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Hearing of the Transportation, Housing and Urban Development, and Related Agencies Subcommittee of the Senate Appropriations Committee - The Department of Transportation's Implementation of the American Recovery and Reinvestment Act (ARRA)

Location: Washington, DC



9:15 A.M. EDT, THURSDAY, APRIL 30, 2009

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SEN. MURRAY: This subcommittee will come to order. We are on a tight timeframe this morning as there is a full Appropriations Committee going this morning as well on the supplemental. So we have a number of members who want to get to both, so we are trying to get started. Senator Bond is going to be here shortly. He's running a little bit late, so I'm going to go ahead and begin and we will have him join us as soon as he arrives.

I want to welcome Secretary Lahood and Inspector General Calvin Scovel from the Department of Transportation to this hearing this morning. We look forward to your testimony and to learning more about the challenges and successes facing the department as you work to implement your sides of the American Recovery and Reinvestment Act.

And this subcommittee is committed to working with you in your efforts. I look forward to a continued partnership with the Department of Transportation as we work to monitor the spending of taxpayer dollars.

In total, the U.S. Department of Transportation received over $48 billion from the Recovery Act to invest in every part of our transport system -- our roads and bridges, airports and railroads, public transportation, ports, and maritime communities. This funding should go to projects that reduce congestion, improve safety, enhance freight mobility, and make our nation stronger, long-term projects for people to work today, and keep businesses moving.

In my home state of Washington, unemployment has now risen to 9.2 percent, well above the national average. Businesses are forced to cut back, families have lost their home to foreclosure, our state government is facing a $9 billon deficit which has left a lot of our worthy transportation projects in doubt. But the release of federal recovery dollars means that a 180 transportation projects in Washington State will be able to move forward creating and sustaining thousands of jobs.

I recently, in fact, toured a project on Interstate 405 in Bellevue that received recovery funds which is going to create about 560 new family-wage jobs. Washington, like other states, will also receive millions to support much needed capital investment in our transit systems which are struggling as well. But the true promise of the Recovery Act will be realized only if DOT and every other agency that has been charged with its implementation does this job effectively, responsibly, and efficiently.

Now, those are not words typically associated with large bureaucracies. But so far, the department has met its deadlines for distributing highway and transit funds, for collecting certifications from each governor on its transportation plans, and publishing a strategy for high-speed rail.

DOT has also created a departmentwide team to oversee and coordinate its workload, and created a risk management plan to identify areas of concern and develop a course of action for each one. But how will the department oversee the funds on a daily basis so that we avoid wasteful spending, we do create jobs, and improve our nation's infrastructure.

The challenges are significant. The Recovery Act calls for frequent and detailed reports, and the department has only just started to prepare for those requirements. DOT still needs to make key decisions about how to allocate over $10 billion provided in the Recovery Act for discretionary programs. That leaves a lot of unanswered questions.

What criteria will the department use to evaluate the applications for the $1.5 billion competitive program? What guidance will the department issue for applicants interested in intercity and high-speed rail grants? What is the best use of funding provided under the New Starts program? Although the department has distributed over $34 billion in highway and transit formula grants, overseeing the use of this funding presents its own challenges to the department.

However, the department ensures the funds are used correctly by state and local jurisdictions at the same time that the department must oversee the regular highway and transit programs. The inspector general recently identified and resolved challenges for the department that could interfere with the best use of recovery funds.

That's an example the department still needs to move quickly to suspend people that have engaged in frauds so that they do not receive any additional federal contracts. It will be particularly important for the department to resolve this issue in order in avoid the kind of wasteful spending that undermines the public's confidence. So as I said, the challenges are significant.

And as the department continues to implement the Recovery Act, this subcommittee will continue to monitor its progress. I hope the information gathered today is the start of an ongoing dialogue with the department. There's too much at stake to not get this right. With that we are joined by Senator Bond.

Sorry we started without you. But I'm delighted you're here, and you can go ahead and do your opening statement.

SEN. CHRISTOPHER S. BOND (R-MO): Thank you, Madame Chair.

And welcome, Mr. Secretary.

I apologize. I had to make a speech downtown this morning, and I had a room full of people. I had to shake and howdy with on the way in. And I'm delighted you started, because we've got a tough morning schedule ahead. But it's important that we have this oversight hearing.

I hope that in the months and years ahead, we will continue to monitor how these funds are being administered through our states and localities and that the Recovery Act will have its intended effect on our nation's economy.

I did not support passage of the Recovery Act but I have always supported investment in transportation, because I do believe that these are the types of investments that should be included in any economic stimulus -- infrastructure spending works to preserve and create jobs, promote the kind of economic recovery that is necessary during these difficult times, and lays the groundwork that's absolutely essential for continued progress and development of our economy.

I would have preferred more spending be included in the Recovery Act for crumbling highway and bridge infrastructure as well as water infrastructure and transit. I was one of only two Republican senators who supported our distinguished chair on the Senate floor when she sponsored an amendment to increase the level of investment for actual infrastructure spending.

I'm disappointed that the overall total for transportation was only $48.1 billion. Out of that total, only ($)27.5 billion was included for our states to address their ever-growing highway and bridge needs. Additional funding for state for infrastructure is what stimulus should be about. We can already see that our aviation funding, highway funding, and transit funding were the first of the funds to hit the ground in sustaining and supporting jobs.

