
service; and its cost. 

[9] New Starts projects are carried out in concert with the 
statutorily established state and metropolitan planning process. 

[10] See 49 U.S.C. § 5309(d)(2). Project justification criteria 
include: cost-effectiveness, land use, economic development effects, 
environmental benefits, mobility improvements, and operating 
efficiencies. FTA recently published an Advance Notice of Proposed 
Rulemaking in the Federal Register, which seeks comments on how best 
to measure cost-effectiveness, economic development effects, and 
environmental impacts, among other things. 75 Fed. Reg. 31383 (June 3, 
2010). To determine the project's local financial commitment, FTA 
evaluates a project's capital finance plan, operating finance plan, 
and non-New Starts share. For more information on how FTA evaluates 
and assigns ratings to projects, see GAO-09-784, Public 
Transportation: Better Data Needed to Assess Length of New Starts 
Process, and Options Exist to Expedite Project Development 
(Washington, D.C.: Aug. 6, 2009). 

[11] To analyze a project sponsor's financial condition, FMOCs assess: 
1) whether the project sponsor is currently in good financial standing 
by reviewing audited financial statements, examining the age of the 
existing fleet, and reviewing recent bond ratings; 2) whether the 
project sponsor has the required funding committed to the project; and 
3) whether the project sponsor has made reasonable assumptions in its 
financial plan for funding the proposed project as well as the rest of 
the transit system. According to FTA officials, the FMOC conducts 
sensitivity testing of the sponsor's financial plan. 

[12] FMOCs conduct local financial commitment assessments prior to a 
project's approval into preliminary engineering and for annual 
evaluation and ratings needed for preparation of the Annual Report on 
Funding Recommendations. Financial capacity assessments are performed 
prior to a project's approval into final design and the receipt of an 
FFGA. 

[13] This rating is combined with a project's justification rating to 
arrive at an overall project rating. The overall project rating 
factors into the agency's decision on which projects to recommend for 
funding in the Annual Report on Funding Recommendations. 

[14] This FMOC worked on a number of New Starts projects, including 
some of the 10 projects we reviewed. The New Starts project cited in 
this example was not among these 10 projects. 

[15] Prior to 2009, FTA last procured the services of PMOCs in 2004. 
FTA most recently procured FMOC services in 2008. 

[16] See 49 U.S.C. § 5327 for a list of applicable grant programs. See 
appendix III for funding obligated for project management oversight 
and financial management oversight from fiscal year 2000 through 
fiscal year 2009. 

[17] STURAA authorized now-FTA's program management oversight program 
and authorized ½ of 1 percent of funds made available for major 
capital programs to oversee the construction of major capital 
projects. Pub. L. No. 100-17, § 324, 101 Stat. 132, 235 (1987), 
codified as amended at 49 U.S.C. § 5327. In 1990, the Department of 
Transportation (DOT) and Related Agencies Appropriations Act, 1990, 
created the financial management oversight program by amending the 
project management oversight program funding provision to authorize 
FTA to use project management oversight funds to contract for such 
oversight. Pub. L. No. 101-164, § 340, 103 Stat. 1069, 1099 (1989). A 
series of reauthorizations increased the amount of funding available 
for these activities, and in 2002, the DOT and Related Agencies 
Appropriations Act of 2002 provided 1 percent of amounts made 
available to carry out oversight activities for section 5309 programs. 
Pub. L. No. 107-87, § 319, 115 Stat. 833, 858 (2001). In 2005, SAFETEA-
LU reauthorized the use of 1 percent of funds to be used for oversight 
activities for section 5309 programs. Pub. L. No. 109-59, § 3026(b), 
119 Stat. 1144, 1622-23. 

[18] GSA's Multiple Award Schedules program is an interagency 
contracting mechanism used by many federal agencies. Under this 
program, GSA awards contracts to multiple vendors for commercially 
available goods and services, and federal agencies, such as FTA, place 
orders under the contracts. 

[19] Acquisitions under the GSA Multiple Award Schedule program are 
governed by FAR subpart 8.4. Competitive negotiations are governed by 
FAR part 15. 

[20] SBA's 8(a) Business Development Program is one of the federal 
government's primary vehicles to assist eligible small disadvantaged 
business concerns to compete in the American economy through business 
development. 13 C.F.R § 124.1. To participate in the program, a firm 
must be certified as meeting several criteria, to include the 
following: it must be a small business as defined by SBA; be 
unconditionally owned and controlled by one or more socially and 
economically disadvantaged individuals who are of good character and 
citizens of the United States; and show potential for success. 13 
C.F.R §§ 124.101, 124.102. 

[21] 40 U.S.C. § 1101-1104; FAR subpart 36.6. Architectural-
engineering services are defined at 40 U.S.C. § 1102(2), FAR subpart 
2.101, 36.601-4. 

[22] Contracting by negotiation is governed by FAR part 15. GAO has 
stated that "it is within the discretion of the contracting agency to 
determine on a case-by-case basis, in accordance with the Brooks Act 
and the FAR, whether the service being procured requires application 
of Brooks Act procedures." Matter of: Photo Science, Inc., Comp. Gen. 
B-296391, July 25, 2005, 2005 CPD ¶ 140. Deferring to an agency's 
determination of whether Brooks Act procedures apply to the agency's 
procurement has been a long-standing practice. In discussing 1988 
legislation to amend the Brooks Act, the conferees stated that the 
amendment "does not impair an agency's discretion to decide whether 
construction manager services should be performed by an architect-
engineer firm or a construction contractor." H.R. Conf. Rep. No. 100-
1070, Sect. 742 (1988). 

[23] We previously reported that reliance on contractor support to 
meet agency missions can increase the risk of conflicts of interest 
among companies and individuals. In such instances, there is a risk of 
inappropriately influencing the government's control over and 
accountability for decisions that may be based, in part, on contractor 
work. See GAO, Contingency Contracting: Improvements Needed in 
Management of Contractors Supporting Contract and Grant Administration 
in Iraq and Afghanistan, [hyperlink, 
http://www.gao.gov/products/GAO-10-357] (Washington, D.C.: Apr. 12, 
2010). 

[24] To create a pool of PMOC contractors, FTA awards indefinite 
delivery, indefinite quantity contracts to multiple firms whose 
proposals meet its solicitation criteria for PMOC services. When FTA 
needs a contractor to oversee the management of a particular project 
during the 5-year contract period, it either assigns a contractor from 
the pool directly (when the oversight work, or task order, is valued 
at $5 million or less) or notifies the contractors in the pool about 
the task order and provides each one a fair opportunity to be 
considered for the oversight work (when the task order is valued at 
more than $5 million) using the procedures in FAR subpart 16.505(b). 
Regardless of the value of the task order, FTA determines that there 
are no conflicts of interest before assigning it or allowing 
contractors to compete for it. 

[25] According to FTA officials, two PMOC contractors who were awarded 
PMOC contracts for the 2004 through 2009 contract period were not 
awarded new PMOC contracts in 2009. One of these contractors did not 
submit a proposal because it was acquired by a competing PMOC firm, 
while the second contractor was not awarded a contract because the 
contract proposal submitted to FTA did not provide the cost 
information required by the solicitation. 

[26] DCAA, located within the U.S. Department of Defense (DOD), 
performs audits and provides financial advisory services in connection 
with the negotiation, administration, and settlement of contracts and 
subcontracts for DOD and other federal agencies. 

[27] Pursuant to the FAR, a task order means an order for services 
placed against an established contract or with government sources. 
Individual orders shall clearly describe all services to be performed 
by the contractor. FAR subparts 2.101, 16.505(a)(2). 

[28] FTA provides guidance for FMOCs' oversight activities through its 
June 2007 Guidelines and Standards for Assessing Local Financial 
Commitment and its July 2002 Financial Management Oversight 
Contractors' Guide for Conducting Financial Capacity Assessments. 

[29] Besides these formal evaluation processes, FTA and PMOCs 
indicated that FTA regional officials maintain an informal process of 
providing feedback after contractors provide recurring and key reports. 

[30] PPIRS assists acquisition officials by serving as the single 
source for contractor past performance data. The FAR requires agencies 
to post all contractor performance evaluations in PPIRS. 

[31] GAO, Mass Transit: Project Management Oversight Benefits and 
Future Funding Requirements [hyperlink, 
http://www.gao.gov/products/GAO/RCED-00-221] (Washington, D.C.: Sept. 
15, 2000). 

[32] See [hyperlink, http://www.gao.gov/products/GAO-09-784] for other 
options FTA could take to expedite project development. 

[33] 49 C.F.R. part 633. 

[34] 74 Fed. Reg. 46515 (September 2009). 

[35] The ANPRM also seeks comment on other areas of FTA project 
oversight, including the scope and applicability of the rule, the 
setting of specific performance standards for technical capacity and 
capability of a project sponsor, and the level of emphasis to be 
placed on project management plans. 

