THE MISSISSIPPI LEGISLATURE

PEER sought to determine the status of the 1987 Four Lane Program and the Gaming Roads Program and how program revisions have impacted costs and timeliness of completion.

The 1987 Four Lane Program was created under House Bill 1206 and originally encompassed 1,077 miles of highway divided into three phases. Later legislative revisions to the program increased the mileage to approximately 1,092 miles. In 1994, House Bill 1302 created Phase IV and added 684 miles to the program. Subsequent legislative revisions increased the program’s total mileage to 1,807 as of June 30, 2000. According to MDOT, as of June 30, 2000, 624 miles of four-lane highways had been completed, 295 miles were under construction, and 165 miles remained for Phases I through III. No part of Phase IV had been let to contract.

During the 1994 legislative session, the Legislature created the Gaming Roads Program (House Bill 1302), which originally included 168 miles of highway in the program. Based on a cost per mile calculation formulated by MDOT, the original cost estimate of the program was $317 million. Legislative amendments and additions to the program increased the program to 253 miles. As of June 30, 2000, forty-eight miles of highways had been completed in the Gaming Roads Program and 101 miles were under construction.

The Legislature originally designed the 1987 Program’s funding mechanism to expire on August 31, 2001, the original estimated completion date for the program. Subsequent revisions have extended revenue sources until the Transportation Commission certifies the 1987 Four Lane Program and the Gaming Program as complete. The Legislature also authorized $200 million in bonds which MDOT issued in FY 1999 to help fund the program.

MDOT’s original cost estimate for the 1987 Program was $1.6 billion. Subsequent to addition of Phase IV, program revisions, and factors that have increased cost, MDOT’s current cost estimate for the program is approximately $5 billion.

Regarding program construction schedules, MDOT has not let contracts in compliance with the schedule established in state law. Under the law, MDOT was required to let 100% of Phase I contracts by June 30, 1993, but all Phase I contracts were not let until FY 1996. Of the Phase II and III contracts required to be let to contract prior to June 30, 2000, MDOT had let 85% of the Phase II contracts and 59% of the Phase III contracts. The first contract for Phase IV is scheduled to be let in July 2005.

The original 1987 Program completion date projected by MDOT was August 31, 2001. MDOT now estimates that Phases I through III will be completed in FY 2008 and Phase IV in FY 2020.

After MDOT issues the $200 million in bonds approved this year, the Gaming Roads Program will have a maximum of $5 million annually to fund construction projects. At the completion of Phase IV of the 1987 Program, the fuel taxes, lubricating oils tax, motor vehicle tag assessment, and the contractor’s tax from the 1987 program will be available to fund the remainder of the Gaming Roads Program.

The Gaming Roads Program’s original cost estimate was $317 million. MDOT now projects that the program will cost $1.17 billion and will be completed in FY 2025.

Although billions of dollars of additional expenses have been found to be associated with the 1987 Program, the funding stream has not been changed. Delays in the program have resulted from spreading a funding stream designed for a $1.6 billion program over $3 billion in costs for Phases I through III.

The following factors contributed to cost overruns and delays in the 1987 Program:

• Inaccurate 1987 Program estimates--In 1987, the Department of Transportation excluded the costs of bridges, interchanges, inflation, and rehabilitation of existing lanes from the original cost estimate ($1.6 billion) for the Four Lane Program, which has resulted in a funding stream insufficient to support all required activities within the original program time frame.


• Inaccuracy of cost projections--Because the Department of Transportation used an inflation factor of 1% rather than the actual construction inflation index rate of 3.4%, the 1987 Program will cost approximately $564 million more than the department’s current projections. The Gaming Roads Program will cost approximately $414 million more than MDOT’s projections.


• Increases resulting from federal regulations, legislative changes, and MDOT initiatives--Factors such as wetlands mitigation, improving road conditions for increased speed limits and truck weight limits, and changes established at MDOT’s discretion have increased costs and delays of construction.

The Mississippi Department of Transportation does not maintain a program management information system that facilitates oversight and management of the preliminary engineering, right of way, and construction phases for highway segments and that readily identifies causes of inaccurate cost estimates, cost overruns, or time delays. Because MDOT’s program management is ineffective, the department cannot provide the timely, accurate information that the Legislature needs for decisionmaking.

