Performance audit, Arizona Department of Transportation, Highway planning and engineering functions

              State of Arizona
Office
of the
Auditor General
PERFORMANCE AUDIT
Report to the Arizona Legislature
By Douglas R. Norton
Auditor General
ARIZONA
DEPARTMENT OF
TRANSPORTATION
HIGHWAY PLANNING
AND
ENGINEERING FUNCTIONS
May 1997
Report No. 97-9
2910 NORTH 44th STREET • SUITE 410 • PHOENIX, ARIZONA 85018 • (602) 553-0333 • FAX (602) 553-0051
DOUGLAS R. NORTON, CPA
AUDITOR GENERAL
DEBRA K. DAVENPORT, CPA
DEPUTY AUDITOR GENERAL
STATE OF ARIZONA
OFFICE OF THE
AUDITOR GENERAL
May 22, 1997
Members of the Arizona Legislature
The Honorable Fife Symington, Governor
Mr. Larry S. Bonine, Director
Arizona Department of Transportation
Transmitted herewith is a report of the Auditor General, A Performance Audit of the Arizona
Department of Transportation=s highway planning and engineering functions. This report is in
response to a May 30, 1995, resolution of the Joint Legislative Audit Committee. The
performance audit was conducted as part of the Sunset review set forth in A.R.S. ''41-2951
through 41-2957.
This is the second in a series of reports to be issued on the Arizona Department of
Transportation. The report addresses ADOT=s efforts to plan, design, and obtain the right-of-way
for future highway projects. Although ADOT recently expanded its efforts to obtain input
from its stakeholders and the public, these stakeholders report that they still know little about
how ADOT actually decides which projects to construct. This problem could be alleviated if
ADOT made greater use of criteria and data when selecting projects for construction.
Additionally, several improvements are needed in ADOT=s Right-of-Way Unit. First, ADOT
often pays more than is necessary to relocate persons who are required to move because of a
highway project. Second, ADOT lacks a systematic method for identifying and selling excess
lands. Finally, ADOT needs to ensure consultants are effectively used within the Right-of-Way
Unit.
My staff and I will be pleased to discuss or clarify items in the report.
This report will be released to the public on May 23, 1997.
Sincerely,
Douglas R. Norton
Auditor General
Enclosure
SUMMARY
The Office of the Auditor General has conducted a performance audit of the Arizona
Department of Transportation=s highway planning and engineering functions, pursuant
to a May 30, 1995, resolution of the Joint Legislative Audit Committee. This audit was
conducted as part of the Sunset review set forth in A.R.S. ''41-2951 through 41-2957 and
is the second of four audits of the Department.
The Arizona Department of Transportation=s (ADOT) mission is to provide a transportation
system that meets the needs of Arizona=s citizens. ADOT=s Intermodal Transportation
Division has primary responsibility for this function. The Division manages and maintains
the State=s approximately 6,000-mile interstate and state highway system. Specific Division
duties reviewed during this audit include planning for future highway projects, designing
highways, and obtaining the land necessary for highway projects (right-of-way).
ADOT Needs To Improve Its
Transportation Planning Process
(See pages 7 through 13)
ADOT needs to refine its transportation planning processes to better ensure that Arizona
has a sound transportation system. Recently, ADOT significantly expanded its efforts to
obtain input from its stakeholders regarding transportation projects. However, many of
these stakeholders, including State Transportation Board members, district engineers, and
local government representatives, are still concerned that they know little about ADOT=s
decision-making process for selecting projects for construction. This may result from
ADOT not prioritizing or explicitly considering criteria such as safety factors or user
benefits, or using data such as pavement conditions or traffic congestion when selecting
projects for its five-year construction plan.1 Further, ADOT is not effectively conducting
comprehensive long-range planning, nor linking plans to long-range goals.
To improve its transportation planning process, ADOT should consider adopting a number
of planning techniques identified by its consultants, other states, and transportation
experts. For example, ADOT should develop a project rating system for prioritizing
projects, and create a more detailed long-term plan that includes funding projections.
1 ADOT annually develops a Five-year Transportation Facilities Construction Program which sets forth the
expenditures for the transportation projects ADOT will construct in the next five years.
ADOT Makes Excessive
Relocation Assistance Payments
(See pages 15 through 20)
ADOT spends more money than is necessary to relocate people who are required to move
because of highway projects. In the majority of cases reviewed, ADOT=s relocation
payments exceeded the statutory maximum. State law provides for the owner of a property
ADOT acquires to be paid the property=s full market value plus up to a maximum of
$22,500 for relocation assistance. ADOT may also pay up to $5,250 in relocation assistance
to those renting homes that it acquires. However, renters of houses ADOT acquires
received an average of $13,000 toward the rent for a new property. High payments result,
in part, because ADOT staff improperly apply federal and state relocation assistance
regulations. For example, relocation assistance payments are largely based on the price of
a comparable property. Despite regulations stating that the Amost nearly representative@
of three comparable properties should be used, ADOT always uses the most expensive
property to calculate payments. Additionally, ADOT inappropriately calculates payments
for moving costs. In one instance ADOT based its payment on moving the equivalent of
21.5 rooms of property, even though the house was a two-bedroom house.
These problems may result from insufficient staff training and management oversight.
ADOT does not provide its employees mandatory training in determining relocation
assistance benefits, and management does not review all relocation assistance calculations.
ADOT Should Develop a Formal
Process for Identifying and
Disposing of Unneeded Property
(See pages 21 through 24)
ADOT recently disposed of property acquired but subsequently not needed for a highway
project for nearly $5.9 million. ADOT has sold approximately 133 properties and an
additional 366 properties await sale. Despite these efforts, there may be many excess
properties that remain unidentified because ADOT lacks a formalized inventory process.
One ADOT staff member estimates several hundred additional excess properties exist in
Maricopa County alone. To ensure all excess land is identified, ADOT should inventory
all land it currently owns, and develop policies that detail specific staff responsibilities for
identifying excess properties, as well as guidelines for determining when properties are
no longer needed and should be sold.
ADOT Needs to Take Steps
To Ensure It Uses Right-of-Way
Consultants Efficiently
(See pages 25 through 28)
ADOT=s Right-of-Way unit contracts with the private sector for several important
functions, including property appraisals, negotiations to acquire property, and demolitions
prior to highway construction. Although ADOT spent over $4.3 million in fiscal year 1995-
96 for these contracted services, Right-of-Way management fails to collect all the necessary
data to determine whether cost savings result from these privatization efforts. Further,
ADOT exercises poor oversight of the consultants. ADOT staff perform multiple reviews
of consultants= work, sometimes duplicating prior reviews, yet fail to document formal
evaluations of the consultants. ADOT should collect data to determine the cost-effectiveness
of using consultants, determine if the current level of consultant oversight is
appropriate, and increase efforts to document problems with consultant performance.
ADOT Should Not Provide Staff for the
Pima Association of Governments
Transportation Planning Office
(See pages 29 through 30)
ADOT should cease staffing the Pima Association of Governments (PAG) transportation
planning office. ADOT has assigned 14 of its transportation planning positions to PAG,
costing more than $500,000 each year; however, it does not assign staff to any of the State=s
other regional transportation planning agencies. In fact, ADOT previously had, but
discontinued in 1992, a similar arrangement with the Maricopa Association of
Governments.
