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This document was superseded by Stewardship and Oversight Agreement Implementation Guidance on 12/09/2013.

Stewardship/Oversight Task Force - Appendix F

Example of Risk/Benefit Assessment

Background: There has been considerable discussion on where FHWA, particularly the Division Offices should expend its resources, i.e., where are those areas where the agency might be at risk if Federal requirements are not adhered to, and conversely, where can we add value. This paper is based on some earlier work by Mr. Leon Witman, former Director of Field Services - West.

Introduction: The following is intended as a guide to assist Division Offices in determining and selecting the most appropriate process to carry out its stewardship and oversight responsibilities. For purposes of this discussion, stewardship is defined as the efficient and effective management of the public funds which have been entrusted to the Federal Highway Administration, whereas oversight is defined as the act of ensuring that the Federal highway program is delivered consistent with laws, regulations and policies.

Approach: The suggested approach takes into consideration the qualifications and technical competencies of the state highway agency; the level of trust that exists with our State partner based on historical relationships, shared expectations, and mutually agreed upon procedures and processes; and importantly, the risk involved from the FHWA perspective. This is the risk element. The second part addresses the question of whether there is an opportunity to make a difference or add value (the benefit). Before proceeding with this approach, the issue of whether FHWA has responsibility in a particular area must be clearly established. The Federal interest and FHWA responsibility is derived from Federal laws and/or regulations which require FHWA oversight or from executive-level policy statements. Once this is established, a determination can then be made as to where FHWA is at risk and where there might be a benefit in FHWA's involvement from both the Division Office's and the State highway agency's perspective. The following matrix helps define what is important and where the Division may want to place its resources.

Low High
Trust & Shared Expectations Quality & Competencies Procedures & Processes in Place Lack of Procedures Evidence of non-compliance

Utilize Potential Maximize Strengths & Potential
Routine Business Utilize Strengths
the Art
Issues Involved

Defining Risk: If there is a Federal responsibility, then a risk assessment can be performed to determine where the Division may want to place its emphasis. This could be done on a programmatic basis. A positive answer to one or more of the following questions can help determine areas where there is a potential high risk.

  • Is there significant potential for waste, fraud, or abuse (involving substantial amounts of money)?

  • Is there a overriding Federal interest as defined in legislation, regulations, our Strategic Plan, or agency policy?

  • Is there a potential to adversely affect the safety of the traveling public?

  • Are there significant environmental impacts which require comprehensive or complex mitigation treatments which are controversial, precedent setting, unusual, or extremely costly in relation to project cost?

  • Will the proposal or action significantly affect the protected rights of, or intended benefits to, individuals?

  • Are there high levels of controversy from the Federal or congressional level, the public, or constituency groups?

  • Are National policy issues involved?

Consistent with law and regulation, the Division can make decisions regarding how they will conduct their oversight and the level of energy/resources depending on the risk. The FHWA may delegate some of its responsibilities, depending on risk, based on a demonstration that the State has in place laws, regulations, directives, standards and/or procedures that either separately or collectively will accomplish the policies and objectives contained in Title 23. In addition, there should be a finding that the state highway/ transportation agency has the capability to carry out project responsibilities in accordance with such requirements. Capability is defined as having an suitably equipped organization with adequate staff and authority to carry out delegated oversight responsibilities. This approach, modeled after 23 CFR 640 (Certification Acceptance), should be based on previous process reviews or a formal finding that the State has adequate internal controls to ensure that the Federal interest is protected.

Defining Benefit: A positive answer to one or more of the following questions can help determine areas where there are opportunities that would benefit one or both parties. This is typically done on a project or new program basis. The issues to review include:

  • Are there issues that significantly affect the quality of the system (e.g., pavement structure, traffic congestion, or operations)?

  • Are there issues that significantly affect the service life of the facility?

  • Is there a potential to stop or substantially delay the overall program in a State or area of the State?

  • Is this an area where the State DOT has limited experience?

  • Does the proposal involve technical complexities, state-of-the-art technologies, or other innovations?

  • Is there potential to save money or are there more cost-effective solutions available?

  • Is there a potential to increase funding levels in state or leverage additional funds?

The assessment described above should be conducted in cooperation with our partners, considering the risk(s) and benefit(s) involved.

Appendix E | Report | Appendix G

Updated: 06/27/2017
Federal Highway Administration | 1200 New Jersey Avenue, SE | Washington, DC 20590 | 202-366-4000