[36] The comment period for this ANPRM closed on January 8, 2010. FTA 
received 22 comments from project sponsors, a PMOC, and associations 
familiar with the transit industry (such as the New Starts Working 
Group and the American Public Transportation Association). 

[37] FTA defines megaprojects as projects with a total cost of $1 
billion or more. 

[38] In 2005, SAFETEA-LU created a new category of projects designated 
as Small Starts, which are projects with a total estimated net capital 
cost of less than $250 million that are requesting less than $75 
million in federal funding. 49 U.S.C. § 5309(e). 

[39] Value capture strategies are mechanisms designed to harness 
increases in value for properties surrounding transit to help fund 
investments in public transit infrastructure or related improvements. 
Value capture strategies used to fund transit vary in form; however, 
each typically involves a private sector contribution through an 
assessment or fee, or a public sector contribution drawn from 
increased property tax revenue. In July 2010, GAO addressed 
experiences of transit agencies and local governments in using transit 
value capture strategies in its report, GAO, Public Transportation: 
Federal Role in Value Capture Strategies for Transit is Limited, but 
Additional Guidance Could Help Clarify Policies, [hyperlink, 
http://www.gao.gov/products/GAO-10-781] (Washington, D.C.: July 29, 
2010). 

[40] According to FTA officials, they first assigned a PMOC to conduct 
oversight prior to entry into the preliminary engineering phase in 
2006. The officials explained that at that time, this practice was 
specific to one project, but that it has now become common practice. 

[41] 74 Fed. Reg. 46515 (September 2009). 

[42] The current PMO rule focuses primarily on requirements for 
project sponsors related to project management plans, and does not 
include other management areas such as technical capacity and 
capability. 

[43] GAO, Public Transportation: Opportunities Exist to Improve the 
Communication and Transparency of Changes Made to the New Starts 
Program, [hyperlink, http://www.gao.gov/products/GAO-05-674] 
(Washington, D.C.: June 28, 2005). 

[44] GAO, Standards for Internal Control in the Federal Government, 
[hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1] 
(Washington, D.C.: November 1999). 

[45] FTA Administrator Peter Rogoff, speech before the 2009 annual 
meeting of the American Public Transportation Association (APTA), 
Orlando, Florida, Oct. 6, 2009. 

[46] 49 U.S.C. § 5309(k)(2). 

[47] Pub. L. No. 109-59, 119 Stat. 1144 (2005). 

[48] Pub. L. No. 100-17, § 324, 101 Stat. 132, 235 (1987), codified as 
amended at 49 U.S.C. § 5327. 

[49] 49 C.F.R. part 633, 54 Fed. Reg. 36708 (Sept. 1, 1989). 

[50] 74 Fed. Reg. 46515 (proposed Sept. 10, 2009). 

[51] FTA provided us with the agency's budget for its project and 
financial management oversight programs from fiscal year 2000 to 
fiscal year 2009. We did not independently verify this budget 
information. 

[52] 40 U.S.C. §§ 1101-1104; FAR subpart 36.6. 

[53] FAR part 15. 

[54] Dollar figures representing a project's total cost are in current 
dollars, not adjusted for inflation. 

[55] Results from nonprobability samples cannot be used to make 
inferences about a population because in a nonprobability sample, some 
elements of the population being studied have no chance or an unknown 
chance of being selected as part of the sample. 

[56] See 49 U.S.C. § 5327 for a list of applicable grant programs. 

[57] 49 U.S.C. § 5327. After the original authorization in STURAA, 
which authorized ½ of 1 percent of funds made available for major 
capital programs to oversee the construction of major capital 
projects, the project management oversight program's funding structure 
was amended. Pub. L. No. 100-17, § 324, 101 Stat. 132, 235 (1987). The 
Intermodal Surface Transportation Efficiency Act of 1991 (ISTEA), § 
3027, 105 Stat. 1914, 2115, increased oversight funds for section 5309 
programs to ¾ of 1 percent. The DOT and Related Agencies 
Appropriations Act of 2002 provided 1 percent of amounts made 
available to carry out oversight activities for section 5309 programs. 
Pub. L. No. 107-87, § 319, 115 Stat. 833, 858 (2001). Furthermore, in 
2005, SAFETEA-LU reauthorized the use of 1 percent of funds to be used 
for oversight activities for section 5309 programs and altered the 
funding limitations for oversight activities for a number of other 
programs. Pub. L. No. 109-59, § 3026(b), 119 Stat. 1144, 1622-23. 

[58] According to FTA officials, the funding provided through this 
process does not include the cost or time of FTA staff. 

[End of section] 

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