The Arkansas Department of Transportation has a variety of areas where it can improve its operations, including how it reports to the state Legislature and improving retention of its employees, according to a consulting firm hired by lawmakers to review the department's operations.
McLean, Va.-based Guidehouse LLP has a contract for up to $722,463 with the Bureau of Legislative Research through Dec. 31 to study the Department of Transportation's processes and operations. The consultant will recommend legislative and other changes.
"We are going down a road. There are multiple stops. We are just at the findings part of this," said Sen. Jonathan Dismang, R-Searcy, told the Legislative Council's Highway Commission Review and Advisory Subcommittee during its meeting Thursday.
The panel and Guidehouse officials will discuss potential recommendations in June, he said.
"Please understand all the information that was gathered, [Guidehouse officials] did their best to thoroughly vet that information," Dismang said. "There is no doubt in my mind that [department officials are] going to have some places that they disagree, maybe they either started doing something that Guidehouse wasn't aware of or they are in the middle of something as far as changes."
"There is going to be a partnership [with the department] as we move forward and part of that consideration will be cost, part of it will be making sure that we hit benchmarks that are clearly outlined through here," Dismang said. "If those benchmarks are hit, then there are cost savings that can be generated."
Sen. Mat Pitsch, R-Fort Smith, said most of Guidehouse's suggestions are good business practices.
REPORTING TO OTHERS
Sagar Gokhale of Guidehouse told the subcommittee that the department's executive performance reporting doesn't emphasize operational effectiveness, and the department's unique governing structure limits how it reports to the Legislature.
The Department of Transportation is governed by a five-member Highway Commission appointed by the governor.
"The department is still creating many of its key operational performance indicators," Gokhale said. "They are still developing targets for all of their key performance indicators, and given the limits on the governance structure, there is really not much reporting of that performance outside of the [state Highway Commission] and the Federal Highway Administration.
"It really limits the ability of the department to truly identify cost efficiencies across the entire agency and it also limits public accountability for their performance," Gokhale said.
The Department of Transportation has 41 performance indicators but only 18 are focused on operational effectiveness and 12 are still under development, he said.
Gokhale said the department also has limited proactive communication of construction project changes and does not effectively track and manage customer inquiries.
Several state transportation departments across the nation have established high standards for stakeholder and public engagement, he said.
"Without rising to those high standards, the potential impact there [is] that there are low customer awareness and satisfaction and public trust with the department," Gokhale said.
"We are not trying to suggest that the department doesn't already have methods through which to communicate projects, changes and status to the general public or key stakeholders or even respond to inquiries that are directed towards the department," he said, referring to using the idrivearkansas.com website and social media for communication.
RETAINING EMPLOYEES
Regarding personnel, Gokhale said the department is limited in what it offers to retain and recruit employees.
The department's turnover rate increased from 6% in 2016 to 9% in 2019. He said 26% of the department's staff are within 10 years of standard retirement age.
"Only about half of the staff members, based on the last survey, believe that they can advance their career at the department," Gokhale said.
Without competitive compensation, the department faces an increasing turnover rate, is limited in its ability to recruit top talent and risks losing its institutional knowledge needed to identify operational efficiencies and savings, Gokhale said.
Gokhale said this analysis was completed in February or early March before the covid-19 pandemic hit. The pandemic completely changed the labor market and collapsed the gas and oil industry, which is a competitor for the department's employees.
But he added, "As the economy potentially improves over time, if these human capital programming items such as the career pathways, and aligned training and potential changes to the compensation structure ... aren't addressed, the department might find itself in a very similar position even in three or four years from now."
"Even if the turnover pauses or decreases for a brief period of time because of the economy, there is also the issue of 26% of staff are eligible to retire very, very soon," he said.
Sen. Bart Hester, R-Cave Springs, said the consultant's report shows that "clearly employees do not value the leadership team and think they are doing a good job" at the department.
"Was that, do you think, mostly directed at [former department director Scott] Bennett or the leadership team as a whole?" he asked Gokhale. "And if it is the whole leadership team, I certainly hope Director [Lorie] Tudor has a real plan to change the culture."
Gokhale said the department's survey of employees asked about the executive leadership team being able to effectively communicate decisions and understand the concerns of the rank-and-file employees.
"Those ratings were a little bit better than the ratings for the director, but there were still some challenges there," he said.
"Director Tudor may be the very best in the country," Hester said. "But the Highway Commission had this information and spent all of about 10 minutes in their search for the new director. It is just a bit concerning."
On Feb. 20, the Highway Commission promoted Tudor to director a day after Bennett announced his retirement after nine years as the agency's director. Bennett departed for a job with an engineering consulting firm working in the southeastern part of the nation.
Tudor is the first woman chosen to head the agency. She was put on the path to the job more than five years ago when the department created the position of deputy director and chief operating officer in 2014 to report directly to Bennett, who picked Tudor for the job.
Gokhale said the department's survey of employees last year found 56% of them trust the executive leadership team.
"There is less trust in the level of inspiration in the prior department director," he said, and more faith and trust in the employees' direct managers and supervisors than for district engineers and the executive leadership team.
Sen. Terry Rice, R-Waldron, said, "With the new director, I have found her to be what I describe as a problem solver, just seeing it in the mindset on a number of occasions."
He said he wants Tudor "to bring to us what improvements could be made in communications with contractors ... in pre-construction and through construction communication to keep from getting to a gotcha stage where things just come up."
OTHER FINDINGS
Guidehouse also noted the department:
• Bases its maintenance projects and budgets on historically allocated financial resources and conducted activities rather than targeted system needs.
• In its construction procurement, does not consider prior contractor performance with one exception.
• Has alternative contracting and project delivery methods that could be strengthened to help manage construction quality and cost.
• Lacks formal systems to identify and implement procurement efficiencies outside of construction.
• Lacks formalized project and portfolio management tools, which limits its ability to optimize projects and maintenance activities.
• Has information technology investments that are not clearly tied to business needs and lack department specific governance.
Tudor declined to comment about Guidehouse's findings.
Act 298 of 2019, sponsored by Dismang, required the Legislative Council to hire a consultant to study the department.
A final report must be filed by Dec. 1 with the governor and and House and Senate leaders, ahead of the 2021 regular session.
In the 2019 session, the Legislature and governor enacted Act 416 of 2019 that will raise more money for state and local roads through a wholesale sales tax on on fuel, higher registration fees for hybrid and electric vehicles and fund transfers. The tax and fee increases went into effect on Oct. 1. Rice sponsored the law.
State officials projected the law will raise about $95 million a year for state highways and about $13 million more a year for cities and counties.
In 2019, the Legislature also referred to voters in the Nov. 3 general election a proposal to permanently extend the 0.5% sales tax for highways. That tax was initially approved by voters in November 2012 for a 10-year period. State officials project the proposal will raise about $205 million a year for the transportation department and about $44 million a year each for cities and counties.
NW News on 05/18/2020