The department does not compile a comprehensive master budget for each highway segment. Instead, the department uses several independent sub-project budgets, which inhibits the tracking of segment costs and progress. Also, MDOT’s frequent modification of budget data and loss of a budget baseline inhibit tracking of segment costs. Because projects frequently overlap segment boundaries, MDOT cannot readily provide cost information on segments under construction. This practice increases the chances for cost allocation errors on completed segments and causes the department’s annual report to the Legislature on the status of the 1987 Program (the AHEAD Report) to contain inaccurate and incomplete information. The department also does not comply with all of the reporting requirements for the AHEAD report as set forth in state law.

The Department of Transportation does not have a centralized information system that contains accurate, complete, and easily accessed financial management information on construction contracts.

Due to program additions and changing traffic patterns, the priority of segments for these programs established in law may not represent current highway improvement needs. The Legislature defines the phases, segments, and priorities of the 1987 Four Lane Program and Gaming Roads Program, but MDOT determines the construction schedule within each phase of both programs. MDOT’s method of establishing "year of need" is the approved highway planning method of the Transportation Research Board, but the department’s ability to address the highways of greatest need is limited because of the priorities required in the law.

MDOT has not made maintenance a high priority when making decisions regarding use of resources. Of a $100 million total maintenance budget for FY 2001, MDOT has budgeted only $21.6 million in pavement projects. The remainder of the maintenance budget will be spent on items such as mowing, providing security at welcome stations and rest stops, and performing maintenance on MDOT buildings.

From FY 1997 through FY 2000, the Department of Transportation expended $94 million more in federal funds for the 1987 Four Lane Program than required by law, rather than using the federal funds for other projects such as maintenance, as was within MDOT’s discretion.

Mississippi law requires that highway construction contracts be let in segments greater than ten miles unless specific criteria are met. The Mississippi Department of Transportation has misused the criteria and let 82% of all contracts for the 1987 Four Lane Program in segments of less than ten miles, with the average segment length being 7.5 miles.

MDOT believes that keeping segments around ten miles in length increases the number of bidders and that it was the Legislature’s intent to enhance bidding. However, PEER reviewed the number of bids received on 1987 Program contracts and found no material difference in the number of bids submitted for contracts for segments under and over ten miles.

MDOT’s practice of piecemealing inhibits the department’s taking advantage of economies of scale in letting construction contracts for highway segments.

1. The Legislature should enact legislation regarding MDOT’s management of the entire highway construction process. The legislation should address the following areas:

   1. MDOT should develop a master budget for each segment of highway. Highway segments should not be less than ten miles in length and should have logical starting and ending points that comply with the National Environmental Policy Act. The master budget should include budgets for all preliminary engineering, right of way, construction projects, and all other costs, such as construction engineering and inspection, for the segment. See recommendation 11 for possible exceptions.

   2. MDOT should develop policies and procedures for the management and oversight of the master budget for each segment which would, at a minimum, accomplish the following:

      1. Develop a realistic cost estimate for each project within a segment which would serve as a budget for the project. The budget for each project should be developed as soon as realistic cost figures can be estimated but not too late to impede the development of the master budget for the segment.

      2. Capture and retain the original budget estimate of each project for comparison to the final cost of each project.

      3. Capture and retain the original master budget of each highway segment for comparison to the final cost of each highway segment.

      4. Develop a process whereby increases or other revisions to project budgets and master budgets are reviewed and approved by appropriate levels of management on the district level and in the Jackson central office. The name and position of the approving MDOT official should be recorded in conjunction with the change. Also, management approval should denote that changes are necessary, alternatives have been considered, and any changes are performed in the most cost efficient manner. Alternatives considered but rejected should also be part of the proposed change documentation file.

      5. Using existing resources, develop an information system whereby cost information for each segment is readily available for the Legislature or public.

      6. Capture costs of contractors or consultants used on preliminary engineering, right of way, and construction engineering and inspection.

   3. MDOT should ensure that individual projects for preliminary engineering, right of way, and construction do not overlap segment boundaries.