Table of Contents
Page
Introduction and Background.............................................................. 1
Finding I: ADOT Needs To Improve Its
Transportation Planning Process ................................................... 7
ADOT=s Current Transportation
Programming Process................................................................................................ 7
Confusion over Process Remains
Despite Recent Improvements .................................................................................. 8
ADOT Needs To Better Ensure
That Programming Decisions Are
Tied to Long-Range Goals......................................................................................... 11
Recommendations...................................................................................................... 13
Finding II: ADOT Makes Excessive
Relocation Assistance Payments.................................................... 15
ADOT Required by Law To
Provide Relocation Assistance .................................................................................. 15
ADOT Makes Excessive
Relocation Payments.................................................................................................. 15
Additional Factors Contribute
To Improper Procedures ............................................................................................ 19
Recommendations...................................................................................................... 20
Table of Contents (cont=d)
Page
Finding III: ADOT Should Develop a
Formal Process for Identifying and
Disposing of Unneeded Property.................................................... 21
ADOT Actively Selling
Excess Properties........................................................................................................ 21
ADOT Lacks Systematic
Mechanism for Identifying
and Selling Excess Property...................................................................................... 22
ADOT Could Adopt Ideas
from Other States........................................................................................................ 23
Recommendations...................................................................................................... 24
Finding IV: ADOT Needs To Take
Steps To Ensure It Uses Right-of-Way
Consultants Efficiently..................................................................... 25
Consultant Use within
ADOT=s Right-of-Way Unit ....................................................................................... 25
Limited Data Available
To Determine Cost Savings ....................................................................................... 25
ADOT Could Improve Its Management of
Consultant Contracts.................................................................................................. 26
Recommendations...................................................................................................... 28
Finding V: ADOT Should Not Provide Staff for
the Pima Association of Governments
Transportation Planning Organization ........................................... 29
Using ADOT Employees for PAG
Regional Transportation Planning
Activities Is Inappropriate......................................................................................... 29
Recommendation ....................................................................................................... 30
Table of Contents (concl=d)
Page
Agency Response
Table
Table 1: Arizona Department of Transportation
Right-of-Way Division
Relocation Payments and Percentage
Exceeding Statutory Maximum
for Selected Highway Projects
Year Ended June 30, 1996 ......................................................................... 17
Figure
Figure 1: Arizona Department of Transportation
Estimated Percentages of Sources and Uses
of Budgeted Revenues
Year Ending June 30, 1997
(Expressed in Millions of Dollars)........................................................... 3
INTRODUCTION AND BACKGROUND
The Office of the Auditor General has conducted a performance audit of the Arizona
Department of Transportation=s highway planning and engineering functions, pursuant
to a May 29, 1995, resolution of the Joint Legislative Audit Committee. This audit was
conducted as part of the Sunset review set forth in A.R.S. ''41-2951 through 41-2957 and
is the second of four audits of the Department.
The Arizona Department of Transportation=s (ADOT) mission is to provide a transportation
system that meets the needs of Arizona=s citizens. To better accomplish this goal, ADOT
recently combined the Highways, Transportation Planning, Public Transit, and Aeronautics
Divisions into the Intermodal Transportation Division (Division). The Division manages
and maintains the State=s approximately 6,000-mile interstate and state highway system
and oversees the location, design, construction, and maintenance of new highways and
facilities. This audit focuses on the Planning and Engineering section within the Division,
which determines the location, timing, and design of highway projects, and obtains the
land necessary for highway projects (right-of-way).
Highway Planning, Design,
and Land Acquisition
ADOT maintains and expands the State=s transportation system by annually
recommending a specific plan for constructing state roads. Planning for system expansion
becomes critical when demands outpace revenues, a situation Arizona currently faces. In
fact, ADOT estimates that Arizona=s transportation needs will exceed anticipated revenues
by $9 billion over the next 10 years. To formalize its plans, A.R.S. ''28-111 and 28-1825
require ADOT to develop a Five-Year Transportation Facilities Construction Program (Five-
Year Program), setting forth the estimated expenditures by project for engineering, right-of-
way, and construction. Each year, ADOT updates the Five-Year Program, including a
new fifth year and making necessary budgetary and scheduling adjustments.
The Department then presents the program to the State Transportation Board for final
approval. A.R.S. '28-302 establishes a seven-member Board appointed by the Governor for
six-year terms. Six Board members represent transportation districts defined in statute,
while one member represents the entire State. The Board is responsible for establishing
policies and the relative weights given to criteria that guide development of the Five-Year
Program. The Board is also responsible for awarding all construction contracts for
transportation facilities.
Once approved, ADOT staff or engineering consultants design the specific projects in the
Five-Year Program and obtain the necessary land for construction. The Division=s Planning
and Engineering section has primary responsibility for these functions. Section staff and
contractors design the roadway and any structures along the highway such as bridges or
overpasses, as well as the signs, striping, and lighting for each highway segment. To enable
ADOT to purchase land needed to build the highway project, the section=s Right-of-Way
unit appraises needed property, purchases it from the current owner, and manages it until
the property is needed for construction.
Staffing and Budget
Highway planning, design, and right-of-way functions are carried out by 592 full-time
equivalent (FTE) appropriated positions within the Intermodal Transportation Division.
The Division=s remaining 1,231 appropriated FTE positions for fiscal year 1996-97 are
responsible for other functions, such as highway maintenance and construction.
ADOT supplements its Planning and Engineering staff with consultants who assist with
highway design and other engineering functions, such as developing right-of-way plans
and surveying land. As of September 1996, ADOT had 226 active engineering contracts
with 96 consultant firms working on 2,060 projects. These contracts, some of which extend
over several years, represent over $350 million. Additionally, the Planning and
Engineering Section also contracts for other types of assistance, such as appraisal services,
process improvement studies, or staff training.
As shown in Figure 1 (see page 3), ADOT expects to receive more than $1.2 billion in revenues
in fiscal year 1996-97, the majority of which supports highway construction. ADOT estimates
it will receive $437.7 million for the State Highway Fund, ADOT=s portion of the Highway
User Revenue Fund. This money is obtained from motor fuels taxes, motor vehicle taxes,
registration fees, and other taxes and fees. The remaining major revenue sources include a
Maricopa County sales tax, federal monies, and bond proceeds. ADOT should receive
approximately $183.2 million this fiscal year in additional revenue from the Regional Area
Road Fund (RARF) for highway projects completed in Maricopa County. RARF revenue is
generated by a half-cent sales tax imposed in Maricopa County from 1985 through 2005 that
is to be used specifically for transportation projects. ADOT also expects to receive Federal
Highway Trust Fund monies to develop and maintain certain highways. Finally, the
Transportation Board plans to issue bonds to complete or accelerate highway construction
unless other funding sources generate more revenue than anticipated.
Figure 1 (see page 3) further shows that ADOT expends a majority of its revenues constructing
highway projects. ADOT=s Transportation Facilities Construction Program includes
expenditures of $768 million for highway projects in fiscal year 1996-97. Further, $114.8
million of the $188.8 million in ADOT revenues the Legislature appropriated for operating
expenses goes to the Intermodal Transportation Division. The Motor Vehicle Division and other
administrative units receive the remainder of the appropriation for their operations.
Figure 1
Arizona Department of Transportation
Estimated Percentages of Sources and Uses
of Budgeted Revenues
Year Ending June 30, 1997
(Expressed in Millions of Dollars)
______________
1 Other revenues include monies from the Enterprise Fund, the State Aviation Fund, and the Vehicle License
Tax.
2 Capital project carryover includes nonreverting funds received and obligated in fiscal year 1995-96, but
not spent before the end of the year.
3 Other capital construction expenditures include aviation projects and acquisition or renovation of
nonhighway capital investments.
Source:ADOT=s fiscal year 1996-97 budget as prepared by ADOT=s Administrative Services Division.
