In the mid-1990s, FHWA implemented a broad-based effort to test and evaluate innovative strategies for state DOTs to get the most from Federal highway grants. Designated officially as the "Test and Evaluation Project TE-045," this effort advanced many financial management tools that are now standard, such as advance construction, flexible matching, and toll credits.
With the current strain on highway funding, FHWA seeking ideas for improving grant assistance through a renewed test and evaluation of innovative financial management practices. FHWA has recently approved alternative cost recovery approaches that will allow California to hire nine additional oversight engineers for local public agency projects. It has also allowed Vermont to recover the costs of administering Emergency Relief funds that are being used to rebuild roads destroyed by Tropical Storm Irene. In both cases, the test program allowed state DOTs to use federal funds for overhead costs without developing a complex "indirect cost allocation plan" (ICAP). With this expedited approval, Vermont and California were able to begin billing FHWA for these additional administrative costs sooner.
By testing methods that are more flexible yet fully consistent with Federal Cost principals, FHWA has allowed these states to use scarce funds more effectively. The Center for Innovative Finance Support in partnership with the office of the Chief Financial Officer is encouraging state DOTs and Division offices to review current financial management practices and identify opportunity to test innovation in financial management. These tests must focus on policy, guidance and regulation within the Federal-aid program. Through sharing successful approaches taken by some states, the program will help all state DOTs pursue new financial flexibilities.
The Administrator recently presented the Missouri Division and DOT with the first ever Innovation in Project Finance and Financial Management Award for its proposal to allow the Missouri Transportation Finance Corporation to sell existing loans on its books in order to raise new capital for additional loans. This approach - an opportunity available to all Federally-authorized State Infrastructure Banks - promises to attract new investment in highway infrastructure.
While the Missouri proposal received special attention, it is just one of many innovative proposals submitted by the Divisions and their State DOT partners in response to our recent solicitation for ideas to improve financial management of the Federal-aid program. The Center for Innovative Finance Support (formerly Innovative Program Delivery) is pleased to announce the other concepts accepted for testing and evaluation. They are:
Several concepts above are achievable under existing authorities, and others will require a tool (Test and Evaluation Program TE-045) employed in the mid-1990s to waive existing policy or regulation in order to test promising new approaches. The Center for Innovative Finance Support will be contacting each Division Office directly to discuss the design and schedule of the initiative, the details of which may differ from those in the original submission. In addition, we will be contacting all the Divisions that submitted proposals to explore alternate approaches to achieve their objectives.
The Center for Innovative Finance Support would like to thank all the Divisions and State DOTs for their participation in this solicitation. We look forward to collaborating further and showcasing innovations that promise to improve our financial management of the Federal-aid Highway Program.
For more information contact: