Put Transit Staff in Charge of Their Own Projects | IFP

Content

This piece is part of IFP’s Transit Abundance Playbook, a collection of proposals for reducing American transit construction costs.

Summary

Excessive use of consultants to manage large capital projects is a significant cost driver in transit project delivery. Over the past 40 years, public agencies have outsourced a large share of their core work to consultants. Design, engineering, project management, and oversight functions that were once handled in-house at transit agencies are now farmed out to private companies. These consultants don’t just assist with designing tunnels or engineering. Increasingly, they manage the entire project: scheduling, budgeting, risk analysis, and even day-to-day decision-making. The result is a system in which public agencies pay significant markups for private expertise while losing the capacity to oversee projects themselves. Costs grow, timelines expand, and every project becomes more dependent on consultants than the last.

Problem

To deliver megaprojects of a scale that they have not led in decades (if ever), public agencies seek out best practices, market discipline, and advanced expertise, often outsourcing both specialized tasks and core program management functions.

Outsourcing project management hasn’t always been the norm. For decades, US transit agencies built big systems with big in-house teams. For example, much of the heavy rail construction in the 1970s, ‘80s, and ‘90s in places like Washington, D.C., Atlanta, and San Francisco was managed by agencies with hundreds of staff engineers and project managers on payroll. Tunneled subway and heavy rail projects completed in the 1990s in these regions had per-mile costs much closer to their international peers. But in the years since, use of consultants for project management in the US has become increasingly common, including at agencies that once had large in-house project management staff. Even at agencies with large capital programs and significant staff, such as New York MTA or Los Angeles Metro, procurements for project management consultants are standard practice.

Consultants have always played an important role in public transit project delivery, offering expertise on both discrete tasks and specialized challenges. But somewhere along the line, the perception formed that public agencies can’t manage their own projects competently. That assumption has cost taxpayers billions.

Consultants managing a project on behalf of a public agency face fundamentally different incentives than in-house staff: they are paid for time and tasks, rather than long-term operating efficiency or budget control. The more complex a project appears, the easier it is to justify additional studies, redesigns, and oversight. Since more work often means more billable hours, consultants have little reason to challenge scope creep or rein in unnecessary complexity. Meanwhile, agency staff lose the opportunity to develop technical expertise, diminishing their leverage and authority to question the consultants’ assumptions or risk analyses.

Political preferences for leaner government budgets reinforce this cycle. Elected officials and political appointees may demand austerity in headcounts and payrolls, and assume that consultants can be brought in only when needed. But temporary consultants often become “embedded staff” or “staff augmentation,” with contracts that can be — and typically are — renewed year after year.

Embedded consultants charge overhead and profit margins on top of salaries, sometimes doubling or tripling the effective cost for the same labor. Agencies justify this premium by pointing to consultants’ supposed expertise and the flexibility they provide, yet many consultants perform routine project management or engineering tasks that full-time public staff could do at a fraction of the cost. The pursuit of leaner payrolls paradoxically drives up total project spending: as agencies lose the ability to perform work themselves, they must continually repurchase the same skills at a markup.

The most critical problem is the tendency to use consultants as decision-making buffers, which reinforces risk aversion and weakens accountability. Consultants are often hired to provide independent assessments or validate controversial choices, giving agency leaders and elected officials political cover for difficult tradeoffs. At the same time, decades of outsourcing have hollowed out the public sector’s technical expertise, leaving few staff who truly understand the engineering, cost, and schedule implications of design and project decisions. The result is accountability diffused across multiple consulting firms, and internal decision-makers reluctant to challenge expert recommendations. Projects grow in scope, conservatism, and contingency allowances, each defended as prudent, but collectively driving costs far beyond international norms. The resulting designs are overly cautious and aimed at minimizing blame rather than optimizing for cost or constructability.

Changing the consultant-driven project management paradigm may meet some objections. One concern is that reducing consultant use and processes could compromise project safety, durability, and environmental oversight. But many of the commonly outsourced tasks are precautionary rather than essential. What truly matters is establishing in-house program management and oversight on critical safety and quality components, rather than piling on layers of review that add cost without proportional benefit.

Another potential objection concerns financial risk. Some transit agencies have attempted to incentivize better consultant cost discipline through penalties and bonus payments, but consultants can still take advantage of fixed-price or outcome-based contracts by padding costs to protect their margins. Asking consultants to take on risk proves expensive for agencies, and it’s often cheaper for the public project owner to accept and manage more of that risk internally anyway.

Finally, there are institutional and structural barriers to reform. Consulting firms are strongly incentivized to maintain the existing paradigm, and agencies fret that they will never be able to hire private-sector talent at public-sector salaries and speed. But gradual and intentional change can help transition the industry, and transit agencies should aim to entice project managers by providing opportunities in which they feel ownership over project outcomes.

Solution

Fixing consultant dependence doesn’t mean firing all consultants tomorrow. Course correction requires building back internal capacity so agencies can competently run projects rather than contracting them out and hoping for the best. Project sponsors — the local transit agencies that own and manage a project — should use their authority to overhaul their staffing structures. The federal government can assist this reconfiguration by incentivizing the development of in-house expertise in transportation policy and funding. By reforming the funding that transit agencies rely on, Washington can help states and localities cut costs and streamline delivery, restoring confidence in public-sector project management.

Federal action could drive this culture change and create durable capacity within agencies through three strategies:

Use the Capital Investment Grants (CIG) process to incentivize expertise
Most large transit projects get major grants from the federal CIG New Starts program. As part of the CIG grant process, the Federal Transit Administration (FTA) assesses project sponsors to ensure they are ready to take on the project. Per FTA’s CIG Policy Guidance, projects must prove their capacity and detail the key management roles in the project management plan they produce in the Project Development stage. While the policy guidance includes preparing a staffing plan, it does not require that project sponsors specify which roles will be in-house and which will be outsourced. FTA should require this detail to determine whether internal staff can capably manage the project.

A project sponsor’s staffing mix should become part of FTA’s project management plan review and inform the CIG scoring that determines whether a project advances to a Full Funding Grant Agreement. Currently, a project’s overall score depends on both the project justification and the local financial commitment. The local financial commitment component, which specifies how a local agency will fund and manage a project, should include a score based on the dedicated in-house staff available for key project management functions based on the needs of the project and the local project sponsor.¹ By doing so, FTA’s scoring would help direct local and federal dollars to well-run projects that build institutional capacity.
Modify FTA project management oversight
The FTA Project Management Oversight (PMO) office is intended to ensure that federally funded transit projects are delivered on time, on budget, and in compliance with federal regulations. The office provides timely and detailed guidance on many topics, including project management capacity and capability. PMO’s primary objective is to verify that an agency has sufficient management capacity “either with its own staff or with qualified consultants.” FTA currently sees these actors as interchangeable; this expectation should be updated to favor in-house staffing.

Project management teams leading low-cost transit projects around the world anecdotally cite a typical mix of at least 60% full-time in-house project staff. But the roles matter: successful projects rely on consultants for specific tasks and short-term roles, but place in-house staff in leadership functions across project management, design, and financial management.

FTA should establish an initial guideline of 60% in-house staffing and develop resources for agencies on in-house roles and management. This guidance should include staffing plans with example organization charts and staffing mixes for project sponsors to adopt, with more detail on how global peers structure their teams to deliver low-cost projects. It should also demonstrate the value of proper staffing, and show agencies how to create a structure (including faster hiring, competitive salaries, and roles with meaningful authority) that helps them hire top talent in a competitive market.
Expand reporting on project staffing
FTA collects information on its federally funded projects and reports cost data in its Capital Cost Database. The database currently has a “soft costs” category that includes professional fees paid to consultants, but that data does not track in-house headcount and staff costs. Federal reporting requirements should compel agencies to disclose the proportion of project funds going to consultants versus public employees. FTA should expand the existing reporting criteria, requiring that soft costs be broken out into in-house and external headcount. Public visibility into these expenditures would encourage balanced staffing and allow policymakers to track whether investments in internal capacity reduce overall project costs.

Building public transportation infrastructure more affordably and efficiently is a function of project delivery and staffing. Consultants play an important role, especially in domains that require specialized knowledge, but US transit construction has become too dependent on them — too many functions have been outsourced, and too little in-house capacity remains. Moreover, consultant incentive structures favor cost escalation, delay, and overengineering rather than speed, affordability, and accountability. To bend the cost curve, public agencies must re-assert control, hire technical talent, increase transparency, and enhance project oversight.

Summary

Problem

Solution

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