Texas Department of Transportation Commission Meeting
Ric Williamson Hearing Room
Dewitt Greer Building
125 East 11th Street
Wednesday, November 18, 2009
Deirdre Delisi, Chair
Ted Houghton, Jr.
Ned S. Holmes
Amadeo Saenz, Executive Director
Steve Simmons, Deputy Executive Director
Bob Jackson, General Counsel
Roger Polson, Executive Assistant to the Deputy Executive Director
MS. DELISI: Good afternoon. It' s 1:43 p.m., and I call this meeting of the Texas Transportation Commission to order. Note for the record that public notice of this meeting, containing all items on the agenda, was filed with the Office of the Secretary of State at 4:15 p.m. on November 10, 2009.
Before we begin, please take a moment to place your cell phones and other electronic devices on the silent or off mode, please.
Today's meeting will involve a series of discussions on various topics currently before the department and the commission. We'll accept public comment that is relevant to the posted agenda items but we will not have an open comment period. To comment on an agenda item, please complete a yellow speaker's card, identify the agenda item on which you'd like to speak. You'll find these cards on the registration table in the lobby.
One other thing before we move on. I' d like to call your attention to the cards placed in the chairs and available at the registration table. These cards announce the Fifth Annual Texas Transportation Forum which takes place January 6 through 8, 2010, here in Austin. If you're involved in transportation in the State of Texas, you can benefit from participating in this forum. Please check out the website and consider registering to attend the event.
Before we begin with the agenda, commissioners, does anyone have any comments, questions, concerns?
MS. DELISI: Amadeo.
MR. SAENZ: Thank you, Madame Chair. The first item on today's agenda is a regular update from Grant Thornton, the consultant that' s doing our organizational management review. Ed Serna will introduce the speaker.
MR. SERNA: Good afternoon, Madame Chair, commissioners. For the record, my name is Ed Serna. I' m the assistant executive director for Support Operations here at TxDOT.
As usual, I' m here to introduce Grant Thornton. Today, Anna Danegger, their director for state and local government practice, will be presenting the Grant Thornton update and visiting with you about the management organization review. However, before she comes up, I'd like to take this opportunity to provide you with a brief summary of some discussions that occurred at a House Transportation hearing on Monday that are related to our management and organizational review.
At the committee' s request, I provided a very brief update on the status of our review to the House Committee on Transportation. They had a couple of key questions that I thought the commission should be aware of. One of the things that I discussed in my presentation was that the commission today would be looking at scope and some of the things, confirming some of the things that the consultant would be reviewing, potentially, in addition to the original scope.
One of the things I mentioned was a compensation study. Chairman Pickett asked why we were doing a compensation study and who had asked for it. I mentioned that the compensation study that was requested was requested by the commission and that the consultant reports directly to the commission and what was being considered was an examination of the full compensation package relative to other transportation organizations in the state as well as nationally to kind of determine if compensation at the department was in line with what was being provided at other organizations.
Another key question that came up had to do with the timeline for delivery of the final report. Chairman Pickett said he understood that the final report would be due originally sometime in December and now it looked like it was January, and asked me to elaborate on that. My response was that the schedule had adjusted one month because we had increased the number of interviews that we had requested -- not we, the department through the commission had increased the number of interviews that we had requested Grant Thornton to conduct. Originally, I think we had planned about 50 and ultimately we had more than twice that number to conduct.
There was no further issues on that other than I did mention to them that at today's meeting, potentially, the commission would discuss with the consultant potentially adding additional items to be considered, and if that were the case, that may affect the scope. And they requested that after the work session, sometime later this week, I provide them with the current or a revised timeline if there was a timeline, or the current timeline, just so that they' d kind of be aware of that, and I said that I would.
They also asked if Grant Thornton had interviewed or intended to interview members of the Transportation Committee. I know that they had interviewed Chairman Pickett, as well as Representative Harper-Brown. I told them that I did not know offhand if they had interviewed any other members of the House Transportation Committee, but would find that out and convey to both the commission and to Grant Thornton that committee' s interest in providing input -- committee members' interest in providing input.
And then finally, one of the members asked me if the Grant Thornton staff had had any meetings with the Sunset staff that had actually conducted the TxDOT review, and I informed them that Grant Thornton had, in fact, interviewed the chair and vice-chair of Sunset and I believe one other member, I think the public member, but I did not know whether they had interviewed or met with the staff. They recommended that Grant Thornton meet with the Sunset Commission staff that had conducted our report in order to get information from them because they felt that the Sunset report was a very thorough report and Grant Thornton may be able to take advantage of some of the information in that report.
The reason I wanted to mention this to you is I felt that as you consider looking at the tasks that Grant Thornton is conducting and the scope of work and the timeline, that you should be aware at least of what the House Transportation Committee provided with regard to feedback. Though they didn't give us any specific direction or instruction -- and Amadeo can correct me if I' m wrong -- specifically to include or to do something, they did make some strong recommendations, for example, about Grant Thornton meeting with the Sunset staff and the commitment that I made to them was that I would get back to them once we had a finalized scope and timeline for that information.
So if I can answer any questions you have about this information, I'd be more than glad to. If not, then I'll ask Anna to come up and present Grant Thornton's update.
MR. HOUGHTON: Hold on, Ed. So when you talked about the timing issues and the add-ons, have we gotten that cleared up as to the add-ons to the study?
MR. SERNA: No, sir.
MR. HOUGHTON: When will that be cleared up?
MR. SERNA: Part of that is intended to be discussed today with regard to recommendations on what could be added. Once the commission says these are things we definitely want you to do or not do, then we, the staff, will work with Grant Thornton to scope it and to negotiate a price on it and then come back to the commission with that information or provide that information to the commission.
MR. HOUGHTON: So are we going to do that after we talk to Anna?
MS. DELISI: I think we should hear from Anna first.
MR. HOUGHTON: Okay.
MR. SERNA: It' s part of that discussion.
MR. HOUGHTON: Okay.
MR. SERNA: Anything else for me?
MR. SERNA: Thank you all.
MS. DANEGGER: Good afternoon, Chair Delisi, commissioners and Mr. Saenz. I'm Anna Danegger, representing Grant Thornton. This morning I' d like to address two topics: First, I' d like to provide you with initial findings regarding TxDOT' s mission statement and its alignment with the organizational structure; and second, I'd like to review with you some of the areas of study that have been discussed but are not currently in scope. We're interested in ensuring that your expectations to us are as clear as possible so that we're able to organize our work efforts to meet those expectations.
Regarding the mission statement, the mission statement that was adopted in draft form in September 2009 is: Emphasizing cooperation, accountability and transparency, we will provide a safe, efficient, cost-effective and environmentally sensitive statewide transportation system for the movement of people and goods.
Over the last decade, there has been increasing recognition that an organization's mission statement should drive its decisions, first and foremost, its budgeting and spending decisions. Accordingly, we looked to the Government Finance Officers Association for its definition of a mission statement. It is an enduring statement of purpose, the organization' s reason for existence, the mission describes what the organization does and how and for whom its actions are carried out. In other words, it' s a statement of what you intend to do, not why but what.
At its core, the purpose statement that' s included in TxDOT's current mission is: We will provide a safe statewide transportation system for the movement of people and goods. This purpose statement leaves the Awhat@ for TxDOT quite broad, allowing stakeholders to set expectations for the agency that it doesn't have the staff or the funding to meet. Moreover, it doesn't support any clear prioritization of one activity over another.
We talked with you about the mission and we conducted approximately 180 interviews with other TxDOT staff and TxDOT stakeholders. We heard clearly that there's a need to synchronize the TxDOT mission with the funding that it receives or secures to execute its mission, and we hear acknowledgment that this synchronization might require changes to legislation. We found that there are some clear themes as to prioritization of TxDOT's activities. These themes are as follows:
TxDOT should continue to be a transportation rather than highway department, focusing on all modes of transportation but will have limited funding for and should have limited focus on non-highway modes with the emphasis in these areas being on vision, coordination, policy-making and partnership. Among the non-highway modes, rail is most critical, and in this area high speed rail for connectivity most important.
TxDOT should operate as the coordinating body for all modes of transportation across all entities without infringing on the rights of local government.
TxDOT should provide expertise and creative finance mechanisms for use in state transportation infrastructure projects and to provide advice to other agencies, upon their request, regarding creative financing mechanisms to pay for state transportation infrastructure, that there are already in effect different, though equally important, missions for roadway activities in rural and urban areas: in the one, the need is to focus primarily on safety and maintenance, in the other congestion relief and connectivity being most important.
These four areas of work, safety, maintenance, congestion relief and connectivity across the system, are highest priority.
We heard that TxDOT should maintain its engineering leadership providing technical engineering expertise to other transportation agencies as required, and leading interaction with state transportation think tanks, and it should continue to have a role in design and build but should also recognize that other agencies may lead projects.
These areas of focus for a mission statement that we heard are not out of sync with the goals that were adopted by the commission for TxDOT in draft form in September of this year. Those goals emphasize partnering, facilitating multimodal transportation funding strategies, and within roadways, maintaining the existing Texas transportation system, relieving congestion, enhancing connectivity and safety.
We propose that TxDOT' s mission statement be more narrow in scope to reflect its areas or priority and its limited funding. Having a more targeted mission statement will provide a framework for organizational recommendations and for monitoring the impact of those recommendations and success of the agency as a whole. Our proposed mission statement is: Provide safe and efficient movement of people and goods, enhance economic viability, and improve the quality of life for the people that travel in the State of Texas by maintaining existing roadways and collaborating with private and local entities to plan, design, build and maintain an expanded transportation infrastructure.
Changing topics to my second area that I' d like to address, the assessment scope. Our scope currently includes making recommendations regarding TxDOT's organization structure and staffing at the management levels of the organization, making recommendations to further transparency and accountability, and making recommendations to further efficiency which we are addressing through a diagnostic review of seven particular process or functional areas, those being, accounting operations, communications, human resources, IT as it supports TxDOT, planning, designing and building.
In the design and build review, it' s intended to be a high level diagnostic review and will not include a review of engineering activities or practices. In the design area we're looking at design processes, including coordination between headquarters and the field, design review, and the use of consultant contracts. In the build area we're reviewing the construction management process, including contract management, quality assurance claims and disputes.
There are a number of topics that have come up that are not currently part of our scope but that have been discussed around this study. We introduced these topics at the last commission meeting and we bring them up again to request your guidance at this meeting. They include a review of alternative financing mechanisms or innovative finance financing strategies and a full assessment of potential cost savings across TxDOT. They also include topics that you, the commission, have raised to us or that you've talked at length about. We'd like to provide a bit more information about these topic areas to allow you to determine whether they ought to be part of our study.
The first is a compensation study that was requested by Commissioner Houghton and discussed in September' s commission workshop. This would include a review of 38 representative position types at the senior levels of the organization. That' s administration, division directors, district engineers, regional directors and assistant regional directors. And we would complete that compensation study for current TxDOT positions and position descriptions. If we wanted to expand that compensation study to include any changes to the organizational structure that were proposed as a result of this review, that could also be done after our initial recommendations were provided.
The second area that has come up a number of times, initially as part of the first House Transportation Committee update and that has been identified as part of our work as an area in which a more in-depth review would be warranted, is procurement and contracting. We are addressing procurement and contracting as it pertains to the design and build processes, however, we're not conducting a functional diagnostic as part of that. This area of study would include reviewing procurement and contracting processes, practices and impacts. For instance, for service contracts, the percent of contracts that are awarded based on best value, the percent that are awarded based on low bid, the reasons for each, the percent of contracts that are awarded to particular types of vendors and to geographic regions, and the frequency with which change orders are made to contracts and the impact of those change orders.
While we would not be able to precisely estimate the amount of time that would be required for that review until we have looked at existing procurement systems and documentation processes to understand how easily we'll be able to get records for this, we expect that this review would take approximately ten weeks.
In keeping with the direction provided by TxDOT at the outset of this study and throughout our correspondence, we will continue to identify additional topic areas that we recommend be considered for further study or for follow-up. That may be done through this contract or through other means. The areas that we've identified for you thus far include: asset management with the exception of roads and transportation infrastructure; a full business process analysis across selected parts of the organization; an activity-based costing to assess TxDOT costs and opportunities and to realize savings as a result of TxDOT prioritizing its activities.
That concludes my comments.
MS. DELISI: When you put the timelines in here, ten weeks for the compensation study and ten weeks for the procurement and contracting, is that concurrent?
MS. DANEGGER: The compensation study could be done concurrent to our current work; the procurement and contracting study we would expect to be done after we conclude our current analysis. We could start it sooner but we don't have the team in place to be able to do all of that at once. The compensation study would be done by additional team members who are experts in the compensation study arena.
MR. UNDERWOOD: What you're saying is you'll use the same people that are already doing the study for procurement and contracting.
MS. DANEGGER: For procurement and contracting, that' s correct.
MR. UNDERWOOD: And in the case of the compensation, you have some other individuals that their expertise is not being used at this time.
MS. DANEGGER: That' s correct.
MR. HOUGHTON: When you talk about alternate financing, how are you going to approach that?
MS. DANEGGER: Innovative financing strategies? Actually that's not part of our current scope. If requested, we could certainly look into what would be appropriate there, but that's not something we're looking at as part of our current scope.
MR. HOUGHTON: Okay. But you brought that up.
MS. DANEGGER: As part of the mission statement, yes.
MR. HOUGHTON: Right.
MS. DANEGGER: Certainly we believe that TxDOT is not funded to be all things to all people, and that as it looks to expand the transportation infrastructure for the state, that alternative financing mechanisms and innovative financing strategies are critical to that.
MR. HOUGHTON: And that' s where you stop. You do not go beyond that and say and here are some of the ideas that go with that.
MS. DANEGGER: That' s correct, as part of this review, we're not doing that.
MR. HOUGHTON: Okay.
MR. HOLMES: Doesn't mean you can't do that, it just means that we have not included that within the scope.
MS. DANEGGER: That' s correct.
MR. HOLMES: Was that requested by anyone, primarily in the legislature? Because they did, in fact, I think I understood you to say, they requested that we look at procurement and contracting.
MS. DANEGGER: Procurement and contracting, absolutely that did come up.
MR. HOUGHTON: Well, be specific, because our conversation this morning on procurement and contracting was narrow as to the minority and HUBs and that kind of procurement contracting, not the general procurement contracting.
MS. DANEGGER: Yes. It' s really come up in two ways. The House Transportation Committee brought it up particularly as it pertains to whether disadvantaged minority business, HUB-owned businesses and so on are getting, in essence, their share of the pie and what the contracting looks like from their perspective. As part of our study, we have realized that procurement and contracting activities are a critical part of the way that TxDOT manages and organizes itself, those activities thread throughout TxDOT, and that that area warrants in-depth review as a result of that.
So really, you're absolutely right, it is two different reasons that this has come up, but all around the same area.
MR. HOUGHTON: But the legislative focus -- or the House Transportation Committee was focused on the minority, HUBs and other.
MS. DANEGGER: Correct.
MR. HOUGHTON: Not the broader procurement and contracting.
MS. DANEGGER: That' s right.
MR. HOUGHTON: And our discussion this morning -- and I don't want to put words in your mouth -- but you said that there are federal guidelines that we have to live within under those rules.
MS. DANEGGER: For construction contracts, that' s correct.
MR. HOUGHTON: So how much more are we talking about adding on here?
MS. DANEGGER: The construction contracts are one piece of the contracting arena , but that's certainly not everything for purchasing, contracting and procurement in TxDOT, it's the majority of dollars but not all of the contracts. We would review the procurement and contracting policies practices to include, for instance, training of staff, how are contracts executed, to what end, what are systems available to support those contracts, so it would be a much broader and deeper review of contracting, procurement and purchasing.
MR. UNDERWOOD: But when you do that you're talking about not only the way we do now is just lowest price but best value too when you do this. Isn't that correct?
MS. DANEGGER: That' s correct. There are some contracts that are kind of strange so you must use low bid, but you're sourcing strategies across all of your contracting, procurement and purchasing ought to be reviewed, in our opinion.
MR. HOLMES: Anna, do you have a sense of -- you said the time frame would be ten weeks and it would be added on to the back-end of the existing time frame so that puts it out in mid April or sometime?
MS. DANEGGER: Something like that, yes.
MR. HOLMES: Do you have a sense of the cost of that?
MS. DANEGGER: If we were to extend this, we would have a smaller team working on the procurement and contracting and purchasing effort, but we expect that it would be important throughout the remainder of this study to work in a more collaborative fashion with you, the commission, to provide you more ongoing updates and so on, so we would expect that that would also be part of that extended timeline. If we were to extend the timeline to provide more briefings to you all, more collaborative work in the areas of analysis that we're already under scope to do and this procurement/contracting area, we expect that that would be somewhere in the range of $300- or $350,000 to add that additional few months of effort.
MR. HOLMES: And the compensation study would be? Did you say how much that would be?
