Office of Performance Evaluations

Idaho Transportation Department Performance Audit

Released January 2009

Report 09-03

The executive summary of the report is provided below. The full report with exhibits is available in PDF (see above), and a limited number of printed copies are available from the Office of Performance Evaluations (OPE). Specific questions about the report should be directed to OPE. General questions should be directed to the Idaho Transportation Department.

Executive Summary

The Idaho Transportation Department (ITD) has responsibility for almost 5,000 miles of highway (or nearly 12,000 lane miles), 1,761 bridges, and 29 rest areas. ITD employs more than 1,800 employees statewide within its eight budgeted programs, including Highways (the subject of this performance audit), Transportation Planning, Contract Construction, and Right-of-Way Acquisitions. The fiscal year 2009 appropriation for the Department was $494 million. A seven-member Idaho Transportation Board has the oversight responsibility for the Department’s administration.

This performance audit found that ITD funding is insufficient to catch up and to match the expected growth in capital program costs for maintaining and preserving state highways and bridges. Idaho roads are deteriorating at a rate exceeding available resources while road construction costs are increasing faster than the general rate of inflation. ITD has worked hard to do more with less, but Departmental programs and plans are generally reactive in nature, lacking a cohesive strategic vision and a coordinated long-term infrastructure management plan. Capital project plans could be improved by establishing uniform project selection criteria and enhancing the integration of the planning process.

Management is district-centered and decentralized, with outcomes that are measured against a select but limited set of performance measures. Generally, ITD does not use currently available technology, nor does it follow consistent project management and consultant management best practices and processes to manage the highway program in the most cost-effective manner. The performance of the GARVEE program could be improved through a more flexible finance strategy and institutionalizing certain generally accepted project management practices within ITD.

Implementation of the performance audit recommendations would yield significant benefits that are described within the report. Near-term benefits are conservatively estimated at up to $19.6 million in one-time savings and more than $11 million in savings during the first five years of implementing the report recommendations. Thereafter, an estimated $6.6 million in savings would be realized annually. Capturing these savings could help address, but will not solve, the funding shortage currently being faced by the highway program.

More significant long-term benefits will accrue over time by implementing the recommendations to acquire comprehensive asset management and system preservation technologies. The recommendations from this report, together with enhanced funding for the highways program, could help Idaho avoid future highway reconstruction costs in the hundreds of millions of dollars. In order to achieve a greater return on investment in terms of extended highway life, future ITD funding should include resources for strategic investments in fully integrated Pavement, Maintenance, and Financial Management systems.

For the near term, this performance audit finds that the $137 million to be allocated to the highway program within the proposed revenue enhancement of $240 million is merited and may even be understated. Any funding enhancement, however, should be accompanied by an explicit policy decision and actions to focus on maintenance, preservation, and restoration first, and to bring the existing infrastructure to an acceptable and cost-effective level. Idaho should consider adopting explicit policies that do not allow new capacity projects to siphon funding from basic highway operating, maintenance, and preservation programs. New capacity projects should be rigorously and independently evaluated for cost effectiveness, with consideration also given to additional long-term maintenance costs. Such an evaluation should also include specific consideration of whether future proceeds from GARVEE can be directed to projects that reduce on-going maintenance costs and support preservation and restoration priorities.

Some of the savings this report identifies can be used in conjunction with the $137 million for addressing funding shortfalls. These savings can also be directed to investing in the pavement and maintenance systems that are required for achieving long-term savings and efficiencies. Failing to invest in necessary management tools will only exacerbate the current highway maintenance backlog, creating larger unfunded liabilities in the future.

Legislative Directive

The 2008 Idaho Legislature overwhelmingly adopted House Concurrent Resolution No. 50, requiring a comprehensive review of the Idaho Transportation Department (ITD). The legislation includes a series of specific questions and information requests, intended to guide future policy decisions regarding funding, project prioritization, oversight, and management of Idaho’s transportation program. In order to obtain objective, factual information, the legislature requested an independent, third-party performance audit from qualified consultant(s) without current contractual relationships with ITD, and without any other conflict of interest with Idaho state agencies.

In framing their requirements for the Performance Audit, the legislature asked a series of questions in HCR 50, from which the audit scope of work was formed. The text of HCR 50 is included in the appendices of this report.

Focus of this Performance Audit

The purpose of the Performance Audit, as commissioned by the legislature, is to assess ITD’s highway construction, preservation, and maintenance program performance in four topic areas:

• Management and Performance
• Contractor Selection and Oversight
• Outsourcing
• Cross-Cutting Issues and Conclusions

This Performance Audit provides a comprehensive assessment and comparison to industry benchmarks and practices of the overall performance of the Idaho Transportation Department by evaluating:

• ITD management and governance, program cost estimates, financing, and project prioritization.
• Effectiveness in reducing program life cycle costs.
• Use of appropriate performance benchmarks.
• Overall program coordination and integration of planning and budgeting among programs and with financial plans.
• Formulas used to schedule work.
• Metrics used to evaluate success.

The audit also studied the processes used by ITD to select and retain consultants and contractors to ensure competition and share project performance risk with contractors, and examines the merits of outsourcing professional services and efficient use of both agency and contracted expertise resources. The Joint Legislative Oversight Committee directed the Office of Performance Evaluations (OPE) to oversee the conduct of the Performance Audit. In August 2008, the OPE contracted separately with the consulting firms Avant IMC, LLC and Robert M. Williams and Associates to conduct the performance audit. This report presents the combined findings and recommendations of that work.

During the course of this audit, approximately 200 interviews and meetings were held, including multiple interviews and sessions with ITD executive management, senior divisional managers at central office; and with District Engineers and senior staff in all six districts. Other interviews were held with key stakeholders, including legislators, legislative Budget and Policy staff, federal agency executives, contractor associations, Metropolitan Planning Organizations, Local Highway Organizations, Connecting Idaho Partners (CIP), and approximately 40 interviews with personnel from peer states’ transportation departments.

For the financial planning and budgeting components of this performance audit, in addition to extensive interviews and exchanges with ITD staff, interviews were conducted with the State’s Chief Economist and the State Financial Officer, staff of the State Controller’s and Attorney General’s Offices, and with the State Treasurer and members of his staff.

Over 1,000 data files and 400 separate relevant documents were received from ITD and reviewed. Idaho Title 40 statutes, ITD Board policies, department rules and regulations, all available policy manuals that govern design, construction, and maintenance activities were also reviewed as they related to specific aspects of the audit. In addition, extensive research on best practices and benchmarks in the transportation industry were pursued, resulting in a reference library of close to 100 articles, papers, and other material, supporting findings and recommendations.

A detailed discussion of the audit criteria, findings, and recommendations can be found in the body of the report.

Overview of the Idaho Transportation Department

The Idaho Transportation Department is responsible for planning, designing, maintaining, and operating a safe and efficient highway and bridge transportation system. The ITD mission statement published in September 2008 is: “Our mission. Your mobility.” The department’s vision statement is: “We will be an industry leader in providing transportation systems and services that are safe, efficient, promote economic vitality, and use innovative technology.” Subordinate goals and objectives identified should serve to advance the mission and vision of the Department.

ITD’s state funding comes primarily from the 25-cent per gallon state motor gasoline tax, which was last adjusted in 1996, and from federal funding sources. The department receives no state general funds.

For FY09, the proposed budget for the Idaho Transportation Department was approximately $490 million. Of that, 49% is derived from gasoline and diesel fuel taxes and 22% is from vehicle registration and license fees. Revenues for the remaining budget come from miscellaneous state, federal, and local matching funds. About $334 million from gasoline and diesel fuel taxes and vehicle registration fees go into the Highway Distribution Account, of which 38% is distributed to local jurisdictions, 5% to State Police, and 57% to the State Highway Account.

