REPORT TO CONGRESS ON THE SURFACE TRANSPORTATION PROJECT DELIVERY PILOT PROGRAM ACTIVITIES

Federal Highway Administration
August 11, 2008 – August 10, 2009

As stated in Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU) Section 6005 (a), codified as 23 United States Code (U.S.C.) 327 (h), the Federal Highway Administration (FHWA) shall submit an annual report to Congress on the administration of the Surface Transportation Project Delivery Pilot Program (Pilot Program). This is the fourth report submitted to Congress and provides information on the activities of the Pilot Program during its fourth year, from August 11, 2008, to August 10, 2009.

Introduction

The Pilot Program, codified as 23 U.S.C. 327, establishes a program to allow the Secretary to assign and the State to assume the Secretary's responsibilities under the National Environmental Policy Act (NEPA) for one or more highway projects. Upon assigning NEPA responsibilities, the Secretary may further assign to the State all or part of the Secretary's responsibilities for environmental review, consultation, or other action required under any Federal environmental law pertaining to the review of a specific highway project. When a State assumes the Secretary's responsibilities under this program, the State becomes solely responsible and liable for carrying out the responsibilities it has assumed, in lieu of FHWA.

The first Report to Congress on the Pilot Program, issued on September 12, 2006, outlined the preliminary activities in implementing the Pilot Program. The second Report to Congress, issued on October 10, 2007, discussed the activities in preparing for administering the program, ensuring ongoing communication and coordination with the pilot States, and addressing the audit process. The third Report to Congress, issued on April 29, 2009, detailed the administration by FHWA of California's participation in the Pilot Program and included the first FHWA audit report on the January 2008 audit. This fourth Report to Congress will include the FHWA second audit report on the July 2008 audit and the FHWA third audit report on the January 2009 audit. This Report will also discuss the fourth FHWA audit completed in July 2009. The draft of that audit report is being finalized. This Report will also discuss the progress that Caltrans has made during the two years of the Pilot Program and what FHWA has learned in those two years.

Status of Pilot Program Participation

Even after multiple outreach efforts to all States asking for interest in participation, California is the only State currently participating in the Pilot Program. A Memorandum of Understanding (MOU) between FHWA and California Department of Transportation (Caltrans) became effective July 1, 2007.

The Audit Process

To ensure compliance by each State participating in the Pilot Program, 23 U.S.C. 327(g) mandates that FHWA, on behalf of the Secretary, conduct semiannual audits during each of the first two years of State participation; and annual audits during each subsequent year of State participation. The focus of the FHWA audits is to assess pilot State compliance with the MOU for participation in the Pilot Program and the applicable Federal laws and policies, collect information needed to evaluate the success of the Pilot Program, evaluate pilot State progress towards achieving its performance measures, and collect information needed for the Secretary's annual Report to Congress on the administration of the Pilot Program. 23 U.S.C. 327(g) also requires FHWA to present the results of each audit in an audit report. The audit report must be made available for public comment, and FHWA must respond to public comments received no later than 60 days after the date on which the period for public comment closes.

An effective audit process must assess compliance with program requirements, provide an independent perspective on the success of the program, and provide technical assistance, when possible. In the case of a Pilot Program, the audit process also should enable the development of lessons learned for other State Departments of Transportation (DOTs) that might participate in the Pilot Program or another similar program in the future.

Limitations of Audits Conducted To Date

The conclusions presented in the audit reports are opinions based upon interviews of selected persons knowledgeable about past and current activities related to the execution of the Pilot Program at Caltrans, and a review of selected documents over a limited time period. The FHWA audit team's ability to conduct the audits and make determinations of Caltrans' successful participation in having met its commitments under the Pilot Program has been further limited by the following:

Audit Team

The FHWA leads and conducts each compliance audit of a State DOT participating in the Pilot Program. The audit teams for the four completed audits have included representatives from the following FHWA offices and Federal agencies, with the only variable being the Federal resource agency representative:

Audit Reports

Following the completion of each on-site audit to a State DOT, an audit report is prepared by the audit team. The report consists of background, scope of the audit, audit process and implementation, overall audit opinion, and findings sections. Each audit report is developed by the audit team. The FHWA permits the State DOT to review and comment on the draft report before publishing it in the Federal Register.

The draft audit report is published in the Federal Register for public comment for a period of at least 30 days. Any comments received, with appropriate responses by FHWA, will be incorporated into the final audit report. The final audit report also is published in the Federal Register. The FHWA audit report includes all the comments received with the appropriate responses.