MS. DANEGGER: Well, it sort of would all roll together because it would be part of a broader work effort to include additional briefings and so on over time.
MR. HOLMES: If we just did the compensation and not --
MS. DANEGGER: I' m sorry, compensation -- I was hearing contracting -- compensation, $80,000, approximately.
MR. HOLMES: Eighty. Well, that' s what I thought I had heard earlier.
MS. DANEGGER: I' m sorry. Contracting, compensation, they start with C, sorry.
MR. UNDERWOOD: On the procurement and contracting, Anna, also when we discussed this prior and whatnot and we were talking last week, this would be a weekly update, is that correct, with the commissioners that are involved in it?
MS. DANEGGER: I think if you extended our timeline, we would want to make sure that we were providing you very regular updates on findings because certainly we have come nearly to the conclusion of our initial efforts in some areas. Other areas will impact that, including procurement -- obviously, if we look at that, that has impacts on the organization structure, but we would want to provide you more interim updates on what our initial findings are so that you have a handle on what we looked at, what current processes are, what our findings are and how we're working toward generating our recommendations, and we would expect that, yes, weekly briefings would be appropriate for that.
MR. UNDERWOOD: Thank you.
MR. HOLMES: Anna, I' m not really going down the path of trying to negotiate this from this dais, but it would seem to me that if we're going to ask you to look at the procurement and contracting that I would like to have a sense of how it breaks down between looking at simply the HUB piece versus the broader piece. My sense about it is that the broader piece would be significantly -- could be significantly valuable in terms of saving the agency and the public money and delivering more value for money. The HUB piece, I guess my instinct about that is that it is more about information than it is about kind of fine-tuning the process and saving money. It helps us understand the extent to which we're complying with the letter and spirit of the law.
MS. DANEGGER: I think that' s right, yes. It's really two almost discreet issues. The numbers about what amount of dollars and what number of contracts to HUB-owned, disadvantaged, woman-owned, and so on, TxDOT certainly has and reports on a very regular basis. The aspect of that that is part of the whole contracting process in terms of how are those procedures executed that might result in more or fewer contracts going to those communities is a subset of then the broader process review and analysis looking at, for instance, systems training, et cetera. So yes, you're right.
MR. HOLMES: Would it make sense -- Ed, you helped negotiate this contract in the first place. Right?
MR. SERNA: Yes, sir.
MR. HOLMES: To take a look at it and bring it back to us and see. I'd like a little bit more review from staff level.
MR. SERNA: What I' d propose that we do is once we get sort of instruction from you, then we'll work with Grant Thornton, look at what they're scoping, talk about the cost or price of doing that in as discreet a set of units as possible -- for example, the DBE/HUB versus the other aspects of procurement contracting or anything else like that, and then come back to the commission with our recommendations -- or not our recommendations but our evaluation of their pricing and of the scope changes. So yes, sir, we would want to do that.
MS. DELISI: So we're going to go forward and you'll come back to us next month with the recommendation.
MR. SERNA: Yes, ma' am.
MS. DELISI: Based on these two components.
MR. SERNA: What we're going to do -- just so that I understand correctly -- is with regard to the compensation study, did you want us to do any more detailed discussion and analysis with the commission to have Grant Thornton begin that effort? That' s one thing that we'll do if you want us to or we can have them just start it.
MR. HOUGHTON: What is the outline?
MS. DANEGGER: I' m sorry. What was the outline of it?
MR. HOUGHTON: What is the charge.
MS. DANEGGER: It' s 38 representative positions which would include the administration, division directors, district engineers, regional directors and assistant regional directors, so 38 representative positions. We would look at those positions' full compensation to include all types of benefits compared to other state and national government and private entities.
MR. HOUGHTON: You're indexing it to the private sector as to an equivalent in a private engineering firm?
MS. DANEGGER: That' s correct. Our comparison points that we have for that would be the Wyatt Top Management Report, the Dietrich Professional Survey Report which is relevant for engineers, the proprietary database that we have regarding private sector compensation, the AASHTO 2008 study -- the 2009 study is due out in December of 2009 -- and then also other governmental entities, particularly in Texas, including Cap Metro, Capital Area MPO, Central Texas RMA, DART, Fort Worth T, Harris County Toll Road Authority, Houston-Galveston MPO, Houston Metro, North Texas Tollway Authority, the VIA and additional MPOs, to include San Antonio and perhaps others.
MS. DELISI: And the compensation study is not going to be focused on what we -- it's not going to reflect the structure we have, but the study is going to reflect the structure you're going to recommend?
MS. DANEGGER: No. It would be done against the structure that's currently in place.
MS. DELISI: But my point is if you're going to make structural changes that we need to have super finance director or whatever, shouldn't the compensation study reflect that?
MR. HOUGHTON: Well, it should. I guess it' s in the AASHTO or somewhere where the private sector/public sector is a percentage of -- the public is a percentage of private. So if that is the case, then if you have that super finance director, then it is somewhere in there. I don't think you're ever going to get to a private sector equivalent, but what is the dynamics there of public to private or public to public, in that case. Was a very, very muddy on that?
MS. DANEGGER: No, actually not at all. In addition, to the extent that we are recommending or we would recommend changes to leadership position descriptions and so on, we could update what is done for current. Our estimate is, I believe, two hours per position to update those to reflect any changes that came out of our recommendations that you chose to adopt.
MR. HOUGHTON: For instance, and this may sound facetious, we lost a district engineer in Houston named Gary Trietsch, and he' s in the back of the room, but he's making ten times what he made at TxDOT now at Dannenbaum. But we can't compete with ten times. What is that, where can you compete to attract and retain the brightest in your agency. Is that where you're headed with it?
MS. DELISI: Well, I think that' s part of it, but I also think --
MR. HOUGHTON: That' s the attract and compete. So in other words, you're raising it up but it's never going to be an equal, it's not going to be that equal. I mean, let me just equate it to public-private schools. Parochial schools are about, give or take, 80-85 percent of a public school, but there' s a reason they work over here. So that' s the point I'm trying to get to.
MS. DELISI: I guess the point I was trying to make is that to make sure that the compensation study is reflective of what other recommendations that they're making in terms of structure. Does that make sense?
MR. SERNA: What I' d mentioned to Anna is I think with the timing of the final report, then that' s something that can probably be considered, so what we'll do is we'll scope the total work effort to take into consideration a compensation study that looks at the current management structure but then also has the ability to either adjust or consider any recommendations that they're making. So in plain English -- and I' m sorry for kind of babbling -- in plain English, if we adjust the due date of the final report, then they'll have adequate time to consider any changes in the compensation study. So if the final report is moved out, then they'll know what those recommendations are and they can include that in the compensation study.
MR. HOUGHTON: I' m shooting a little in the dark, Ed, because I have no idea right now what a district engineer is making versus a private sector equivalent. I mean, if you can, I have no clue how to index that, where' s my baseline. So I've got to start at a baseline: if, in fact, you fully load these benefits over here in the public sector and you look at the private and they're close or if they're in that range, or if they're way out of balance, we haven't kept up, then so be it then there's a recommendation coming from Grant Thornton. But I have no clue what that is today.
MR. SAENZ: It' s kind of looking at existing positions, existing structure, and I think, from the Chair's point of view, is if you make a recommendation that we need to have an innovative financing director and the duties and responsibilities and the skill sets of this director would be so much that somehow you would also identify potential salary range so that if we go out, we would bring in people to compete with people that do like kind of work on the outside.
MR. SERNA: I understand, Commissioner Houghton, exactly what you're looking for with regard to the baseline as well as the Chair' s position of needing to get information if there are recommendations in the organizational change for the same reason, the compensation considerations or information to be provided there as well. So I'll make sure that when we work with Grant Thornton to finish scoping that, that we'll include those aspects and those kinds of issues and considerations.
MR. HOUGHTON: Did you say TTA would be a part of this? Is that one of the 38?
MR. SAENZ: Yes.
MR. HOUGHTON: Texas Turnpike.
MR. SERNA: Yes, sir.
MR. HOUGHTON: Because the guy at the CTRMA is making at least 15 times what our TTA guy is making. I had to say it, Heiligenstein, I had to say it.
MS. DELISI: He' s not denying it.
MR. HOUGHTON: Did you see him stand up and wave his arms?
MR. SERNA: We'll come back next meeting with information and recommendations on these two scopes. And the second that we'll look at is the procurement and contracting in two discreet sort of evaluations: one on the HUB/DBE portion of it, and then the other on the broader aspects that Anna described. I understand that too.
