October 2, 2014

The U.S. Government Accountability Office on September 23 released an audit of the Department of Transportation’s TIGER grant program recommending that DOT develop “clear linkages between project performance measures and the programs, goals, and include measurable targets”. The report also provides interesting insight over how DOT evaluates and selects TIGER projects, but there are clearly missing gaps in the information.

The full report is available here.

GAO has been analyzing the TIGER program for a year, since Sen. David Vitter (R-LA) asked GAO to do so in September 2013. On May 28, 2014, GAO wrote to the new Secretary of Transportation to convey initial findings that DOT did not document key decisions made during the FY 2013 TIGER grant evaluation process: “Specifically, DOT did not document key decisions to (a) accept and review applications after the published deadline; (b) advance projects with lower technical ratings instead of more highly-ranked projects, and its procedures were inconsistent with DOT’s internal guidelines; and (c) change the technical ratings of lower-rated projects selected for funding to the highest technical rating category. An absence of documentation of such decisions can give rise to challenges of the integrity of the evaluation process and the rationale for the decisions made.”

In an August 25 response, an Assistant Secretary of Transportation reported that DOT was working to address many of GAO’s complaints about the FY 2013 process in the ongoing FY 2014 application process, including a more consistent policy of automatic rejection of late applications (except for one where grants.gov had a technical issue), maintaining more consistent technical ratings throughout the process, and giving “greater specificity for documenting project selection to provide transparency over project selections.” The letter also agreed with the general GAO goal of performance measures for the program, even though, as DOT noted, such measures were not included in any of the laws funding the TIGER program.

However, the GAO report was ill-timed, in that its detailed analysis of the FY 2013 TIGER selection process came just eleven days after DOT announced the FY 2014 TIGER grant recipients – and we don’t know just how more transparent the 2014 process was than the 2013 process.

But we know the endgame – that the top of the list of TIGER winners in the FY 2014 round, as selected by DOT, looks a lot like a list of the top earmarks of an earmarked TIGER program would look in an appropriations bill.

As a comparison, let’s look back at what happened the last time the Appropriations Committees created a surface transportation program out of general revenues, pre-TIGER – the $293 million “Surface Transportation Priorities” appropriation in FY 2010. This appropriation was split up 353 different ways via earmarking, with an average project grant size of $830 thousand. But there were some big ones at the top – fifteen individual earmarks of $2 million or more. Unsurprisingly, nine of the fifteen largest earmarks went to senior members of the Appropriations Committees (specifically, the senior members of the full Senate committee and its Transportation-HUD subcommittee). Of the fifteen projects totaling $2 million or more, Thad Cochran (R-MS) got four projects totaling $10.3 million; Robert Byrd (D-WV) got the biggest one at $4.4 million; Patty Murray (D-WA) got one totaling $3.1 million; Kay Bailey Hutchison (R-TX) got one totaling $2.5 million, and Richard Shelby (R-AL) got one totaling $2.0 million.

If Congress were still in the business of earmarking individual projects via legislation, then the surface transportation authorization bill would still be full of big projects for the authorizers who wrote the bill and certain other key party leaders, and the appropriations bill would still be full of big projects for senior appropriators. (Both sets of earmark-writers always made sure to include many smaller earmarks for rank-and-file legislators, which made it easier to muster the votes necessary to pass the bills on the chamber floors.)

Since TIGER is not an authorized program, and must be funded each year out of general revenues by the appropriators, the distribution of an earmarked TIGER program would probably look, at the top, much like the FY 2010 STP earmarks did – heavy on the senior Senate appropriators and party leaders. (Since the original TIGER program in 2009 was directed towards larger projects, there would presumably be fewer earmarks in an earmarked TIGER program but they would be larger in size.)

Direct earmarking by Congress is no more. But in the FY 2014 TIGER grants announced by DOT last month, eight of the ten largest grants went to projects represented by senior appropriators or party leaders.

(Ed. Note: It would be fun if GAO had released the detailed TIGER project data, so we could see how the projects that were rated “not useful” or “acceptable” or “moderate risk” but were funded anyway correlated with the political power of their Congressional sponsors, wouldn’t it?)

So even though direct earmarking is no more, it is obvious that senior members of the Appropriations Committees, and party leaders, still have a significant advantage over average legislators when trying to get a large TIGER grant from the Department of Transportation. But is this a bad thing?

The appropriators chose to fund the TIGER program in FY 2014 at $600 million, which was more than in recent years. To do so, under the Budget Control Act spending cap, the appropriators had to make difficult decisions between TIGER money and air traffic control, Amtrak subsidies, HUD housing vouchers, lead paint removal, aid for the homeless, and so many other programs. If the appropriators had not been assured of some kind of preferential treatment in the selection process, they might have found room in other areas, and we might only have had a $300 million or $400 million TIGER program in 2014 instead of a $600 million program.

