Each 1% improvement across all the scope areas could have a $13 million financial impact annually
Columbus –Auditor of State Keith Faber’s office released the phase II performance audit of the Ohio Department of Transportation (ODOT), where the Ohio Performance Team (OPT) reviewed pavement, bridges, maintenance, fleet, overhead, and strategic information and found millions in potential savings. This is the fifth performance audit of ODOT dating back to 2011.
The areas analyzed in this report have an annual cost of approximately $1.4 billion. The size of these expenditures dictate that even small improvements in efficiency could have a relatively large impact on the Department’s finances and operations. AOS estimates that each 1% improvement across areas analyzed in this project could result in a $13 million financial impact. Additionally, the audit identified that by adopting nationally recognized practices in regard to bridge inspections could alone save more than $9.7 million annually, while maintaining generally accepted safety protocols.
“The safety of travelers on Ohio’s roadways is always a top priority, however, we don’t have to choose between being safe and being efficient; our report examined high dollar spending areas of the Department and made valuable recommendations that can truly have an impact on state spending,” said Auditor Faber. “By implementing our recommendations, ODOT can become more efficient and effective while continuing to ensure we can all safely get from point A to point B.”
The 133rd Ohio General Assembly passed House Bill 62, the state transportation budget, which increased the gas tax in order to provide ODOT with additional revenue to achieve their agency function and mission. As a part of the legislation, ODOT was required to undergo several reviews of efficiency and effectiveness including a performance audit conducted by the Auditor of State’s Ohio Performance Team. OPT completed the initial review in January 2020 and launched a phase II to address additional areas of interest identified in phase 1. Phase 1 recommendations yielded up to $21 million in savings, with an additional $22-42 million in cost avoidance from the fleet recommendations. The report is available online.
The Auditor’s office used a transportation consulting firm, The Kercher Group, for a Phase II to provide technical assistance and subject matter expertise as part of a review of ODOT’s highway management and maintenance practices.
Highlights from the audit include:
STRATEGIC BUSINESS INTELLIGENCE
- Managing a multi-billion dollar entity like ODOT requires precise knowledge that can lead to better business decisions. Auditors found that in several areas, ODOT lacks the information necessary to optimize Departmental activities.
- ODOT spent about $1.1 billion on pavement and bridge maintenance in FY 2019, accounting for 32.1 percent of the Department’s annual expenditures. Auditors found that Ohio’s bridge maintenance program is both safe and effective, and achieves these results at a lower cost than peer states. While the costs associated with the program remain lower than peer states, the audit found two additional areas that could result in increased efficiency and potential cost savings.
- While keeping safety a top priority, newly constructed or recently updated bridges could allow for major savings by adopting federal requirements of a two year inspection cycle. Currently, Ohio law requires annual inspections on all bridges in Ohio, the industry standard supports the federal standard 24 month cycle for most inspections. The General Assembly should revise ORC §5501.47 to remove the requirement that ODOT conduct annual inspections of all bridges and instead adopt a risk based methodology for bridge inspection, consistent with peer states and federal guidelines. Bringing ODOT’s bridge inspection guidelines in-line with federal guidelines will save an average $9.7 million in annual bridge inspection costs at the state and local level.
- ODOT also currently lacks a Bridge Management System. Without a BMS the Department risks sub optimal decision making and could have a difficult time sustaining current progress with bridge management.
- The Department projects spending over $300 million per year on bridge maintenance, repair, and preservation over the next decade, so even a 1 percent improvement in efficiency could result in $25 million in savings and allow for labor hours to be utilized for other important projects.
- ODOT spends $43 million per year on fleet replacement and lacks a centralized policy that governs the cycling of fleet and equipment. By properly managing fleet operations based on an optimized usage plan, ODOT could minimize expensive maintenance costs and maximize resale or salvage value of vehicles and equipment reduces lifecycle costs of vehicles, which promotes effective, efficient, and transparent use of government resources. While OPT has reviewed and made recommendations in this scope area in a 2015 performance audit, their practices show that they did not follow the 2015 audit recommendation, and there is significant variation in disposal age for like items within a district.
- ODOT Fleet Central Office should implement policies for the replacement of fleet equipment for ODOT Districts and identify when districts should dispose of equipment and what should be considered when evaluating if a replacement is necessary. This policy should cover all pieces of equipment, including all sizes of vehicles, mowers, and equipment with small engines, such as weed whackers.
- ODOT has historically spent about $800 million per year in pavement including repairs, rehabilitation, and construction. The size of this investment is indicative of the fact that managing pavement is one of ODOT’s most important functions. They currently have a manual process used to collect pavement data, while peer states typically use either a fully automated system or a hybrid between automation and manual data collection.
- ODOT should develop an efficient and effective pavement data collection plan consistent with best practices. For example, ODOT currently fully projects future pavement expenditures for five years, whereas best practice states use much longer projection periods. By optimizing the time horizon of pavement projections, the Department may be able to select more cost effective treatment options. Additionally, further optimization of the pavement management system, especially by lengthening the timeframe used to project pavement expenditures, could help the Department sustain current success and further refine its decisions regarding pavement investment.
Other recommendations regarding maintenance management, finance, Key Performance Indicators (KPI), and overhead can be found in the report which is posted online.
This performance audit was conducted during a state of emergency due to the COVID-19 pandemic. The analysis was based on current agency operations, with an emphasis on the most recent fiscal year completed, FY2019-20, and the current fiscal year in progress, FY2020-21. The report does not account for the changes that have occurred and will occur from the unanticipated disruption caused by the pandemic.
A full copy of this audit report is available online.