And Anna asked a question. The current timeline calls for a preliminary draft sometime next month. My recommendation to the commission is if we're going to be looking at this, that we ought to probably determine the impact of adding this before we come back and say here's a final report but now I'm going to pull it back because we're going to have to make these other changes and additions and modifications. So with that said, if it's okay with the commission, we're probably going to adjust the dates to take into consideration some of these other things that we're adding to their review, so won't be something coming with regard to a draft in December.
Anything else for me?
MS. DELISI: Great, Ed. Thank you.
MR. SAENZ: Thank you, Ed; thank you, Anna.
Next item, Mary Meyland is going to lead us in a discussion on some of the on-budget and performance measures that we've been developing in our project delivery, both on the design side and the construction side. You asked questions in the past about overruns and estimates, and staff has been working on a lot of that work, and she' s going to kind of bring us up to date on where they're going and get some feedback.
MS. MEYLAND: Thank you. Good afternoon, Chair Delisi, commissioners. My name is Mary Meyland, I am the director of your Strategic Policy and Performance Management Office, and we have been working pretty diligently over the last eight months to try to develop a consensus within the organization of what these measures should look like and what they should consist of. And we've been working very closely with David Casteel and his regional leadership teams which includes the district engineers, the Construction Division, who is represented by Ken Barnett here today, and our interim Project Management Office, who is represented by Maureen Wakeland here today, to develop these measures.
This is the absolute first public reveal of these performance measures which we hope -- and I will conclude at the end of these comments -- to go out publicly on the internet by the end of this year. So without any further delay, we're going to go into our quick presentation to kind of show these to you and see if we can get your feedback on them because we hope to go public very soon.
Just as a reminder, we have decided and we have been told that we need to go into a more transparent arena, and our endeavor, as we have moved through this, is to make our very difficult, hard technical information transparent or easy for everyone to understand, so that' s the direction we're heading. Of course, we're using everyone as a potential audience, not just our internal customers from a management perspective, but probably more important, our legislators and our employees, and everyone has got a different perspective in which they would like to see our information, and we've taken this in consideration.
Basically from TxDOT, we want to look at our resources and we want to make sure that we're doing the best we can with what we have. And the legislature is obviously looking at why are we doing what we're doing and that we're doing the best that we can fiscally. And accountability from the public goes without saying, and our employees obviously have a confidence that they would like to put out publicly that they know they're doing the right thing with what they have. So those are the things we've been trying to accomplish through the last couple of months.
And I'm going to let the two individuals who have been most involved in developing these measures through the collaborative process, Maureen Wakeland, who is our interim director of our Project Management Office, recently from Houston but now has moved into the regional area, and Ken Barnett, who is working in the Construction Division, make these individual presentations of the detailed information.
I would also like to introduce Texas Transportation Institute by way of Curtis Beatty, who is also here with us in the room today, who has helped us develop the statistics and basically collaborated with us to ratify and make sure that these data points are correct.
So at this point, I' m going to introduce Maureen.
MS. WAKELAND: Good afternoon. My name is Maureen Wakeland. I'll be discussing two performance measures: the first one is related to cost-estimating performance, and the second one is related to project development timeliness.
Our purpose of the first performance measure is that of measuring the accuracy that an engineer would estimate the cost and then comparing that to the bid price. The benefit of having this cost performance measure is that we would hope to improve the financial planning control piece. We understand that since the engineer' s cost estimating is part of the programming piece, then by improving our cost estimating performance, we can also improve our financial planning piece. We're going to measure cost estimating performance by comparing the engineer' s estimate to the bid amount.
This graph represents three things: first, it represents the engineer's estimate over time; it also describes the thresholds from internal management and the legislature; and it also describes how we will be able to look back at our performance over time. And I will describe each of those.
First, in describing the engineer' s estimate, as a project develops through the project development phase, the scope of project can expand or contract, and thus, the engineer' s estimate can increase or decrease depending upon the scope, or also depending upon unit price changes over time.
Now I'll describe the thresholds. Proposed House Bill 300 gave us some guidance on what the legislative was looking at for legislative thresholds, and that is described by the dark blue line between the red color and the yellow line. The legislative described that during the planning phase, they were looking at trying to get the engineer's estimate within 20 percent of the bid price, and as the project got closer to letting, and thus, the engineer had more information, they were trying to get the accuracy to 10 percent, and that's what we see described here, the 20 percent and 10 percent.
In addition to describing the thresholds for legislative, we've also described, by the yellow and green, thresholds for internal management. They're a little bit different. The concept of having green or very good thresholds for internal management was that by defining green and yellow, we could describe lessons learned and compare best practices for internal management benefit.
The third piece I wanted to talk about in this chart was the opportunity to look back. We now have a system in place where the engineer can archive the engineer's estimate and the scope of work over the duration of project development. So once the project is let, then we will know the construction engineer' s estimate during those key phases of the project and we will also know the bid price so we can look back and then compare the bid price to the construction estimate during the planning phase and during the different project development phases of 60 percent and 100 percent.
MR. HOUGHTON: Let me ask a question.
MS. WAKELAND: Yes, sir.
MR. HOUGHTON: Whose engineers are doing this?
MS. WAKELAND: Well, it' s the engineer that's responsible for the project development phase of the project.
MR. HOUGHTON: Is that consulting engineers?
MS. WAKELAND: It primarily would be TxDOT engineers, but if a consultant was responsible for the project and project development of that project, and it is part of their scope and it usually would be, then they would be the engineer responsible for developing the cost estimate.
MR. HOUGHTON: And your lines here that I' m looking at, right now, as I've seen it over the past several months, we're in the yellow on the bottom side.
MS. WAKELAND: Yes. Actually, we're a little bit lower than that, we're more in the red. We will show that to you. Part of both of these performance thresholds that I'll be describing, we're looking back -- we're looking back four years for the cost estimating performance and we'll be looking back 18 months for the scheduling performance.
MR. BARNETT: Good afternoon. Ken Barnett director of the Construction Section.
On your question, Commissioner Houghton, that' s exactly true. For the vast majority of this calendar year, we have been red, well below the legislative threshold, and that' s kind of what we wanted to talk about now. What Curtis and Maureen did is they looked at how we've performed in this area from fiscal year 2006 through fiscal year 2009 to kind of look and see how have we done. And frankly, during that period, we didn't do real good, and that's because of some of the volatility in the market that we've all seen in recent years, and part of that explains why we've been so far under this year.
MR. HOUGHTON: Ken, not only volatility in the market but capacity by the construction industry?
MR. BARNETT: This particular year it' s both of those things.
MR. HOUGHTON: A lot of capacity but little work.
MR. BARNETT: That' s correct, sir. Part of it is commodity-driven and the demand went down everywhere, so the prices went down. The other part of that that' s affecting us a lot is we have way more capacity for contractors than we have for work, so they're even cutting the price even again beyond that. That particular piece is really difficult to predict, but we're working on that. Curtis is helping us with looking at some of the commodity futures to do our estimating which is different than what we've done in the past, and we'll look at some of that here in a minute.
We're developing these new tools to try to help us with that, look at what the commodities are going to do and maybe look at what the market is going to do, so stuff that happened this year maybe doesn't happen to us in the future. And what we want to do with that new tool is going forward, by fiscal year > 11, we want to have 50 percent of our projects within 10 percent bid to estimate, and the last couple of months we're getting a lot closer -- I think we're 13 percent again this month. By 2013 we hope to have this tool developed to the point we have 75 percent of our projects within 10 percent of the bid to estimate, so we're working in that direction.
This is how we've been doing. In FY > 06 we met the threshold 45 percent of the time; in FY > 07, 41 percent of the time; FY > 08, 35 percent of the time; and this last year 34 percent of the time. And this next slide kind of shows why; this is the reason that I think is why. And what you're looking at now shows two things. That nice squiggly line -- which is an engineering term -- is the one-month moving average of the seal coat asphalt that we get; the straight heavier line -- also a technical term -- is the twelve-month moving average of the seal coat.
What we're trying to show with this slide is two things. If you look back from like > 99 to 2004, both of those lines were relatively flat which tells me there' s not a lot of fluctuation in the market, there' s not a lot of fluctuation in commodity prices. It also tells me another thing -- and that's kind of what I've shown there -- when my line is really flat, I can probably estimate my prices using twelve-month moving averages because it doesn't change a lot.
Going forward to 2006 to today, we can see that those commodity prices and our market changes a lot, and if I use a twelve-month moving average, I'm way behind. And that last twelve-month moving average on the right is my explanation for what you have seen up here every month this year. We're estimating prices based on sky-high prices in 2008, and with those twelve-month moving averages, we are not picking up the fact that the market has changed and that is not the price that we should be paying anymore.