Follow-up to Previous
Auditor General Report
As part of the current audit, concerns identified in the Office of the Auditor General=s 1990
performance audit of ADOT=s Highway Design Process were revisited. The report (Auditor
General Report 90-3) recommended that ADOT strengthen its design review process for
constructing highways. Design reviews are scheduled at various stages in the design
process to ensure the road can be constructed as intended and that it will function safely
State Highway
Fund (35%) $437.8
Other
(9%) $115.8
Bond Proceeds
(18%) $221.0
Federal Monies
(18%) $233.5
RARF
(14%) $183.2 Highway
Construction
(60%) $768.3
Production of
Arizona Highways
Magazine (1%) $12.5
Other Capital
Construction
(3%) $40.1
Operations
(18%) $222.8
Debt Service
(18%) $225.5
Revenues Expenditures
1
3
Total Revenues and Expenditures = $1,269,200,000
Capitol Project
Carryover
(6%) $77.9
2
and efficiently when built. ADOT concurred with the recommendation and began
strengthening its design review process by developing the Highway Development Process
Manual. The manual provides a uniform review process for all highway design projects,
including guidelines for each design review stage.
However, following the policies in the new manual did not entirely resolve the problems
resulting from inadequately reviewed designs. A 1993 internal ADOT study found that on
most projects, different individuals are responsible for the project during each phase from
project initiation through construction. This leaves no one individual responsible for
ensuring each project is adequately reviewed and approved changes are implemented. To
further alleviate this problem, ADOT is implementing a comprehensive project
management process, and now assigns a project manager who is responsible for ensuring
each project is adequately reviewed, completed on time, and within budget. When fully
implemented, managers will provide oversight from the initial design through one year
after construction on each project. A separate audit of ADOT=s construction program will
assess the impact of the design process on construction costs and timeliness.
Scope and Methodology
This audit focused on ADOT=s efforts to plan, design, and obtain the right-of-way for
Arizona=s future highway projects. Regarding highway planning, this audit reviewed
ADOT=s planning process for highway projects funded with State Highway Fund monies
(ADOT=s portion of HURF monies). A separate audit will assess ADOT=s management
performance in planning and constructing the MAG Regional Freeway System.
Several methods were used to study the issues addressed in this audit, including:
n Interviewing individuals involved in the transportation planning and decision-making
processes, including all seven State Transportation Board members, local government
transportation planning representatives, ADOT=s district engineers, and ADOT
planning staff;
n Attending 13 internal ADOT committee meetings held to prioritize and discuss
transportation projects, as well as 4 Board meetings;
n Reviewing recent internal ADOT studies, surveys, and reports regarding planning and
right-of-way functions and ADOT=s documentation regarding the extent and cost of
consultant use;
n Surveying all 102 staff within the Right-of-Way unit to identify the amount of time
ADOT employees spend reviewing and monitoring consultants= work compared to
completing tasks in-house;1
1 Responses were received from 94 percent of Right-of-Way staff.
n Conducting a review of literature, including journal articles and reports from other
states, regarding transportation planning and the privatization of government
functions;
n Surveying 14 other states= Departments of Transportation and the Federal Highway
Administration regarding their highway planning and right-of-way management
practices;1 and
n Reviewing 46 randomly selected files detailing ADOT=s relocation of persons living in
properties ADOT purchased. Thirty relocations on the Squaw Peak Parkway project
from Thunderbird Road to Bell Road and all 16 relocations for a 1995-1996 highway
widening project at Interstate 10 and Baseline Road were reviewed.
This report presents findings and recommendations in five areas. ADOT needs to:
n Develop a process for selecting future highway projects that relies on criteria and data,
and is better linked to long-range planning;
n Reduce expenditures for relocating persons who are displaced due to highway projects
by more closely following federal and state laws;
n Develop a formal process for identifying and disposing of property purchased but not
needed for highway projects;
n More effectively use consultants in the Right-of-Way unit by collecting data to ensure
cost savings result, avoiding duplication of oversight efforts, and evaluating consultant
performance; and
n Cease providing staff for the Pima Association of Governments transportation planning
group.
This audit was conducted in accordance with government auditing standards.
The Auditor General and staff express appreciation to the State Transportation Board, the
Director of ADOT, the State Engineer, and the Deputy State Engineer for Planning and
Engineering and their staff for their cooperation and assistance throughout the audit.
1 The 14 states contacted were identified as using best practices in transportation planning and engineering,
or were similar to Arizona in transportation-related characteristics (i.e., total lane miles, total highway
expenditures), or were states that border Arizona. States contacted were: Alabama, California, Colorado,
Florida, Georgia, Indiana, Kentucky, Minnesota, Missouri, New Mexico, North Carolina, Texas, Utah, and
Washington.
FINDING I
ADOT NEEDS TO IMPROVE ITS
TRANSPORTATION PLANNING PROCESS
ADOT needs to refine its transportation planning process to ensure that Arizona develops
a sound transportation system for the future. Recently, ADOT significantly expanded its
outreach efforts, obtaining additional input from key stakeholders and the public.
However, many of these people remain uninformed as to how ADOT selects projects for
construction. This may result from ADOT=s failure to adequately consider criteria and data
when making decisions. Contributing to this problem, ADOT also lacks specific long-term
goals to guide the development of its construction program.
ADOT=s Current Transportation
Programming Process
ADOT currently uses a multi-phase annual programming process to select projects for
construction. Each year, ADOT district engineers, representing nine regional districts, work
with regional planning organizations, individual local governments, and the general
public to identify various transportation projects they believe need to be initiated. The
district engineers submit prioritized lists of potential projects to ADOT=s central office staff.
The central office staff also identify potential projects. The lists are then submitted to
ADOT=s Program Development Committee (Committee), a nine-member internal
committee which plays a key role in developing the Five-Year Transportation Facilities
Construction Program (Five-Year Program). The Committee reviews these lists of projects
and recommends projects for further evaluation to determine their feasibility, estimated
costs, and anticipated schedules.1 It also annually recommends which evaluated projects
should be placed into the Five-Year Program. The Priority Planning Committee, a
statutorily created committee chaired by the Deputy Director, reviews the
recommendations of the Program Development Committee before they are submitted to
the State Transportation Board for final approval.2 The approved Five-Year Program then
serves as ADOT=s schedule for designing, obtaining the right-of-way, and constructing
highway projects.
1 The nine-member committee includes the deputy state engineers for Planning and Engineering and
Operations, a representative of the Transportation Planning Group, and six ADOT assistant state engineers.
Three staff members from the Planning Group, the State Engineer=s Group, and Finance also assist the
Committee.
2 The Priority Planning Committee includes representatives from the Intermodal, Operations, Aeronautics,
and Administrative Services Divisions appointed by the Director.
Confusion over Process
Remains Despite Recent
Improvements
While ADOT has taken steps to gather more input for developing its Five-Year Program,
its decision-making process remains unclear. Despite additional outreach efforts, external
groups still lack a complete understanding of how and why ADOT selects projects for
construction. By making programming decisions without explicitly using detailed criteria
or data, ADOT cannot adequately explain or justify its major construction project selections
to its stakeholders.
ADOT more actively involving stakeholders and the publicCADOT has taken steps to
better solicit public input during the Five-Year Program=s development. First, ADOT
recently began coordinating three statewide meetings a year with regional and local
transportation planners to discuss the programming process. Second, ADOT has held 11
regional focus sessions with local government officials to update attendees on ADOT=s
priorities and processes and to discuss the transportation issues that are important in that
region. These meetings are held directly before or after Transportation Board meetings
which are held at a different location around the State each month. Third, the Program
Development Committee visits the districts and regional planning organizations to explain
ADOT=s time frame and process for selecting projects for assessment and construction and
to discuss the projects most important to each district. Finally, ADOT continually obtains
input through monthly Transportation Board meetings and three public hearings held
prior to the adoption of the Five-Year Program.
