Transportation Infrastructure - Oversight of Rental Rates for Highway Construction Equipment Is Inadequate: Rced-93-86 (Paperback)

Pursuant to a legislative requirement, GAO provided information on the equipment rental rates states use to reimburse contractors for unanticipated work on federal-aid highway projects, focusing on: (1) the basis on which states establish equipment rental rates; (2) whether states establish rental rates that are appropriate with contractors' actual equipment costs; and (3) whether the Federal Highway Administration (FHwA) adequately oversees states' use of rental rate guidelines. GAO found that: (1) of the 52 departments of transportation that use a standard rate guide to determine equipment rental rates, 47 use national standard rate guidelines, 3 use published guidelines from external sources, and 2 have developed their own rate guides; (2) although the California Department of Transportation (Caltrans) has taken steps to lower its rates, its rates remain 10 percent higher than national standards because its equipment rental rate guidelines are not based on national standard rates and include unallowable costs; (3) 28 of 52 departments of transportation improperly established their equipment rental rates because they failed to follow FHwA guidelines, adhere to required methodologies, or fully account for duplicative overhead cost factors; (4) FHwA has allowed duplicative overhead costs to be paid by federal funds because its staff is not familiar with standard rate guidelines; (5) FHwA oversight of states' use of rental rates is inadequate because its rental rate guidance is not incorporated into highway program and policy manuals, guidance on contractor discounts is insufficient, review of rental rates is not systematic and consistent, and its field offices are not told of potential problems; and (6) FHwA inattention to rental rate policy guidance and rate-setting methodologies has resulted in higher costs and inequitable treatment of contractors.