MR. HOUGHTON: Ken, let me ask you another question. Where in that graph did we hit our highest letting in TxDOT' s history?
MR. BARNETT: That would be in the > 05 and > 06 and > 07 is when that occurred. This particular line here is just seal coat and is not reflective of the letting.
MR. HOUGHTON: I know that, but there' s a correspondence to it.
MR. BARNETT: There is a correspondence in one other reason why we need to try to balance our letting -- and Maureen will talk about the timeliness -- as we throw a lot of work out there prices do tend to come up.
MR. HOUGHTON: Right.
MR. BARNETT: And that is part of it.
So what we wanted to do is we're going to change the way we estimate and we're going to account for these fluctuations where and not be estimating looking back, we're going to start estimating looking forward and try to better predict some of these things that have happened like this year.
Any questions on that before Maureen moves on to timeliness?
MR. HOUGHTON: So those spikes that we saw in your graph could be directly impacted by our letting?
MR. BARNETT: Yes, sir, they could. That particular spike that you're looking at there that caused the prices to go really high, the one-month spike, that was something we actually knew about before this. There was a significant shortage of asphalt materials and that's why that price went like that. That real high spike you see in 2005 is Hurricane Katrina. Some of that other stuff is related to what we do but I guess we're trying to recognize that we are part of a global market and we need to estimate that way and we haven't done that in the past.
MS. WAKELAND: The second performance measure that I'll be talking about has to do with design development timeliness, and that has to do with the engineer's ability to estimate the duration of the project development activities and then to deliver those projects on time. We expect the benefit of measuring design development timeliness to be improved resource management for both financial resources and for engineering resources. Also, we hope that by better estimating that we will be able to deliver our projects on time for construction lettings. We will be measuring the target dates versus the actual dates. This describes the two performance measures for legislative requests and the internal management thresholds. Essentially, they're very similar. We got the direction from the draft bill, House Bill 300, to draft up the legislative request thresholds.
We do have some historical data. About 18 months ago, the administration implemented PDMS, Project Development Management System. It was a tool used by the engineers to forecast when they would be able to schedule certain milestones in project development, and then, also part of the tool, the engineer then, once that milestone was met, they put in dates in the tool. So now that time has passed, the 18 months, we're able to look back and then compare the target due dates the engineer' s populated looking forward, to the actual due dates the engineer' s populated once those projects had met those milestones. Our goal is that 90 percent of our projects will be delivered on time for project development purposes.
We have a quick graph here. This graph represents the timeliness of projects statewide for the last 18 months. Based on this performance measure, we have delivered projects ready to let 90 percent of the time, and the corresponding part of that is 10 percent have be not. So the percentage early is represented by the green bar and those are negative early, and those that are late are on the right side.
So now I'll turn it back over to Ken Barnett who will describe on-time, on-budget construction activities.
MR. BARNETT: We defined the two measures that we want to go out with to the public for measuring the performance of our construction projects. Both are fairly straightforward: Was it on-budget? Was it on-time?
On-budget we're going to define as the actual cost of the project versus what we thought it was going to cost. The actual cost is going to be what the final amount we paid to the contractor was; what it should have cost will be the award amount of the contract -- which is the number that I give to you every month here at the commission meeting -- along with some other elements that are built into that contract when we let it, such as for quality control, quality assurance bonuses, they get a bonus for ride, and the larger mobility projects sometimes have very large incentives for completing the job faster, they have costs for police that aren't actually in the award amount. So what the project should have cost for the comparison is going to be what you award every month as the award amount plus these other items that are built into the contract when we let it.
For on-time performance, what we're going to look at is how long the project took, so how many days we charged or months of barricades that we paid -- and barricade months paid is the amount of months that barricades were up and the public was aware there was a project going on because we had signs out there -- versus how much we put in that contract when we let it. So it will be how much we did in the end and how much we put in when we let it.
One issue about this that we've looked at is the reason that project goes late, we're not going to take that into consideration. We're looking to be 100 percent transparent here so we're just going to tell it like it is. What that means is if we have a really wet year one year and the weather isn't good for construction, then the projects are going to be delivered late. But again, we want to be 100 percent transparent so it is what it is.
MR. HOLMES: Ken, before you get too far away from the slide before this one, you had some additional costs, police and all that. Do you have a general sense of an average percentage of what those would be on top of the numbers that are approved here?
MR. BARNETT: It varies quite a bit.
MR. HOLMES: But if you just took an average across the last billion or so.
MR. BARNETT: Three to four percent
MR. HOLMES: Okay.
MR. BARNETT: Now, understand, commissioners, that can be a very large number, 3 to 4 percent of a very large number, and on individual projects it's a huge number, but 3 to 4 percent overall for the program.
MR. HOLMES: Okay, thank you.
MR. BARNETT: Yes, sir.
MR. SAENZ: Ken, just on the paving, the quality assurance program for paving and the bonus, what has our average been lately? That's one that' s almost on every project.
MR. BARNETT: Most people hit that, Amadeo, so it' s about 5 percent. In fact, on like the porous friction course, it' s 10 percent and people usually hit that too.
MR. SAENZ: That' s 5 percent of the amount that they bid on the item, not on the contract.
MR. BARNETT: Correct, on the item.
MR. HOLMES: Just so I make sure I understand it correctly, my question is if you aggregate all of the items that you had listed on the slide before this one, what percentage increase would that be, and I understood you to say three to four.
MR. BARNETT: Three to four. The item that Mr. Saenz was mentioning is the asphalt/concrete pavement. The bonus is 5 percent but it' s 5 percent of that item, not the contract, and that' s why the number comes down.
So here's what we want to do. For on-budget performance we're going to say we're green, we're good, we've met our goal if we're at the award amount plus 10 percent; if we're at the award amount plus 10 percent over that, then we're not doing too good. On-time, the same thing, if we finish within 10 percent of the time or the months of barricades, we're good; if it's above that, we're going to report it as red, not so good. Both of these are patterned after House Bill 300.
So here we are for on-budget performance since 2005. We are talking about going out to the public with the last four fiscal years, plus the current twelve-month average, and we're actually getting better in this area. We've been averaging about 74 percent, 2005 to 2007, 2009 we got up to 82 percent, and right now we're at about 83 percent, so we're definitely moving in the right direction, keeping our projects on-budget.
MR. HOUGHTON: And the reason back in 2005-2006 could be commodity prices, or what were they?
MR. BARNETT: No, sir, not really. In 2005-2006 we were doing a lot of change orders, adding a lot of work, the projects were just costing a lot more than when we awarded them.
MR. HOUGHTON: Those contractors like those change orders, don't they.
MR. BARNETT: Yes, sir, they do.
MR. BARNETT: Now we're getting a little bit better, our design is getting better, we're not doing as much extra work.
As far as on-time, this number doesn't look really good, but there again, it is what it is. We're not really getting better or worse, we're just kind of that's where we're at and that's what it is. As we report this to the public, it's our intention to explain -- like we're currently at 49 percent not meeting the goal -- and it' s our intention to say what that is, a certain percentage is going to be the contractors' NLDs, a certain percentage were delayed for utilities, whatever. We're just going to portray it like this, this is the results, this is why we think that is, and there it is.
So that's all I had on these, if anybody has any questions.
MR. HOUGHTON: So now what are you going to do about it?
MR. BARNETT: Now what are we going to do about it. Some of these things we do have control over, Commissioner, some of these things, frankly, we do not. A lot of our projects are delayed for utilities and in many cases there's just not a lot we can do about it.
MR. HOUGHTON: Let' s just take the year 2009, utility issues there? Is it a majority of utility issues?
MR. BARNETT: We're still working on it, there's a percentage of that, 10-15 percent when I was looking at it. We're still compiling those numbers but that' s what I remember.
MR. HOUGHTON: Just looking at where the big problems are.
MR. BARNETT: Utilities are going to be a big one, the fact that the contractors liquidated damages is going to be a big one -- that' s probably 30 percent right there between just the two of those. The weather is in there, other stuff.
MR. SAENZ: I think, Commissioner, this gives us an opportunity to look at: these projects are not coming in, what are the reasons, which ones are under our control, which ones are not. And for example, in the utilities, do we need to come in there and do something in the utility process so that the utilities are adjusted before, or do we have a process where the utilities are then adjusted by the contractor and we make that a contract item where then that counts and you give them time to do that.
Because I think what' s happening is we bid the job based on the work that we need to do for construction, and if for some reason a utility gets delayed, the contractor just can't do anything, so time just sits, time stops, work stops, clock continues.