Key stakeholders still lack understanding of decision processCDespite these efforts,
various internal and external groups have labeled ADOT=s Program Development
Committee a Ablack box@ because it makes decisions without providing feedback to
external groups. For example, although districts and local governments submit prioritized
lists of projects to the Committee, the Committee does not adequately explain how it uses
the lists, or why it selects certain projects for initial evaluation or the Five-Year Program.
Also, for those groups responsible for overseeing and approving the Committee=s
recommendations, the Committee does not provide sufficient information as to how and
why it developed its priorities.
These stakeholders characterize ADOT=s current planning process as confusing, and as a
result they may have a limited impact on transportation decisions despite being key
figures in maintaining and improving the State=s transportation system. The following
concerns were expressed.
n State Transportation Board MembersCBoard members, who according to statute are
ultimately responsible for selecting state transportation projects, have consistently
expressed concern with their limited role in ADOT=s decision-making processes. This
appears to be a long-standing problem. For example, a 1982 Office of the Auditor
General report (Report No. 82-4) found that Athe Department of Transportation does
not provide sufficient information to the Transportation Board to enable the Board to
make well-informed decisions. The Board does not have adequate program options
and alternatives and lacks information on the impact of program policies.@
Most current Board members indicated that the problems described in the 1982 report
still exist. For example, one Board member stated that ADOT central staff make
programming decisions in isolation and have too much control over the transportation
decision-making process. Another Board member said that Board members are not
presented with enough information and alternatives in time to make any meaningful
suggestions or changes.
n Local interestsCADOT district engineers and local government representatives
expressed frustration with ADOT=s current planning processes. One district engineer
stated that a Ablack hole@ mentality exists within ADOT=s central office staff, evidenced
by a lack of feedback between these staff and the districts. Another stated that no one
within central ADOT can explain how programming decisions are made. Planners
from one local organization stated that the process is shrouded in mystery: no one
knows how ADOT prioritizes and selects projects.
Failure to define and consider criteria and data contributes to frustrationCThis frustration
is understandable given the Program Development Committee=s failure to explicitly
consider criteria and data or use a formalized process when making decisions. During
observations of ten Committee meetings, instead of discussing criteria or data when
selecting projects, the Committee appeared to make subjective decisions regarding
transportation projects. This results from several flaws in the Committee=s decision-making
process.
n First, while the Committee has adopted criteria provided in A.R.S. '28-111 and added
a few additional criteria, it has still not defined the criteria, assigned relative weights
to show which are the most important to consider, or determined how they will use the
criteria to make decisions. Criteria listed in statute for prioritizing transportation
projects include safety, user benefits, land use, and projects= useful life expectancy, and
ADOT=s additional criteria include congestion and access.
n Second, the criteria are not discussed when members recommend funding allocations
or projects for inclusion in the Program. While the committee members have years of
experience, the failure to lay out the criteria as they relate to each project prevents
meaningful discussion of different views and makes explaining their decisions to
others in terms of the criteria difficult.
n Finally, until just recently, no minutes were taken to document the Committee=s
discussions and decisions. Thus, even general discussions about projects are not
recorded and cannot be accurately related to persons outside the Committee.
ADOT also inadequately uses data generated from Arizona=s six transportation
management information systems to make decisions about major construction projects.
These systems provide data on pavement conditions, traffic congestion, road safety, public
transportation, and bridge status that are used to identify certain projects for construction.
While ADOT is still developing some of these systems, others already produce relevant
data that the Committee could also use to help prioritize major construction projects.
Problems observed during Committee meetings include the following:
n Making funding recommendationsCThe Committee did not use formulas or cost-benefit
analyses to recommend allocations for various types of transportation projects,
such as major construction, minor construction, and pavement preservation. Instead,
the Committee based its allocation recommendations on historical funding amounts
and members= judgment.
n Recommending projects for constructionCThe Committee prioritized and selected
projects for its recommended Five-Year Program without explicitly considering criteria,
data, or cost-benefit analysis. As a result, some projects may be selected that are not as
important as others. For example, the Committee chose a $6 million project for the
1998-2002 Five-Year Program that was promoted by a Board member, despite
unanimously agreeing that the project is not important and is certainly not a high
priority.
n Recommending other projects for fundingCAdditionally, the Committee made
recommendations to fund or increase funding for rockfall containment projects and
improvements to the Freeway Management System, ports-of-entry, and pavement
conditions without considering any data or criteria.1 In the case of the Freeway
Management System, ADOT has already authorized $87 million worth of projects in
previous Five-Year Programs. The System must be built incrementally, but cannot
provide its full benefit until it is completed, which will cost another $226 million.
However, the Committee has not prioritized the System as compared to other projects
and has decided to include only a minimal amount of funding for freeway
management system projects in the 1998 update to the Five-Year Program. ADOT needs
to determine the system=s priority to ensure that millions in state revenues are not
expended on a project that may never be completed.
1 The Freeway Management System is an automated system designed to monitor and control traffic flow on
freeways. The system includes ramp meters, traffic counters, freeway counters, and electronic road signs.
ADOT needs to adopt a more data-driven method for making decisionsCADOT should
develop a decision-making process based on criteria and data. To help develop such a
process, ADOT contracted with a consulting firm to identify quantitative methods for
making planning decisions. In fact, the consulting firm has already made 24 specific
recommendations regarding how ADOT can refine its decision-making process. The
consultant recommends that ADOT refine a project rating system for prioritizing projects,
incorporate data generated from management systems into the decision-making process,
and track decisions to ensure that projects meet performance standards. However, ADOT
has not implemented these recommendations.
Other states have developed decision-making processes based on criteria and data to make
justifiable decisions. For example, Ohio has a planning process that relies heavily on data
and performance measures. Data used for decision-making includes transportation
efficiency measured by traffic volume compared to road capacity, average daily traffic
counts, vehicle classification, safety, and economic development factors. Washington has
developed a sophisticated system for using performance measures to make trade-off
decisions. Several other states, such as Colorado, Missouri, New Jersey, Texas, and
Wisconsin, also use technical data and criteria to make transportation decisions.
Further, Utah conducted a study to identify improvements to its procedures for selecting
and funding highway projects. The study recommended adopting a data analysis model
that uses criteria and optimization techniques to make transportation decisions. According
to the authors of a Transportation Research Record article, this model is Aan extremely useful
decision model for prioritizing and programming transportation projects.@ The intent of
the model is not to Areplace expert judgment but rather to aid and enhance that judgment.@
ADOT Needs to Better Ensure
That Programming Decisions Are
Tied to Long-Range Goals
In addition to increasing the use of criteria and data, ADOT should make programming
decisions based on well-defined long-range goals for the State=s transportation system.
Currently, ADOT does not explicitly link project decisions to long-range transportation
priorities. This occurs because ADOT, in conjunction with the State Transportation Board,
has not specifically defined the State=s long-range transportation goals in terms of funding
allocations and project selection priorities. ADOT should create a more detailed long-range
plan that includes well-defined goals and priorities.
Planning decisions are not adequately linked to long-range goalsCThe Project
Development Committee fails to explicitly link planning decisions to long-range priorities
for the State=s transportation system. Although Arizona has a 20-year Transportation Plan,
the Committee rarely refers to it when making decisions. The 20-Year Plan is a general
policy document that provides information on the status and future needs of the State=s
transportation system. Though the plan is not project-specific or cost-constrained, it still
contains valuable information for making short-range decisions. For example, the Plan
identifies 14 priority corridorsCbroad geographic bands that provide important
transportation connections between parts of the State. One such corridor is between Tucson
and Phoenix, which includes Interstate 10, the Southern Pacific rail service, and Amtrak.