And I applaud you, Mr. Secretary, and the DOT boys for their ability to meet all the deadlines thus far contained in your section of the Recovery Act. Funds are being announced, and we'll see actual obligations and outlays of funds to the states in the coming weeks. And I understand, as expected, that the bids are coming in significantly lower.

We're getting good -- particularly good value for our spending now. While progress has been good and however -- and over 2,000 projects have been awarded, there are a number of new accounts and activities that we need to monitor in the future. Of particular interest to me and a number of senators are two new grant programs to be administered within the department, ($)8 billion for high-speed rail and ($)1.5 billion for a new discretionary grant program for surface infrastructure projects.

We are awaiting the interim guidance and Federal Register notices on the specifics of these new programs. I understand that the GAO and the DOTIG will be auditing and reviewing these new areas. It's my hope that we'll have a follow-up hearing in the future where we can expect the results of these reviews.

And with that, Mr. Secretary, I look forward to hearing your comments.

And I thank you, Madame Chair.

SEN. MURRAY: Thank you very much, Senator Bond.

Mr. Secretary, welcome to our subcommittee. Your statement, it will be printed and it's on the record, but we would appreciate some opening remarks from you.

SEC. LAHOOD: Well, Madame Chair, first of all, this is my first opportunity to personally thank you for your leadership in supporting the president's economic recovery plan. Without your leadership and the leadership of others here in the Senate, we wouldn't be sitting here today talking about our opportunity to put people to work. So I thank you very much for all your leadership.

And to you, Senator Bond, thank you for your leadership over the years in transportation. You've been a strong advocate for almost everything we do at the department and we're grateful for your support, sir.

And I'm enormously proud of the men and women at the department who have worked extraordinarily hard to implement this groundbreaking legislation in record time while fully embracing the letter and spirit of the Recovery Act commitment to accountability and transparency. Our people have been working 24/7.

And of the roughly $48 billion provided to the department by the Recovery Act, we have announced nearly $45 billion for roughly 2,800 surface and aviation improvement projects. And as of this week, more than $9 billion of these funds have been obligated in nearly every state and territory.

Every governor, all 50 governors have accepted our portion of the recovery plans. And -- because they know that they can put their people to work in their states in good-paying jobs. The FAA has been very effective in soliciting and reviewing project proposals and awarding discretionary funds so that ready-to-go airport improvement projects could begin.

Within two weeks of passage, the Federal Highway Administration appropriated funds, and has been working aggressively to move projects through the approval process. The Federal Transit Administration now has 136 transit agency grant proposals totaling nearly $1.5 billion ready to be obligated.

And the Maritime Administration will soon award $100 million in grants to hundreds of small shipyards. The Recovery Act also makes historic investments intended to jumpstart new high-speed passenger rail service for the nation. Later this summer we will begin awarding a portion of the ($)8 billion in recovery to deserving rail corridor projects all over the country.

I intend to invite all of the corridor folks from around the country, folks that have been dreaming about high-speed rail to Washington to listen to their proposals, to talk to them, and then to begin working with them. We want to establish the kind of relationships that we've had with others.

And so we will very soon have a meeting of all the high-speed rail corridor folks and listen to what they've been doing, and then figure out how we can apportion the $8 billion so that we can jumpstart opportunities all over America. I traveled around the country to New Hampshire, Vermont, Arizona, Texas, and a number of other states and we've been out meeting with governors and other officials to make sure that the projects that we are funding are on track, and the money is being well spent.

We put together in our organization at DOT, the TIGER team which works everyday, all the modes coming together, talking to one another about how the money is being spent, and making sure that it's spent correctly. There are at least three checks on what we are doing., the website established at the White House which we give information to that lists the projects, the states that it's going to, eventually what projects are being funded, and eventually how many jobs are being created.

There are two IGs looking at what we're doing. The OIG that was appointed by the president, Mr. Devaney and his staff, and then of course our own IG who you'll be hearing from today. So transparency and making sure that every dollar is spent correctly; no earmarks, no boondoggles, no sweetheart deals -- this money, these hard-earned dollars will be spent the way that you all intended for it to be spent.

So we're working hard at this. We think we've got it right. And we think very soon thousands of people will be working around America in good-paying jobs rebuilding America's infrastructure.

I look forward to your questions, Madame Chair.

SEN. MURRAY: Thank you very much, Mr. Secretary. I appreciate you being here. Let me start with the ($)1.5 billion in competitive grants for transportation project that will have a significant impact on the nation and the metropolitan region.

This is a new program for the department, and it's unique because it involves almost every mode of transportation. The competitive program was included in the Recovery Act to make sure that billions of dollars that we are investing will result in some meaningful legacy projects, you know, so that we can see some real improvements to transportation infrastructure.

And I believe strongly that we can't invest more than $48 billion in supplemental funds in transportation without making sure that we get some real, measurable improvements for communities. So I want to ask you today what kind of criteria you are considering that will make sure that this program creates a legacy of significant transportation progress.

SEC. LAHOOD: We have submitted our criteria to the White House and to OMB. We're waiting for guidance from them. We believe that as early as next week the criteria will be out, will be made public. But I will tell you this. You all, in your bill that the president signed for ($)28 billion for roads and bridges, ($)8 billion for transit, ($)1 billion for airports, ($)8 billion for high-speed rails.

