THE MISSISSIPPI LEGISLATURE

The Joint Committee on

Performance Evaluation and Expenditure Review

Report # 581

Mississippi Department of Transportation: A Review of Departmental Accountability and Transparency

Executive Summary

Introduction

Studies show that the funding available for transportation is not sufficient to meet Mississippi’s highway, road, and bridge needs. In light of the increasing need for expenditures to repair or maintain the state’s roads and bridges, MDOT must be as accountable, transparent, and efficient as possible with the funding it receives.

National data shows that transportation system needs exceed the funding allocated and state data indicates that the same is true in Mississippi.

• MDOT allocates approximately $150 million annually to pavement projects, but estimates that an estimated $1 billion would be needed to repair pavement to an acceptable condition and $400 million would be needed annually to maintain pavement in good condition.
• MDOT allocates from $50 million to $80 million annually to bridge projects, but estimates that $2.7 billion would be needed to repair or replace bridges and $200 million annually would enable replacement of all currently deficient bridges in a timely manner and guarantee maintenance and repair of all bridges in the state system.

MDOT’s Operating Environment

Mississippi’s Transportation Governance Model

State departments of transportation employ various types of governance models. Most state departments of transportation are governed by a secretary, commissioner, or director, as well as a policymaking board or commission, which is the model that governs MDOT. However, Mississippi’s model is unique in that its transportation commissioners are elected. Consequently, MDOT’s decisions or the decisions of its commissioners are susceptible to political influence.

According to research, states can limit political influence on transportation policy through certain best practices (e.g., avoiding geographic representation by commissioners). PEER also contends that sufficient transparency in decisionmaking would help reduce political influence or the appearance of political influence by assuring stakeholders that decisions are data-driven rather than being politically driven.

MDOT’s Staff Resources and Equipment

Eighty-six percent of MDOT’s 3,460 employees work in MDOT’s maintenance and construction programs. MDOT’s maintenance program activities are primarily performed by in-house staff. MDOT’s construction program activities are performed by contractors who are responsible for actual construction, in-house staff who perform various activities (e. g., planning, design, right-of-way acquisition), and contracted staff who perform a portion of MDOT’s engineer work.

Of its 3,460 employees, MDOT has 195 engineers with the Professional Engineer credential and an additional 83 engineers-in-training who work under the supervision of the professional engineers. Many of MDOT’s professional engineers perform administrative and oversight duties rather than working on projects (e. g., performing road or bridge design work). Engineers-in-training comprise thirty percent of MDOT’s engineering staff and represent a relatively inexperienced group of engineers.

According to the State Auditor’s Property Division, MDOT’s heavy equipment inventory includes over 7,000 vehicles and other equipment. Of that, according to MDOT, its roadworking inventory includes 1,257 pieces of equipment, including 645 tractors.

Senate Bill 2917, 2012 Regular Session, mandated a moratorium on vehicle purchases for FY 2013 and a fleet reduction of two percent per year from July 1, 2012, to June 30, 2016, by all agencies with more than fifty vehicles. Subsequently, MDOT officials contracted with a consulting firm to review its equipment management processes and systems. The consultant’s report was due to be released in mid-December 2013.1

Comparison of MDOT’s Budget to Those of Other State Transportation Departments

Comparison with Contiguous States’ Receipts

MDOT’s total receipts for FY 2012 were approximately $1.3 billion. Of the group of states including Mississippi and its contiguous states, this was the second lowest amount. Departments of transportation in the contiguous states had receipts ranging from approximately $1 billion in Arkansas to approximately $2 billion in Tennessee. All five states received a similar ratio of federal, state, and other sources for FY 2012.

Comparison with Contiguous States’ Disbursements

For FY 2011, Mississippi disbursements per mile were below the median in all four program areas: capital outlay (road and bridge), maintenance, administration, and enforcement. Also, the percentage of funds Mississippi distributed among the four program areas did not appear out of line with other states. Thus, PEER’s analysis showed that Mississippi is not an outlier in terms of amounts disbursed per mile or the percentage of funds disbursed among the four categories.