According to the Plan, the Aprotection and development of these corridors should be
included in the planning and performance criteria for State modal plans and regional and
local transportation plans.@
ADOT needs to improve long-range planningCADOT, in conjunction with the State
Transportation Board, needs to go beyond the current 20-Year Plan and better define its
long-term goals and priorities. Specifically, ADOT needs to include funding allocations
and specific projects in its plans. Without clearly defined future plans based on good
revenue forecasts, stakeholders at all levels of government cannot adequately plan for the
State=s unmet transportation needs. Also, without effectively linking specific decisions for
the Five-Year Program to long-range goals and priorities, limited resources may be
expended for projects that are not as important as others in meeting the State=s future
transportation needs.
Currently, ADOT has an internal committee examining ways to create a more detailed
long-range plan; however, the group has just started this process. ADOT may want to
consider looking at other states that have comprehensive long-range planning mechanisms
that are directly linked to short-range planning decisions. For example,
n Utah has two components in its long-range plan that are used to make planning
decisions. One is a financial forecast for the next 20 years. The other contains a listing
of all future projects needed for the State=s transportation system, including those that
cannot be built with existing revenues. Transportation regions and state decision-makers
use this information to make project selections and funding decisions. For
example, Utah found other revenue sources to build a $1 billion construction project
that could not be funded with existing resources.
n Washington=s long-range plan contains long-term objectives and options for meeting
those objectives. State rules require that no projects can be selected for construction that
are not identified as a solution in the long-range plan.
Further, experts suggest that in order for states to conduct effective long-range planning,
they must create a preliminary estimate of costs for such items as capital projects,
operations, and maintenance in a proposed plan. Next, states should forecast potential
revenue by funding source for both the short and long term, which enables states to
identify shortfalls and either modify the plan or develop new revenue sources. Finally,
states should allocate resources after consensus on the plan has been reached.
Recommendations
1. ADOT should adopt a method that makes greater use of data and criteria for making
programming decisions. ADOT should begin by determining the relative weights of
its current criteria. Also, ADOT should consider implementing the recommendations
and approaches identified by its consultants.
2. ADOT should continue its efforts to expand the involvement of its district engineers,
regional transportation planning groups, and the public in its transportation planning
and programming processes.
3. ADOT should continue its efforts to create a detailed long-range plan that includes an
accurate long-term financial forecast and a listing of needed transportation projects,
including those that cannot be funded with current revenues.
4. ADOT should better link short-range programming decisions to long-range priorities
by explicitly considering ADOT=s long-term transportation priorities and goals when
developing recommendations for projects and funding allocations for the Five-Year
Program.
FINDING II
ADOT MAKES EXCESSIVE
RELOCATION ASSISTANCE PAYMENTS
ADOT often pays more than is necessary to relocate persons who are required to move
because of a highway project. Some ADOT practices not only result in excessive payments,
but also violate federal and state law. To address these problems, ADOT needs to better
train its staff and maintain more accurate data on relocation assistance payments.
ADOT Required by Law to
Provide Relocation Assistance
When ADOT buys property it needs for a highway, state laws require ADOT to pay the
owner the property=s market value, which is determined by an appraisal. A.R.S. '28-1842
also requires ADOT to provide relocation assistance to those who are required to move
because of a highway project. Relocation assistance is intended to minimize the impact of
a highway project on those who are displaced, and ensure property owners are treated
fairly and consistently. Federal relocation assistance regulations include policies for
implementing this program. ADOT has adopted the federal relocation regulations in its
administrative code and operating manual, which apply to both state-funded and federally
funded projects.
Relocation assistance pays a person who owns and occupies a property the difference
between the price ADOT pays for the home and the price of a comparable dwelling
currently available on the market. These payments are known as price differential
payments. If the resident is renting the property, ADOT must pay the difference between
the monthly rent and utilities of the property being acquired and the monthly rent and
utilities of a comparable property, for 42 months. ADOT must also compensate all
displaced persons for moving costs and pay owner-occupants for other expenses, such as
closing costs on a replacement property and any increased mortgage interest costs. In fiscal
year 1996, ADOT relocated 487 residences and businesses, at a total cost of approximately
$7,102,400. Federal monies constituted $1.2 million of the total amount.
ADOT Makes Excessive
Relocation Payments
Although the regulations are meant to ensure fair compensation, ADOT often makes
payments that exceed the statutory maximum. These large payments result from improper
relocation practices, some of which violate federal and state law.
A study by the Federal Highway Administration found that some of ADOT=s relocation
assistance practices are improper. This 1995 study, requested by ADOT, identified
numerous problems with ADOT=s practices. A review of relocation assistance payment files
during this audit confirmed that ADOT still does not properly apply numerous
regulations. These practices not only cause excessive payments, but they also put federal
funding at risk because the federal government can recover monies spent in violation of
the regulations. For example, the Federal Highway Administration recently recovered $1
million for violations by the Massachusetts Department of Transportation.
Payments often exceed statutory limitsCPayments exceeding statutory limits were
common in the files reviewed during the audit. A.R.S. ''28-1844 and 28-1846 provide that
price differential payments cannot exceed $22,500 and rental assistance payments cannot
exceed $5,250 unless the construction project will be delayed because comparable
dwellings could not be located. However, as shown in Table 1 (see page 17), ADOT=s
average rental assistance payment was more than double the statutory maximum. Price
differential payments also frequently exceeded the limits.
Improper procedures cause excessive paymentsCSeveral improper ADOT procedures lead
to high payments. ADOT incorrectly applies the regulations in six areas:
n Inappropriately using Alast resort@ provisionCAs previously noted, A.R.S. '28-1851
allows payments exceeding the limits to be made when a highway construction project
Acannot proceed on a timely basis because comparable replacement dwellings are not
available and the head of the displacing agency determines that the dwellings cannot
otherwise be made available.@ However, it appears that ADOT simply employs this
Alast resort@ provision whenever an agent calculates a payment that exceeds the
statutory limits, regardless of when construction will commence. Construction on the
Squaw Peak segment studied was not scheduled to begin for 6 to 12 months after
payments were made using the last resort provision. However, according to ADOT
management, acquisition of all necessary properties can occur up to 4 months prior to
the planned start of construction without delaying the construction schedule.
In those instances where Right-of-Way staff do not locate a comparable dwelling that
will result in a statutorily allowed payment, Right-of-Way management should
postpone determining the assistance payment and search further for acceptable
properties. Additional properties may become available, resulting in a reduced
payment. In fact, in one file reviewed, searching for additional comparable dwellings
saved ADOT $5,900. The Alast resort@ provision should be reserved for use when
construction is imminent.
Not searching for additional properties may result in ADOT selecting properties for
relocation assistance calculations that are superior to the houses acquired. For example,
ADOT acquired a property renting for $500 a month. It was a 1,021-square-foot, two-bedroom,
one-bath house with a carport, built in 1969. The house used for the payment
calculation was a three-bedroom, two-bath house with 1,316 square feet, a two-car
garage, and a spa, built in 1988. It rented for $900 a month, which resulted in a rental
assistance payment of $16,800.
Table 1
Arizona Department of Transportation
Right-of-Way Division
Relocation Payments and Percentage
Exceeding Statutory Maximum
for Selected Highway Projects
Year Ended June 30, 1996
Price Differential Payments Rental Assistance Payments
($22,500 Statutory Maximum) ($5,250 Statutory Maximum)
Squaw Peak Interstate Squaw Peak Interstate
Highway 10 Highway 10
Number of
payments reviewed 18 11 12 5
Payment range $7,400 $12,500 $6,300 $5,250
to $25,236 to $27,500 to $20,840 to $16,800
Average payment $17,950 $19,900 $13,725 $11,970
Percentage of payments
exceeding maximum 44% 45% 100% 80%
Source: Auditor General staff analysis of 46 ADOT Right-of-Way relocation assistance files.
n Basing payments on most expensive comparable propertyCPrice differential and
rental assistance payments are based on the price of a comparable property. For both
renters and owner-occupiers, ADOT searches for homes similar to the property to be
acquired. A displaced person does not have to purchase or rent any of the properties
ADOT finds; the properties are simply used to calculate the relocation payment. The
regulations require that three comparable homes should be located, if available, and the
payment should be based on the one that is Amost nearly representative@ of the home
acquired.