(Ed. Note: TW is reminded of something that happened on July 29, 2005 – the day that the conference report on the mammoth SAFETEA-LU surface transportation bill was being voted on in the House and Senate. TW had stayed up overnight adding up the largest earmarks in the bill and was just gobsmacked at how House Ways and Means chairman Bill Thomas (R-CA) appeared to have received more earmarks than anyone else – his total take was over $750 million, which was just astounding by the historical standards. The TW editor was sitting next to senior transportation authorizer Pete DeFazio (D-OR) in the House Radio and TV Gallery and said to DeFazio, “I’m really having trouble wrapping my head around the size of Bill Thomas’s earmark total.” DeFazio responded with two words: “finder’s fee” – and explained that Thomas had used his Ways and Means position to shake the couch cushions of the Internal Revenue Code and come up with over $4 billion in additional Highway Trust Fund receipts over the life of the bill that would sustain an even greater amount of additional spending over the life of the bill, so he was given a hefty finder’s fee for his district. Thomas took home a king’s ransom in earmarks – more than any other legislator in any other bill, ever, in all likelihood. But without Thomas’s efforts, most of the money he received in earmarks would not have been in the bill in the first place, and several billion dollars that went to support highway and transit projects in the other 49 states and DC would not have been provided, either.)

So, from a public policy perspective, the question is this: is it better for the country to have a $600 million per year TIGER program in which applications from senior appropriators appear to have a bit of a “thumb on the scale” in favor of the projects they are advocating, or a $300-400 million per year TIGER program in which they don’t?

The following sidebar takes data from the new GAO report on how DOT evaluated the FY 2013 TIGER project applications and puts it into a narrative.

“Technical Evaluation” of TIGER Projects

The first step in DOT’s evaluation of TIGER grant applications is, according to the GAO report, to “assign ratings based on the selection criteria in the NOFA and not consider the statutory requirements.” For FY 2013, DOT received 585 TIGER applications, which were technically evaluated as follows:

The percentages of projects that got each level of rating in FY 2013 did not change significantly when broken down by region or by urban/rural setting:

No matter how one slices the above data, 20-25 percent of all projects were highly recommended, around 10 percent were not recommended, and the “recommended” bracket got around 40 percent of the applications.

However, when one breaks down the 585 FY13 applications by mode (road, transit, rail, etc.), then it becomes clear that the selection criteria announced by DOT in the Notice of Funding Availability in the Federal Register appear to be somewhat biased against road projects. Just 17 percent of the road project applications received for FY 2013 received a “highly recommended” rating (54 of 313 applications), while 43 percent of the mass transit applications were highly recommended (59 of 138):

But while a “not recommended” technical evaluation kills a project, the rest of the T.E. ratings do not determine who gets funded and who does not. When looking at success rates for project applications, 15 of the 54 “highly recommended” road projects were funded, for a success rate of 28 percent, while just 3 of the 59 highly recommended transit projects were funded, for a success rate of just 5 percent.

(The real question is how two of the nine “acceptable” rail projects got funded.)

“Project Readiness” of TIGER Projects

Of the 585 total FY13 TIGER applications, 56 were rejected outright as “unacceptable” at the initial, technical evaluation level. Of the remaining 529 active applications, 136 were rated “highly recommended” and were forwarded for two other kinds of analysis – project readiness and benefit-cost analysis. However, GAO rapped DOT’s knuckles for not making clear and public how it determined which of the “recommended” and “acceptable” projects to move forward to the next level and which to reject outright.

In addition to the 136 highly recommended project applications, the TIGER team also forwarded 53 of the “recommended” and “acceptable” applications for project readiness review. The project readiness evaluation team then analyzed those 189 applications for how well the project was “able to complete any federal environmental and other requirements before expiration of statutory deadlines to incur obligations.” Of those, 18 of the 189 were rated as “high risk” and discarded. Of the remaining 171 applications, 92 were rated “low risk” and 70 were rated “moderate risk” as shown in the following table.

It is not surprising that fewer project applications in the South were rated as “high risk” than anywhere else – a longer construction season due to warm weather, and less restrictive environmental and zoning laws, means that projects can generally proceed to the obligation stage a bit more quickly than in other areas. However, aside from rejecting “high risk” projects as a potential waste of money, this rating was not dispositive, either.

Benefit-Cost Analysis of TIGER Projects

While the project readiness team was evaluating the 136 projects that got “highly recommended” on their T.E. and the 53 “recommended” and “acceptable” projects as well, a separate team of economists was performing benefit-cost analyses on the 136 highly recommended projects and 35 other project applications, for a total of 171. The BCA was broken down into a five-way calculation metric (we have shortened the category names to save space; anyone wanting the original language can look in Table 15 of the GAO report):

Benefit-cost analysis is clearly less valued by the TIGER team at DOT than are the other two evaluation processes. While a “not recommended” rating at the initial, technical evaluation level kills an application, and while getting a “high risk” rating on the project readiness evaluation kills an application, 5 of the 52 FY13 applications were rated as having costs that likely, or certainly, outweighed the economic benefits of the project. (The unanswered question, of course, is which projects got the negative BCA ratings but got funded anyway? And were their sponsors particularly politically well-connected?)