First Caltrans Audit — January 29 – February 1, 2008

The first onsite audit conducted under the Pilot Program was carried out in California from January 29 through February 1, 2008. The audit, as required in SAFETEA-LU, assessed Caltrans' compliance with the roles and responsibilities assumed and also provided recommendations to assist Caltrans in creating a successful program.

As this was the first FHWA audit of Caltrans' participation in the Pilot Program, it was designed to begin the periodic auditing process. Prior to the onsite audit, team members conducted telephone conversations with Federal resource agency contacts in California. The individuals interviewed did not identify any specific problems or issues with coordination under the Pilot Program at this early stage.

The onsite audit team conducted a review of the fundamental processes and procedures put in place by Caltrans to meet the assumptions of the roles and responsibilities set forth in the MOU and their application for assumption. The FHWA audit team carefully examined Pilot Program areas to confirm compliance in accordance with the established criteria set forth in the MOU and the Caltrans' application for assumption. The audit identified areas of improvement in order to meet the established criteria. The audit team reviewed how Caltrans and District level staffs are using procedures and tools in the areas of program management, quality assurance and control and legal sufficiency. The audit team conducted onsite visits at Caltrans Headquarters Office in Sacramento and at Caltrans District 4 in Oakland. During the audit, the team conducted interviews with more than 40 Caltrans staff in both the capital and local assistance programs, as well as with legal staff at Headquarters and in other District Offices. The audit team interviewed a cross section of staff with responsibilities under the Pilot Program including top senior managers, senior environmental planners, associate planners, and technical experts. The audit team also reviewed project documentation from Caltrans' projects that was provided to the FHWA California Division Office.

Overall, the audit found that as of February 1, 2008, Caltrans had made reasonable progress in implementing the start-up phase of the Pilot Program operations and learning how to operate this new Pilot Program effectively. Based on the information reviewed, the audit team determined that Caltrans was carrying out the responsibilities it assumed in keeping with the intent of the MOU. During the onsite audit, Caltrans' staff and management expressed ongoing interest in obtaining constructive feedback on Pilot Program successes and areas for improvement.

The audit team presented its findings (compliant, needs improvement or deficient) in the audit report. The FHWA received input from Caltrans on the draft report. The first audit report was published in the Federal Register for public comment on June 2, 2008, with a 60-day comment period. At the close of the comment period, August 1, 2008, only one comment from Caltrans had been received. The Caltrans comment thanked FHWA for the opportunity to participate in the Pilot Program and for providing the audit findings and technical assistance to Caltrans through the audit process. The final audit report was published in the Federal Register on September 23, 2008, and can be found at http://edocket.access.gpo.gov/2008/pdf/E8-22131.pdf.

Second Caltrans Audit — July 28 – August 1, 2008

The FHWA audit team conducted the second onsite audit of Caltrans' participation in the Pilot Program from July 28 through August 1, 2008. For this audit, the FHWA audit team continued to examine Pilot Program areas to confirm compliance in accordance with the established criteria in the MOU and Caltrans' application for assumption, as well as to identify Pilot Program areas in need of improvement to meet the established criteria. The audit team expanded its focus from the first audit to include reviewing the core area of performance measures.

Prior to the onsite audit the audit team conducted interviews with Federal resource agencies and Caltrans' Headquarters staff. The onsite audit consisted of site visits to three Caltrans Districts: District 7 (Los Angeles), District 8 (San Bernardino), and District 11 (San Diego). This audit consisted of interviews with more than 40 Caltrans staff at Headquarters and in the three Districts in the capital and local assistance programs, as well as legal staff at Headquarters and in field offices. As with the first audit, the audit team interviewed a cross section of staff including top senior managers, senior environmental planners, associate planners, and technical experts. The team also reviewed project documentation and project files for more than 30 files in the three Districts visited.

The second audit report was published in the Federal Register for a 30-day comment period. Only one comment was received by FHWA during the 30-day comment period for the draft audit report. It was an anonymous comment and questioned the cost and time saving benefits of this Pilot Program. The FHWA considered this comment and felt that this comment related more to the need for the Pilot Program as opposed to the results of the audit, especially since the comment was submitted prior to the audit report being publicly available. As such, the FHWA felt that there was no need to revise the draft audit report findings to be responsive to the comment. The final audit report was published in the Federal Register February 17, 2009, and can be found at http://edocket.access.gpo.gov/2009/E9-3325.htm and in Appendix A of this report.