ADOT, however, calculates every price differential and rental assistance payment by
using the most expensive of the three comparable homes. Not only does this practice
violate the regulations, it causes many payments to be thousands of dollars more than
necessary. If, for example, ADOT had used the mid-priced comparable property in each
of the 46 cases reviewed for this audit, the State would have saved $106,096 on these
payments alone. Using the lowest-priced property would have saved $257,697.
In one file reviewed, ADOT paid $31,500 for an 894-square-foot, 2:-bedroom house in
Tucson. The lowest-priced comparable dwelling the agent found was a three-bedroom,
two-bath house with 1,172 square feet and an asking price of $63,000. However, the
most expensive property was used, with a price of $73,500.
In another case, the property ADOT acquired rented for $750 a month. One of the three
comparable properties also rented for $750 a month. However, the agent used the most
expensive of the three comparable properties: a new house with better features, renting
for $1,000 a month. As a result, ADOT paid $11,970 in rental assistance when it could
have paid for only the moving costs.
Of the 10 states surveyed, all use the most comparable property, whether it is the least
or most expensive property, for payment calculations.1
n Failing to adjust asking prices of comparable propertiesCIn making the price
differential calculation, ADOT uses the asking price of the comparable properties,
without taking into consideration that the price of a home is generally negotiable. The
regulations require an adjustment to be made to the asking price of comparable
properties, as justified by local market conditions. To fulfill this requirement, California
generally makes a 3 to 5 percent adjustment, Utah usually adjusts between 1 and 3
percent, and Alabama adjusts approximately 5 percent. The City of Phoenix generally
finds that actual selling prices for homes are 4 to 5 percent lower than asking prices in
the Phoenix area. By making this adjustment, ADOT would have saved $110,635 to
$138,294 on the 29 price differential payments in the files reviewed.
n Improperly determining moving cost paymentsCIn addition to the price differential
or rental assistance payment, ADOT must pay for moving costs. There are two moving
cost options available to displaced persons: a payment for actual moving costs,
determined from commercial moving bids, or a fixed payment, based on the number
of rooms in the dwelling acquired.
Although it appears that ADOT paid the appropriate amounts when it based payments
on actual moving costs, ADOT often made improper determinations of fixed payments.
In 36 of the 46 cases reviewed, moving cost payments were based on fixed payments.
Fixed payments are calculated by using a schedule the Federal Highway
Administration approved that specifies a payment based on the number of rooms in
a house. A room should be counted as one room, and a bathroom not counted, unless
1 States surveyed regarding right-of-way practices include Alabama, California, Colorado, Florida, Kentucky,
Missouri, New Mexico, North Carolina, Utah, and Washington.
it contains an excessive amount of personal property. Additionally, when a room is
used for storage purposes it can count as more than one room. However, the room
counts in the files reviewed were often excessive. For example, agents counted 21.5
rooms of property in a two-bedroom, 1,047-square-foot house, and 29 rooms in a three-bedroom,
1,092-square-foot house, resulting in payments of $2,400 and $3,200,
respectively. In several files, bedrooms or living rooms were counted as at least two
rooms, and bathrooms counted as a room.
n Inappropriately using low-income method for rentersCSome excessive payments also
result from ADOT=s improper use of an income-based method for calculating
payments. Problems were identified in two of the five cases reviewed using this
method. Regulations provide that ADOT must pay renters the difference between the
rent and utilities of a comparable rental and the lower of either a) the rent and utilities
the renter had been paying, or b) 30 percent of the renter=s gross monthly income. This
difference is then multiplied by 42 months to calculate the total payment made to the
renter. According to the Federal Highway Administration, the renter is responsible for
providing income documentation. The regulations state that if a person does not
provide appropriate evidence of income, the income method should not be used for the
payment calculation. However, in one case the renter produced only a handwritten tax
return from the previous year, with no W-2 forms. In another case, a renter provided
a tax return for the previous year to document her income. She told the Right-of-Way
agent that her annual income was low because she did not start her present job until
August of that year. Thus, it represented only five months= pay. Although the renter
continued to have the same monthly income as that which she had during the last 5
months of the preceding year, the agent determined her current monthly income by
dividing the total income for the preceding year by 12 months instead of 5 months. This
significantly understated the renter=s current monthly income. The agent then used this
amount to calculate a rental assistance payment of $16,217. When asked about this case,
the agent=s supervisor stated that the agent=s calculations improperly understated
monthly income.
n Paying unnecessarily for features the comparable property lackedCADOT also
unnecessarily increases price differential payments by improperly applying another
relocation requirement. The regulations provide that a price differential should be
increased by an appropriate amount if the site of the comparable property lacks a
Amajor exterior attribute@of the property acquired, such as a swimming pool or a
significant lot size difference. ADOT paid for features in 17 cases reviewed. However,
in 10 of these cases, ADOT paid for features that are not Amajor exterior attributes,@
such as fireplaces, barbecues, wood stoves, solar water heaters, and ceiling fans.
Federal Highway Administration officials have stated that an agency should not pay
for these types of features.
Additional Factors Contribute
To Improper Procedures
Right-of-Way agents= failure to properly apply the regulations may result from two
additional factors. First, training and oversight regarding relocation assistance seems to be
lacking. Second, poor data systems provide insufficient management information.
Management has not taken steps to ensure compliance with regulationsCFailure to
properly apply the regulations may result from insufficient training. ADOT does not
provide its staff or consultants with mandatory training in determining relocation
assistance benefits. The federal government provides relocation assistance training through
the National Highway Institute, but ADOT employees and consultants have not attended
these classes. The courses include a basic relocation class, an advanced class, and business
relocation classes. Each class costs approximately $1,000 per day. A percentage of the
federal revenues ADOT is provided for the construction budget can be used for such
training costs.
Further, a Right-of-Way management practice and a lack of accurate data contribute to
ADOT=s failure to ensure compliance with the regulations. First, management reviews
payment calculations prepared by staff agents, but does not review the work of consultants
employed to supplement staff. Consultant calculations are reviewed by staff agents.
ADOT management should review both staff and consultant calculations. Second, ADOT
lacks accurate relocation assistance data. In 30 percent of the files reviewed, there was a
discrepancy between actual payments and the amounts listed in the database that tracks
all acquisition and relocation activity. The lack of oversight and accurate data make it
difficult for managers to detect payments that exceed limits.
Recommendations
1. ADOT should provide more formal training to agents to improve their compliance with
regulations.
2. ADOT should more closely adhere to regulations in the following areas when
calculating relocation assistance payments:
a. Use the price of the most comparable dwelling to calculate price differential and
rental assistance payments;
b. Adjust the asking prices of comparable dwellings to reflect the difference in the
local market between asking and selling prices;
c. For fixed moving cost payments, create guidelines for determining the number of
rooms in a property to ensure reasonable and consistent payments;
d. Apply the last resort provision only when necessary to allow a project to continue,
and document in the file justification for the decision;
e. Use the low-income method for making a rental assistance calculation only when
sufficient proof of low income is provided; and
f. Make adjustments only when the site of a comparable property lacks a Amajor
exterior attribute@ of the acquired property.
