After the analysis of four rail projects, the Government Accountability Office (GAO) has recommended ways that the Federal Transit Administration (FTA) can help project sponsors increase the reliability of their cost estimates on rail projects.

The GAO looked at the factors affecting the cost of rail projects, selecting four rail projects to serve as case studies. After interviewing the people involved in the projects from industry and government, the GAO identified approaches that can help project sponsors — usually state and local government agencies — manage costs, including improving their cost estimation.

The analysis found that project sponsors and other stakeholders have identified various approaches sponsors have used to manage a project’s cost, including:

• Ensuring management capability;

• Making informed procurement decisions;

• Managing risk; and

• Managing stakeholder relationships.

For example, sponsor officials and a contractor's representative from one GAO case study said they managed risk by cooperating to purchase steel materials early in the project to reduce the risk of additional steel price increases.

For its part, the GAO found that while the FTA’s cost estimating information for sponsors aligns with many best practices, the agency could improve the information's usefulness. GAO found that taken together, FTA's cost estimating information substantially or fully met seven of the 12 cost estimating steps outlined in GAO's Cost Estimating and Assessment Guide, but did not align with five of the steps. For example, the documents did not discuss sensitivity analyses — an assessment of each factor's effect on cost. Doing so could help sponsors better identify which cost factors are most likely to influence a project's overall costs if assumptions change, thereby improving an estimate's reliability and better informing sponsors' decisions, said the GAO.

In addition, sponsors may have difficulty identifying critical cost estimating information because it is distributed across 14 different documents available to sponsors, 11 of which are intended for FTA's oversight contractors. By improving the content and organization of cost estimating information, FTA would help project sponsors increase the reliability of their cost estimates and reduce the risk of cost overruns.

In summation, the GAO recommended that the FTA should:

(1) ensure that FTA's cost estimating information is consistent with all 12 steps in GAO's Cost Guide for developing reliable cost estimates; and

(2) provide a central, accessible source of cost estimating information for project sponsors.

FTA partially concurred with the first and concurred with the second recommendation, however, the GAO said it believes the FTA should fully implement both recommendations.