ITD plans to use about 55% of its budget for contract construction and right-of-way acquisition (about $270 million), and allocate the 45% balance (about $219 million) to cover operating, capital and facility expenses, personnel, and other items. Considering the relatively low level of revenue available to the ITD for the highway system in relation to documented demands on the system, Idaho’s resources to maintain and improve the state’s road system are limited.

Key Audit Findings

Public accountability was a central criterion applied to ITD throughout the performance audit and in developing findings. Since the Idaho Transportation Department is entrusted with public resources, the audit team expected a high degree of efficiency and effectiveness in achieving its expected outcomes.

During the course of the review, the audit team found several cross-cutting issues that impact ITD’s performance. The overall high-level findings are listed below.

Current funding cannot keep pace with the growth in costs to meet Idaho’s basic transportation needs of preserving and restoring its highways and bridges.

Even with the implementation of best practices identified in this performance audit, it will become increasingly difficult for ITD to catch up on needed improvements while maintaining adequate levels of performance without additional infusion of new resources to fund operations, maintenance, and preservation of the state highway system. ITD’s increased cost of doing business at current service levels is increasing faster than revenue growth. The rate of increase in construction and maintenance costs is outpacing the rate of increase of the budget appropriations. Moreover, the rate of deterioration of the highways is greater than the rate of budget increases. The best efforts of the Highway Division to find innovative ways to make every dollar count will be insufficient over time, given current funding conditions.

Prior to the recent sharp economic downturn, Idaho leaders and transportation officials held public meetings to discuss new highway revenues. The $240 million proposed revenue increase included a $137 million increase for ITD. A finding of this report is that the $137 million will not reasonably sustain the department’s highest priorities of preservation and restoration beyond the first year and over the financial planning period.

The reason why $137 million would not provide sufficient funding is because the current plan does not address long-term preservation and restoration needs from capacity projects that are already programmed. The estimated 4-year shortfall is at least $55 million. This shortfall is caused by a growing need for preservation and restoration, and the department’s “worst-first” focus instead of “preservation-first.”

An example of the benefits of the preservation-first strategy would be to set targets for moving from a backlog reduction posture in the shorter term 5-10 years to an asset management approach covering 7-25 years, which would position Idaho to spend increasingly more funds on early preventative maintenance. This will help prevent the recurrence of the current situation wherein the improvement needs so exceed existing resources that there is no way of making progress without additional resources.

The Department lacks a comprehensive statewide strategy for capital improvements and operations.

Although a strategic planning effort has been underway for about a year, and given that a long-term policy document exists, there is no integrated statewide long-term transportation plan that considers capital and maintenance and preservation projects upon which to base future departmental planning and forecasting. Strategic planning must shift to becoming an ongoing business and financial planning process, which will enable more effective budget allocations according to need rather than allocation by historical data. It is essential that any large organization dedicate some reasonable level of effort to strategic planning, planned implementation, and evaluation of progress.

There are no current operational goals linking the day-to-day operations to overarching strategies or goals. Management is activity driven, not performance driven. Districts are responsible for most of the highway related activities, but consistent and transparent performance measures are not used to set goals and hold districts accountable. The absence of measurable objectives linked to broad goals is a barrier to being a productive and efficient enterprise.

ITD lacks an integrated mid-term business and financial planning process to address challenges such as revenue shortfalls and to implement ITD’s strategic vision.

ITD has not developed an adequate mid to long-term business and financial plan for the operating and construction programs. As a result, decision-makers do not have sufficient information to make informed decisions about sustaining the state's transportation program. ITD's financial planning documents project revenues and expenditures over a limited time period (5 years for Statewide Transportation Improvement Program or STIP, 8 years for financial planning), but they do not offer strategies and alternatives for addressing potential funding shortfalls. Other financial documents simply take the current budget and extend into future years, but are not based on demand. In addition, projects identified in the department’s long-term planning (Horizons) are listed without identifiable funding sources. Unless funding is identified, these projects stay in Horizons. This finding can be fundamentally addressed through a combination of top-down statewide strategic direction and bottom-up district planning from which each district would respond with a multi-year district business plan.