FINDING III
ADOT SHOULD DEVELOP A
FORMAL PROCESS FOR IDENTIFYING AND
DISPOSING OF UNNEEDED PROPERTY
While ADOT has begun selling some unneeded properties, it has not established a plan
for identifying excess properties. ADOT has taken steps to eliminate properties no longer
needed, selling several million dollars= worth of land. In addition, ADOT=s method of
identifying properties may leave many excess properties uninventoried. ADOT needs to
implement policies and procedures to better identify and sell properties as soon as they are
no longer necessary for highway projects.
ADOT defines excess property as parcels of land in surplus of transportation needs. Excess
property results from two basic sources. First, ADOT often purchases land that will not be
needed for construction, but will be damaged in the construction process. Rather than
leaving a landowner with a damaged piece of property, ADOT purchases the extra land.
In addition, changes during a project=s design and construction phase can result in pieces
of land that are no longer needed. ADOT is sometimes left with valuable pieces of
property. However, the remaining lands are often small parcels of little value. Regardless
of the parcel=s value, ADOT is responsible for maintaining the land.
Federal regulations require that states reimburse the federal government for excess
property, purchased in whole or part with federal monies, two years after the highway is
open to the public or when ADOT makes its final request for federal monies for right-of-way
purchases, whichever comes first. However, if the property is valued at less than
$2,000, the agency does not have to reimburse the federal government. An agency can
decide to keep excess lands, but it still must remit to the federal government the properties=
fair market value.
ADOT Actively Selling
Excess Properties
ADOT has made significant efforts to reduce its excess property inventory. In part due to
legislative interest, ADOT hired two consultants to research properties no longer needed,
prepare such properties for eventual sale, and update the excess property inventory. These
efforts have already resulted in large monetary returns. At the time of the audit, ADOT
had auctioned off 133 parcels, for $5.9 million. Prices paid for parcels ranged from $500 to
$895,000. To date, ADOT has identified an additional 366 excess properties. Currently,
these parcels are in various stages of the disposal process, including 96 parcels ready for
sale. While no estimates exist for the fair market value of all 366 parcels, the 96 parcels
ready have been appraised at over $3 million.
ADOT Lacks Systematic
Mechanism for Identifying
and Selling Excess Property
While ADOT has made progress selling properties previously identified, it does not know
how many more parcels of excess property it owns, and it lacks the policies and procedures
needed to track and dispose of excess lands. Because ADOT does not maintain an
inventory of its properties, its personnel sometimes learn that the Department owns a
parcel only when someone calls to inquire about purchasing it. In order to meet federal
requirements and maintain an up-to-date inventory, ADOT will need to develop an
inventory of all property and then develop policies assigning responsibility for identifying
excess lands. ADOT also needs to spell out the criteria for determining when excess
property should be sold.
ADOT unaware of all the properties it ownsCADOT needs to develop an inventory of all
its properties. Currently, ADOT relies on several mechanisms to identify land it owns.
Although ADOT has hired consultants to catalog its lands, the consultants rely on old,
often incomplete right-of-way plans. Additionally, ADOT learns of properties through calls
from the general public. While it is difficult to determine how many properties exist, one
ADOT staff member estimates that there are several hundred additional properties in
Maricopa County alone.
Policies are needed to guide disposition processCIn addition to developing and
maintaining a current inventory of properties, ADOT needs to develop a clear policy
designating responsibility for identifying excess properties. Current policies indicate that
when excess property is identified, district engineers should submit disposal forms to the
Right-of-Way unit and other groups within ADOT. However, the policies do not indicate
who among the district staff should identify potentially excess property or how to make
the determination that a parcel is surplus. ADOT staff have suggested that project
managers should be responsible for identifying excess properties. Project managers are
involved with projects from the beginning to end stages of construction, making them
uniquely qualified to identify land that may not be needed.
The lack of guidelines for determining when property should be sold also hinders ADOT=s
ability to dispose of excess property. After a property has been identified as surplus, its
sale must be approved by various units within ADOT, such as statewide project
management and the materials unit. Because there are no written policies dictating when
a property should be sold, each unit has individual discretion as to what should be kept.
Internal reports suggest obtaining these approvals causes a significant time lag in selling
the land. On several occasions, it took over one year for the units to sign off on the
disposal form.
Finally, complicating the decision to keep or sell the land is the low value of some
properties. In some cases, it would cost more to sell a property than it is worth. One ADOT
estimate found that it costs approximately $5,000 to sell a piece of land. This estimate
included the cost of researching the property=s title, developing a legal description,
conducting an appraisal, and efforts made to sell the property. However, some properties
already sold were worth less than $5,000. In these cases, ADOT has two options that may
reduce or eliminate selling costs. According to A.R.S. '28-1865, ADOT may dispose of the
properties worth less than $1,000, by quitclaim deed to the adjoining property owners
without formally trying to sell the property. ADOT also has the option of paying property
owners for damages instead of purchasing land that will be damaged by its projects.
ADOT may need to include in its guidelines for selling properties alternate strategies for
dealing with properties of little or no value.
ADOT Could Adopt Ideas
from Other States
To better track property in the future, ADOT should take additional steps to identify and
sell excess property. While developing its policies, ADOT should consider methods
implemented in other states to address this problem. Other states also experience
difficulties identifying and selling their excess land. Interviews with right-of-way staff in
other states revealed that some excess land is not identified for some time after
construction, and often only after public inquiries. However, a few states have found more
proactive ways to accomplish this task. Officials representing these states discussed the
necessity of having the transportation department emphasize the importance of reducing
excess land inventory. ADOT should consider some of the following methods to aid in its
reduction of excess lands:
n Complete inventoriesCOther states, such as Colorado, have established databases
with complete listings of all department-owned properties.
n Periodic review of propertiesCBoth the Washington and Colorado Departments of
Transportation require systematic reviews of inventory to determine excess land that
can be sold. Currently, Colorado=s Department requires that each region annually
evaluate their properties, including newly completed construction projects, to
determine whether or not any properties should be sold. In fact, Colorado law requires
the state transportation commission to inventory excess lands.
n Committees determine which properties are excessCThe California Department of
Transportation has a property retention committee charged with determining which
properties are excess, and if those excess lands should be sold. If the committee
determines a property should be kept, it must prove to the Department why the land
is still needed.
Recommendations
1. ADOT should expand the excess property inventory currently being developed to
include all land ADOT owns. In addition, ADOT should develop procedures to ensure
that the property inventory is updated as each new property is acquired.
2. ADOT should develop policies pertaining to excess properties. These policies should:
n Define staff responsibilities for identifying properties that may be excess, and
n Provide guidelines for determining when properties should be sold that take into
account the properties= varying values, specifically those of little value.
FINDING IV
ADOT NEEDS TO TAKE STEPS
TO ENSURE IT USES RIGHT-OF-WAY
CONSULTANTS EFFICIENTLY
ADOT=s Right-of-Way Unit contracts with private companies for several important
functions. However, ADOT may not be effectively using its consultants. ADOT decided
to privatize many of these functions without determining whether cost savings would
result and still fails to collect adequate information to ensure cost savings continue.
Further, the Right-of-Way unit may be duplicating its consultant oversight efforts and fails
to adequately evaluate consultant performance.
Consultant Use within
ADOT=s Right-of-Way Unit
The ADOT Right-of-Way unit purchases properties for Arizona highways and other
transportation projects, and manages lands needed for future transportation projects.
Currently, there are eight different sections within the Right-of-Way Unit, including
administration. Staff within these sections are responsible for preparing plans and deeds
for needed properties, purchasing properties, providing relocation assistance to
landowners, and managing and selling properties. ADOT also contracts with the private
sector for a significant portion of its property management, acquisitions, plans, titles, and
appraisal functions. The unit currently uses a total of 38 on-call consulting firms, in
addition to dozens of private maintenance contractors, such as plumbers, carpenters, and
painters, to work on properties until they are needed for a highway project. In fiscal year
1995-96, consultant contracts amounted to approximately $13 million.1
Limited Data Available
To Determine Cost Savings
Right-of-Way management cannot determine if its use of consultants is cost-effective.