So we think the discretionary money ought to look at some other modes that didn't get the kind of attention that these did. And so we're thinking in terms of ports and multimodal opportunities that really weren't considered as much as maybe some of you would have wished.

And I know that that's one of the reasons that these dollars were put in there. That's kind of what we're looking at and -- but the actual criteria will be made public next week.

SEN. MURRAY: Okay. And do states and local governments understand that when they apply for these grants that we are looking for long-term priorities?

SEC. LAHOOD: Absolutely, sustainable transportation opportunities.

SEN. MURRAY: Okay. What kind of outreach are you doing to make sure people understand what these projects are, or are you just waiting for people to apply to you?

SEC. LAHOOD: For the ($)1.5?


SEC. LAHOOD: Well, we need to get the criteria out. It has not been made public. We're waiting for a little guidance here from the White House and OMB. And once we get that we'll put it out publicly, and then we'll begin working with folks around the country that want to make application. It will become very clear that, you know, we want some innovative approaches. We want some approaches that we're not covered under the other portion of the economic recovery.

SEN. MURRAY: And since we are -- you are looking towards making sure that port and freight rail and other improvements are part of this, are you going to do some outreach to some of those communities, states and local governments to make sure they understand that's what you're looking for?

SEC. LAHOOD: Absolutely. I think we may use the model that we used on highway money where we invited all the state DOT secretaries to Washington even before the bill was signed, talked to them about how we wanted to get the money to them, do the same. We're doing that with high-speed rail corridors inviting all the folks to Washington. And we may very well invite a number of folks to DC to talk about the ($)1.5 billion. So there is a good understanding of how this money should be used.

SEN. MURRAY: Okay. Well, let me ask you about that high-speed rail. You released your vision for that just a couple of weeks ago and provided an overview for the high-speed rail program; did not provide details yet about how exactly the recovery funds are going to be used. I think you said those were coming in June, the details of that program.

But I wondered if you could give us a little bit of insight today on what you expect. Are you looking for brand new corridors or improving the speeds on current corridors, or what are you looking for?

SEC. LAHOOD: There are a number of high-speed corridors around the country. We know about the Northeast Corridor. And we know that in California they've been working on high-speed for over 20 years, passed a referendum, set aside money. And they are in a much different position than maybe a corridor in the Midwest where they sort of talked about it, or a corridor in the South where maybe they need some study money.

I think what we would do is look at the ($)8 billion as an opportunity to begin several corridor opportunities. In California, obviously, they are way ahead of a number of other places in the country. In the Northeast, you know, the same kind of a program. The Northeast Corridor -- if you straighten out some tracks along the Northeast Corridor, you can get some of the Amtrak trains to go a little bit faster.

In the Midwest they have been dreaming about high-speed from Wisconsin, Minnesota through Illinois all the way down to Saint Louis.

SEN. MURRAY: So you have a lot of applications. How are you going to prioritize, and what will be your criteria to prioritize which of those projects?

SEC. LAHOOD: Well, we really believe we can help jumpstart peoples' opportunities. Look at -- in California they've done all their studies, they are working on their environmental, they've got money set aside. That's different than, perhaps, in other part of the country where they may need some money to do a study to really begin.

It's not unlike when the interstate system was started. I'm sure that President Eisenhower -- all the lines weren't on the map. They sort of knew where they were going to begin. And I believe that 20 -- two decades from now, you're going to see a network of high-speed rail. And we're going to help provide some opportunity.

This is not the -- ($)8 billion that you provided, another ($)5 billion in the president's next five-year budget, so we have ($)13 billion, not near enough to do --


SEC. LAHOOD: -- everything we want to do, but it is a very good start. It's 13 billion times more than we've ever had before. So --

SEN. MURRAY: (Laughs.) Okay. Well, there is no state match requirement in this --

SEC. LAHOOD: That's correct.

SEN. MURRAY: -- but will you give priority to projects that do have a match?

SEC. LAHOOD: I think we're going to give priority to those that have been working on high-speed rail and been dreaming about it and put their plans in place and meet the commitment by having referendums passed and have their plans in place. I mean -- but we also know that there are other corridors that could use a little bit of money to get a study going. And we don't want to short-circuit those opportunities either.

SEN. MURRAY: Okay, I appreciate it. Thank you.

Senator Bond.

SEN. BOND: Thank you very much, Madame Chair.

And thank you, Mr. Secretary, for mentioning ports and multimodal. For those of us in the Midwest, we know how important those ports are in taking large bulk commodities off of our highways. Our rails are absolutely clogged; we've got to have those ports. I appreciate that. I thank you for mentioning my constituents in Saint Louis and high-speed.

When you're talking about all those wonderful Midwest high-speed corridors, be helpful if one of them crossed the Mississippi River. And I got a pretty good place to do that. So we look forward to working with you on that. I understand on the earmarks. People get mad at congressional earmarks, but those of us here know that we do earmarks because we listen to our state DOTs, we listen to our local leaders.

And somebody's got to earmark them. Right now it's going to be the Department of Transportation people who earmark them. And that's fine, but I just urge you to continue, as you said you would, listening to state DOTs and the local leadership, because they are the ones who really know where the priorities are. That's what we do.

We get criticized for it. But I read article 1 section 8, 9 saying that's our responsibility. But I appreciate your willingness to listen. I've got a big problem, something that was left out of American Recovery Act. I was advised by leaders on the floor that they were going to deal with it. Somebody put the kibosh on it, so it didn't happen.

But we all know there is a looming $8.7 billion recession -- rescission of the highway funds on September 30th, if something is not done to fix it. We're getting all these money for recovery to stimulate job creations. But if this rescission goes through, it's going to cancel numerous projects that are either ready to go or already underway.

And I'd like to know what your views are on that unfortunate rescission provision, and what you think can, should, and will be done to fix it.

SEC. LAHOOD: Well, we're monitoring where we are with the Highway Trust Funds.

And we realize that you all were good enough to put the $8 billion out of the general fund in the Highway Trust Fund last year. And as a member of the House last year, I supported that and --

SEN. BOND: I did too. That was transit funds. And the highway funds have briefly been transferred to the --


SEN. BOND: -- general fund, but we got a little problem --

SEC. LAHOOD: -- we're paying close attention to this. And I think we'll give you some pretty good guidance about midsummer where we're at, and if we're going to run out of money again.

SEN. BOND: Something's got to be done on that rescission, or that messes up the plans that are already under way. That one is a looming tragedy that I had hope we could deal with in the Recovery Act, but we need to deal with it. Now, during the debate on the bill, it was stated that 3.5 million jobs would be created.

Unemployment rate has gone from 8.1 percent to 8.5 percent. Do you have a good fix yet on how many jobs have been created by the department with the funds that have been allocated? And what quantitative methods or tools will you use to determine how many jobs have been created?

SEC. LAHOOD: During the month of May, we will put out a report, Senator, that will define what the term "jobs" means here. We're trying to work with OMB, and we're trying to work with our state DOT friends on this. We want to make sure that everybody understands what a job means.

Does it mean when somebody is working on a job in a certain part of Missouri and then that job is complete and then they go to another job, is the account that a second time, or does that mean the person is, you know, continues in their employment? And so there are a few little of these delicacies --

SEN. BOND: Yeah --

SEC. LAHOOD: -- here that we are trying to work out. But by -- very soon here we will have a good definition that people will understand, and that everybody will agree to.

SEN. BOND: Okay.

SEC. LAHOOD: And once we do that we can, I think, assess very well how many jobs are going to be -- we know there are going to be an enormous number of jobs created. We know that, and we also know that as soon as the weather breaks here, which it's now doing in the Midwest, a lot of these projects will begin in places where the weather, you know --

SEN. BOND: Yeah, I understand. We've had a little weather in it --


SEN. BOND: One quick question. Does Amtrak have a strategic plan for annual appropriations of the Recovery Act? We're worried if Amtrak needs to get its act in -- together. What are doing to make sure that it meets specific goals and targets?

SEC. LAHOOD: Well, we're going to work with Congress on the bill that you all passed. We think it's a good bill. And we think it, you know, really helps us work with Amtrak, and keeps them meeting certain standards and obligations that were set out in the legislation. I just met with the Amtrak board at their board meeting here a week or so ago. And we talked about some of these issues.

But look, we think the Amtrak bill is a pretty good guidepost for all of us to be following here to make sure Amtrak continues to be a very viable passenger rail service in America.

SEN. BOND: Thank you, Mr. Secretary.

And thank you, Madame Chair.

SEN. MURRAY: Thank you.

Senator Feinstein.

SEN. DIANNE FEINSTEIN (D-CA): Thank you very much, Madame Chairman.

Thank you very much, Mr. Secretary. I very much appreciate your coming and spending a little bit of time with me. I want to concentrate on two subjects. One is the air traffic controller, and the other is the high-speed rail.

Following this hearing last year -- you were not here -- I asked the GAO for a study of the Southern California TRACON on the belief that -- and that belief remains -- that we have major problems with insufficient air traffic to insufficiently trained air traffic controllers doing the work of a controller.

The inspector general just came out with his report, and he predicts that later this year 40 percent of the people working at the Southern California TRACON will not have full certification -- excuse me. I find that unacceptable. The problems are that there really is, I think, insufficiency in the training program.

I think there is a cost of living problem with respect to that area of our state. We have found it with federal firefighters too. Other services are more attractive to them because they pay better.

In any event, the GAO made four recommendations. One is to validate the staffing ranges for Southern California and Northern California TRACON to ensure that their staffing levels are sufficient to handle the volume. I would ask you to carry that out. The second is, expand the use of relocation, retention, and other incentives to entice more experienced controllers to accept positions or differ retirements at LAX and Southern California TRACON.

Third, to provide LAX, Southern California TRACON, and Northern California TRACON with enough contract instructors, classroom space including offsite locations, and simulators for the expected search in new controllers -- this is particularly critical, GAO says, at Southern California TRACON -- and to evenly distribute the placement of new trained trainees throughout the year to avoid training bottlenecks, and conduct an independent analysis of overtime scheduling practices at all three facilities. I would like to ask you today to commit to carrying out those recommendations of the GAO.