How MDOT Spends Its Money

For FY 2013, seventy-two percent of MDOT’s expenditures (approximately $794 million) were for the construction program, which consists of both pre-construction and construction activities. Of construction program expenditures, new capacity and system preservation and maintenance project activities accounted for $499 million.

Comparison of MDOT and Other State Departments of Transportation on Measuring System Performance and Efficiency

Accountability for Performance

MDOT conducts a well-developed needs assessment to show its transportation system needs and has established broad goals for system performance, which are generally the same across states. However, MDOT has fallen behind other states by not fully developing and reporting on performance measures for each of its system goals.

Regarding regularly reported measures of system performance, state departments of transportation annually report data related to bridge conditions, road conditions, and fatalities to the Federal Highway Administration. This data allows for studying trends and making comparisons on three important measures of system performance that relate to MDOT’s safety and maintenance/preservation goals. For two of the three measures, Mississippi has improved its performance at a faster rate than contiguous states.

• From 1992 to 2010, Mississippi showed more progress than its contiguous states in decreasing its percentage of deficient bridges. In 2010, Mississippi performed better than the national average on bridge conditions.
• For 2004 to 2009, Mississippi followed the national trend showing a relatively consistent percentage of roadways in mediocre or poor condition across those years. Compared to its contiguous states, Mississippi is in the middle for its road conditions.
• Mississippi’s rate of highway traffic fatalities and the rates of contiguous states have historically been above the national average. However, from 1993 to 2010, Mississippi showed more progress in decreasing its highway traffic fatalities than did its contiguous states.

Regarding other performance measurement and reporting, a 2011 report by the Pew Center on the States and the Rockefeller Foundation rated Mississippi as one of nineteen states “trailing behind” other states in measuring transportation system performance in six key areas (e. g., safety, jobs and commerce, mobility, access, environmental stewardship, and infrastructure preservation). MDOT has not made sufficient progress in fully implementing its performance measures for each of its system-wide goals so that system-wide progress can be tracked over time.

Also, although MDOT’s 2013 stewardship agreement with the Federal Highway Administration outlines performance measures for MDOT’s construction program, these measures are in the initial stages of development.

Accountability for Efficiency

MDOT has some efficiency-related measures, but they are limited in determining the efficiency of departmental operations. Relative to other states, MDOT has room for improvement in measuring its own efficiency. The best measures of efficiency would focus on operations under MDOT’s control.

MDOT’s Decisionmaking Process for Ensuring Efficiency and Management of Workload

MDOT’s Accountability for Its Staff in Relation to Workload

While individual divisions (e. g., Maintenance) may evaluate staffing in relation to workload needs, MDOT has no department-wide effort to analyze its workforce in relation to its current and future workload. Such an analysis would include determining the department’s optimal size and the most efficient combination of full-time employees, temporary workers, and contract services to achieve MDOT’s mission.

How MDOT Accounts for Its Engineering Staff

MDOT provided PEER with project workload information that accounts for roughly 7.6% of its in-house engineers. The primary concern is that the majority of engineers’ workload is not tracked. Therefore, PEER could not verify, with MDOT official documentation, whether the department is utilizing its in-house engineering resources efficiently.

MDOT spent approximately $42.7 million in FY 2010 to outsource engineering functions, $47.5 million in FY 2011, and $48.5 million in FY 2012.

How MDOT Justifies Continuing to Outsource Engineering Functions

MDOT struggles to recruit and retain engineers on its staff due to the position’s salary level being significantly less than what an engineer could earn at a private firm. Thus MDOT lacks personnel available to complete projects or personnel with specialized skill sets (e. g., bridge design). To complete the projects, MDOT must outsource to gain the particular skills needed, which increases engineering costs because the per-hour rate for contracted engineering services is higher than the in-house rate.

MDOT’s Bridge Division needs outsourced consultants most frequently because MDOT lacks sufficient in-house skills necessary to complete complex bridge-related tasks. As federal mandates increase (for example, more rigorous bridge inspections), MDOT Bridge Division leadership believes that its outsourcing needs will also increase. A potential concern is that MDOT would not be able to monitor those contracts effectively.