Third Caltrans Audit — January 26 – January 30, 2009

The FHWA audit team conducted the third onsite audit of Caltrans' participation in the Pilot Program from January 26–30, 2009. For this audit, the FHWA audit team continued to examine Pilot Program areas to confirm compliance in accordance with the established criteria in the MOU and Caltrans' application for assumption, as well as to identify Pilot Program areas in need of improvement to meet the established criteria. The audit team expanded its focus to include onsite visits to the two Caltrans Regional Offices and also to focus on the local assistance program.

Prior to the onsite audit, the audit team conducted interviews with Federal resource agencies and Caltrans' Headquarters staff. The onsite audit consisted of site visits to District 3/North Region, District 4, District 6/Central Region, and District 10. This audit consisted of interviews with more than 80 Caltrans staff in both the capital and local assistance programs.

As with the other audits, the audit team interviewed a cross section of staff including top senior managers, senior environmental planners, associate environmental planners, environmental planners and technical experts. The team also reviewed project documentation and project files for more than 35 files in the three Districts visited.

The third audit report was published in the Federal Register for a 30-day comment period. There were no comments received by FHWA during the comment period. Therefore, the FHWA felt that there was no need to revise the draft audit report. The final audit report was published in the Federal Register July 28, 2009 and can be found at http://edocket.access.gpo.gov/2009/E9-17896.htm and in Appendix B of this report.

Fourth Caltrans Audit — July 27 – July 31, 2009

The FHWA audit team conducted the fourth onsite audit of Caltrans' participation in the Pilot Program from July 27-31, 2009. Again, the FHWA audit team continued to examine Pilot Program areas to confirm compliance in accordance with the established criteria in the MOU and Caltrans' application for assumption, as well as to identify Pilot Program areas in need of improvement to meet the established criteria. The audit team focused its onsite visits to review of project files and compliance with all assumed responsibilities. The audit team visited Caltrans Districts 5, 7, 11 and 12. Prior to the onsite audits, and also during the onsite audit, interviews were conducted with agency staff in the following Federal resource and permitting agencies: the U.S. Army Corps of Engineers (USACE); the USFWS; the USFS; the National Oceanic and Atmospheric Administration (NOAA); and the Environmental Protection Agency (EPA) regional offices in California. During the on-site audit, interviews were conducted with 80 staff at the four Caltrans District offices visited, legal staff in Caltrans Headquarters, and USACE staff in the Los Angeles District office. The audit team also reviewed project files and records for over 45 projects under the Pilot Program.

The draft fourth audit report has been provided to Caltrans for their review and comments prior to FHWA publishing the draft report in the Federal Register.

Observations

As this Report to Congress occurs at the milestone marking the two-year point of Caltrans' participation under the Pilot Program, FHWA feels that it is appropriate and responsible to reflect on the past two years.

Entering into the Pilot Program, Caltrans was a State that had implemented for many years its own State NEPA process (the California Environmental Quality Act – CEQA). Additionally, Caltrans had a Quality Assurance/Quality Control (QA/QC) process in place. Yet, as part of the learning curve involved with the responsibilities assumed and from findings identified in the FHWA audits, Caltrans found that there are process and procedural improvements that needed, and continue to need, to be made. These include: 1) implementation of the Uniform Filing System, 2) expanded QA/QC process to include final review of the environmental document, 3) documentation process for the class of action determination, 4) legal sufficiency review process, 5) tracking history of changes made to the Standard Environmental Reference (SER), 6) development of online training courses, and 7) development of performance measures.

The FHWA, in its audit reports, has acknowledged the improvements that Caltrans has made in its processes and procedures. Caltrans, a very large and decentralized organization, encounters challenges with consistency across its 12 Districts. The audits reflected this consistency issue, as findings for the same assumed responsibility greatly varied from District to District. In a situation like this, there is a strong need for a statewide management and quality assurance system to assure compliance. The four audits conducted did not show that such a system exists within Caltrans. The FHWA has also identified other ongoing issues that have yet to be resolved. These include: tracking of staff resources needed to carry out the responsibilities assumed; accuracy of quarterly reports sent to FHWA; limited scope of self-assessments; and limitations of identified performance measures.

From the past two years of the Pilot Program participation by Caltrans, some lessons learned by FHWA are:

While the Pilot Program has not had the benefit of operating across different States, the variation across Caltrans' 12 Districts does provide insight into differing and effective approaches to the assumption of the Secretary's responsibilities. The variation across the Caltrans Districts provides a broader perspective for the Pilot Program than a State with a highly centralized or consistent approach would have. Lessons learned that should benefit other States who would be interested in participating in the Pilot Program are: