a

GAO

United States Government Accountability Office

Report to the Senate Committee on 

Commerce, Science, and Transportation 

and the House Committee on 

Transportation and Infrastructure

July 2005 FREIGHT 

TRANSPORTATION

Short Sea Shipping 

Option Shows 

Importance of 

Systematic Approach 

to Public Investment 

Decisions

GAO-05-768
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

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www.gao.gov/cgi-bin/getrpt?GAO-05-768.

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and methodology, click on the link above. 

For more information, contact JayEtta Z. 

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Highlights of GAO-05-768, a report to the 

Senate Committee on Commerce, 

Science, and Transportation and the 

House Committee on Transportation and 

Infrastructure 

July 2005

FREIGHT TRANSPORTATION 

Short Sea Shipping Option Shows 

Importance of Systematic Approach to 

Public Investment Decisions

Transportation experts have cited numerous benefits, such as congestion 

mitigation, for developing short sea shipping, but they have also noted 

numerous obstacles, such as shippers’ reluctance to try a different mode for 

transporting their cargo, that impede its development. Absent in-depth 

information on the benefits and obstacles, opinions vary on how to proceed. 

Some stakeholders favor extensive public involvement, including federal 

funding for projects while others see a more limited public role, such as 

addressing regulatory provisions that may interfere with its development. 

The two new services GAO examined provide insights—but no clear 

answers—about the viability of this approach. 

The Department of Transportation (DOT) has made short sea shipping a 

high-priority option to enhance freight mobility and has drafted a policy 

proposal to provide potential federal funding. So far, the department’s 

efforts have been too narrowly focused. Before determining that federal 

funding should be applied to its development, a thorough understanding of 

key issues is required, such as the potential effect of federal involvement on 

the competitive balance among all transportation modes, lessons to be 

learned from recent start-up services, and actions that could mitigate 

identified obstacles, particularly with respect to reluctance to use this 

option. 

Public transportation decision makers are also actively considering short sea 

shipping in the context of a range of other options to address freight mobility 

challenges in their jurisdictions. Improving freight mobility, however, is a 

particularly complex challenge because the freight transportation system 

encompasses many modes on systems owned, funded, and operated by both 

the public and private sectors. In light of growing budget deficits, public 

decision makers must guard against waste of limited public resources when 

making investment decisions. This report contains a four-step approach for 

helping public decision makers define the rationale for public involvement, 

assess the merits of projects, determine the appropriate level and type of 

public support, and evaluate project results. 

Self-propelled Short Sea Shipping Vessel 

A dramatic increase in freight 

moving on the nation’s highways 

and rail lines, coupled with growing 

congestion and infrastructure 

limitations, has prompted DOT to 

explore new mobility-enhancing 

options like short sea shipping 

(SSS)—transporting freight by 

water between domestic ports, 

either along the coast or on inland 

waterways. This report describes 

(1) why SSS is being considered 

and factors affecting its viability, 

(2) the department’s role in the 

development of this option, and (3) 

issues that should be considered by 

public transportation decision 

makers when making investment 

decisions about this option or other 

types of projects for addressing 

freight mobility challenges. This 

report is based on a review of 

pertinent studies, federal activities, 

and an examination of two new 

SSS operations. 

What GAO Recommends

GAO recommends that the 

Secretary of DOT and the 

Administrator of the Maritime 

Administration: (1) develop a more 

thorough understanding of SSS 

issues before defining a federal role 

involving substantial federal 

investment and (2) use current 

mechanisms to encourage other 

public decision makers to use a 

systematic approach for making 

investment decisions on freight 

mobility projects. 

DOT officials generally agreed with 

the contents and agreed with the 

recommendations in this report. 
Page i GAO-05-768 Freight Transportation

Contents

Letter 1

Results in Brief 4

Background 6

Transportation Stakeholders See Short Sea Shipping As Having 

Multiple Benefits, but Also Cite Obstacles That May Impede 

Development 10

The Department of Transportation’s Role in the Development of SSS 

and Freight Transportation Improvements Needs More Careful 

Study 25

A Sound Investment Approach Is Needed to Guide Current and 

Future State and Local Public Investments in Freight 

Improvements 34

Conclusions 45

Recommendations for Executive Action 46

Agency Comments and Our Evaluation 47

Appendixes

Appendix I: Objectives, Scope, and Methodology 50

Appendix II: GAO Contact and Staff Acknowledgments 52

Tables Table 1: Characteristics of Traditional and Newer Waterborne 

Services 8

Table 2: Benefits of Short Sea Shipping Cited by Stakeholders 12

Table 3: Summary of Operating Characteristics of SSS Services 

GAO Studied 15

Figures Figure 1: The Sea Trader 17

Figure 2: Map of the Gulf Coast Service 19

Figure 3: Map of the Northeast Service 20

Figure 4: Investment Approach to Guide Public Investment 

Decisions 36
Contents

Page ii GAO-05-768 Freight Transportation

Abbreviations

CMAQ Congestion Mitigation and Air Quality

DOT Department of Transportation

FAST Freight Action Strategy

FHWA Federal Highway Administration

FTA Federal Transit Administration

ISTEA Intermodal Surface Transportation Equity Act

MARAD Maritime Administration

MPO metropolitan planning organization

NYMTC New York Metropolitan Transportation Council

PIDN Port Inland Distribution Network

SEA-21 Sea Transportation Efficiency Act of the 21st Century

SSS short sea shipping 

TEA-21 Transportation Equity Act for the 21st Century

TIFIA Transportation Infrastructure Finance and Innovation Act

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Page 1 GAO-05-768 Freight Transportation

United States Government Accountability Office

Washington, D.C. 20548

A

July 29, 2005 Letr

The Honorable Ted Stevens

Chairman

The Honorable Daniel K. Inouye

Co-Chairman

Committee on Commerce, Science, and Transportation

United States Senate

The Honorable Don Young

Chairman

The Honorable James Oberstar

Ranking Democratic Member

Committee on Transportation and Infrastructure

House of Representatives

A robust U.S. economy depends on the efficient movement of freight to fuel 

domestic production and satisfy consumer demand. In 2002, 16 billion tons 

of freight, valued at about $11 trillion in year 2000 dollars, moved through 

the U.S. transportation system. The efficient movement of these goods 

across roadways, rail lines, and inland waterways, helps ensure that 

factories remain efficient, packages are delivered on time, and retail and 

grocery store shelves are stocked. Efficient freight movement also tends to 

lower total shipping costs, helping keep production costs and consumer 

prices lower, and these savings to households and businesses help ensure 

that American products remain competitive in global markets.

Increases in freight volume coupled with current rail, roadway, and port 

capacity problems, however, are stressing the capacity of the U.S. 

transportation system and interfering with the efficient movement of these 

goods. Estimates made in 2003 suggest that growing international trade and 

domestic production will increase overall freight traffic by 70 percent by 

2020. Adding this much freight to the transportation system is particularly 

worrisome since the system is currently showing signs of strain. For 

example, roadway congestion, which affects 60 percent of the freeway 

mileage in urban areas, is causing significant delays for truck traffic in 

certain cities. Driver shortages further impact the efficient movement of 

goods and make it difficult for trucking companies to expand capacity—a 

factor that is particularly relevant since trucks carry 78 percent of the 

nation’s goods (measured in terms of freight tonnage). Freight movement 

by rail is also encountering serious capacity problems in many areas. In 

July 2004, for example, Union Pacific took measures to limit service 
Page 2 GAO-05-768 Freight Transportation

because increasing freight volumes were affecting service levels.1 The 2002 

Mid-Atlantic Rail Operations Study,2

 which analyzed rail traffic in five 

states in the Northeast, noted that there was a lack of capacity on critical 

rail lines in at least 25 different locations. Congestion at freight gateways—

container ports and land border crossings—is also expected to worsen as 

containerized imports from our international trading partners are 

estimated to double in the next 15 years. 

There are no quick and easy remedies for these capacity problems. 

Addressing these problems is a particularly complex challenge because the 

surface transportation system encompasses many modes—water, highway, 

transit, and rail—on systems owned, funded, and operated by the public 

and private sectors, or both. State and local governments, for example, 

have primary responsibility for selecting projects within their jurisdictions, 

while private sector companies conduct most of the actual transportation 

of cargo. Public transportation decision makers who attempt to expand 

infrastructure capacity face a myriad of funding, planning, and regulatory 

constraints. Highway projects costing from $100 million to several billion 

dollars, for example, are becoming commonplace and can take as much as 

two decades to complete. In the New York City area, transportation 

officials estimate that transportation projects will cost an estimated $147.1 

billion (in 2005 dollars) by 2030, and most of this money is needed just to 

maintain the current infrastructure.3

 Freight railroad expansion efforts, 

which are largely a private-sector endeavor, are also costly. The MidAtlantic Rail study estimated that it would cost $6.2 billion to address 

freight rail capacity needs in that region.4

 These problems are only 

exacerbated by difficulties in accessing federal, state, and local funding 

sources for freight projects. Public officials have noted that inadequate 

1

Union Pacific Railroad Press Release (July 8, 2004).

2

The Mid-Atlantic Rail Operations Study was a joint product of five states (Delaware, 

Maryland, New Jersey, Pennsylvania, and Virginia); the I-95 Corridor Coalition, which 

represents 13 states in the Northeast; and three railroads (Amtrak, CSX, and Norfolk 

Southern). 

3

Estimates are from the New York Metropolitan Transportation Council (NYMTC). NYMTC 

is an association of governments and transportation providers that serves as the 

metropolitan planning organization for New York City, Long Island, and the lower Hudson 

Valley.

4

This estimate is not expressed in dollars of one particular year because components of the 

cost were estimated in different years, but it roughly represents the estimated cost in 2000 

or 2001 dollars.
Page 3 GAO-05-768 Freight Transportation

funds for freight projects also hinder expansion efforts. Finally, in many 

larger urban areas, a lack of available land to build new roads or rail lines 

adds to the constraints imposed by the costs to expand capacity. 

The continued growth in freight volume has led the U.S. Department of 

Transportation to explore alternatives to improve freight mobility. One of 

the options the agency is exploring involves the use of waterborne freight, 

known as short sea shipping. Broadly defined, short sea shipping 

encompasses waterborne transportation of commercial freight between 

domestic ports through the use of inland and coastal waterways.5

 The 

department is exploring whether moving more freight in this manner could 

provide an economically viable option to relieve some highway and rail 

congestion while increasing freight mobility. We conducted this study to 

provide information to the Congress about this effort as it considers 

various ways to enhance freight mobility. Our report addresses (1) why 

short sea shipping is being considered as an option for addressing freight 

mobility concerns and the factors that affect its viability as an approach, 

(2) the Department of Transportation’s role in the development of short sea 

shipping, and (3) issues that should be considered by public transportation 

decision makers when making public investment decisions about short sea 

shipping or other types of projects for addressing freight mobility 

challenges.

To determine why short sea shipping is being considered as an option for 

addressing freight mobility concerns and the factors that affect its viability 

as an approach in the United States, we conducted a literature review of 

public- and private-sector reports and studies related to freight mobility 

issues and the waterborne transport of goods, and interviewed known 

short sea shipping experts in the public and private sectors. To determine 

whether the issues identified through the literature review and interviews 

were evident in practice, we visited two short sea shipping operations and 

interviewed a wide range of public and private transportation officials 

involved with or knowledgeable about the services. In identifying existing 

services, we relied on information gleaned from the literature review and 

interviews, and selected a private-sector operation that ships cargo along 

the Gulf of Mexico and a publicly funded operation that ships cargo 

between the Port Authority of New York and New Jersey and the Port of 

5

The U.S. waterway system consists of approximately 25,000 miles of inland, intracoastal, 

and coastal waterways and channels, of which about 12,000 miles are capable of handling 

commercial traffic. 
Page 4 GAO-05-768 Freight Transportation

Albany. We also interviewed officials at the federal level, including at the 

Department of Transportation and the Department of Homeland Security’s 

Customs and Border Protection agency, to supplement information 

obtained through the literature review and interviews. To determine the 

Department of Transportation’s role in the development of short sea 

shipping, we interviewed officials at the department and its agencies, 

including the Maritime Administration and the Federal Highway 

Administration. We also collected and analyzed documents supplied by the 

department and its agencies. To determine issues that should be considered 

when making public investment decisions, we analyzed the results of this 

review of short sea shipping and built on the perspectives gained from our 

past work in transportation systems and federal investment strategies.6

 We 

performed our work from July 2004 through June 2005 in accordance with 

generally accepted government auditing standards.

Results in Brief Transportation stakeholders representing both the public and private 

sectors believe that incorporating short sea shipping into the surface 

transportation system can produce numerous public benefits, but 

stakeholders also note that numerous factors may limit the development of 

short sea shipping services in the United States. Potential benefits of new 

applications of short sea shipping, according to these transportation 

stakeholders, include improved freight mobility, improved air quality, and 

reduced public expenditures on large infrastructure projects. For example, 

some transportation officials in the Northeast believe that a short sea 

shipping service operating out of the Port Authority of New York and New 

Jersey could relieve congestion in and around New York City because 

cargo could move by ship rather than by truck. Transportation officials 

note, however, that numerous legal, operational, and acceptance-related 

factors, such as laws that increase start-up costs, necessary modifications 

to port facilities, and a general reluctance among shippers to try new 

modes, may present obstacles to a wider development of short sea shipping 

services. For example, ports may be mainly set up to lift containers from 

large cargo ships using cranes, but short sea shipping operations may 

6

Transportation Research Board, Special Report 252: Policy Options for Intermodal 

Freight Transportation (Washington, D.C., 1998); Transportation Research Board, Special 

Report 271: Freight Capacity for the 21st Century (Washington, D.C., 2002); GAO, Highway 

and Transit Investments: Options for Improving Information on Projects’ Benefits and 

Costs and Increasing Accountability for Result, GAO-05-172 (Washington, D.C.: Jan. 24, 

2005); and GAO, Freight Transportation: Strategies Needed to Address Planning and 

Financing Limitations, GAO-04-165 (Washington, D.C.: Dec. 19, 2003). 
Page 5 GAO-05-768 Freight Transportation

instead use trucks to roll containers on and off barges or small ships—an 

approach requiring new truck ramps and holding areas. The effect of such 

factors, however, remains somewhat unclear, given that few new 

applications of short sea shipping have been developed. For the two 

operations we examined, many of these factors were apparently not 

insurmountable, although there were indications that some factors may 

interfere with further development. For example, operators of a service 

between several ports in the Gulf of Mexico said the federal requirement to 

use a U.S.-built ship for domestic shipping was limiting their ability to 

expand capacity, because there are a limited number of U.S.-built ships 

available on the market. Sponsors of a service between the Port Authority 

of New York and New Jersey and the Port of Albany said that shipper 

reluctance to use the service was limiting their ability to attract more 

business, even though the subsidized service is being offered at a lower 

cost than trucking. 

The Department of Transportation has established short sea shipping as a 

high priority component of the federal freight transportation strategy and 

has drafted a policy proposal to provide targeted incentives for short sea 

shipping projects. The department has been exploring the potential of the 

option to reduce congestion and expand capacity of the freight 

transportation system, but its efforts to date have been narrowly focused—

that is, they have been focused on the option itself and not on the impact of 

this option on other transportation modes or of federal involvement in its 

development. Nonetheless, the Department of Transportation is already 

contemplating a potential role for the federal government; it has developed 

policy proposals that would include short sea shipping as a central 

component of increased federal investment in the maritime sector. Before 

determining that federal involvement is appropriate, a more 

comprehensive understanding of key issues should be explored. If a federal 

role does exist, key issues that are pertinent to this role are (1) how to go 

about providing federal support to privately owned and operated 

infrastructure and (2) whether and how to increase funding levels for 

freight improvement projects. Considering the implications of these 

broader issues can help guide the agency in defining the federal role and 

ensure that the federal approach for short sea shipping development is part 

of an integrated federal approach to addressing the nation’s congestion and 

capacity problems. 

As the federal role is being defined and clarified, public transportation 

decision makers at the state and local levels are also actively considering 

short sea shipping and other options to address the freight mobility 
Page 6 GAO-05-768 Freight Transportation

challenges affecting their jurisdictions. Increased funding constraints and 

compartmentalized funding programs, however, create challenges for 

public decision makers in setting transportation priorities and linking 

resources to results to ensure that limited public dollars are wisely and 

effectively spent. A systematic investment approach to guide public 

investment decisions at all levels—federal, state, and local—could help 

public decision makers in making those difficult choices. Building on the 

perspectives gained from our past work in federal investment strategies 

and the work of transportation experts, we developed a four-step approach 

that may be helpful. The first step of the approach involves determining 

whether public support for a proposed project is warranted by considering 

whether it is expected to produce public benefits, such as reduced 

congestion, improved air quality, and economic development opportunities. 

If a rationale for public involvement can be established, the second step 

involves a closer scrutiny of the proposed project through an analysis of 

the costs and expected benefits of the proposed project to determine if the 

project is the most cost-effective option among alternatives. The third step 

of the approach involves determining the level and type of public support 

to be provided. This step involves recognizing that public support does not 

necessarily mean financial support, but when financial support is provided, 

it should be structured in such a way to minimize distortion of any 

competition. The final step involves the evaluation of ongoing and 

completed projects to determine if intended benefits have been achieved 

and to hold decision makers accountable for their public investment 

decisions. 

We recommend that the Secretary of Transportation and the Administrator, 

Maritime Administration, (1) ensure that a comprehensive understanding 

of key issues is developed before defining a federal role that would involve 

any substantial federal investment in short sea shipping projects and (2) 

use current mechanisms to encourage decision makers at all levels to take 

a more systematic approach to making decisions about freight mobility 

projects. In commenting on a draft of this report, the Department of 

Transportation generally agreed with its contents and agreed with the 

recommendations. The department also provided technical comments that 

we incorporated, as appropriate.

Background Transporting freight by water has been part of the freight network for many 

years in the United States, but most operations have traditionally been used 

for the movement of bulk commodities, such as coal, petroleum, grain, and 

lumber. Waterborne modes, sometimes referred to as short sea shipping 
Page 7 GAO-05-768 Freight Transportation

(SSS) operations, currently operate along the Mississippi River system, 

across the Great Lakes, through the St. Lawrence Seaway, and along some 

coastal routes. Together, these operations moved about 6 percent of the 

nation’s freight tonnage in 2000. SSS is one of the most cost-effective ways 

to move heavy, lower-value, and non-time-sensitive goods, but since it is 

slower and less reliable than trucking or air, shippers tend to move highervalue and time-sensitive freight by faster and more reliable modes, such as 

trucking or air.

Recent years have brought an increasing focus on developing new SSS 

options that are better suited for moving cargo that normally travels by 

truck and tends to include higher-value and time-sensitive goods. (See table 

1 for examples of traditional and newer waterborne services.) Some of 

these proposals rely on traditional waterborne methods, such as tug-andbarges, that are adapted to move containerized cargo instead of the 

traditional bulk commodities. For example, one operation we examined 

uses a tug-and-barge to move containers between two cities in the 

Northeast. Other proposals, however, look much different from the 

traditional waterborne modes. For example, one operation has proposed 

using two self-propelled ships to move containerized cargo along coastal 

waterways at faster speeds than tug-and-barges. Another proposal calls for 

building a dozen “next-generation” vessels that could move trucks and 

passenger cars along an extensive waterway network at more than four 

times the speed of tug-and-barges.
Page 8 GAO-05-768 Freight Transportation

Table 1: Characteristics of Traditional and Newer Waterborne Services

Source: GAO analysis of information from studies, interviews, and other sources. 

To develop these newer types of SSS operations, some transportation 

stakeholders have called for extensive public-sector involvement, while 

others have advocated for a more limited government role. For example, 

some transportation stakeholders believe that the federal government 

should provide money for SSS demonstration projects or heavily subsidize 

start-up operations to prove to shippers that this is a viable mode of 

transportation. Others, however, see a more limited government role and 

argue that government officials should focus their efforts on addressing 

regulatory provisions that may interfere with the development of SSS 

operations. 

The waterborne transportation of freight has a strong presence in Europe, 

where European Union policies have encouraged its use. In Europe, SSS 

grew steadily between 1970 and 1998.7

 Shipping in Europe, however, is not 

directly analogous to shipping higher-value freight in the United States. For 

example, Europe’s rail system is less efficient for moving freight than the 

U.S. rail system, and because of Europe’s geography, many of Europe’s 

main industrial centers are close to waterways. Thus, in many cases, SSS 

routes in Europe may provide the fastest and most reliable service between 

Characteristics Traditional services Newer services 

Cargo Mostly lower-value non-time-sensitive 

cargoes, including bulk commodities, such 

as grain, coal, and lumber

Many different types, but many are targeted 

at the higher-value time-sensitive 

containerized freight that normally moves by 

truck 

Vessel speed/type Mostly slower-moving tug-and-barge 

operations 

Higher-speed self-propelled vessels; many 

propose using ships that can allow trucks to 

roll on and roll off, instead of the traditional 

methods in which cargo is lifted on and off 

by large cranes

Areas served Along inland waterways and the Great 

Lakes

Proposals include the Great Lakes and 

inland waterways, but many are focused on 

coastal routes that parallel high-traffic 

interstates 

Purpose To provide the most economical way to 

move low-value and non-time-sensitive 

freight

To remove cargo from busy truck cargo 

routes and port areas 

7

Data on the percentage of freight moved by short sea shipping in Europe is only available 

through 1998. 
Page 9 GAO-05-768 Freight Transportation

destinations. In addition, legal provisions—such as road taxation and 

driving restrictions—increase the cost of road transport in Europe and play 

a role in the greater use of SSS.

Federal funding that could potentially be used to assist with the 

development of SSS in the United States is currently limited. Under certain 

circumstances, however, current federal laws could provide some 

financing for waterborne options because these laws allow states more 

flexibility to expend federal aid on certain nonhighway freight projects. 

The Intermodal Surface Transportation Efficiency Act of 1991 (ISTEA) and 

its successor, the Transportation Equity Act for the 21st Century (TEA-21), 

broadened the reach of programs established under title 23 of the United 

States Code8

 to fund and finance surface transportation projects with user 

tax receipts9

 credited to the Highway Trust Fund and distributed to states 

through annual apportionments according to statutory formula.10 While 

funds apportioned to the states are most often used to build and maintain 

roads, innovations in ISTEA and TEA-21 allow transportation decision 

makers some flexibility in using funds for freight improvement projects. 

For example, funds can be used to make improvements to rail lines and 

port facilities. The current federal framework also allows for greater use of 

public-private partnerships through programs such as the Transportation 

Infrastructure Finance and Innovation Act of 1998,11 a program that 

provides federal loans or loan guarantees to be used in concert with 

funding from other sources, including the private sector. 

Transportation planning occurs at the federal, state, and local levels. 

Although the last two surface transportation reauthorizations provided 

enhanced project-specific decision authority for the use of formula funds to 

the state level, the U.S. Department of Transportation (DOT) has 

responsibility for nationwide transportation planning, as well as program8

Several programs were expanded under title 23 of the United States Code to allow funds to 

be used for nonhighway projects, including the Surface Transportation Program (23 U.S.C. § 

133) and the Congestion Mitigation and Air Quality Improvement Program (23 U.S.C. § 149).

9

The user taxes include excise taxes on motor fuels and truck-related taxes on truck tires 

and sales of trucks and trailers. Formulas consider a variety of factors, including vehicle 

miles traveled on the interstate system and motor fuel usage by each state’s highway users.

10Other programs have been established at the federal level to build, maintain, and operate 

inland waterways and enhance and maintain harbors.

11P.L. 105-178, 112 Stat. 241 (1998). Seaport projects are ineligible for funding under the 

Transportation Infrastructure Finance and Innovation Act (TIFIA).
Page 10 GAO-05-768 Freight Transportation

level oversight. DOT has recently become involved in exploring the 

potential of SSS to expand the capacity of the freight transportation system 

to improve freight mobility and reduce congestion. In its strategic plan, 

DOT states that the U.S. coastal and inland waterway system is 

underutilized and could provide a practical, safe, and efficient means of 

transporting freight.12 Through its National Freight Action Agenda, DOT 

has specifically identified SSS for accelerated development.13 As the 

primary operating agency within DOT responsible for promoting SSS, the 

Maritime Administration (MARAD) has also made SSS a high-visibility 

component of its strategic plan.14 MARAD’s Strategic Plan proposes that 

greater use of the maritime transportation system, through elements like 

SSS, offers the potential to reduce passenger and freight congestion, as 

well as facilitate increased U.S. military reliance on commercial marine 

transportation systems.15 

Transportation 

Stakeholders See Short 

Sea Shipping As Having 

Multiple Benefits, but 

Also Cite Obstacles 

That May Impede 

Development

Stakeholders, including transportation officials and maritime stakeholders 

representing both the public and private sectors, see SSS as a potential 

option for improving freight mobility and creating other benefits, especially 

in high-demand transportation corridors, but they also note that certain 

obstacles may limit its development. Benefits cited include improved 

freight mobility, reduced infrastructure spending, and improved air quality. 

Potential obstacles to being an effective competitor include laws that 

increase start-up and operating costs, port facilities that are not readily 

adaptable to SSS operations, and a general reluctance among shippers to 

try new modes. For the two operations we examined, the effect of these 

potential obstacles varied. Some affected the viability of the operations, but 

others appeared to have little effect or were overcome by the operators. 

12DOT, Department of Transportation Strategic Plan, 2003-2008: Safer, Simpler, Smarter 

Transportation Solutions (Washington, D.C., September 2003). 

13DOT has also recently developed the National Freight Action Agenda, in conjunction with 

its operating agencies, in an effort to guide DOT and its partners in making the nation’s 

transportation system better serve its citizens. The Action Agenda identifies six high-priority 

freight initiatives, one of which is to accelerate the development of short sea shipping. 

14Maritime Administration, Strategic Plan for Fiscal Years 2003-2008 (Washington, D.C., 

September 2003).

15MARAD’s Strategic Objective Commercial Mobility aims to address congestion reduction 

by promoting the exploration of technology development and infrastructure that will 

improve the use of the maritime system. 
Page 11 GAO-05-768 Freight Transportation

Benefits Cited Include 

Improved Freight Mobility, 

Improved Air Quality, and 

Reduced Infrastructure 

Spending

According to stakeholders, the development of SSS operations may 

produce a number of public benefits.16 (See table 2.) By providing an 

additional option for transporting freight, stakeholders contend that such 

services would increase the capacity of certain freight routes, thus 

alleviating many of the capacity stresses that currently affect the surface 

transportation system. For example, an SSS service that moved cargo from 

New York to Miami might reduce the number of trucks on Interstate 95, the 

major highway between the two cities, thereby reducing overall roadway 

congestion. Similarly, SSS services that move containerized cargo out of 

busy ports to less congested ports could help alleviate dock congestion and 

reduce the number of trucks and trains traveling on crowded port access 

routes, thus alleviating capacity constraints affecting many ports. 

Stakeholders also contend that since SSS services are more fuel efficient 

than trucks, SSS operations can help improve air quality in certain 

locations by reducing pollution. Finally, stakeholders contend that SSS 

services could provide a more cost-effective alternative to building new 

roadways and rail lines, thus reducing the amount of money spent on 

infrastructure projects. 

16We did not determine, through our own independent analysis, whether SSS can produce 

these public benefits, and we were unable to locate studies that determined, through 

rigorous analysis, the potential public benefits of SSS. 
Page 12 GAO-05-768 Freight Transportation

Table 2: Benefits of Short Sea Shipping Cited by Stakeholders 

Source: GAO analysis of studies, reports, interviews, and position papers. 

Potential Obstacles Cited 

Include Legal, Operational, 

and Acceptance Issues

While stakeholders contend that such SSS operations can produce a 

number of public benefits, they also note that various obstacles could make 

it difficult for operators to start and sustain an SSS service that competes 

effectively with other modes. Since few SSS services have actually been 

created, there is no consensus about the effect, if any, these obstacles 

would present to SSS development. The potential obstacles cited involve 

legal, operational, and acceptance-related challenges. Legal requirements 

could present a barrier to SSS development by increasing the start-up or 

operating costs of operations. Operational challenges involve incompatible 

infrastructure and potential strains on port capacity. Finally, a general 

unwillingness among the shipping community to switch from wellestablished modes, such as trucking and rail—even if SSS can be shown to 

be a competitive option—can present a barrier to SSS development. 

Legal Requirements Paying the Harbor Maintenance Tax. Some proponents contend that 

the Harbor Maintenance Tax, a general levy on the value of cargo moved 

through a port,17 would make SSS less competitive with other modes, such 

as truck or rail, because it places an additional tax burden on shipping by 

water. The fee, which pays for such activities as harbor dredging, is levied 

on the value of cargo (0.125 percent) as it is loaded or unloaded from a 

Benefit Explanation

Improved freight mobility (increased freight 

capacity) 

At a basic level, incorporating SSS into the surface transportation system may add 

capacity to certain cargo routes because it increases modal alternatives. SSS 

operations may also help increase capacity in other ways, such as helping remove 

containers from busy ports, thus freeing up needed dock space for incoming cargo. 

Improved freight mobility (less congestion) By taking trucks off the road, SSS may help alleviate congestion along key corridors. 

Improved air quality Barging services may be more fuel efficient than trucking, and one barge may be able 

to carry as much freight as 58 trucks. Removing these trucks from the road and using a 

more fuel-efficient option may reduce emissions and improve air quality. 

Reduced need to build roadways and rail lines By reducing the pressure on existing transportation infrastructure, SSS can reduce the 

need to build new infrastructure. Large infrastructure projects, such as new roadways 

and rail lines, are expensive, time consuming, and in some cases may be limited 

because of population density or land costs.

1726 U.S.C. § 4461 and 19 C.F.R. § 24.24. In the case of imports, the importer pays the tax. In 

all other cases, the shipper pays the tax.
Page 13 GAO-05-768 Freight Transportation

commercial vessel in a U.S. port.18 Stakeholders argue that since shippers 

may avoid the tax by utilizing other modes, such as trucking or railroads, 

few would choose to use SSS services. For example, a shipper moving 

cargo from New York to Miami using SSS would be subject to the tax, but 

the same shipper can avoid the tax if the shipment travels by rail or truck. 

Trucking associations note, however, that they, too, are subject to user 

taxes, such as tolls and federal taxes.

Potentially higher vessel costs because of Jones Act requirements. 

Some SSS stakeholders contend that certain provisions in the Jones Act,19

which requires that any vessel (including barges) operating between two 

U.S. ports be U.S.-built, owned, and operated, may increase the start-up 

costs of SSS operations because ships built in U.S. shipyards tend to be 

more expensive than vessels that can be acquired from the global market.20 

These higher costs, in their view, could increase start-up costs and make it 

difficult for operators to create SSS services or sustain profitability. 

Another stakeholder argued that SSS operators are overstating the cost 

differences between U.S. and foreign-built ships and note that even if U.S.-

built ships are more expensive, these additional capital expenditures, given 

the long operating life of a ship, would add little to the cost of each trip. 

Operational Issues Potential need to alter port facilities. Current port infrastructure is 

often designed to accommodate large and deep-draft oceangoing vessels 

and may not be compatible with ships designed for SSS operations. For 

many oceangoing ships, large cranes are generally used to load and unload 

containers. This approach, referred to as “lift-on/lift-off,” may be 

compatible with some SSS operations, but others may use different loading 

and unloading techniques. For example, some SSS operations may use a 

different approach, such as “roll-on/roll-off,” in which trucks drive off and 

18Cargo entering some ports is exempt, such as those in Alaska, Hawaii, Puerto Rico, and 

possessions of the United States. For domestic shipments, the fee is levied at one port—

either the port of departure or the port of entry, but not both—and it does not normally 

apply to movements along inland waterways as long as the ship moving the goods is subject 

to the Inland Waterways Fuel Tax (19 C.F.R. § 24.24 (C) (5) and 26 U.S.C. § 4042). 

19Section 27 of the Merchant Marine Act of 1920 (46 U.S.C. App. § 883).

20We asked one SSS operator about whether the Jones Act requirement to use U.S. crews 

was a potential obstacle to expanding SSS services since U.S. crews may be more expensive 

than foreign labor. The operator said the requirement was not a particularly important issue, 

but that Coast Guard crewing requirements, which he believes mandate unnecessarily large 

crews for his SSS operations, increase the costs of SSS operations.
Page 14 GAO-05-768 Freight Transportation

on the ship. Therefore, starting an SSS service might require ports to build 

ramps that allow trucks to move on or off the ship or additional dock-side 

space where truck trailers wait to be loaded and unloaded from the ramp. 

SSS vessels are also smaller than oceangoing ships, and this size difference 

has raised concerns that SSS ships will not be compatible with docks 

designed for larger oceangoing vessels. 

Added handling costs. Shipping operators must pay dockworkers to lift 

cargo on or off ships, and some stakeholders have argued that the cost of 

these “lifts” will make SSS services less cost competitive with other modes. 

A shipper moving a container by SSS from New Orleans to Houston, for 

example, would need to pay for at least two “lifts”—one at the port of 

departure and one at the port of arrival. This could add hundreds of dollars 

to the total shipping costs, according to some proponents. A shipper 

choosing to move the goods by truck avoids the costs of the “lifts.” An SSS 

service using a roll-on/roll-off approach rather than cranes to load its 

vessels, however, might encounter cost savings. 

Potential strains on port capacity. While some SSS services may 

improve port efficiency, thus reducing strains on port capacity, other types 

of SSS services might have the opposite effect, according to some 

stakeholders. For example, a service that attracted additional containers to 

a port for shipment by SSS rather than by truck would add to the number of 

containers entering and leaving the port. Because of these concerns, some 

proponents have advocated basing SSS services at ports that handle less 

cargo than the nation’s major freight gateways, but these are often further 

away from the major market areas that demand the cargo. 

Acceptance-Related Challenges A viable economic advantage. Some stakeholders note that short sea 

shipping must offer economic advantages before shippers would be willing 

to use such services. Stakeholders note that for shippers to be willing to try 

this new approach, SSS operations would need to provide service that is 

cost-competitive with other modes and is as consistent and reliable. In 

addition, shippers would need to identify some advantages to shifting to 

SSS services, such as faster, more reliable, or cheaper service than other 

transportation modes. 

General reluctance to try new modes. A general reluctance among 

shippers, freight forwarders, and others involved in moving freight to try 

new shipping modes, regardless of the potential benefits, poses an 

additional challenge, according to many stakeholders. One transportation 

stakeholder told us that since shippers have operated under negotiated 
Page 15 GAO-05-768 Freight Transportation

contracts with trucking companies for many years, they may be unwilling 

to shift business to SSS operations regardless of perceived benefits. 

SSS Services Examined 

Were Operationally 

Different, but Both 

Attempted to Address 

Similar Freight Capacity 

Concerns 

While the two SSS services we examined—one in the Gulf Coast and one in 

the Northeast—differed in many ways,21 both of the services were designed 

to address capacity concerns. The two operations differed in such ways as 

the types of vessels used, operating schedules, types of cargo moved, and 

structure of funding (public or private). (See table 3.) Both services, 

however, were designed to provide a modal alternative that could help 

improve freight mobility around ports and along congested cargo routes. 

Table 3: Summary of Operating Characteristics of SSS Services GAO Studied 

Source: GAO analysis of information provided by SSS operators. 

Gulf Coast Service The Gulf Coast service, which began in 2000, is a private-sector initiative 

designed to attract shippers concerned about several freight capacity 

issues at ports and along key transportation routes. Operating on a 7-day 

21Some of the transportation stakeholders we spoke with noted that SSS operations may be 

less successful on the West Coast because of labor issues, port density along the West Coast, 

and a lack of freight movement along the north-south cargo routes (most freight in the 

western United States tends to move west to east). 

Characteristic Gulf Coast service Northeast service

Operator/sponsor Osprey Line, LLC (private operator) Port of Albany, Port Authority of New York 

and New Jersey (primary project sponsors), 

and private barge operator (vessel operator)

Funding source Private funding only: Operator charges 

shippers for the service

Private funding: Operator charges shippers 

for the service 

Public funding: Shipping rates are 

subsidized with money from a federal grant 

(Congestion Mitigation and Air Quality 

program) and funds from the Port of Albany 

and the Port Authority of New York and New 

Jersey 

Type of cargo International and domestic containerized 

cargo, mostly bulk commodities but also 

finished manufactured goods

International containers (no domestic) 

carrying mostly bulk commodities

Vessel type Self-propelled ship (lift-on/lift-off) Tug-and-barge operation (lift-on/lift- off)

Service frequency Once every 7 days Once every 7 days
Page 16 GAO-05-768 Freight Transportation

cycle22 around the Gulf of Mexico, the Gulf Coast service uses a selfpropelled U.S. flagship vessel (named Sea Trader) to move international 

and domestic containerized cargo, such as building supplies, finished 

manufactured goods, and chemicals, to and from ports in Houston, New 

Orleans, Tampa, and other cities as needed. (See fig. 1 for picture of the Sea 

Trader.) For example, the service moves finished manufactured products 

from Houston to Tampa and empty containers from Florida to Gulf Coast 

ports. The self-propelled vessel completes these types of trips in about half 

the time of a tug-and-barge service, according to the operators of the 

service. Speed is important, they said, because it allows them to compete 

with trucking along these cargo routes. 

22This means that the vessel returns to its port of origin every 7 days. A shipper moving 

goods from Houston to Tampa, for example, could make one shipment every 7 days on this 

SSS service. 
Page 17 GAO-05-768 Freight Transportation

Figure 1: The Sea Trader

The service has provided a successful solution to several of the freight 

mobility concerns in the area, according to operators. (See fig. 2 for a map 

of the Gulf Coast service.) Two concerns, in particular, attracted 

customers to the service, according to officials we spoke with. One was the 

difficulty of finding truck drivers for several routes covered by the service. 

These routes, such as Houston to Tampa, are reportedly undesirable to 

many truck drivers because they involve a long-distance trip that may take 

multiple days, and the drivers often receive compensation for only one leg 

of the trip. One logistics provider23 told us that a company in the region 

began using the SSS service because it was unable to find drivers willing to 

move cargo from Houston to destinations in Florida. Operators of the 

23Logistics providers, such as third- and fourth-party logistics providers, work with clients to 

arrange for the transportation of products. One task of a logistics provider is to help clients 

determine which mode of transportation to use, such as truck, rail, or SSS. 

Source: Osprey Line, LLC.
Page 18 GAO-05-768 Freight Transportation

service maintain that the service provides shippers with an alternative 

means of moving cargo along these routes. The second concern was 

declining rail service, which has become increasingly unreliable, according 

to the operators and the logistics provider we spoke with. 

According to the operators, the service has also been able to help relieve 

port congestion and provide other public benefits, including the following: 

• Because containers can be transferred directly from other ships to the 

SSS vessel at the Port of Houston, fewer trucks will need to travel along 

port access routes, thus reducing congestion on roadways leading to 

and from the port. 

• This ability to pick up cargo from the port also increases the amount of 

cargo that can be removed from the docks during a 24-hour period, 

increasing overall port capacity and reducing the amount of time that 

cargo normally sits on the docks24 before it is loaded onto another mode 

for delivery to its final destination. 

• Finally, to the degree that containers are transported to their destination 

on the SSS vessel instead of on the highway, the service reduces the 

number of trucks traveling along congested roadways. 

24According to officials at the Port of Houston, cargo normally sits on the dock for an 

average of 7 days before a truck removes it. 

Freight Movement and the Gulf Coast 

Service

According to the Gulf Coast operators, the 

Gulf Coast service was created in response 

to many of the freight capacity problems 

affecting the Gulf region. Transportation 

officials said that the most significant 

problems are at major urban areas-such as 

Houston and Dallas-and major freight 

gateways-such as the Port of Houston and 

the Port of Laredo. Private stakeholders and 

public-sector officials in the region identified 

the following problems: 

● Large influxes of cargo from international 

trading partners have severely 

constrained capacity at the Port of 

Houston, resulting in extended "dwell 

times" that now average 7 days. (Dwell 

time refers to the amount of time that 

cargo remains in the port before it is 

removed by truck, rail, or another mode.) 

● Roadway congestion around major urban 

areas and along the primary access 

routes to the ports has made it difficult to 

move cargo in and out of the port and to 

the final destination. 

● Growing rail inefficiency and a truck driver 

shortage has contributed to freight 

mobility problems. A logistics company 

spokesperson said that it was difficult to 

find drivers to complete “long-haul” trips 

and that railroad service is increasingly 

inefficient.
Page 19 GAO-05-768 Freight Transportation

Figure 2: Map of the Gulf Coast Service 

The Gulf Coast service has been able to attract enough business that the 

service is currently covering most of its operating expenses. The logistics 

provider we spoke with said the cost of the service was competitive with 

trucking rates. Although the service has been able to move enough cargo to 

sustain operations, the operators said that they are still operating below 

full capacity and have had a difficult time attracting more business from 

shippers in the area. Nonetheless, the operators said they plan to add an 

additional self-propelled vessel to the Gulf Coast route within the next 12 

months. They expect future customers to be attracted because of (1) 

problems that trucking companies are having with finding drivers for 

certain long-distance routes and (2) continued concerns on the part of 

shippers about rail service in the region. 

Northeast Service The Northeast service, which began in April 2003, is a public-sector 

initiative designed to help alleviate many of the port capacity problems at 

the Port Authority of New York and New Jersey as well as relieve 

congestion on crowded roadways in the New York City area. The Port 

Authority of New York and New Jersey, the Port of Albany, and regional and 

state planners spearheaded an SSS service for moving containerized cargo 

up and down the Hudson River between the Port Authority of New York 

and New Jersey in the south and the Port of Albany in the north. This 

Houston New Orleans

Tampa

Gulf Coast Service

Houston--Tampa--New Orleans--Houston

(7-day cycle)

Source: Osprey Line, LLC.
Page 20 GAO-05-768 Freight Transportation

service is part of a proposed inland distribution network that planners hope 

will include multiple rail and SSS services.

This service, called the Albany Express Barge, uses a privately owned and 

operated tug-and-barge to transport the containers, which are primarily 

loaded with bulk commodities, such as logs and silicon. (See fig. 3 for a 

map of the Northeast service.) Shipping containers between these ports by 

barge is slower than shipping them by truck, so the two ports decided to 

use a public subsidy to make the shipping rate more attractive to potential 

shippers. With the help of the public subsidy, the ports were able to set a 

shipping rate 10 percent below the rate for shipping by truck. Officials at 

the Port Authority of New York and New Jersey, faced with space 

limitations and expecting a dramatic influx of international cargo in future 

years, believed that within 15 years, such operations would be able to 

transfer more than 18 percent of all containerized cargo moving into and 

out of the Port Authority of New York and New Jersey. 

Figure 3: Map of the Northeast Service

New York

Albany

Northeast service (PIDN)

A tug-and-barge moves international 

containerized cargo between the Port 

of New York and New Jersey and 

the Port of Albany on the Hudson 

River (approximately 150 miles)

Source: Port Authority of New York and New Jersey.

Freight Movement and the Northeast 

Service

Transportation officials at the Port of Albany, 

the Port Authority of New York and New 

Jersey, and planners at the state and 

local level created the Northeast service 

in response to freight capacity problems 

affecting the region. They noted the 

following regional concerns, adding that 

these problems are expected to worsen 

as local and international cargo levels 

rise dramatically in the next few years: 

● Port congestion has increased the “dwell 

time” of containers to an average of 6 to 

8 days and access routes to and from 

the port are severely congested.

● Traffic congestion around New York City, 

especially at “choke points” such as the 

bridges and tunnels leading to the city, 

is interfering with the efficient movement 

of freight. 

● New hours of service regulations are 

limiting the amount of cargo that one 

driver can ship, reducing the overall 

capacity of trucking. For example, they 

noted that drivers who are stuck in heavy 

traffic are unable to finish their trip before 

their "operating window" expires. 

● Officials said the large volume of 

passenger trains in New York limited 

the number of “operating windows” in 

which cargo trains are allowed to enter 

the city, and officials noted that many 

bridges and tunnels offer limited height 

clearances, affecting the ability to 

double-stack containers. 

● The high cost of land and the increasing 

population densities have made it difficult 

to expand roadways and rail lines to 

deal with these capacity problems.
Page 21 GAO-05-768 Freight Transportation

To set a shipping price that was lower than trucking rates, the ports have 

used public funding from several sources as a way to supplement the 

amount the operator is receiving. The main sources for this subsidy are two 

federal grants secured by the Port of Albany through the Congestion 

Mitigation and Air Quality Improvement (CMAQ) program.25 The first grant 

was for $3.3 million for 2003 to 2004; the second, an extension of the first 

grant, was for $2 million for 2005. Under the rules of the CMAQ grant, Port 

of Albany officials are required to provide a 20 percent match to receive the 

funds. The Port of Albany has been providing much of this amount from its 

budget, although Port Authority of New York and New Jersey officials have 

recently provided $500,000 to help meet the requirement.26 Operators of the 

service also collect a fee from users of the service for each container 

shipped, which, according to port officials is about 10 percent less than 

what it costs to move the same goods by truck. 

This service is not meeting officials’ expectations.27 Port officials said that 

during the first 2 years, it has moved significantly less cargo than originally 

projected and will likely remain dependent on public subsidies for the next 

10 years. The operation initially began as a twice-weekly service, but 

shortly after its launch, officials cut service to once a week because the 

volume of freight was not sufficient to sustain two trips a week. During the 

first 12 months of service, the operation moved an average of 105 

containers per month. Usage rose to an average of 383 containers per 

month in the next 11 months (April 2004 through February 2005), but this 

higher level is still far less than originally projected. In addition, port 

officials said that about half of the containers that travel on the service are 

empty and, thus, do not generate revenue for the service.28 Because usage 

is lower than expected, the ports have had to use more grant moneys than 

expected to meet the operator’s costs. According to port officials, without 

25The CMAQ program was designed to assist nonattainment and maintenance areas under 

the Clean Air Act in attaining the national ambient air quality standards by funding 

transportation projects and programs that will improve air quality. 

26This is an advance on a $25 per container payment that the Port Authority of New York and 

New Jersey makes to the Port of Albany to help keep shipping rates on the Northeast service 

lower than trucking rates.

27Officials from the Port Inland Distribution Network generated expectations based on the 

volume of containers actually shipped.

28Empty containers must be repositioned for use when there is a lack of two-way trade; that 

is, the containers must be returned to the steamship companies after the freight has been 

transported to its final destination.
Page 22 GAO-05-768 Freight Transportation

the 1-year $2 million extension of the CMAQ grant, the operation would 

likely have been discontinued. Plans for the service after grant moneys are 

exhausted are uncertain. 

Effect of Potential 

Obstacles Varied for the 

Two Services 

Some of the factors that stakeholders identified as potential obstacles 

appeared to affect the development and continued operations of the Gulf 

Coast and Northeast services, but others had little effect or were overcome 

by the operators.29 For example, neither the Northeast nor the Gulf Coast 

operators cited inadequate port infrastructure as a major obstacle to 

development, but both said that shipper reluctance was affecting the 

viability of their services. Some factors, such as handling costs, affected the 

two services in different ways. Below, we describe how each identified 

obstacle affected the two SSS operations we examined. 

Harbor Maintenance Tax. The Harbor Maintenance Tax did not appear 

to be a significant obstacle to the development or operation of either SSS 

service, but in both cases, the operators of the services still expressed 

concern about its potential effect. While users of the Northeast or Gulf 

Coast service are required to pay the Harbor Maintenance Tax, the 

operators said they were not sure whether the shippers using these 

services were submitting their payments. Operators of both services 

nonetheless said they were concerned that if the tax is ever explicitly levied 

on these domestic movements, shippers may be unwilling to use the 

services because they can avoid the cost by using land-based options. 

Jones Act requirements. The Gulf Coast operators said that, in general, 

the high capital costs of U.S.-flag vessels are affecting their ability to 

expand operations and keep shipping prices competitive with trucking, 

while the Northeast operators said that this requirement was not affecting 

them. The difference, however, may lie primarily with the type of vessel 

each service uses. According to the Gulf Coast operators, this obstacle did 

not prevent them from starting their service because they were able to buy 

a used U.S.-flag ship—a cheaper alternative than buying a new U.S.-flag 

vessel. For expansion, however, the Gulf Coast operators said the limited 

29While these findings suggest that many of these obstacles may be surmountable, it is 

important to note that because we evaluated only two existing operations, these lessons 

may not be transferable to other operations. It is also important to note that because our 

case-study approach focused on existing services, it provides no indication of whether other 

operators may have considered a service but not followed through out of concern for any of 

these obstacles. 
Page 23 GAO-05-768 Freight Transportation

number of used U.S.-flag ships available on the market poses a greater 

difficulty. Operators of the Northeast service, by contrast, said the 

requirement was not a significant concern because they use a tug-andbarge option in which the U.S. and foreign-built versions, compared with 

self-propelled vessels, are more similarly priced.30 

Handling costs. The Gulf Coast operators said that handling costs were 

not a significant concern because they were able to negotiate special rates 

with dockworkers. In contrast, the Northeast operators said that handling 

costs are affecting the sustainability of their service. In both instances, the 

operators were able to negotiate special contracts with dockworkers that 

reduced the cost of each “lift,” thus helping decrease overall shipping costs. 

The Northeast operators, however, said even their negotiated rates are still 

high enough to affect viability. 

Port infrastructure. Neither service cited port infrastructure as a 

problem. Gulf Coast operators said they worked with transportation 

officials in various locations to provide needed infrastructure additions or 

upgrades at ports, such as roadway access routes. However, both operators 

used lift-on/lift-off equipment (such as cranes), and it is unclear whether 

SSS operators who attempted to use roll-on/roll-off technology would 

encounter port infrastructure problems. 

Adverse impact on port capacity. According to port officials in the 

Northeast and the Gulf Coast, the SSS operations have not had a significant 

impact on port capacity. For the Gulf Coast operation, officials at the Port 

of Houston said that the SSS service was moving a small amount of freight; 

thus, it did not add to capacity problems at the port. In the Northeast, 

officials from the Port of Albany and the Port Authority of New York and 

New Jersey said that the operation was also not adding to capacity 

concerns. 

Shipper acceptance. The Gulf Coast and Northeast operators both said 

that a general unwillingness among the shipping community to try new and 

untested modes, such as SSS, was affecting the viability of their SSS 

services. The Northeast operators said that even though they are offering a 

service that is cheaper than trucking, they have been unable to convince 

30While some stakeholders have cited potentially higher costs associated with the Jones Act 

provision that requires the use of U.S. crews, which can add to the cost of each trip, neither 

of the SSS operations we visited had such concerns.
Page 24 GAO-05-768 Freight Transportation

shippers to switch. The Gulf Coast operators also said that they have had a 

difficult time convincing many shippers to switch from trucking to SSS, 

even though they believe they offer a service that is comparable in price 

and speed to trucking. Our discussions with logistics providers produced 

two main explanations for this lack of acceptance. One concerns speed. 

For example, one logistics official in the Northeast told us that SSS services 

in general are too slow for shippers’ needs, and thus many shippers are 

unwilling to use them. The other concerns frequency of service. Logistics 

providers in the Northeast and the operators of the Gulf Coast service said 

that the SSS services are at a disadvantage to trucking because they cannot 

currently offer more-frequent service, while trucking companies can move 

goods daily. This frequency of service, according to logistics providers, is 

an important factor for many shippers. 

Operators of the Gulf Coast service echoed these concerns in their own 

comments about potential obstacles to keeping or expanding a viable SSS 

service. They said the ability to provide service that is comparable with 

trucking is critical, especially if the goal is to remove trucks from major 

roadways and port access routes. In this regard, they said, tug-and-barge 

operations are too slow to compete with trucking along certain cargo 

routes, and even self-propelled vessels are still slower than trucks along 

many cargo routes. Likewise, frequency of service was a concern because 

more-frequent service allows shippers to integrate SSS services into their 

supply chains. The Gulf Coast operators also said that Coast Guard crewing 

requirements were an impediment to SSS operations that use self-propelled 

vessels because the Coast Guard requires a larger crew for self-propelled 

vessels that carry containers. Because the operators of the service must 

pay for a larger crew, these requirements decrease the cost 

competitiveness of the SSS operation, according to the operators of the 

Gulf Coast service. Finally, the most important factor, according to the Gulf 

Coast operators, is that SSS services must be cost-competitive with 

trucking if such operations are going to attract business from shippers. 

Stakeholders involved with the Northeast service said that a lack of 

commitments from ocean carriers—those responsible for exporting and 

importing international shipments—is also affecting the viability of their 

SSS service. According to officials at the Port Authority of New York and 

New Jersey, ocean carriers often decide how international cargo entering 

the United States will reach its final destination, and, therefore, having 

their commitment to move goods on the Northeast service might make it 

more successful. This is a factor that could affect other SSS operations in 

other regions of the country. 
Page 25 GAO-05-768 Freight Transportation

The Department of 

Transportation’s Role 

in the Development of 

SSS and Freight 

Transportation 

Improvements Needs 

More Careful Study

While SSS appears to have merits worth considering, it is unclear why DOT 

has already identified SSS as a high-priority component of the national 

freight transportation strategy and chosen to promote and accelerate its 

development. Such an endorsement appears premature given the limited 

experience in the United States in using this approach, the preliminary 

nature of the information generated so far through the agency’s exploratory 

efforts, and the absence of a comprehensive understanding of key issues 

necessary to define the appropriate federal role needed, if any. Before 

moving ahead, more work is necessary to establish whether federal 

intervention in the development of SSS in this country is appropriate. Then, 

if an appropriate federal role exists, a necessary next step is to consider 

what changes, if any, might be needed to carry out that role. Two questions 

appear central to such a discussion: (1) Should federal support be provided 

for privately owned and operated infrastructure? (2) Should funding levels 

be increased and existing funding sources expanded?

DOT Has Identified SSS 

Development as a National 

Freight Priority before 

Determining Why the 

Federal Government Should 

Be Involved

DOT has identified the acceleration of SSS development in the United 

States as one of six high-priority freight initiatives through its National 

Freight Action Agenda and has taken steps to explore the viability of the 

approach.31 According to agency officials, SSS is an important concept for 

the agency to explore because of the potential of the approach to produce 

public benefits, such as reducing traffic congestion in areas experiencing 

heavy freight movement and expanding the capacity of the freight 

transportation system to support continued economic growth. At this 

stage, however, agency officials acknowledge that all of the public benefits 

of SSS and factors that may affect its development in this country have not 

been fully considered. DOT has undertaken a number of exploratory 

activities, most of which were undertaken to promote and accelerate the 

approach in the United States. For example, MARAD—the primary agency 

within DOT responsible for the SSS initiative—has funded studies of the 

concept, created a public/private partnership of stakeholders to share 

31The National Freight Action Agenda was developed to guide the agency and its partners in 

agency efforts to make the transportation system better serve its citizens. Within this plan, 

DOT has identified the following six high-priority freight initiatives: (1) facilitate the 

development and planning of major freight projects, (2) promote intelligent transportation 

technologies to improve freight transportation, (3) improve intermodal connectivity by 

improving coordination of planning and financing across DOT programs, (4) enhance DOT’s 

Freight Capacity Building Program, (5) improve the timeliness and quality of freight data, 

and (6) accelerate development of SSS.
Page 26 GAO-05-768 Freight Transportation

resources and in-kind services for accelerating SSS development in the 

United States, and sponsored conferences to exchange industry knowledge 

of SSS and its potential contribution to the nation’s transportation system. 

Agency officials emphasize that MARAD’s exploration of these issues spans 

only a few years and results to date can be characterized as preliminary.

DOT does not yet appear to have a sound basis for identifying SSS as a 

high-priority component of the national freight transportation strategy. 

Thus far, federal efforts have focused on studying and exchanging industry 

knowledge on the concept, and not on whether federal involvement in its 

development is necessary. This information may be useful in understanding 

the potential of the approach to reduce congestion and expand system 

capacity, but it will not help policymakers determine whether federal 

involvement in its development is warranted, and it does not begin to 

broach issues involving the effects of federal involvement on the freight 

transportation system as a whole. For example, DOT has not thoroughly 

assessed key issues, such as

• the potential impact of federal involvement in developing SSS on the 

competitive balance among all transportation modes;

• lessons learned from new SSS services, such as the Gulf Coast and 

Northeast services that we examined; and

• obstacles and mitigating actions necessary to developing SSS, 

particularly with respect to the reluctance by shippers and logistics 

providers to using this option.

In-depth insight into these and other issues is an important prerequisite in 

order to establish the extent of federal involvement needed, if any, in the 

development of SSS in this country. However, it is unclear at this time 

whether DOT and, in particular, MARAD are planning to address these 

issues. DOT’s Office of Freight and Logistics and MARAD’s Directorate of 

Port, Intermodal, and Environmental Activities, which together account for 

the bulk of federal SSS activities undertaken to date, have recently 

reorganized and are rethinking where next to focus their SSS efforts. Both 

are developing plans for future SSS activities in which they plan to engage, 

and these plans were not yet finalized and were not available for our review 

during the course of our work.

Before asserting a federal role in the development of a domestic SSS 

system, DOT should consider whether federal involvement is even 
Page 27 GAO-05-768 Freight Transportation

appropriate. As part of the agency’s information-gathering efforts, it would 

be important for DOT to consider the potential of the private sector to 

develop SSS without any involvement from the federal government. Many 

transportation experts maintain that government involvement in freight 

projects should be limited to circumstances in which market-based 

solutions would produce less than efficient results.32 Government-imposed 

solutions to freight problems have the potential of superseding solutions 

that the private market would reach on its own. Determining whether SSS 

development could occur solely in response to market forces is an 

important issue to explore, in part, because the federal involvement may be 

spurred by considerations other than freight efficiency. For example, the 

federal government is interested in maintaining the safety and condition of 

the transportation system in addition to improving the efficiency of the 

system. Therefore, without fully exploring the implications of federal 

involvement, policymakers may adopt an approach that unintentionally 

causes market distortions and reduces efficiency. In the extreme, providing 

federal support for a project has the potential of producing overcapacity 

and distorting shippers’ choices about which transportation mode to use.

Part of determining the advisability of a federal role involves assessing the 

risks associated with providing federal support for SSS projects. While 

lessons learned from the two SSS operations we reviewed are not 

necessarily transferable to other operations, they serve as examples of how 

government intervention might produce the risk of resources being used 

inefficiently. One of these services (the Gulf Coast service) had little or no 

federal involvement and demonstrates the willingness of users to pay for a 

project; the second (the Northeast service) involved a federal subsidy and 

demonstrates the risk associated with providing a subsidy when demand is 

not completely understood. The unsubsidized Gulf Coast service depends 

on private-sector demand and has been able to attract enough business that 

the service has been able to cover most of its operating expenses. In 

contrast, the subsidized Northeast service is not meeting the expectations 

established for it, even though the ports were able to set a shipping rate 10 

percent below the rate for shipping by truck with the help of the federal 

subsidy. Additionally, an extension of federal funds had to be secured, 

without which the operation would have been discontinued, according to 

project sponsors. 

32For example, less than efficient results would include solutions driven by the private 

sector that may not recognize certain costs imposed on others by users of the transportation 

system, such as congestion, environmental costs, and accident costs.
Page 28 GAO-05-768 Freight Transportation

At the very least, the lessons learned from the two operations we reviewed 

suggest that more information should be developed to help policymakers 

weigh the risks associated with federal involvement in SSS. However, the 

available evidence indicates that DOT is already proposing a role for the 

federal government in SSS and is considering federal financing 

mechanisms that will, in part, provide support for SSS projects. DOT has 

recently developed federal policies intended to benefit the maritime sector 

and packaged these policies within a proposal referred to as the SEA-21 

initiative. According to DOT officials, the purpose of the SEA-21 initiative 

would be to create a federal maritime program similar to the surface 

transportation program governed by ISTEA and TEA-21. This proposal has 

not been formally introduced, but, according to the prepared remarks of 

the Under Secretary of Transportation for Policy, DOT has endorsed SEA21 and appears to be committed to its eventual enactment.33 DOT officials 

have stated that the proposal includes SSS as a central component and 

involves increased investment in the maritime system by leveraging 

federal, local, and private sector funds. It would thus appear that DOT has 

determined that the federal role would involve the provision of targeted 

incentives for SSS projects. These decisions seem premature by 

establishing that federal involvement is warranted before determining how 

SEA-21 will impact the competitive balance among all transportation 

modes, such as rail and trucking. 

If a Federal Role Exists, Key 

Policy Issues Merit Close 

Consideration 

If DOT determines that federal involvement in the development of SSS is 

appropriate, changes may be needed at the federal level to realize the 

concept’s potential. These changes potentially affect the federal surface 

transportation program established under Title 23 of the United States 

Code because the vast majority of freight moves across the nation’s 

roadways, and this program provides most of the federal support 

forroadways.34 This program is also important in any discussion of 

providing federal support to advance freight improvements in that freight 

33Remarks of Jeffrey N. Shane, Under Secretary of Transportation for Policy, at the 

September 25, 2003, annual National Waterways Conference and the May 20, 2004, National 

Maritime Day Luncheon held in Washington, D.C.

34Other programs build, maintain, and operate the inland waterways; provide aid to airports; 

maintain the air traffic control system; and maintain harbors. The federal surface 

transportation program, however, is the largest of those programs and the most important 

for freight.
Page 29 GAO-05-768 Freight Transportation

transportation is typically intermodal and through these acts the Congress 

established intermodalism in federal policy.

If a federal role exists for SSS, the potential change involved appears to 

center on two broad policy questions: (1) Should federal support be 

provided for privately owned and operated infrastructure? (2) Should 

funding levels be increased and existing funding sources expanded? 

Understanding the implications of these broader policy issues can help 

guide DOT as it wrestles with defining the federal role for SSS development 

and ensuring that the approach adopted will be part of an integrated 

approach to addressing the nation’s congestion and capacity problems.

Determining How Federal Aid 

Could Be Applied to Projects 

That Provide Benefits to the 

Private Sector 

Accommodating freight projects under federal aid programs involves 

considering the implications of providing public support to projects both 

that provide substantial private benefits and that individuals and firms 

would be willing to pay for on their own. The high level of private sector 

involvement in freight transportation is a major factor distinguishing 

freight improvements from other transportation projects. For example, 

most freight carriers are private companies, and they own and operate 

significant components of the nation’s freight transportation infrastructure, 

such as port terminals, trucking companies, and rail lines. Therefore, any 

freight improvement, including SSS projects, would likely involve privately 

owned or operated infrastructure. Funding such types of projects might 

thus provide a significant benefit to the SSS operator that owns and 

operates the service. 

The rationale for considering whether federal aid programs should be 

broadened to include freight improvements is that these types of projects 

also have the potential of producing a public benefit. Broadly stated, a 

freight improvement project may produce benefits that are not captured in 

market transactions. For example, an SSS project might alleviate 

congestion over a wide area by removing some freight from highway and 

rail, thereby increasing the capacity of the surface transportation system. 

These types of benefits provide benefits to society but do not in themselves 

generate incentives to the private sector to invest because the benefits do 

not accrue to the projects’ users and, therefore, would not be reflected in 

the prices they would be willing to pay. 

Although freight improvement projects may have potential to produce 

public benefits, current decision-making processes and federal funding 

requirements can limit the consideration they receive. Transportation 

decision making has been established primarily as the responsibility of 
Page 30 GAO-05-768 Freight Transportation

state departments of transportation and local metropolitan planning 

organizations,35 based on the premise that these levels of government 

would know best how to identify transportation priorities and dedicate 

funding to them. As we have reported in the past, however, consideration 

of freight improvement projects within this state and local process is 

limited because the process is oriented to projects that clearly produce 

public benefits, such as passenger-oriented projects.36 Because of eligibility 

requirements, many federal-aid programs also limit the use of federal 

support for privately owned or operated projects. The exceptions to such 

restrictions include the Congestion Mitigation and Air Quality (CMAQ) 

program, which requires a correlation between the use of funds and 

improved air quality, and loan or loan guarantee programs, such as the 

Transportation Infrastructure Finance and Innovation Act (TIFIA) 

program, that require that the projects being supported have the ability to 

take on debt. 

When public subsidization is being considered for freight infrastructure 

projects—which to a large degree would likely benefit the private sector—

the appropriate scope of government involvement must be considered 

carefully. Apportioning the cost burden of freight projects among 

participants equitably37 is important not only to guard against the waste of 

limited public resources but also to enhance the efficiency of the 

transportation system by supporting only the most worthy projects. 

Federal subsidies should not be assumed for all projects, since this 

increases the risk of resources being used inefficiently. Encouraging or 

requiring state and local decision makers to establish cost-sharing 

frameworks between the public and private sectors would better ensure

35Federal law requires the creation of metropolitan planning organizations (MPO) for any 

urbanized area with a population greater than 50,000. Composed of representatives from 

local governments and transportation authorities, MPOs are regional policy boards charged 

with developing a comprehensive metropolitan long-range transportation plan and 

transportation improvement program that considers a wide array of interests and factors 

through cooperative partnerships with stakeholders.

36GAO-04-165.

37The use of the term “equitable” in this regard refers to the principle that beneficiaries 

should pay for project costs commensurate with the benefits they receive from projects.
Page 31 GAO-05-768 Freight Transportation

that federal funds or support are being applied in the most effective way.38 

Cost-sharing involves two important factors: 

• First, the degree of public involvement, whether local, state, or federal, 

should be limited to the public benefits the project is expected to 

produce—for example, those related to congestion reduction, pollution 

reduction, accident avoidance, and other public benefits. In other 

words, the cost-sharing framework should ensure that the private sector 

is assessed the costs of projects commensurate with the benefits it 

receives from them. 

• Second, care should be taken to adequately consider the capabilities and 

resources of the private, state, and local entities to fund freight 

improvement projects. These stakeholders may seek to use federal 

funds to reduce the levels of commitment they would have provided 

otherwise. Federal assistance, when deemed appropriate, should 

promote or supplement expenditures that would not otherwise occur 

and should not supplant private or other public investors.

Encouraging or requiring the quantification of project costs and identifying 

all parties who will bear the costs can help ensure that costs are 

apportioned among all stakeholders equitably. When federal support 

through a loan or loan guarantee is used to advance a project, rather than 

using federal funds, DOT could consider encouraging or requiring that 

project sponsors plan the project to be self-supporting by targeting user 

fees to retire debts. Relying on revenue from users and encouraging 

public/private partnerships to provide efficient solutions to freight 

transportation needs should increase the likelihood that the most 

worthwhile improvements will be implemented and that projects will be 

operated and maintained efficiently. 

There are precedents in which cost-sharing frameworks have been devised 

for freight improvement projects that stress reliance on federal, state, local, 

and private partnerships to share in the costs of freight projects. One such 

example involves a rail project in the Los Angeles area—the Alameda 

Corridor Project—which created a 20-mile railroad express line connecting 

the ports of Los Angeles and Long Beach to the transcontinental rail 

38We discuss the value of conducting benefit-cost analyses in GAO-04-165, GAO-05-172, and 

GAO, Surface Transportation: Many Factors Affect Investment Decisions, GAO-04-744

(Washington, D.C.: June 30, 2004).
Page 32 GAO-05-768 Freight Transportation

network east of downtown Los Angeles. Project sponsors secured a federal 

loan to cover a relatively small portion of the project cost and planned the 

project in such a way that revenues from fees assessed on the users of this 

service were targeted to retire debts. Also, the Freight Action Strategy 

(FAST) project in Washington state, involving a series of freight 

improvement projects in the Everett-Seattle-Tacoma region, received 

funding from a variety of public sources and private railroads. These 

projects illustrate how a cost-sharing framework—not largely dependent 

on federal funding—can be devised in such a way that all stakeholders 

share in the cost of freight projects.

By requiring or encouraging state and local decision makers to develop 

equitable cost-sharing frameworks as a condition for public support, the 

federal government would help ensure that costs are borne by all relevant 

stakeholders and that public resources are used as effectively and 

efficiently as possible. This approach would likely involve the least 

intrusive change at the federal level because it would retain the basic 

structure of transportation decision making by leaving the identification of 

transportation objectives and solutions to address those objectives in the 

hands of state and local decision makers. This change, however, might not 

change the perspectives of state and local transportation decision makers, 

who tend to give freight improvements limited consideration in the 

transportation-planning process. Left in the hands of state and local 

decision makers, freight improvement projects may continue to receive 

secondary consideration even if the eligibility requirements of existing 

federal-aid programs have been broadened to include freight 

improvements.

Determining Whether Funding 

Levels Should Be Increased and 

Sources of Funding Expanded

After deciding if federal financial support should be provided for SSS 

development, a follow-on consideration is whether additional resources 

beyond what is currently available should be provided. The primary source 

of federal support for freight improvements is the federal surface 

transportation program. The revenues collected and disbursed through this 

program involve excise taxes on highway users, which are credited to the 

Highway Trust Fund and apportioned to states by formula. States are given 

some flexibility in selecting projects on which federal-aid funds are 

expended, making possible the expenditure of federal aid on nonhighway 

freight projects in certain limited circumstances. Limited availability of 

federal funds, coupled with the hesitancy of state and local decision 

makers to devote public resources to projects that produce direct benefits 

in readily identifiable forms to the private sector, has resulted in freight 
Page 33 GAO-05-768 Freight Transportation

improvement projects typically not receiving the level of federal support 

that perhaps some in the freight industry believe is necessary. 

Considering whether Highway Trust Fund revenues should be expanded to 

nonhighway freight projects is a controversial issue. The argument against 

increasing flexibility in the use of federal-aid funds is related to the way 

revenues are collected. However imperfectly it may be implemented, the 

method by which revenues are collected and credited to the Highway Trust 

Fund is based on the user-pays principle, which contributes to efficiency.39 

In this instance, the user-pays principle ensures that users value the facility 

at least as much as the cost of providing it. However, the opposing view 

holds that highway users do not pay for the effects of air pollution and the 

congestion delays they cause for others, and user-fee payments are not well 

matched to highway agency costs attributable to individual highway users. 

For example, the Transportation Research Board has reported that the 

heaviest combination trucks pay a smaller share of the expenditures 

highway agencies incur to serve them. Therefore, an argument in favor of 

increased flexibility in the use of these funds is that nonhighway uses of 

trust fund revenues may be defended as offsetting the effects of imperfect 

pricing of highways.40 Another argument for increased flexibility is that 

states should manage their transportation infrastructure programs by 

defining their transportation objectives and then identifying the optimal 

means to obtain those objectives. Limiting consideration of nonhighway 

solutions is an arbitrary constraint that will lead to suboptimal investment 

solutions. 

In the face of controversy over use of the Highway Trust Fund for 

nonhighway projects, DOT has proposed a separate funding source to 

address improvements involving the maritime system. According to DOT 

officials, the SEA-21 proposal—a maritime version of the federal surface 

transportation program—is intended to benefit the maritime sector. 

Creating a new system of providing federal funds for freight projects based 

on one mode, however, addresses neither the problems of the overall 

system nor the source of the federal aid that will be necessary to implement 

the SEA-21 initiative. An integrated approach to addressing the 

impediments to freight mobility involves evaluating investment decisions 

39Transportation Research Board, Special Report 252: Policy Options for Intermodal 

Freight Transportation (Washington, D.C., 1998).

40Transportation Research Board, Special Report 252.
Page 34 GAO-05-768 Freight Transportation

across modes and making modal trade-offs. For example, a nonhighway 

project, such as SSS, may have the potential to relieve highway congestion 

and is, therefore, not a project that should be viewed in isolation of other 

modes. 

Adopting an approach that involves new funding sources and federal-aid 

programs would require substantial changes at the federal level. Therefore, 

careful consideration should be given to the implications of implementing 

such changes. More work needs to be done to determine whether new 

sources of funding are actually required for SSS development or whether 

existing funding levels and sources could accommodate these types of 

projects. While the freight transportation industry and transportation 

agencies might agree that improving freight mobility is an essential factor 

for maintaining the nation’s economic health and competitiveness and that 

adequate funding must be made available for freight projects, reaching 

agreement on where the money should come from or how federal aid 

should be administered will be much more difficult. 

While we have enumerated various factors that federal policymakers 

should consider in determining an appropriate role in the development and 

implementation of SSS in the United States, state and local transportation 

decision makers will also be faced with making difficult choices regarding 

SSS and other freight-related projects. In the next section, we describe an 

approach that state and local planners could use to guide investment 

decisions. 

A Sound Investment 

Approach Is Needed to 

Guide Current and 

Future State and Local 

Public Investments in 

Freight Improvements

While DOT considers the federal role in the development of SSS activities, 

transportation decision makers at the state and local levels also face the 

need to consider alternatives for improving freight mobility. This is a 

challenge that goes far beyond SSS, because the transportation system 

involves many different modes and is funded by both the public and private 

sectors. Successfully addressing the needs of the system in the face of 

these complex, crosscutting challenges will require state and local decision 

makers to make tough choices in setting priorities and linking resources to 

results to ensure that public dollars are wisely and effectively spent. The 

public investment approach that we have developed, which grows out of 

our past work and our interaction with transportation experts, may be 

helpful in guiding public investment decisions.
Page 35 GAO-05-768 Freight Transportation

The Complexities of the 

Transportation System and 

Growing Fiscal Constraints 

Present Challenges for State 

and Local Decision Makers

Improving the efficiency of the nation’s surface transportation system is a 

particularly complex challenge because it encompasses many modes—

water, highway, transit, and rail—on systems owned, funded, and operated 

by both the public and private sectors. As primary decision makers, state 

and local governments have significant and broad responsibilities. On the 

front lines of transportation decision making, state and local governments 

must address multiple and sometimes competing priorities, such as 

maintaining the safety and condition of the transportation system while, at 

the same time, improving the efficiency of the system. 

Addressing these transportation challenges in light of federal and state 

budget constraints will require an understanding of existing transportation 

program constructs and financing mechanisms to ensure that limited 

public dollars are wisely and effectively spent.41 For example, the current 

method of dispersing federal transportation funds to the states does not 

necessarily encourage transportation decision makers to address the needs 

of the system in a systematic or rational manner. Much of the public 

funding for system maintenance and improvement for surface 

transportation projects comes from federal programs established under 

Title 23 of the United States Code, with funds from the Highway Trust Fund 

apportioned to the states by formula without regard to the needs or 

capacity of the recipients.42 Because decisions are primarily made by state 

and local governments, there is little assurance that the projects selected 

and funded best meet the nation’s mobility needs. Improving freight 

mobility in particular is hampered by the highly compartmentalized 

structure and funding of federal transportation programs. The structure 

and funding of these programs give state and local transportation agencies 

little incentive to systematically compare the trade-offs between investing 

in different transportation alternatives to meet mobility needs because 

funding can be tied to certain programs or types of projects. For example, 

while passenger and freight travel occurs on all modes, federal funding and 

planning requirements focus largely on highway and transit. This 

framework makes it difficult for freight projects to be integrated into the 

transportation system. 

41GAO, 21st Century Challenges: Reexamining the Base of the Federal Government, GAO05-325SP (Washington, D.C.: February 2005).

42Other programs have been established at the federal level to build, maintain, and operate 

inland waterways and enhance and maintain harbors. 
Page 36 GAO-05-768 Freight Transportation

A Public Investment 

Approach Can Help Public 

Decision Makers Guard 

against an Inefficient Use of 

Public Resources

As calls for increased transportation investments come amid growing 

concerns about the size of federal and state budget deficits, state and local 

decision makers must guard against any waste of limited public resources 

when making transportation investment decisions. At the same time, 

intermodal approaches and coordinated solutions involving the public and 

private sectors should be considered. Using the work of transportation 

experts and our own experience in evaluating freight mobility projects, we 

have developed a public investment approach to guide public decisions 

about freight improvement projects.43 This approach incorporates but also 

expands upon the points discussed earlier in describing the actions we 

think DOT needs to take in assessing potential federal involvement. As can 

be seen in figure 4, this approach encourages public decision makers to 

consider four steps: (1) establish a rationale for public involvement in a 

project, (2) develop a systematic framework to evaluate the merits of 

projects, (3) determine the level and type of public support to be provided, 

and (4) evaluate projects to ensure that intended benefits have been 

achieved. 