MR. HOUGHTON: The clock runs but they don't work.
MR. SAENZ: And so this gives us an opportunity, now that we're measuring it, to find out what the problems are and then take actions to address the problems. Just like the measure on the cost estimating, we're now looking at futures to come up with a different mechanism for estimating costs so that we can hit the target.
MR. HOUGHTON: Commodity futures?
MR. SAENZ: Yes, commodity futures.
MR. BARNETT: Yes, sir.
MR. HOUGHTON: I' d like to talk to them personally about that.
(General talking and laughter.)
MR. SAENZ: For many years, as far as our estimating, we've always used historical data, and for many years you saw that we were pretty flat, so it was pretty easy, we were hitting the targets, but things are so volatile now and there' s so much competition that we have to come up with a better way to estimate.
MR. HOUGHTON: Well, Amadeo, it looks like the chart earlier on, the spikes, is that we somewhat drive those commodity charges, not completely but we drive it by the amount of work that we're throwing out there. And now currently, it' s the lack thereof that we're in a global marketplace and those commodity prices have come down, but at the same time, we've got a capacity now where less work, same number of contractors or in the area of the same number of contractors, that they're sharpening up their pencil.
MR. BARNETT: There' s two things I've been seeing, and I think both of these are at play. I didn't put it in the presentation but I probably should have. The nice squiggly line there that's the one-month moving average for seal coat, the producer price index for number 2 diesel fuel looks exactly like that -- in fact, it's essentially the same curve. People project what happens with number 2 diesel fuel, and you can look at PPIs and predict what' s going to happen with it. So given the chart that I have, I think even today I can project my future for seal coat asphalt just on what' s going to happen with number 2 diesel fuel. That' s part of it.
The other part that we affect, Commissioner, that supply and demand issue, I think comes into play on the program as a whole. Individual items, I think are affected by the commodities but our overall HCI, mobilization and barricades, we want to look the project as a whole, that' s where that comes into play. Like right today, we see contractors bidding one percent, two percent for mobilization, and they typically bid ten. So that' s the part that I think we affect with our letting.
MR. HOLMES: Do you have a sense of, in the seal coating type projects, the asphalt type projects, what percentage of the cost is asphalt or seal coat, any kind of sense? Because that' s a commodity price that we're really not going to affect to a great extent. We had that one anomaly when the asphalt plant went down, those guys had some financial problems. But other than that, I mean, it's a worldwide commodity price. But what percentage of the total cost of those projects relates to the actual product that is being purchased and put in place?
MR. BARNETT: It varies by the project, of course. It' s typically 30 to 40 percent of the cost of the project is just the material itself.
MR. HOLMES: And when you project, looking into the future, in your estimates, are you going to use the futures price for number 2 fuel oil, or are you attempting to figure out what it might be in spite of the futures price?
MR. BARNETT: Both of those things. The other interesting thing, Commissioner Holmes, is the seal coat price that you're looking at out there is the total thing, that' s labor, materials and equipment. It' s completely nonsensical that that line followed the number 2 diesel fuel, but it did, so there again, it is what it is. That' s actually the total cost of the material installed, not just the material itself. I don't know why that happened, but it did. So we're going to use that and watch what happens for the producer price index for that as it goes up and down, because as you know, that sometimes doesn't match what the futures people thought was going to happen. That's what we're going to try to do.
MR. HOUGHTON: There seems to be a concern coming that flash that is used in concrete.
MR. SAENZ: Fly ash.
MR. HOUGHTON: Whatever it' s called, it may be prohibited by the EPA.
MR. SAENZ: Yes. EPA is wanting to --
MR. HOUGHTON: I hear that will have a profound effect on price.
MR. SAENZ: Right now on our concrete, we use about 20 to 25 percent fly ash and it creates a more durable concrete or more cost-effective concrete, and if EPA were to determine that fly ash is a hazardous material, we would no longer be able to use it, that' s going to impact our price considerably. At the AASHTO board of directors, we've sent resolutions to the EPA about our concerns with that potential determination.
MR. HOUGHTON: Because that would have to be produced offshore?
MR. SAENZ: Well, what happened is fly ash is a byproduct of the cement industry, what they're really looking at, they're angry at the cement manufacturers so we would have to get fly ash -- well, if they make fly ash a hazardous material, we couldn't use it, period, so we would have to buy just regular cement and use 100 percent regular cement, and the push is to quit making cement here and then we' d have to import cement from somewhere else which would be more costly. It' s something that's being looked at at the national level right now. Every state is impacted.
MR. HOUGHTON: Well, obviously, from a dollar standpoint.
MR. BARNETT: Thanks.
MR. SAENZ: Mary.
MS. MEYLAND: One more slide just to close this. As evidenced by your good questions, we cannot just put these bar graphs out to the public for their consumption, so I do want to make an emphasis that when we do publish these to the web and we do put them in our final report -- which we hope to do -- there will be at least 20-aught of them in the next six months that come out in response to HB 300, these are the first four and we think they're the heavy lifters of all the others to come, and we are developing journalism to go along with the graphs so that they'll be able to tell more completely the story about the questions that you asked so that the public won't be left hanging, well, what are they doing about it and why.
So that will be part of the production of these performance measures to put them in a journalistic form, and we have the four that are going out now with these four measures and they were done by John Sabala and Sondra Johnson of my office. So I just wanted to let you know that that's coming, we're excited to be able to unveil that hopefully December-January time frame.
And with that, thank you.
MR. SAENZ: Thank you, Mary. You're still up on the next discussion item. You're going to present a discussion on the vehicle miles traveled studies and some work that Mary has been working with TTI on a concept that we're going to try to move forward on, and we want to get a little feedback to make sure we're going in the direction that you all saw.
MS. MEYLAND: Yes. In direct response to some interests that the commission expressed a couple of months back in regards to pursuing more information on the vehicle mileage fee versus a tax. That seems to be the symbolism that's being attracted at the national level because of the tax inferences. We have put together with TTI -- the smart guys -- a proposal for you to consider of working with an exploratory committee to kind of put some questions to bed or get some answers to some questions and help us kind of focus on the direction in the future.
The committee, as we propose and for your consideration, is to provide or guide an independent assessment of the viability of the mileage based fee as a replacement and/or in addition to, and maybe help address or at least put some direction to the key policy issues that have been brought forward from other studies that have been done in the nation. And we thought a second component would be very good, and we've done some of this and I think you've heard about it in the North Texas area -- and I was a part of that when I was up there -- went out to the public to kind of gauge and inform on the different ideas of the funding mechanisms and the concerns that we have about our funding, and we could then gauge that more with some more focus groups and opinion surveys from what we've already done in the past.
Just to bring you back up to date, we're going to come off of what has already been done to date and we just listed for you there the previous studies that have been completed, and TTI and their focus group in this area has been very much engaged with the owners of each one of these projects that have been done at other research areas, and we would make sure that there's no duplication and that the questions that are rolling out of these studies would be the ones that this committee would use to try to address or answer for a Texas application.
So far, as you well know, the study findings have said that we've got to find a new way to keep investment going and up versus down for transportation and that the projections are very grim based on the erosion of the fuel tax because of fuel efficiencies.
There's various ways that you can do the mileage fee. One of the things that keeps coming back up and we'd definitely want the committee to delve into more detail is the electronic means of collecting this charge for an instate mileage fee. There' s lots of creative ways. Michael Morris, who I believe will be here either today or tomorrow, made a presentation to his communities up north about doing something in replacement of the vehicle tax.
So there are different ways that this one-time, one-year fee that would be put on a vehicle for the mileage that you drive in one year versus having to collect it at the pump or collect it on a regular rolling basis. There's lots of ways that that could be accomplished and this committee could kind of explore the pros and cons of those but not really come up with a direction but explore the pros and cons.
The benefits, obviously we know that there are ways to do this, and interestingly enough, even this week we found out from the Netherlands that they have proposed for 2012 implementation taking away their tax on their roads and their tax on their vehicles and they're going to a time charge, basically, which is relative to a 7-cent per mile tax for all of their users, and theirs is geared more to congestion relief but they're going countrywide on this. And it' s interesting to see that there's more and more applications being done every week, it seems.
These are the unanswered policy questions that keep emerging from all of the research that' s been done to date that we'd want to be able to focus on. Obviously it's the privacy issues and how that could be protected, how would we possibly go about integrating systems nationwide, there' s obviously some interest at the federal level, and what technologies that we would use.
The committee role, to guide the study that TTI would be the principal investigator on. We also have kind of a new venue, we've got quite a few people in the industry in the technology trade that are interested and offering and volunteering their resources, their experiences, not only nationally but internationally, and they're willing to come to the committee and offer their ideas and suggestions for consideration in trying to model something of this.
And obviously the bottom line, we' d provide their recommendations or their solutions or their ideas relative to the policy issues back to the commission for consideration.
We do have some recommendations from individuals who have asserted their interest in participating and they all represent Texas industry, infrastructure and the investment community, and obviously we have members from the technology trade who have very much indicated an interest in trying to participate in this or at least support it in some way, and we are proposing that obviously all of this would be by invitation by the commission, through the commission or maybe members of the legislature.
We have a timeline to basically kick things off in January, do some individual briefings to make all the members at the same level of information before we get together as a community, and then come to some conclusions early on, probably in the June-July-August time frame so that you would have something to digest before we get into the pre-legislative session.
And that's the presentation that we have based on the proposal we received from TTI to kind of head up an exploratory committee on VMT. Thank you.
MR. SAENZ: So I guess, Mary, in a nutshell we want to put in place -- use some input from the committee to identify political issues, policy issues of vehicle miles fee, and then from that, that' s something that could be presented. In fact some of the feedback that I received, commissioners, from the Senate Transportation and Infrastructure is that how soon could we get that in place because they're wanting to see what the issues are.
MR. HOUGHTON: Before the next session.
MR. SAENZ: Before the next session. So I think we had heard it from you all to start looking into this thing, we had heard it from several committees, and we're trying to piece together how we get that information so that it can be available for the legislature.
MR. UNDERWOOD: Let' s just make sure that we give them options, not conclusions.
MR. SAENZ: Yes, sir. It' s really identifying all the issues, positive and negative, so that everyone has all the information.
MR. HOUGHTON: I would, as a recommendation, your second to the last slide committee memberships would include the MPOs or a representation of the MPOs since they're not included in there.
MS. MEYLAND: Absolutely.
MR. HOLMES: Mary, do we have a cost estimate on this study? Is it primarily internal?
MS. MEYLAND: Yes, it' s internal and we're using TTI as a leader or basically a facilitator in this, and it wasn't very expensive, I know that otherwise, I would have remembered it, but I can bring that information forward for you. Thank you for your input.
MR. SAENZ: Thank you, Mary.
Agenda item number 4. Coby is going to give us an update on the federal legislative update.
MR. HOUGHTON: Amadeo, is Coby going to read his report like a schoolteacher to the children, or is he going to engage in conversation?
MR. CHASE: Sure, exactly. For the record, my name is Coby Chase. If you'd like me to, absolutely.
MR. SAENZ: He could always do what Senator Carona told me. He said, You're not going to read the entire report, are you?
MR. HOUGHTON: Coby, you're not going to read the entire report, are you?
MR. CHASE: I could pantomime, Commissioner. I have lots of options. Yes, I am.
MS. DELISI: That' s never the answer Amadeo gave Senator Carona.
MR. CHASE: Would you like me to call Senator Carona and see what I should do?
MR. HOUGHTON: How was your trip to Washington, D.C., and our delegation? Do you want to talk about that?
MR. CHASE: It went very well. Met with six or seven of them. Congresswoman Eddie Bernice Johnson, who is our senior member on House Transportation and Infrastructure, organized the meeting and we walked through the rescission's impact to Texas and how to decipher the numbers and what they've been over time and what they would mean into the future, and also a discussion of reauthorization and breathing life back into the Texas Transportation Working Group in Washington, D.C. And we talked at length about the effort the commission has underway that the Government and Public Affairs Division is doing, meeting with stakeholders around the state and interest groups about what would be important in a reauthorization bill for Texas. And it was a very good conversation, all in all.
MR. HOUGHTON: And my understanding is that we're looking at, the most latest and greatest, a six-month extension?
MR. CHASE: Well, yes, the Senate is. As you know, current law expires -- well, the extension expires December 18, December 19, the morning of December 19, and today, even while you are meeting, they just wrapped up a hearing in the Senate Environment and Public Works Committee, the first one they've had since June, on reauthorization, and they had US DOT there, and it was Senator Boxer and the committee, Senator Inhofe and the committee explaining why they think a six-month extension is the way to go.
They had some stories about DOTs that were struggling and why these extensions underfund them, and there was a letter sent to Senate leadership signed by seven senators, chair and ranking members of four of the relevant committees with one ranking member not signing -- for whatever reason, I have no idea -- that there should be something done before the end of the year on the six-month extension. The challenge with that will be the Senate calendar and everything that's already on it plus all the time and energy and oxygen healthcare will suck out of the calendar between now and the end of the year.
MR. HOUGHTON: Does any of that six-month extension rescind -- that's the wrong word -- the rescission?
MR. CHASE: Rescind the rescission? Senator Boxer intends to rescind the rescission. The challenge will be -- well, rescinding the rescission is a challenge, in and of itself, but the question is where Texas and 29 other states, to different degrees, are in a similar boat with its contract authority for this year, ours being at $103 million, whether or not they take care of that in that legislation.
The last version Senator Boxer and Senator Inhofe rolled out, it took care of the larger rescission but for the states, the 29 states that had contract authority hits this year of different degrees, it was going to leave it to the appropriators to decide whether or not they wanted to fix it but it would give them the ability to do. And we spoke to all of our appropriators on the House and Senate side, and there' s a general willingness to try to fix that if it gets into Appropriations, if they're given the opportunity.`
MR. HOUGHTON: That' s the good news.
MR. CHASE: That' s the keep hope alive news.
MR. HOUGHTON: Stimulus 2?
MR. CHASE: Stimulus 2. It bobs along, the discussion, and in recent days -- in the recent week or so, it' s taken on more of a discussion. The thing is the Senate has said sure, Stimulus 2 might be a good idea, and what's been kind of interesting about it is the discussion that they want to actually pass a stimulus bill that creates jobs -- that' s their words, not mine. It makes you wonder about the previous stimulus bill, what the intention was. But the discussion in the house -- which I will admit concerns us quite a bit -- is that it may be being written now -- we're asking our delegation to see who's writing it and where -- and it would be inserted into a conference report which means it would not really ever be vetted in public, it would come in at the last minute, it would be shoved to the House floor and the Senate to deal with.
So the Senate has indicated they' d prefer to do it in January or at the beginning of next year as a stand-alone piece of legislation out in the open. If it' s being written behind closed doors in the House, we' d like to figure out whose door it is and talk to our Texas delegation and see what's going to happen and how we could benefit from it. The first thing, they should repeal the rescission in it, that would go a long way.
MR. HOUGHTON: In your heart of hearts and your crystal ball, do you believe there's going to be a Stimulus 2?
MR. CHASE: No, not any time soon.
MR. HOUGHTON: Not any time soon.
MR. CHASE: But I' m willing to eat those words.
MR. HOUGHTON: When you look at the reauthorization, in all honesty, they keep talking about pouring more money in but they have to have the revenue sources to go with it. They're talking about a $500 billion bill versus a $280-?
MR. CHASE: $240-, in current tax revenue that' s where it's at.
MR. HOUGHTON: And $240- is what is supported by current tax revenue.
MR. CHASE: Yes, sir.
MR. HOUGHTON: So the fill-in is do they know yet, or they don't care?
MR. CHASE: I don't know that they don't care, it' s just no one has been able to coalesce.
MR. HOUGHTON: Recently haven't cared on certain things.
MR. CHASE: Yes. I mean, there' s this distraction of these extensions that are just a drain on time and energy and calories when really they need to be discussing the longer term, how are you going to pay for any size bill beyond $240 billion, and the chair of the House Transportation Committee has been talking to colleagues on his side of the aisle, I don't know if it' s delegation by delegation but it's what do you think about a 10-cent gas tax increase, and I don't know that he's got a resounding boy, that's a great idea to do right now.
I know we have expressed some concerns to our members of the delegation that well, a 10-cent gas tax increase shoved through that current system where we get 70 cents of it back at TxDOT might not be such a great thing. I mean, money is money, I will say that, but don't take anything else off the table while you're talking about this. House Ways and Means and Senate Finance, neither one have said they embrace this ginormous piece of legislation, or at least the funding end of it. Senator Cornyn is scheduled to speak at the forum on the last day, closing luncheon, he is the Texan who will have a say in how that legislation is financed.
MR. HOUGHTON: One thing I've never forgotten is when we had Speaker Dick Gephardt here and he reminded me of the gas tax increase the last time they did one at the federal level was the year that the following election the Democrats lost control, and he said, that has not been lost on the body. So believe a gas tax increase or not, but I don't think that's been lost on those folks. But if you see a doubling of the bill, would that double revenue to Texas?
MR. CHASE: Not necessarily. Doubling of that, first of all, you have to look at the number of offices and programs its created. It talks a game of consolidating and putting things together, it doesn't really, it doesn't merge their funding. The other thing is how much of that, for instance, goes into a national infrastructure bank, how do you get it out of the national infrastructure bank is the other question.
MR. HOUGHTON: So the actual dollars to Texas, we do know or don't know?
MR. CHASE: We do not know. The other part of it is there are many giant questions as to where money gets put in the bill in the first place. No state has any idea what its rate of return is or anything of that nature. The Senate, on the other hand, has nothing which is so far preferable. The House side has got a piece of legislation that, frankly, hasn't been vetted all that well. It would be interesting to see how and when it comes out. And I expressed these concerns to the members of the delegation I met with and ran them through some large questions we have.
It isn't to say everything in the bill is bad but there are some -- one program where we worked many years or after two authorization cycles to fix was the Border Infrastructure Program where Texas actually receives a guaranteed 25 percent rate of return in that, and we've built a lot of great projects along the border. That dissolves, it gets merged into other things, there's no guaranteed rate of return. When I mentioned that, that got everybody' s attention, and when I mentioned you don't see what your rate of return is yet, and it brings tolling decisions to D.C. to decide when you can build toll roads and what the rates are and things like that, that started to get their attention.
MR. HOUGHTON: That' s an Oberstar issue on the toll road issue, wasn't it?
MR. CHASE: Yes -- well, the entire bill is his, so yes.
MR. HOUGHTON: The reason I bring some of this up -- and maybe others have questions -- Amadeo and I had the privilege and opportunity of testifying before Senate Transportation in El Paso which was not recorded, and it was Senator Shapleigh, Carona, and I don't remember who else, waved a letter from the Chair that says we'll be out of money for new mobility projects in 2012, and we attested to that and agreed to that. And there was a lot of we need more revenue into the system to build Texas. So when you see the doubling of the Transportation Bill and you see Stimulus 2, it brings everybody's awareness up and hope up, but at the end of the day, that light at the end of the tunnel becomes a train.
MR. CHASE: Right, and the other is -- I'll try not to be cynical --
MR. MEADOWS: It' s hard.
MR. CHASE: It is hard, isn't it. There's a little -- I don't know how much momentum, but there is more of a discussion now about a two-year bill that front loads the money up front to the tune of $60 billion a year which would be more, I think, than we get now.
MR. HOUGHTON: For us.
MR. CHASE: Well, for states.
MR. HOUGHTON: I think you've got to bring it down to this level, what is it that Texas gets.
MR. CHASE: Well, I haven't seen the bill yet, Commissioner, but the discussion is front loading in $60 billion a year which is --
MR. HOUGHTON: Let me grab at something besides air.
MR. SAENZ: Coby, I guess if you look at 2009 nationwide was about $35-, $40-?
MR. CHASE: Yes, SAFETEA-LU.
MR. SAENZ: SAFETEA-LU was about $35- or $40-, and we received about $3-, $4-?
MR. CHASE: We received a little more than that.
MR. SAENZ: About 8 percent.
MR. CHASE: Right. Since they haven't decided if it would just push it through current law, then you could just run a calculation, or if they mess with the law somewhere and change the distribution. If they did like stimulus and said let' s push it through current programs, I think we would see a little bit of a bump.
MR. HOUGHTON: Well, I think that' s what needs to be disseminated is here is if, if, if, there is the what ifs that we could grab onto and our appropriators across the street and our partners could say okay.
MR. CHASE: Agreed. But I don't even think they've started drafting it yet, but it's just something that they've talked about.
MS. DELISI: When you were talking about a two-year bill, are you talking about they were contemplating taking the existing revenues and advancing them for two years?
MR. CHASE: Yes.
MS. DELISI: And make the last four years hole even bigger?
MR. CHASE: It could do that.
MR. HOUGHTON: It' s living for today.
MS. DELISI: Carpe diem.
MR. CHASE: And again, it kind of points to a series of stopgaps in a program that until recent history wasn't a stopgap program, it wasn't a continual crisis in funding it.
MS. DELISI: So is the gas tax the only revenue source that's being discussed right now?
MR. CHASE: No, it' s not the only one being discussed, but they're all being cussed.
MS. DELISI: That sounds familiar.
MR. CHASE: Shocking observation, isn't it. But there's no broad consensus around one thing other than spend money, there' s no consensus about how to raise the money. The Texas delegation had some very good ideas, actually, when I sat in the room with them and met with them, and it involves tolling, public-private partnerships, even a gas tax increase. I mean, those were all on the table, and the sentiment was we should try to embrace as many of these as possible which was good, which was a really good thing to hear.
Now would you like me to read my presentation? Just kidding.
MR. SAENZ: Thank you, Coby.
The last item, commission, is an update on the implementation of the recommendations of the State Auditor' s Office Cash Flow and Forecasting and Fund Allocation Audit that was done last year, or almost two years ago.
MR. RAGLAND: Thank you. For the record, I' m Brian Ragland, director of the Finance Division, and this is the periodic update on the State Auditor's Report that was completed in the summer of 2008 on the department' s cash forecasting and fund allocation processes.
I'm happy to report that 16 out of 18 recommendations have been implemented. I'll briefly touch on two of those that have been completed since my last report to you, and then I'll mention what' s left to accomplish.
So recommendation number 11 -- which is on your page 12, I believe -- had to do with adjusting districts' work programs when the actual expenditures differ from the initial funding allocations in their work programs, and the recommendation is that this would include adding or subtracting the impact of change orders from the work program balance. Basically, this deals with affecting the obligation limit that' s allocated out to the districts each year and capturing all related cash costs not just the bid price. So this has been completed.
We have and will continue to capture change order amounts and we'll work with the districts to verify and confirm those amounts by category of work. In addition to change orders, we're going to capture those other things that Ken Barnett spoke to earlier that affect the final cash cost of any project but are not necessarily captured up front in the bid price. And would also mention that these things will be credited or debited to the districts'letting caps by category and I'll mention that the FY 2010 allocations were adjusted using this method, so the current allocations they have have been adjusted for change orders and other things that counted against them in the previous fiscal year.
Recommendation number 12 -- which is on page 13 -- was to develop and implement a transparent process that would communicate to the districts the reductions in their current year funds when they accelerate projects, and this has to do with establishing some sort of a borrowing and lending type arrangement where if a district needed to accelerate a project from a future year into the current year and they did not have the work program available to them, then they could reach out and borrow from another district.
We have completed that, we've put a process into the DCIS system which will track these type of arrangements between districts. The information is rolled up and presented into a web-based environment and we also maintain that agreement in the Finance Division's system so that once it gets a couple or three years down the road, District X claims that District Y owes them money, then we have the documentation to establish that.
So those two were completed and we've got two left to round out the implementation. The other two are, first of all, number 6 which is on page 7, and this has to do with the developing and implementing policies for the cash forecasting process. When this was recommended, we were right in the middle of rewriting our cash forecasting system so the timing wasn't perfect to write policies and procedures. Now that we're done with that, we're working with TTI through an interagency agreement so that our policies and procedures coincide with their cash forecast system manual, and we're told that we can expect some progress next month in December, so I'll be updating you on that in December. I need to circle back with them and make them fully aware that this is an important commitment.
Finally, number 14(a) on page 15 is related to implementing the recommendations of the 2030 Committee, and I expect next month to update you on where we are with doing that. And that' s all I have unless you have any questions of me. Thank you.
MR. SAENZ: Thank you, Brian.
Those are all the agenda items, Madame Chair.
MS. DELISI: That concludes the agenda for today. Is there a motion to adjourn?
MR. HOUGHTON: So moved.
MR. HOLMES: Second.
MS. DELISI: All in favor say aye.
(A chorus of ayes.)
MS. DELISI: Opposed, no.
MS. DELISI: The motion to adjourn passes. Please note for the record that it is 3:21 p.m. and this meeting stands adjourned.
(Whereupon, at 3:21 p.m., the meeting was concluded.)
C E R T I F I C A T E
MEETING OF: Texas Transportation Commission Workshop
LOCATION: Austin, Texas
DATE: November 18, 2009
I do hereby certify that the foregoing pages, numbers 1 through 76, inclusive, are the true, accurate, and complete transcript prepared from the verbal recording made by electronic recording by Nancy King before the Texas Department of Transportation.
On the Record Reporting
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