ITD is reliant on district-centered methods of operation, with insufficient uniform direction regarding centralized performance management, asset management, and project and consultant management programs.

While ITD is comparable to other peer transportation departments in terms of its challenges, basic structure, and overall performance, ITD leadership needs to be more forward-looking and require stronger proactive management at all levels. ITD’s distinct district-centered method of operation results in the Highway Division being more focused on day-to-day operations. As a result, ITD is reactive rather than proactive. Innovations that have been identified are generally a necessary short-term response to reduce costs and stretch the maintenance budget.

The districts operate autonomously and diligently, but do so with a lack of central strategic direction and standard operational and performance measures. The uniform ingenuity and efforts of staff to reduce costs within existing budget allocations would be enhanced through strategic guidance, goal setting, and the use of consistent operational measures statewide.

Because reporting is inconsistent, varied, and not easily aggregated, formal communication across functions is limited and labor-intensive. Information-sharing is informal and meeting-dependent. As a result, information sharing is inefficient, and organizational memory is lost.

There is no documented performance management process. The department recognizes that it should be doing a better job in evaluating its own performance, and has begun taking steps towards improving performance measurement, reporting, and evaluation. Although during fiscal year 2008 the Department’s director formed a new organizational unit, Office of Performance Management, to address performance measurement, there is no current performance measurement responsibility assigned in the organization. This unit has not yet been staffed. To maintain an organization’s morale and performance, it is important for all employees to understand the overall direction of the department and progress achieved in meeting statewide strategic goals.

Department does not have necessary systems, processes, and tools to run a cost-effective highway program.

Exacerbating the financial challenges is the fact that ITD lacks many of the tools and methods to effectively plan future operations, particularly long-term needs, and communicate the conditions of the state highway system to its stakeholders. Districts are responsible for most of the highway related activities but there are no transparent statewide performance measures in place to set goals and hold districts accountable.

Other Major Areas of Concern

Coordination of Planning and Programming Efforts

The department's short- and long-term transportation planning and programming efforts need to be better coordinated, and must link strongly with an adequate financial plan. Important assumptions and choices embedded within the decision process are unclear. Decisions about project prioritization are made without adequate criteria or data; and multiple planning processes are not adequately coordinated to assess both short-term and long-term transportation program needs. For example, informal policies promote funding preference for maintenance and preservation of existing highways, but evidence indicates that these programs are chronically under-funded even as substantial resources are allocated to new highway capacity projects.

Bond Financing Policies

ITD, together with other involved state agencies, should improve policies and procedures related to the issuance of bonds to fund highway projects. In the context of the adopted policy decision to issue bonds for capital projects, the process could have been improved by: (1) analyzing the tradeoffs of borrowing to fund projects, such as potential impacts to preservation and maintenance, and, (2) having better procedures to ensure that alternative financing structures are considered and shared with key decision-makers through the Idaho Credit Enhancement Committee.

STIP Project Selection Guidance and Criteria

The department's Statewide Transportation Improvement Program (STIP) meets minimum federal guidelines. However, the process for determining how projects are selected for inclusion in the proposed STIP could be improved. The department does not consistently demonstrate which specific criteria or data, such as safety, user benefits, and congestion relief are used to prioritize projects at the districts. A more transparent process would enhance accountability and improve public support. It is recommended that project selection should be flexible and not strictly dictated by formula, but Idaho would benefit from some core criteria to guide priority setting for project investment.

Maintenance and Preservation Project Selection

Preservation projects do not have sufficient, sustained funding and ITD does not have a consistent, well-documented process for prioritizing projects using objective criteria such as pavement condition, safety data, and traffic volume. Appropriate use of engineering, management, and planning tools commonly used in other states would provide better documentation and would also make the process more open and transparent. The multi-year financial plan only identifies the net funds (revenues after maintenance and operations) available for contract construction, without separately identifying the amount available for the highest priorities of preservation and restoration.

Project Management

ITD is in the project management business. There is an observed inconsistency among districts in their capability and capacity to manage projects with respect to staff skills and management tools. There is a lack of familiarity of project management plans and an inconsistent use of Work Breakdown Structures. The department does not use a common project management methodology and toolset to monitor and track all projects statewide. Each district uses its own process, which is incompatible with others, making aggregation of information very difficult.

Project management should be a core skill-set throughout the department. There is a lack of project-management and consultant-management training. Regardless of how each district manages its own state-funded projects, Grant Anticipation Revenue Vehicle (GARVEE)-funded projects are managed differently because of the involvement of the Connecting Idaho Partners (CIP) consultants. Although CIP has sophisticated tools and methodologies, the department, in most districts and the central office, has opted to use them only on a limited basis. CIP’s ConstructWare software is being piloted by District 5, and the CIP project scheduling system is being evaluated for potential ITD use. Establishing a department-wide project management initiative will improve project delivery and project cost effectiveness – it should also have some indirect benefit by promoting staff retention through better staff development.

Asset Management

Best practice asset management processes have adopted preservation-first strategies and moved away from worst-first investment strategies in favor of life-cycle cost principles that result in the most cost-effective preservation and maintenance. A worst-first strategy moves the most critical roadway deficiencies into the highest priority as these problems occur. In effect, ITD follows a worst-first strategy, which is in contradiction to their preferred policy of preservation-first.

This worst-first approach is not considered to be a best practice as it is not cost-effective and may lead to significant long-term deterioration of the roadway infrastructure and exposes the public to potentially serious safety hazards. Worst-first does not allow the department to keep pace with growing need for highway improvement. In contrast, the preservation-first strategy bases the transportation program upon a foundation of appropriate preventive maintenance treatments to keep good pavements and structures in serviceable condition for longer periods of time. Doing so helps to maximize the life cycle of the investment.

ITD districts do not have the tools or resources to address the most effective life cycle pavement treatments, resulting in accelerated deterioration of non-deficient highway segments caused by deferred maintenance. The rate of deterioration of Idaho roadways is estimated at 8% to 12.5% per year. The current road maintenance resource shortfall has resulted in a system decline in which at least 35% of Idaho roads, based on Federal Highway Administration (FHWA) statistics, are ready for immediate rehabilitation or reconstruction.

Consultant Management and Oversight

ITD retains the services of a program management consultant, Connecting Idaho Partners (CIP), to co-manage GARVEE-funded projects. Management, delegation of authority and supervisory control of GARVEE-funded projects, particularly during construction, are not clearly defined between the CIP consultant, the districts, and the GARVEE Office.

In addition, project management tools used by the Connecting Idaho Partners would benefit other ITD projects if institutionalized and consistently used within ITD. Project delivery would improve and project cost-effectiveness would increase if ITD were to establish a department-wide capital project management initiative in the form of a Project Management Office (PMO) responsible for continued oversight of the GARVEE program; institutionalize project management tools; and establish department-wide project management standards of practice.

Regarding the use and management of consultants for other construction projects, there is no systematic comparison or cost-benefit analyses to determine the optimal mix of in-house and outsourcing professional services. ITD does not possess the decision-support systems in-house to regularly perform cost-benefit analyses because the essential data is not systematically available. The basic ability to compare in-house vs. consultant (or contractor) unit costs for professional service or maintenance activities would be a significant starting point.

Best Practices Would Improve GARVEE Project Planning and Execution

The GARVEE program lacks an adequate financial plan. The GARVEE plan does not have essential elements of a complete financial plan such as: projected post-construction operating, maintenance, and preservation costs; the updated forecasted reinvestment rates reflecting the $22 million negative arbitrage; and full integration into the overall ITD financial plan.

The current financing plan includes five staggered bond sales (two of them have already occurred) of approximately $998 million for road capacity projects through 2012. Repayment is to be from federal highway revenues, with total debt service over the life of repayment estimated at $1.54 billion. Debt service will consume about 30% of Idaho’s future federal highway revenues until the bonds are retired. The GARVEE financing plan, as proposed, will result in approximately $22 million in negative arbitrage costs. A more flexible financing strategy could eliminate this negative arbitrage problem in future bond issuances, potentially saving Idaho $19.6 million in financing costs.

ITD Efficiency Efforts

Over the last several years, in response to the growing fiscal challenge, and as a result of the department’s Practical Design initiative, each of ITD’s districts has developed methods of operation that attempt to do more with less. The Practical Design initiative expects that all approved future construction projects are designed to save costs according to practical design standards. In order to ensure that these are real savings, however, the use of a cost analysis or value engineering analysis on the effect of the changes that reduce the cost of the bid should be required.

In other areas, the districts have been able to demonstrate some modest real cost savings (e.g., District 1 in-house vehicle repair). In other instances, we found that ITD staff has cut costs by doing less (e.g. narrower shoulders, steeper grades). Districts have also transferred some specific maintenance costs to the private sector (e.g., District 2 has a program to flatten slopes along highways to make them farmable). In one case, a district manufactures its own salt brine to mitigate the rapidly increasing costs of road salt.

In other efforts throughout the Highway Division, measures have been put in place to limit outsourcing design work and to maximize the utilization of ITD engineers. The current outsourcing of professional services (for non-GARVEE-funded projects) to in-house is a ratio of 60-40. Our analysis has determined that continued outsourcing at the current ratio is necessary to the department, given the rate of turnover of professional staff. However, retaining professional work in-house is more cost-effective, and productivity is greater, when ITD is fully staffed and utilizing existing ITD technical resources at full capacity.

Despite these efforts, without making significant changes to governance policies, operations, and perhaps most importantly the funding structure of the department, as elaborated further in Chapter 2 Section 1B, ITD’s Highway Division will not be able to sustain even current levels of service, which are increasingly showing signs of deferred maintenance and repair.

While we agree with the overall thrust of the ITD Efficiency Report, the bigger issue now is that no efficiency efforts alone will solve current problems. Efficiency should be linked with additional investment in order to realize steady, cost-effective improvements to the roadway network.

Identified Savings

We identified opportunities for quantifiable, near-term savings as well as changes which could provide significant long-term savings in transportation capital and operating budgets. These changes alone, however, will not address the immediate financial challenges facing the department. The key to the department’s long-term success will be how it transforms itself from merely performing necessary day-to-day activities without the tools it needs, to a department that is performing those activities with systematic planning precision in pursuit of overall department strategic goals and objectives. Accomplishing this transition will provide demonstrable improvement in efficiency and effectiveness.

Near-term (5 year) savings are estimated to include:

• A potential one-time savings of up to $19.6 million achieved by using short-term debt to avoid significant negative arbitrage costs in the capital program supported by bond sales.
• Establishing an internal Project Management Office (PMO) under the Highway Division, with responsibility to track all statewide highway construction projects, will improve project delivery and increase project cost-effectiveness. An estimated savings of $5.3 million in the first five years from efficiencies gained by using best practice project management coupled with consultant management techniques. An estimated savings of $3.1 million would be realized every year after the internal PMO is in place and operational.
• Estimated savings of $6.1 million in the first five years from improved productivity from more effective use of consultants to offset turnover and staffing shortfalls. Thereafter, an estimated $3.5 million in savings would be realized annually. In addition, a potential annual savings of $385,000 accomplished by reducing turnover as discussed in Section 1A.
• Significant savings of as much as 3% on selected projects in the capital program, by amending state procurement policy and Contract Construction practices by using Design-Build. Design-Build pilot projects should be implemented to gain invaluable experience with this American Association of State Highway and Transportation Officials (AASHTO) best practice.

Long-term savings opportunities include:

• Those transportation agencies that use performance-based management have credited measuring and reporting on performance as a means to achieve cost savings, garner public support for transportation investment, and deliver projects more quickly. Ensuring that the performance standards are a part of the day-to-day operation, and are linked to the overall strategy, is essential. Comprehensive performance management programs have demonstrated savings in terms of increased productivity (efficiency), reduction in time to achieve goals (effectiveness), and in turn, a reduction in costs (economy). Implementing a performance-based management system involves a significant organizational cultural adjustment and commitment.
• Integrating existing life-cycle cost analysis process is an essential component of strategic asset management, which is considered an indispensable practice if the sustainability of its infrastructure systems is to be realized. Best practice models compare alternative highway investment strategies by comparing user benefits with life-cycle capital, operating, and maintenance costs under different strategies. Best practice pavement modeling can compare optimal miles of maintenance needed by assumed deficiency levels. National studies indicate that long-term savings can be realized through better use of funds on investments that have higher rates of return. The implementation of an integrated set of technology systems would give ITD the capability to make the most efficient decisions related to prioritizing, scheduling, and budgeting pavement maintenance and preservation projects with significant long-term savings to the roadway network.
• ITD has the opportunity to develop a statewide procedure to document, evaluate, and share various innovations, process changes, and implementation of new technology. While each item may not be applicable in every district, a formal process can be put in place to review applicability. Technology transfer in increasingly important as research results and practical applied implementation experience occur more rapidly. This will promote a culture that embraces learning, innovation, and change.
• ITD should continue to track actual district cost savings from the Practical Design Efficiency Report and evaluate those efficiencies. For all Practical Design projects, the use of a cost analysis or value engineering analysis on the effect of the changes that reduce the cost of the bid should be required.

Key Recommendations

Given current conditions it will become increasingly difficult for ITD to improve or even maintain “average” levels of performance without fundamental change. Part of this change will involve addressing funding needs. As noted, the $137 million proposed to be allocated to the highway program is merited and may even be understated. We recommend, however, that any funding enhancements be accompanied by an explicit policy decision and actions to focus on maintenance, preservation, and restoration first, and to bring the existing infrastructure to an acceptable and cost-effective level. Idaho should consider adopting explicit policies which do not allow new capacity projects to siphon funding from basic highway operating, maintenance, and preservation programs. New capacity projects should be rigorously and independently evaluated for cost effectiveness, with consideration also given to additional long-term maintenance costs. Such an evaluation should also include specific consideration of whether future proceeds from GARVEE can be directed to projects that reduce on-going maintenance costs and support preservation and restoration priorities.

Further, to be able to meet the challenges of the coming decade, ITD should:

• Develop a comprehensive strategy and vision, linked to operational goals and objectives, to address long-term statewide capital program and operational demands.
• Develop an integrated mid-term (8 to 20-year) business and financial planning process to address the challenges of the revenue shortfalls and the implementation of ITD’s strategic vision.
• Use a more flexible financing strategy to reduce negative arbitrage in future bond issuances, potentially saving Idaho $19.6 million in financing costs.
• Provide stronger direction from central office to the districts through centralized performance management, asset management, practical design, and project management programs.
• Adopt a preservation-first strategy to keep good pavements and structures in serviceable condition for longer periods of time.
• Establish formal training programs emphasizing project and consultant management.
• Acquire or develop enhanced operational technology, decision-support tools, and standard performance metrics needed to promote performance effectiveness, measure performance results, and provide management accountability.
• Idaho Legislature appropriate up to $6 million for acquisition of key technological tools, for a pavement management system, maintenance management system, integration of systems with financial management systems.

The key to the department’s success will be how it transforms itself from performing necessary day-to-day activities to meet short-term needs, to a forward-looking organization that is performing those activities in pursuit of overall strategic goals and objectives.