How MDOT Determines Whether an Engineering Function Should Be Contracted Out

In FY 2012, 78% of MDOT’s forms requesting consultant services justified the request on the basis of a lack of personnel resources needed to complete the project in a timely manner. However, MDOT does not have a formal written process to determine if and when a project should be contracted out based on the personnel available. When MDOT makes the decision to outsource, it is difficult to determine what factors are considered and what information is used to make that decision.

Based on PEER’s estimates, MDOT could save approximately $21.8 million per year in engineer consultant costs by recruiting skilled professional engineers and offering them a salary comparable to that available in the private sector.

MDOT’s Process for Selecting and Prioritizing Construction and Maintenance Projects

How MDOT’s Priorities Have Changed and the Effects of the Change

According to MDOT, many of the state’s older bridges have become deficient and roads that were built as part of the 1987 highway program have begun to need “new life.” Because in the past MDOT funds were expended heavily for road expansion and because a system preservation budget has not historically been included as part of the state’s plan to build roads and replace bridges, MDOT’s priorities and funding have shifted away from new capacity projects to system preservation projects (e. g., overlays, bridge replacements). For FY 2015, MDOT estimates that system preservation projects will account for 73.8 percent (approximately $415 million) of its construction program budget.

As a result of the shift in funds to system preservation and the high cost of construction, MDOT has a “backlog” of 77 new capacity projects on its prioritized list totaling approximately $3.5 billion in construction costs. Because funds are not sufficient to complete these projects in a timely manner, MDOT will likely have to absorb the sunk costs of work conducted on some of those projects that will not be used (e. g., environmental studies).

Effectiveness and Transparency of MDOT’s Processes for Project Selection and Prioritization

MDOT collects most of the data needed in order to select and prioritize projects in the most efficient manner (i. e., based on need). However, in some cases, MDOT was unable to document the selection and prioritization process used in the past (i. e., prior to 2012) to justify projects on its prioritized lists. MDOT has begun using decisionmaking software for new capacity projects that could provide a well-documented system for its selection and prioritization processes; however, the department has not established a timeline for using this software or other tools (e. g., matrices) that includes a disciplined way of accounting for both quantitative and qualitative elements in the decisionmaking process for prioritizing all types of projects. Also, MDOT’s five-year plan does not provide sufficient transparency to show how projects change from year to year.

MDOT’s H.E.L.P. Program and Its Impact on Future Debt Service Requirements

Since January 2005, the Transportation Commission has entered into interlocal agreements with six local governments to finance and accelerate highway projects by bond issues through the Highway Enhancement through Local Partnerships (H.E.L.P.) Program under the statutory authority of MISS. CODE ANN. Section 61-5-8 (1972). MDOT does not maintain proper documentation of the evaluation and selection process for this program as required by law. In addition, MDOT does not conduct a cost-benefit analysis to determine whether the issuance of H.E.L.P. bonds is both cost beneficial and feasible to the state. By entering into these interlocal agreements, MDOT has obligated the state to debt service requirements that could impact the state’s future ability to construct and maintain needed highway projects.

Recommendations

1. In order to increase transparency of its decisionmaking and to help ensure an efficient distribution of resources, MDOT should place a greater emphasis on its performance measurement efforts. Specifically, MDOT should:
   
   
   • decide on performance measures for each of its seven system goals, set performance targets, and begin to monitor annual progress toward those goals;
   • determine and implement the best reporting tools to communicate its progress (e. g., online dashboard, as part of its annual report); and,
   • eventually, use its performance indicators to help drive decisionmaking in all aspects of the department, including budgeting, project prioritization, and allocation of staff.
2. As part of its effort to increase accountability for resources, MDOT should establish and report measures of efficiency. Specifically, MDOT should:
   
   
   • review its stewardship and oversight agreement and identify indicators of efficiency (e. g., on-time and on-budget indicators);
   • review other states’ measures of efficiency (including those listed in this report) to determine the best measures for MDOT to use in demonstrating efficiency of its internal operations and begin tracking those measures;
   • in order to provide a more comprehensive measure of cost per mile, refine its cost per mile information to include all pre-construction and actual construction costs, rather than specific components;
   • in order to compare its project costs to those of other states, consider conducting a study similar to that done by Washington State to show:
     
     
     • all-inclusive costs for completed roadway projects around the nation or within the region;
     • all-inclusive costs for typical roadway projects in Mississippi; and,
     • where possible, how Mississippi’s costs compare to those of other states.
3. In order to optimize utilization of professional staff, MDOT’s Human Resources Department should conduct a department-wide workforce planning initiative (similar to that of GDOT, described on page 54 and in Appendix J, page 129) that would result in a determination of optimal staff size and skill sets based on anticipated workload.
4. Once MDOT’s staffing needs have been objectively determined through a workforce planning study, MDOT should conduct a cost-benefit analysis to determine which staffing option is more beneficial: (1) increasing or maintaining critical in-house skills through the addition of PINs and selected pay increases; or (2) contracting out for needed skills. If MDOT determines that building in-house skills is more beneficial, then the department should propose to the Legislature the inclusion of sufficient funds in MDOT’s personal services budget to allow for needed PIN increases or salary increases for staff with complex and critical skill sets. The increases could be paid for through a reduction in the amount of dollars needed for contracts.
5. Taking into account the efforts of other state departments of transportation to address the efficiency of staff, MDOT should consider the following areas of analysis for every MDOT division and district:
   
   
   • staff development strategies, including:
     
     
     • confirming personnel’s understanding and agreement with MDOT’s mission and how MDOT’s workforce should coincide with that mission;
     • identifying the job qualifications necessary to perform required functions;
     • determining whether the personnel holding positions possess the necessary qualifications/skills;
     • developing typically outsourced personnel skills (i. e., engineering); and,
     • in situations in which it is necessary, reorganizing and transferring personnel to other positions;
   • succession planning, including:
     
     
     • identifying which job functions will remain constant and which will change (and a plan to handle changing job functions);
     • forecasting staffing needs (based on past project data and future project plans);
     • determining what staffing adjustments need to be made as a result of forecasted needs; and,
     • using a resource similar to the ACCESS-based database used by New Mexico DOT’s Human Resources department. The ACCESS database allowed New Mexico to plan for succession and track more than 200 attributes of personnel (see Appendix I, page 126);
   • knowledge management, including:
     
     
     • determining what skills are available in-house and how MDOT is affected if that skill is no longer available;
     • identifying MDOT’s critical skill positions;
     • determining how many of the persons in those critical skill positions are eligible for retirement in the next five years and the next ten years; and,
     • determining and planning how MDOT will react if a critical skill position suddenly becomes vacant voluntarily.

     Knowledge management would be similar to the efforts of the Virginia Department of Transportation. VDOT began its knowledge management program after the significant loss of critical in-house knowledge. Its program covered VDOT in its entirety and allowed VDOT to manage job-related knowledge within its organization (see Appendix I, page 126);

   • cross-training, including:
     
     
     • training personnel who were originally hired to perform one job function with the skills necessary to complete additional functions, contingent on feasibility and proposed benefits of cross-training an individual in a particular position;
   • reorganization/transfer of skills, including:
     
     
     • analyzing department-wide resources to determine where that skill would best benefit the organization and best fulfill MDOT’s mission; and,
     • creating incentives to current engineers for obtaining the needed skill set.
6. MDOT should utilize a uniform method to track its professional engineers’ active projects and tasks. A uniform method would help to increase the transparency needed to show that its professional staff is being held accountable for work performed and decisions regarding workload for professional staff are based on a comprehensive look at staff utilization and schedules. PEER recommends capturing this information in a system such as the “Active Project” software program used by MDOT’s Materials Division for its geotechnical engineers.
7. To help ensure the most efficient use of its in-house and contracted engineering staff, MDOT should create a checklist that divisions and districts would follow to confirm and justify their proposed need to hire an engineering consultant. A knowledge management system similar to what the Virginia Department of Transportation has would allow division or district heads to know what skill sets are available in-house, regardless of that person’s physical location. If the lack of available personnel is the justification for outsourcing, the requesting division should have access to the knowledge management system so that it can provide documentation to show that the skill sets are not available to complete the assignment.
   