According to Right-of-Way management, many previous privatization decisions were not
1 $4.3 million of the $13 million is used for conducting appraisals, right-of-way planning, title searches, and
property management. The remaining $8.8 million is used for the testing and removal of hazardous waste
on acquired properties, maintenance of properties, and demolition of properties prior to construction.
based on an analysis of cost savings, but instead on external recommendations and
reductions in ADOT staff. Right-of-Way staffing has decreased by 30 percent in the last 5
years due to a Project SLIM study (process improvement studies sponsored by the
Governor=s Office), that recommended eliminating 18 positions, numerous Right-of-Way
reorganizations, and retiring staff. At the same time, workloads increased. As staffing
levels have decreased, the unit began relying more heavily on consultants. Managers
indicated they needed to contract with the private sector for additional assistance.
However, ADOT fails to track all the necessary data to evaluate whether privatization
attempts have been cost-effective. Although both Arizona=s and the federal government=s
privatization policies suggest comparing costs to complete a function in-house versus the
private sector, ADOT lacks complete cost comparison data between ADOT staff and
current consultants. While the unit has salary information for both in-house staff and
consultants, there is limited information available on overhead and other indirect costs
needed to determine the cost of completing a function in-house. Additionally, the Right-of-
Way unit does not track the amount of time staff spend overseeing consultants, which
is an important component of the cost to privatize a function. Interviews with Right-of-
Way managers revealed that developing an in-depth cost comparison is a long-term goal;
however, this information is not currently tracked.
ADOT Could Improve
Its Management of
Consultant Contracts
In addition to collecting more data to evaluate its privatization decisions, ADOT needs to
better manage the consultants they are currently using. ADOT should determine if the
level of oversight it gives consultants is appropriate. Also, Right-of-Way managers and
staff need to increase their efforts to document problems with consultants.
Significant time spent overseeing consultantsCRight-of-way staff appear to be spending
a significant amount of time monitoring and reviewing the work of consultants. A survey
of Right-of-Way staff was conducted to determine the amount of time spent reviewing and
managing consultants. Staff were asked to estimate the amount of time they spend
overseeing consultants or reviewing their work. Staff indicated spending an average of 33
percent of their time monitoring consultants. Units that relied heavily on the work of
consultants indicated spending a greater percentage of their time reviewing consultants=
work. Their remaining time at work is spent completing other assigned tasks. Yet, in some
situations, ADOT staff reported that they re-inspected the work of consultants already
supervised by employees in other right-of-way sections. For example, project management
staff reported that they review and modify the work of consultants who develop right-of-way
plans. However, staff within the plans unit already monitor these consultants.
Similarly, staff in several units review appraisal reports and title reports completed by
private fee appraisers and private title companies, respectively. This confirms a 1993
internal study that also found a large amount of duplication in the Right-of-Way unit in
the form of employees validating and checking previously gathered data.
ADOT should take steps to determine if the number of staff needed to review consultants=
work is appropriate and if oversight efforts are duplicated. As part of this effort, ADOT
should consider developing a time code for staff to use that will track the time they spend
reviewing consultants= work.
ADOT needs to document consultant performanceCAdditionally, Right-of-Way staff fail
to adequately document consultants= performance through formal evaluations. Throughout
the audit, managers expressed frustration with the level of consultant error and other
problems with consultants that ranged from inadequate quality to an inability to complete
work according to the contract schedule. However, none of the sections that use
consultants have formal processes for evaluating their consultants at least annually. Only
one group within the Right-of-Way unit appears to perform any evaluations, and these
reviews are completed only once every two to three years. Yet, evaluations provide critical
information to ensure consultants achieve the standards set in their contracts. In fact,
according to the American Association of State Highway and Transportation Officials
guidelines, agencies should evaluate consultants at pre-established points for each contract.
Further, the evaluations should Aconsider formal technical reviews, quality and timeliness
of work, and administrative relationships between the consultant and the agency.@1
Other groups within ADOT are required to perform annual evaluations of consultants. For
example, the engineering consulting group, which hires consultants for various ADOT
units such as design or bridges, requires that all consultants receive a yearly evaluation
from their supervisor. The Right-of-Way unit should begin conducting yearly evaluations
of all consultants. This will provide the unit with documentation of any problem areas that
need to be addressed.
The Right-of-Way unit also needs to work with the ADOT procurement group in
identifying any problems with consultants. Procurement staff should be notified of any
problem areas since they have the ability to negotiate with or remove poorly performing
consultants. Further, some of the problems encountered with consultants might be
alleviated through clearer communication of ADOT standards in the contract negotiation
stage, or redefining the contract scope.
1 American Association of State Highway and Transportation Officials Guidelines for Preconstruction Engineering
Management, published in September 1991.
Recommendations
1. ADOT should continue its efforts to collect the financial data necessary to evaluate
privatization attempts. This would include data on the direct and indirect costs of
completing specific tasks in-house and the costs associated with managing consultants.
2. ADOT Right-of-Way management should determine whether the current level of
consultant oversight is necessary. Specifically, they should determine if the number of
staff reviewing consultants= work is appropriate and if staff are duplicating oversight
efforts. To assist in this evaluation, ADOT should consider establishing a separate time
reporting code to track staff time spent reviewing and monitoring consultants.
3. The Right-of-Way group should conduct performance evaluations of all consultants at
least annually.
FINDING V
ADOT SHOULD NOT PROVIDE STAFF
FOR THE PIMA ASSOCIATION OF GOVERNMENTS
TRANSPORTATION PLANNING ORGANIZATION
ADOT should cease staffing the Pima Association of Governments (PAG) Metropolitan
Planning Organization. Currently, ADOT employees serve as PAG regional transportation
planners. However, ADOT does not provide this service to any of the State=s other regional
planning organizations.
PAG is one of four Metropolitan Planning Organizations (MPOs) in Arizona. Federal law
requires urban areas with populations of over 50,000 to form MPOs through an
intergovernmental agreement between the Governor and at least 75 percent of the local
governments within the region. MPOs are responsible for a number of regional functions,
including transportation planning. Specifically, they must create annual regional
transportation improvement programs and long-range transportation plans. Each MPO
employs transportation planners to develop these plans. However, PAG only employs 3
staff, while 14 ADOT employees perform PAG=s remaining planning functions.
Using ADOT Employees for PAG
Regional Transportation Planning
Activities Is Inappropriate
Providing state employees to PAG for regional transportation planning activities is costly
and inequitable. The policy is costly because in fiscal year 1996-97, the salaries of state
employees serving as regional transportation planners for PAG amounted to $525,655. The
policy is inequitable because ADOT has not provided planners for any of the State=s other
regional transportation planning organizations since 1992. In 1991, Peat Marwick, a
consulting firm, examined the relationship between ADOT and the Maricopa Association
of Governments= (MAG) Transportation Planning Office. At the time, ADOT employees
served as MAG transportation planners. The report recommended that ADOT cease
providing employees for this function since the arrangement A. . . raised certain questions
about the group=s ability to serve the needs of two different organizations. . . .@ and further
stated that the staff=s Adual reporting responsibilities left it with an uncertain sense of
accountability.@ ADOT formally stopped providing state employees for MAG=s regional
transportation planning activities in 1992.
Nationally, state departments of transportation do not staff MPOs or other types of regional
planning groups. None of the 13 states contacted provide state employees for regional
transportation planning activities.
Recommendation
ADOT should not provide planning staff for the Pima Association of Governments
Transportation Planning Office.
Agency Response