WisDOT: completes first report on financial status of major highway projects costs, 1989-2004

For information contact:
Robert St. Clair, Director, WisDOT Bureau of State Highway Programs
(608)266-9495
robert.st.clair@dot.state.wi.us

Report Highlights Importance of More Accurate Cost Estimates and
Reforms in Project Approvals and Oversight

The Wisconsin Department of Transportation (WisDOT) has completed the first ever review of the financial status of the state’s major highway projects. The report calls attention to the importance of more accurate cost estimates, reforms in how projects are “enumerated” by the Legislature, and better oversight once projects have been approved. The Department is implementing these needed reforms, and worked with members of the Senate and Assembly last year to pass legislation that puts some key reforms into law.

“This report highlights the importance of the reforms we are making to have more accurate estimates and more rigorous oversight and accounting of transportation projects,” said DOT Secretary Frank Busalacchi. “These projects are incredibly important to our infrastructure and our economy, but we need to make sure they go forward in a responsible way that protects taxpayers.”

The report examines the 27 active “major” highway projects that have been “enumerated” or added to the list for construction through legislative action. Under state law, a “major” highway project is defined as a project that has a total cost of more than $5 million and constructs a new route of 2.5 or more miles, adds capacity to five or more miles of an existing highway, or converts an existing multi-lane divided highway of 10 or more miles to freeway standards.

The report found that – over the approximately 15 year time period covered – the current estimated cost for design services, real estate, construction and other related expenses for the 27 enumerated projects is $3.31 billion, which is $1.36 billion more than the original estimated cost of the projects at the time they were recommended to the Transportation Projects Commission (TPC) and the Legislature for enumeration.

Of the $1.36 billion increase, some $573 million or 42% can be attributed to inflation alone over the 15-year time span covered in the report. Other factors affecting the estimated cost increases include:

· Real estate costs ($207 million or 15%)
· Construction labor and materials ($216 million or 16%)
· Design costs ($212 million or 15%)
Busalacchi outlined the following actions being undertaken by the Department to reform the system:
1) The Department worked with State Senator Carol Roessler, State Representative Suzanne Jeskewitz and other members of the Legislature in the last session to pass Act 217, signed into law by Governor Doyle. The bill:
· Calls for regular reporting by DOT on the financial status of major projects. DOT has completed the first report as required, and will produce additional reports every six months to track the progress of the major projects.
· Prohibits the Legislature from enumerating projects unless those projects have been recommended by the TPC, a public/private commission that reviews and makes recommendations regarding major highway projects in Wisconsin. Along with the Governor, the commission includes five state senators, five Assembly representatives and three citizen members. At least eight of the major highway projects covered in the report were added at the discretion of the Legislature and without the TPC’s recommendation.
· Projects will be enumerated later in the process when a more accurate estimate of the cost is available. In the past, projects were often enumerated before design work was far enough along in the process to get a more accurate estimate of the cost.
2) Secretary Busalacchi is implementing a new system to provide better oversight of major projects. In the past, after the Legislature has enumerated a project with a given cost estimate, DOT has made modifications during the design phase at the request of Legislators, local officials and others that have substantially added to the cost. While tailoring a project to a community’s needs is important, Busalacchi has instituted a new process that calls for regular review and scrutiny of individual major highway projects. For example, when changes are made to the design of a project that increase costs, the Department will look for ways to save money in other parts of the project to keep unexpected cost increases as low as possible.
3) The Department is creating a more detailed and standardized checklist to generate more firm project cost estimates.

“This report will be a powerful tool as we work to reform the system,” said Busalacchi. “By regularly updating and sharing these reports, we hope to generate a broader understanding of this important program while keeping decision-makers and citizens better informed about the status of these projects.”

Historically, design costs have not been included in initial project cost estimates. Also, if the project was enumerated before completion of an environmental study, it is difficult to precisely determine the project’s exact “footprint” or the amount of real estate that may be required to complete it. It can take several years to design, purchase necessary real estate and complete construction on major highway projects (several projects on the current enumeration list date back to 1989). While some projects are nearly complete, others are in the early environmental study stage.

The major highway projects financial status report can be found on the WisDOT Web site at: (www.dot.wisconsin.gov/projects/state/sixyear/major-financial.htm).