SEC. LAHOOD: I'm committed to doing that, Senator. And I thank you for your leadership. When you and I met, this was the number one issue on your list, and --

SEN. FEINSTEIN: That's right.

SEC. LAHOOD: -- I take your point on this. We will have an FAA administrator in place as soon as the Senate can confirm him. And I think he is an outstanding person, a former airline pilot, the former president of the Airline Pilots Union. And I think he will bring extraordinary experience particular to these issues that have been recommended in this report.

And we are committed to working with you to make sure these recommendations are followed. It has everything to do with safety. And I know that's what you care about, and that's what we care about.

SEN. FEINSTEIN: Yeah, I'm very worried about a potential serious accident. I misspoke, Mr. Secretary. The IG report --

SEC. LAHOOD: Right. No, I understood --

SEN. FEINSTEIN: -- GAO report --

SEC. LAHOOD: Yes, yes, and I understood.

SEN. FEINSTEIN: But thank you very much for that. You said that privately, you've said it publicly.


SEN. FEINSTEIN: That means a great deal to me. The second thing is the high-speed rail. You pointed out that California has passed a $9-billion bond for high-speed rail with another ($)900,000 going into rail generally in the state. We are prepared to move on the San Francisco to San Jose line, and also on Anaheim to L.A.

The vision is to have a rail spine right down the center of California that can move people and goods very, very rapidly -- 2-1/2 hours between Los Angeles and San Francisco -- which then should rival what is a very heavily congested air commuter pattern. So we obviously will be coming in for additional funds.

My question to you, do you find the California proposal deficient in any way, or do you believe that the state has its act together?

SEC. LAHOOD: California is far, in a way, ahead of any place else in the country. They are about this close to having just about everything that's necessary. And I have no doubt that they will be at the top of the list just because people have been working on it, as you know, for 20-plus years.

And their dream finally comes true with the president announcement that $8 billion that you all -- under your leadership were able to put, or the president was able to include in this bill that you all passed. And so California is ahead of the curve.

SEN. FEINSTEIN: Well. And when California has passed a financing bond --

SEC. LAHOOD: That's right.

SEN. FEINSTEIN: -- I'm sure it's something that people want so --

SEC. LAHOOD: That's exactly right. That is the commitment --

SEN. FEINSTEIN: -- I very much appreciate that.

SEC. LAHOOD: -- that I think is extraordinary. It's an extraordinary commitment.

SEN. FEINSTEIN: Right. Right, it is. So that completes my turn --

SEN. MURRAY: Thank you.

SEN. FEINSTEIN: -- my questions, Madame Chairman.

And thank you, Mr. Secretary.

SEC. LAHOOD: Thank you.

SEN. MURRAY: Thank you very much.

Senator Alexander.

SEN. LAMAR ALEXANDER (R-TN): Thank you, Madame Chair.

Mr. Secretary, welcome.

SEC. LAHOOD: Good morning.

SEN. ALEXANDER: Good to see you. I've got just a couple of questions I would like to ask you. I want to ask you about the possible relationship between electricity transmission lines and railway rights of way. The president and you are talking about new high-speed rail. The president is talking a lot, as many others are, about the need for an improved method of transmitting electricity across long distances.

That raises the difficult prospect of where to put the transmission lines, because the areas where the electricity needs to go is usually highly populated so you end up with a -- at the very least -- a lot of delay or if you succeed, a lot of unsightly transmission lines in places where people don't want them.

I don't know very much about this. I was talking to the head of the Federal Energy Regulatory Commission about it the other day. But is there any possibility of putting the transmission lines along the railway routes or even burying them along the railway routes or even making them useful for electricity, for trains, and in that way provide a source of revenue for the trains and at the same time avoid the expensive delays and difficulties of siting transmission lines, or is that already being done?

SEC. LAHOOD: I'm not an expert on this, Senator, but I know this. In talking about really expanding our broadband capability and putting fiber down where we're building roads or we're building railway beds, it's possible to do that. I don't know about the electrification.

I do know this that Dr. Chew, Secretary Chew at Energy has been talking about this and thinking about this and trying to figure out how to make this happen. And so rather than saying something where I don't really know of what I speak, I'd rather talk to him and sort of see what his take is on this. I've not heard that you can do this, but I know you can lay fiber down along roadways.

SEN. ALEXANDER: Yeah, I haven't, either. And the FERC chairman didn't either. And I'm not sure he can do it. But it would be typical of government to start out and build a lot of high-speed rail --


SEN. ALEXANDER: -- lines away one place and transmission lines another place --


SEN. ALEXANDER: -- and it might be a good idea just to explore where there's any relationship between the two. It might actually save money, time to do three things at once. The second is something I've always been intrigued with, and you may not know about this either, and maybe Senator Bond knows more about it.

But a few years ago, I believe Missouri had a different way of dealing with bridges. They made a deal with the federal Department of Transportation and said give us the money and we'll build in five years what we would otherwise have built in 30 years. And they did it by the use of private contractors and they avoided a lot of delay and expense going through the usual federal regulatory procedures.

It sounded like that was a successful effort. And it's been a year or two since I've caught up with it. But if it is -- if I remember the bottom line well now, Senator Bond or Mr. Secretary, I believe Missouri felt it could repair all the bridges it needed to repair within five years rather than 30 years.

And it could deal with the money that was about to be allocated by the federal government over a period of time. Did that work, and if it did work, can it be tried at other places?

SEC. BOND: I would say to my friend from Tennessee it was a great idea. I think it could work, design, build contracts. Unfortunately, FHWA didn't approve it. So it's an idea that is just -- no -- but still it's an idea I think could save us -- could do a whole lot more with a whole lot less.

SEN. ALEXANDER: Well, I would like -- I'm raising it just to call it to your attention, Mr. Secretary. I know from my own experience as governor, we on a couple of occasions experimented with buying a building from a private contractor. We said okay, here are the specifications, and here is the price. And we got it in half the time and half the cost.

And this was the same idea applied to bridges, a negotiation between the state and the federal government.

If that's promising and if it permits states to take a certain amount of tax dollars which are scarce -- we just talked about the trust fund and all the challenges we have there -- if that's possible to do, why not take in two or three states, explore and see how it works?

And if you need some changes in law to do it, I'd be glad to help you with it. Again, I'm not expecting you to know the answer to that. I just was very intrigued by -- my old governor instincts got the best of me, and I just wanted to ask whether its --

SEC. LAHOOD: Well, look -- Senator, we've talked about thinking outside the box on how do we build -- use the Highway Trust Fund which is inadequate and do all the things we want to do. And we're talking about public-private partnerships and we're talking about these kinds of opportunities.

And you know, if you all are in a mind to help us with that, I mean these are the kind of things that we need to do if we're going to do all the things that we want to do in America with new bridges and new roads. And public-private partnerships, certainly, have to be a part of it.

SEN. ALEXANDER: Thank you, Madame Chairman.

SEN. MURRAY: Thank you.

Senator Lautenberg.

SEN. FRANK LAUTENBERG (D-NJ): Thanks, Madame Chairman. And I apologize for tardy arrival. And I ask unanimous consent that my full statement be included in the record.

SEN. MURRAY: It will be.

SEN. LAUTENBERG: The focus here -- and I welcome Secretary Lahood. We're getting to know each other fairly well.

SEC. LAHOOD: Yes, sir.

SEN. LAUTENBERG: Yeah. And I think we're on the good track.

SEC. LAHOOD: I agree with that.

SEN. LAUTENBERG: Yeah, okay. Well, as long as you agree with my track we're going to do well.


The thing that I like here is that we're really focusing on the transportation picture in total. Whether as Senator Feinstein discussed getting the relationships in FAA squared away, making sure that we have our highway improvement funding that's critical, but -- (inaudible) -- Mr. Secretary.

I think it's fair to say that the position that the rail elements is coming into play. And when I look and see that the kinds of spending that we're looking at -- Recovery Act, for instance, includes a new $1.5 billion grant program to fund nationally and regionally significant transportation improvements for highway, transit, rail, port initiative.

Now, what's the yardstick by which the administration will make judgments to determine which of the projects are truly national or regional -- of regional benefit?

SEC. LAHOOD: Well, as I indicated, we have the criteria. We're waiting for guidance from OMB and the White House. And we think we will have that very, very soon, maybe as soon as next week. And we will put it out so that everybody around the country knows what it is. And then we will begin to look at opportunities that really can provide the kind of jobs that I know all of you want to do, but also have a national significance.

SEN. LAUTENBERG: You know, we have a target that touches several objectives. And one of the things that we're being asked for by the president is to make sure that we get to the quickest way for value investment, but to create jobs. And one of those places that I see -- and you know we've talked a lot about it -- is in the high-speed rail area -- $8 billion in the Recovery Act and $1 billion in the president's 2010 Budget -- critical step forward.

But there is still more that we need to do to build a strong high-speed passenger rail that works in the country. And is it fair to say that the administration does support a dedicated source of funding for high-speed rail?

SEC. LAHOOD: Well, I think there is no question about that, Senator, given the fact that the president has included ($)1 billion each year for the next five years in addition to the ($)8 billion that you all passed in the economic recovery. I believe that's true.

SEN. LAUTENBERG: All right. I just want to confirm these things. The New Start process, the federal program that fund major transit projects, can take over a decade before the project even begins construction. Now, what can DOT do to speed up the New Start process without compromising environmental standards or wasting any money in haste?

SEC. LAHOOD: We have proven at the department that when Congress gives us some deadlines, which was 120 days in the bill that you all passed, we can get $48 billion out the door. And the way we did it is created what we call the TIGER team where we put all the modes together in a room everyday, talking to one another, trying to figure out, you know, if there are problems, if there are issues.

And in doing that, we eliminate a lot of bureaucracy and a lot of red tape. And that's the kind of process we need to put in place for these new starts. It takes way too long. We don't want to short- circuit anything. We want to make sure everything is done by the book. But it should not take a decade to get a new start, it just shouldn't. And we're going to work very hard to improve the system so that we can really cut down the time that it takes for these new starts to be awarded.

SEN. LAUTENBERG: Well, running the risk that repetition doesn't carry the load that we'd like to see it carry, I want to talk for a moment about the tunnel -- the ARC tunnel. And the fact that New Jersey and the Port Authority have put $5.7 billion up for this tunnel, and are looking to the federal government to give just that extra push.

And I know that you've been committed to seeing this get going. And I'm hoping that next week when we see the president -- is it next week that we're going to see the president?

SEC. LAHOOD: I believe so, yes.

SEN. LAUTENBERG: -- that we'll get the confirmation that everybody's in the loop on this, and that we'll be able to get shovel ready -- people standing in attention holding their shovels that includes John Corzine and Frank Lautenberg ready to start digging.

SEN. MURRAY: I can't wait to see that.

SEN. LAUTENBERG: And we hope the budget will do it.


SEN. MURRAY: You will have a hard head on.

SEN. LAUTENBERG: I just start off with one.

SEN. MURRAY: All right.

SEN. LAUTENBERG: So thanks very much, Secretary Lahood. I think that you're passing the elementary grades very rapidly and getting into the full swing to be here and we're proud to see it happen.

SEC. LAHOOD: Thank you, sir.

SEN. MURRAY: Thank you, Senator Lautenberg.

I just have a couple of quick questions, then I want to turn to the IG. The IG did identify the funding for intercity and high-speed rail as a challenge for the department, because the federal railroad administration doesn't have the experience in running a grant program of that size. We set aside $80 million for that program.

What can we know to ensure that the FRA does have the expertise to --

SEC. LAHOOD: Well, I think one thing you should know is we hired one of the best rail people in the country in the rail administration. She is doing a great job. She knows all of these folks all over the country that have been working on high-speed rail. She's been in place and she's working very hard.

We will have a rail administrator that you all -- the Senate just approved last night as soon as he is sworn in. So, you know, we're staffing up with people that we think are the experts and can really help us. If we need additional staff, we obliviously will come back and talk to you about that, Madame Chair.

SEN. MURRAY: Okay. I appreciate that, and we'll be following that closely. And also I want to ask you about the tight deadlines for the use of highway and transit programs in the recovery package. Half of the state's highway grants have to be obligated within 120 days or they're going to be redistributed; same with transit grants, I think there are 180 days. Do you see any significant problems coming out of that we need to --

SEC. LAHOOD: I don't at this point, and mainly because of the good relationships we have with transit districts and with highway administrators. They get it, they want the money. Lot of these projects have been sitting on shelves, and they're going to do everything in their power to make sure that it's done.

SEN. MURRAY: Okay. We'll be following that closely too. And finally I just want to mention that Senator Bond and I both were very concerned about ensuring that a fair share of the transit funding was distributed to rail communities. I am hearing reports now that the requirements -- those funds be used for capital expenses and not operating expenses.

It is posing some problems for our rail transit systems. Do you have any reason to believe that transit funding will be left unused because of that requirement?

SEC. LAHOOD: Well, we're just starting the -- well, you know, that money hasn't gone out the door, but we will keep you posted on how that's going. We know the highway money is going to be on time, and people are going to start to work. We're just starting to get the transit money out of the door.

SEN. MURRAY: If you can keep an eye on that, because we're hearing that some of -- many of the transit agencies, because of budget cuts elsewhere, are laying off workers and cutting services because of a shortage of operating funds and if that -- noted since by investors that sit there because they can't be run. So if you can keep an eye on that.

SEC. LAHOOD: Sure. I would just recommend this, Madame Chair. I think Congress needs to consider allowing transit districts to use part of their money for operating. We're very open-minded about that at the department. I hope Congress will be too. This is a real issue. It does no good to buy all these new buses if you don't have people to drive them.

SEN. MURRAY: Right, we're -- (cross talk.)

SEC. LAHOOD: So I hope Congress will be open-minded about that.

SEN. MURRAY: Okay. I appreciate it. Mr. Secretary, you've survived your first hearing here.

SEC. LAHOOD: Thank you.

SEN. MURRAY: Well, actually your second -- first. We appreciate your being here today and look forward to working with you as we monitor this. And thank you for the great job you and your folks are doing.

SEC. LAHOOD: Thank you very much.

SEN. MURRAY: So thank you.

SEC. LAHOOD: Thank you.

SEN. MURRAY: We will now turn to the IG. As I had said earlier, we have a full committee hearing now, so most of our members are having to attend that. But Mr. Scovel, your input is extremely important to this committee. I know some members have questions that they will be submitting that we can hope we can get an answer on.

This is not the only hearing we're going to have following this. And I appreciate the opportunity to have you in front of us today. So if you want to go ahead with your testimony.

MR. SCOVEL: Thank you very much, Chairman Murray, Ranking Member Bond, and members of the subcommittee.

I welcome the opportunity to testify today on the challenges facing DOT's implementation of the Recovery Act and our related audit and investigative initiatives. We're working with DOT officials in support of their related efforts. And we have assembled a team of auditors, investigators, and attorneys to review DOT's implementation of the recovery program.

To that end, we appreciate the additional funding you provided to us and we intend to make the most of it. This funding will help us maintain staff, travel, budget, information technology, and other resources that we need. My statement today focuses on the challenges facing DOT and our strategy to advance the effective and efficient use of these funds.

First, DOT must continue to address the significant oversight challenges posed by the Recovery Act. Last month, we issued a comprehensive report that identified actions DOT should take now to address known challenges and support Recovery Act requirements. These challenges fall into three areas: first, overseeing grantees receiving funding; second, implementing new programs and reporting requirements in an effective manner; and third, combating fraud, waste, and abuse.

The specific actions we noted in our report include acquiring sufficient staff with relevant expertise, ensuring that grantees use appropriate contract types, addressing internal control weaknesses such as identifying any unused funds for use on other eligible projects, developing plans and criteria for more than $9 billion in new programs, and finally, taking timely action to suspend or debar contractors who defraud the government.

Next, I want to focus on what our office is doing to promote accountability in the recovery program. Our audits and investigations will continue to examine areas that present the greatest risks. And we are committed to promptly notifying DOT and Congress of actions needed to prevent fraud, waste, and abuse and achieve program goals.

In anticipation of the act's passage, we initiated a risk-based three-part strategy. We completed phase I last month by issuing our comprehensive report on DOT's oversight challenges. Phase II of our strategy is now under way. We're conducting a series of structured reviews or scans of the DOT agencies that receive recovery funding.

Specifically, we're examining vulnerabilities in program management and planning that could impede DOT's ability to effectively oversee projects and meet new statutory and OMB requirements. We will be reporting the results of phase II to a series of advisories to the department and Congress as the events warrant.

And I'd like to emphasize that these may not take the form of full-blown audit reports, but our intent is to fast-track our initial observations, confirm the results, and bring them to the attention of the Congress and the secretary at the earliest opportunity.

Our investigators are also being proactive in supporting DOT and its grantees. They're reaching out to officials in all modes of transportation to conduct fraud awareness and prevention briefings and training at all levels of government. So those involved in carrying out the recovery program know how to recognize, prevent, and report suspected fraud.

Today, we've made personal contact with FHWA officials in all 50 states and the District of Columbia, FDA officials in 24 states, FAA officials in 20 states and DC, and state and local officials in 45 states and DC. I assure you that we are strongly committed to meeting our increased audit and investigative workload.

And in conclusion, it's critical that we do everything possible to maximize this opportunity to make needed investments in our nation's infrastructure while protecting taxpayer dollars. That concludes my statement.

Madame Chairman, I'd be happy to answer your questions.

SEN. MURRAY: Thank you very much for that. What is your biggest concern regarding the department's implementation of the Recovery Act?

MR. SCOVEL: Our scan that we have under way, phase II of our investigative plan, audit plan, will identify across every mode the extent to which the 10 individual focus areas are present in each mode. Frankly, that doesn't concern me too, too much.

Our audit plan will subject every mode to what amounts to a full body scan. We're putting them under an MRI to see the extent to which these focus areas, potential problems, are present in all the modes. We'll know within about 90 days. And we'll be reporting to you and the secretary.

What does keep me awake at night -- and frankly, it is unknowable -- is the extent to which fraud and waste will infiltrate the program. The commonly used figure of 7 percent lost to fraud would mean the equivalent of one-and-a-half roads and bridges right down the Potomac.

And that's far too important to some and far too important potential of infrastructure to be lost. Our investigators will be doing everything we can to stem that.

SEN. MURRAY: Have you given any specific recommendations to the department about how to deal with that?

MR. SCOVEL: Yes, we have. And our specific recommendation so far include our very proactive approach to briefing throughout the department, to state and local officials, and to contractors at all levels. I'd like to give great credit to Secretary Lahood. He has been very supportive in this effort.

And he and I co-hosted a webcast that was broadcast throughout the department back in March. He has committed himself and the entire department to doing it by the book. And I am frankly very encouraged to that, because it speaks to his commitment to both program integrity and to the fraud prevention effort.

SEN. MURRAY: Okay. And we would like you to keep this committee fully aware of any potential problems that you see out there.

MR. SCOVEL: We certainly will.

SEN. MURRAY: Okay. And I understand that a number of inspector generals from across the federal government are meeting and communicating regularly about their experiences as well with the Recovery Act. Are you participating in that network?

MR. SCOVEL: Madame Chairman, yes, I am. I'm a statutory member of the Recovery Accountability and Transparency Board headed by Earl Devaney, a former IG. In addition, I was asked to co-chair a special working group composed of all 28 IGs who are receiving -- whose agencies are receiving recovery funding.

The idea is to communicate best practices, coordinate efforts, reach out to state and local officials, so that we can coordinate with them on how to best protect taxpayer dollars.

SEN. MURRAY: Any lessons learned from your participation in that?

MR. SCOVEL: We're just starting. On the RAT Board we're focusing on the transparency element, the piece, the accountability program and emphasis will be satisfied by the special working group that I'm co-chairing along with the member of Mr. Devaney's staff, Jack Higgins, a distinguished former IG in his own right.

SEN. MURRAY: Okay, very good. As I said, there is a full supplemental Appropriations Committee hearing that most of our members including myself need to be at, so we'll have to cut it short at this point. I do have some questions I would like to submit for answers in writing. I know other committee members do as well.

But I really appreciate your staying on top of this and staying with us. We want to make sure that the considerable amount of money that we put out there, that we earn the trust of America by doing it right. So I appreciate the work you and your office is doing, and we'll continue to support that.

MR. SCOVEL: Chairman Murray, thank you very much for your support and your confidence.

SEN. MURRAY: Thank you very much. And this committee is adjourned prior to -- subject to the call of the chair.


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