   A uniform scheduling system for all professional staff (as described in recommendation #6) would allow the requesting division or district to determine whether in-house staff can complete the project in a timely manner.
   
   Some components of the checklist should include answers to, or documentation for, the following conditions:
   
   
   • Regardless of their position or departmental placement within MDOT, which current MDOT personnel are qualified to complete this project/skill/function required?
   • Why can the above-named staff not complete the assignment?
   • Can any workload realignments or adjustments (independent of personnel’s district or division affiliation) take place to free a qualified engineer (or personnel) to complete this necessary project/skill/function?
   • What is the time frame/due date by which this project must be completed?
   • If the due date were amended, could an in-house engineer complete the project/skill/function?
   • How feasible would it be to amend a due date if it were to result in cost savings for the department?
   • How would extending the due date of this project (to cut cost) hurt department-wide business?
8. In order to increase its transparency in decision-making regarding bridge projects, MDOT should establish a written policy for selecting and prioritizing bridge projects based primarily on the Significance Index Model (SIM). Any future decisions that deviate from using the SI rating as the basis for selecting the bridge project should include written justification for selecting those projects that are spread on the commission minutes.
9. MDOT should revise its five-year schedule of proposed projects to increase transparency. Specifically, MDOT should:
   
   
   • place its schedule online with the ability to query based on the various elements of the project (e. g., by planned begin date, by program);
   • include all projects MDOT plans to complete within the five-year period;
   • clearly demonstrate how projects have changed; and,
   • include a brief description of the data used to select the project (e. g., SI value, PCR/other pavement data, year of need).
10. Given that funds are limited for new capacity projects and that the process for allocating money to new capacity projects is presently not sufficiently transparent, the Legislature should amend MISS. CODE ANN. Section 65-3-97 (5) (a) (i) (1972) to require that MDOT submit a detailed description of the criteria and analyses used by MDOT staff to determine any re-prioritization of new capacity projects to the Transportation Commission for inclusion as an attachment to its minutes. The Transportation Commission should ensure that the specific reasons for the reprioritization are spread upon its minutes and that all supporting documentation provided by MDOT staff is included as an attachment to the minutes. The commission should make all such criteria and analyses available to the public upon request.
11. MDOT should establish a timeline for allocating maintenance funds based primarily on statewide need so that pavement maintenance funds can be directed to the highways with the highest needs. In the interim, MDOT should document its method for transitioning to this needs-based allocation, including the method for the transition percentages used in allocating funds to districts. For example, MDOT could state that all districts will receive an allocation that is within ten percent of its needs-based allocation (i. e., based on the Accountability and MDOT Maintenance Operations [AMMO] system) by FY 2015, within five percent by FY 2016, and within less than five percent by FY 2017.
12. To provide a more objective, accountable, and documented system for project selection and prioritization, MDOT’s Planning Division should develop a written plan and procedures for using Decision Lens (decision-making software) or any other prioritization tools to account for quantitative and qualitative elements and have them ready for use in its project selection and prioritization processes in FY 2015.
13. The Legislature should amend MISS. CODE ANN. Section 65-1-8 (1972) to provide that from and after July 1, 2014, the Mississippi Transportation Commission shall not enter into interlocal agreements that indebt the state to finance local highway construction projects.
14. Regarding the pending consultant’s report on MDOT’s equipment, the PEER Committee should provide members of the Legislature with a summary detailing the consultant’s findings, recommendations, and implementation strategy as soon as practicable following the release of the consultant’s report.1

1 On December 20, 2013, PEER staff received a copy of the Dye Management Group’s report, “Equipment Management Review: Final Recommendation Report.” PEER will provide members of the Legislature with an analytical summary of the report as soon as practicable. [NOTE: The Dye Management Group report and the PEER analytical summary of the report are now available.]

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