   4. MDOT should ensure all information relating to the entire construction process for highway segments is readily available to answer information requests from the Legislature and other parties.

2. MDOT should fully comply with MISS. CODE ANN. §65-3-97 (9) and present all required information in the annual report to the Legislature.
3. MDOT should ensure that all information reported annually to the Legislature in compliance with MISS. CODE ANN. §65-3-97 (9) is accurate.

4. MDOT should ensure all pertinent construction contract information is complete, accurate, and in a format which facilitates the preparation of important management information for MDOT management, the Legislature, and other parties. The information should include, at a minimum:

   1. Contract let date;

   2. Highway on which contract was let;

   3. Project description, including beginning and ending point of the contract;

   4. Contract length in miles;

   5. Name of winning contractor;

   6. Original contract amount;

   7. Final contract amount;

   8. Total earned by contractor;

   9. Liquidated damages, if any;

   10. Original contract completion date;

   11. Revised contract completion date, if applicable;

   12. Actual contract completion date.

5. When calculating total costs for the 1987 Four Lane and Gaming Roads programs, MDOT should use the actual inflation index rate as calculated by MDOT’s construction inflation index, provided such calculation is in accordance with and approved by the Federal Highway Administration. Also, any total cost projections should include all known costs such as debt service.

6. The Legislature should amend MISS. CODE ANN. § 65-3-97 and § 65-39-1 to require, after completion of Phases I through III of the 1987 Four Lane Program, the prioritization and construction of highways and roads found in Phase IV of the 1987 Four Lane Program, Gaming Roads Program, and highways not listed in the 1987 Four Lane or Gaming Roads programs. The Federal Highway Administration’s accepted standards for estimating capacity, determining level of service for highways, and determining construction needs should be a major factor in prioritization and construction.

7. After completion of Phases I through III of the 1987 Four Lane Program and the prioritization of highways in Phase IV of the 1987 Four Lane Program, Gaming Roads Program, and highways not listed in either program, the $36 million earmarked as MDOT’s share of the state’s gaming tax for the Gaming Roads Program should continue to be used exclusively for expenses related to the Gaming Roads Program.

8. MDOT should reprioritize construction at least every five years until conclusion of the 1987 Four Lane and Gaming Roads programs. The Federal Highway Administration’s accepted standards for estimating capacity, determining level of service for highways, and determining construction needs should be a major factor in prioritization and construction. MDOT should report this reprioritized construction schedule to the Legislature in the subsequent legislative session and make available for review its supporting documentation of the revised schedule.

9. MDOT should consider all sources of revenue, including the use of federal funds, when addressing maintenance needs.

10. MDOT should collect its assessed quantified maintenance needs on a uniform basis from year to year and compare these needs to data on actual roads paved to determine its effectiveness in meeting needs.

11. The Legislature may consider granting MDOT the option of allowing segments less than ten miles in length if one or more of the following conditions are met:

    1. The segment as prescribed in law is less than ten miles;

    2. The segment will connect a four-lane highway existing as of July 1, 2001, or a four-lane highway for which a construction contract has been let by July 1, 2001, with the state boundary or the Mississippi River.

    3. For a particular project, the costs of constructing a single segment of at least ten miles in length would exceed by at least ten percent the aggregate costs of constructing two or more segments. In such instances, the MDOT shall have thorough documentation to support the exception.

12. In any case in which the Transportation Commission authorizes the construction of a highway segment of less than ten miles in length, the commission shall set forth and record in its official minutes, on at least a quarterly basis, explanation and justification therefor based upon one or more of the conditions prescribed above.

13. MDOT should include in the annual report submitted to the Legislature by the Transportation Commission a listing of all construction contracts less than ten miles let by the commission during the previous fiscal year. Information provided in the listing of construction contracts less than ten miles should include, at a minimum, the following:

    1. Contract let date;

    2. Highway on which contract was let;

    3. Project description, including beginning and ending point of the contract;

    4. Contract length in miles;

    5. Name of winning contractor;

    6. Original contract amount;

    7. Justification and explanation for letting a contract less than ten miles.

14. The Legislature should require MDOT to prepare an annual report for the Gaming Roads Program that provides the same data as required by MISS. CODE ANN. Section 65-3-97 (9).