Figure 4: Investment Approach to Guide Public Investment Decisions

43Transportation Research Board, Special Report 252 and Special Report 271; GAO-05-172;

and GAO-04-165.

Establishing a 

rationale for 

involvement

Does the project 

have the potential 

to reduce external 

costs and produce 

public benefits?

Evaluating the 

merits of a 

proposed project

Is the project a lowcost alternative to 

constructing new 

highway capacity?

Is the project the 

most cost-effective 

option among other 

modal improvements?

Determining the 

level and type of 

support

Can the project be 

self-supporting?

If not, to what extent 

should stakeholders 

share in the cost of 

the project?

Evaluating the 

Performance of 

Projects

Have intended benefits 

been achieved?

If not, what 

modifications can 

be made to achieve 

benefits?

Source: GAO.
Page 37 GAO-05-768 Freight Transportation

Step One: Determining Whether 

Public Support in a Freight 

Project Is Warranted by 

Establishing a Rationale for 

Involvement

Public transportation decision makers attempting to advance freight 

improvement projects must work within a system that is often designed to 

favor projects that appear to clearly produce public benefits, such as 

passenger-oriented projects. Public transportation-planning decision 

makers are hesitant to give consideration to freight improvements because 

many freight improvements are undertaken by and directly benefit the 

private sector. Generally, freight improvements undertaken by the private 

sector usually arise in response to market forces (e.g., profit) and, as a 

result, are most likely to produce efficient results. Care should be taken not 

to artificially stimulate the market by publicly subsidizing an operation 

inappropriately, especially if the private sector is unwilling to undertake the 

project in the first place. Otherwise, this would likely be a waste of public 

resources. Although freight improvement projects may also produce public 

benefits, public planners are wary of providing public support for projects 

that would also yield direct private benefits. Within this focus, publicsector attention tends to be directed to freight projects only when there is 

considerable public benefit as well. 

There are, however, freight improvement projects that are unattractive to 

the private sector but have the potential of producing benefits to the public; 

one such benefit is reducing the external costs of transportation, such as 

reducing fuel emissions and roadway congestion. Considering whether the 

project has the potential to reduce the external costs of transportation 

provides an indication of a project’s potential for yielding a good return. 

For example, improving freight mobility through the implementation of an 

SSS service may have the effect of shifting some freight from truck to water 

and, as a result, reduce external costs such as pollution and congestion. 

These benefits can, in turn, produce indirect benefits, such as economic 

development and employment, that affect the regional or local economy. 

Lowering transportation costs for users and improving access to goods and 

services enable new and increased economic and social activity. Over time, 

indirect impacts, such as changes in land use and development, changes in 

decisions to locate homes and businesses in areas where housing and land 

are more desirable, and changes in warehousing and delivery procedures 

for businesses in order to take advantage of improved speed and reliability 

in the transportation system may occur. These impacts can lead to 

increased property values, increased productivity, employment, and 

economic growth. These indirect impacts, however, may constitute 

transfers of economic activity from one area to another or are a result of 

the direct benefits filtering through the economy. Although these indirect 

benefits represent real benefits for the jurisdiction making the 
Page 38 GAO-05-768 Freight Transportation

transportation improvement, they represent transfers and not real 

economic benefits, from a national perspective. 

The SSS service sponsored by the Port Authority of New York and New 

Jersey serves as an example of how public involvement in a proposed 

project appears to be justified. SSS was being explored by the port 

authority as a way to transport a portion of the international containers 

entering the congested and capacity-constrained Port Authority of New 

York and New Jersey to the less congested and capacity constrained Port of 

Albany. Public officials believe that an SSS service between these two ports 

has the potential of diverting international containers from trucks to barge 

and by doing so, truck emissions, fuel consumption, roadway wear and 

tear, and roadway congestion (i.e., external costs) would be reduced. 

Public officials also believe that the service will create new economic 

development opportunities at public facilities, if successfully implemented. 

Potential private benefits identified include increased efficiency for 

terminal operators, reduced highway congestion for truck drivers, and 

stable and reliable scheduling and defacto free warehousing of inventory 

for shippers.44 Project sponsors also believe that both sectors would gain 

service insurance and security benefits due to the redundancy aspect of the 

new service and its safety advantages in transporting hazardous materials 

outside of populous urban highway and rail corridors.45 However, 

establishing a rationale for public involvement is not enough to justify 

financial support for a project. Rather, it merely supports closer public 

scrutiny of a proposed project through benefit-cost and other analyses to 

determine if the project is worthwhile.

Step Two: Developing a 

Framework to Evaluate the 

Merits of the Proposed Project

Once public interest in a project appears to be justified, investment 

decisions based on a systematic benefit-cost analysis could provide a 

structure for rational analysis and a factual basis for public discussion of 

public decisions. Benefit-cost analysis enables decision makers to more 

closely scrutinize the justification for a project by quantitatively 

considering whether the proposed project is a low-cost alternative to 

44According to project sponsors, the warehousing benefit is becoming more important to 

shippers and ocean carriers as terminal operators, in an effort to handle more cargo within 

their facilities, continue to put pressure on the shippers and carriers to move containers off 

their piers as quickly as possible.

45According to project sponsors, the lack of freight system redundancy is particularly 

troublesome in corridors such as Interstate 95 where the loss of any individual segment 

could have an impact. 
Page 39 GAO-05-768 Freight Transportation

constructing new highway capacity and whether it is the most costeffective option among other modal improvements. By including a 

comparison of other modal improvements, the public planner gains an 

understanding of the trade-offs and relationships among alternative 

solutions involving different transportation modes. 

A carefully considered list of public and private benefits and costs should 

be developed and the costs and expected payoffs should be quantified. For 

freight improvement projects, the costs and expected benefits largely 

mirror those of highway and transit projects. In recently published work on 

highway and transit investments, we provided information on the types of 

costs and benefits decision makers typically consider when evaluating 

highway and transit projects.46 We reported that these types of projects 

have the potential of producing direct benefits, such as travel-time savings, 

and collateral benefits, such as a reduction in the adverse environmental 

impacts of transportation. These direct benefits can produce indirect 

benefits, such as economic development opportunities that affect the 

region or local economy. Freight improvement projects seek to produce the 

same benefits. Highway and transit projects also produce costs, including 

the direct costs to construct, operate, and maintain the project as well as 

other potential social costs resulting from the construction and use of the 

facility, such as unmitigated environmental effects. Any freight 

improvement project under consideration would include similar categories 

of costs.

Although public decision makers may view freight projects as being 

somewhat different from highway and transit projects, state and local 

decision makers can use similar categories of costs and benefits. The SSS 

service operating in the Northeast illustrates this point. Project sponsors 

considered the proposed SSS project as an option that had the potential to 

reduce congestion in and around the Port Authority of New York and New 

Jersey. The project was considered to be an environmentally sound method 

for moving international containers from the congested port, via a biweekly 

barge service, to a less-congested port area. In this example, project 

sponsors quantified potential project benefits such as congestion 

reduction, improved air quality, and economic development opportunities 

for the feeder port. Costs considered included the capital and operating 

costs of the barge service. 

46GAO-05-172.
Page 40 GAO-05-768 Freight Transportation

In conducting benefit-cost analyses, accurate and relevant data are 

essential to the evaluation of freight improvement proposals because such 

data are needed to evaluate forecasts of transportation demand and the 

effect a project would have on diverting traffic to and from other 

transportation modes. However, in past reports, we have found that state 

and local decision makers do not have data to sufficiently evaluate freight 

projects.47 Without such forecasting, the analyses will not expose the true 

costs and expected payoffs of a project. The SSS service operating in the 

Northeast provides insights into what might occur if sufficient data are not 

available to forecast demand. While this service appeared to be a project in 

which public involvement was justified, acceptance-related issues with the 

potential users of the service were apparently not adequately considered to 

accurately predict outcomes. For example, project sponsors did analyze 

data indicating that there were sufficient cargo flows to support the new 

service, but they had difficulty estimating the level of acceptance of the 

new service by stakeholders within those markets. They acknowledged, 

however, that shipper acceptance is perhaps the most critical factor that 

has held back the project so far. After starting the service, they realized that 

factors beyond market size, level of service, and service cost must be taken 

into account. Consequently, once the service began operating, service had 

to be cut back from twice a week to once a week, and the federal grant 

being used to subsidize the operation was expended more quickly than 

anticipated. Juxtaposing this example with another illustrates the 

significance of this point. The SSS service operating in the Gulf of Mexico 

performed a market survey before implementation to determine that a 

market existed for the service. In this case, the service was advanced by the 

private-sector and not surprisingly, depends on private-sector demand. 

While benefit-cost analysis ensures that decision makers closely scrutinize 

proposed projects objectively, we recognize that other factors work against 

using this kind of analysis. These factors may involve the way federal 

programs are structured and funded, federal requirements that place 

demands on analytical resources to other areas, and the high cost of such 

analyses. In addition, factors other than those considered in analyses of 

projects’ benefits and costs can play a greater role in shaping state and 

local public investment choices. Some of the factors considered reflect 

local or regional priorities and needs; others are required to be considered 

in the decision-making process by federal legislation. These factors may

47GAO-04-165 and GAO-05-172.
Page 41 GAO-05-768 Freight Transportation

not be easily considered in traditional benefit-cost analysis.48 Nevertheless, 

as we have recommended in an earlier report, the increased use of benefitcost analysis can provide important information that can be used to inform 

discussions on transportation investments.49

Step Three: Determining the 

Level and Type of Public Support 

to Be Provided

If evaluation supports the merits of public involvement in a freight project, 

the public decision maker must determine the level of public support to be 

provided. While in most cases, public involvement is often assumed to 

mean subsidization of a project, such involvement need not necessarily 

imply the need for or appropriateness of subsidization. A subsidy is any 

cost imposed on taxpayers as a whole to pay for benefits that are received 

by users of the service. Therefore, if a public decision maker plans a project 

to be entirely self-supporting from user fees and private-sector 

contributions, no public subsidy is involved. Relying on revenue from users 

increases the likelihood that the most worthwhile improvements will be 

implemented, operated, and maintained efficiently. Fees assessed on the 

mode in question should be accurately aligned with the costs other modes 

or vehicles impose on the transportation system. Otherwise, one mode may 

enjoy an advantage over another in competing to transport goods. For 

example, according to the Transportation Research Board, the heaviest 

trucks pay a smaller share of the expenditures that highway agencies incur 

to serve them.50 From an economic standpoint, this level of taxation 

distorts the competitive environment with other modes by making it appear 

that the heavier trucks are a less-expensive means for shippers to transport 

goods. Ultimately, an accurate alignment of fees to costs could provide 

incentives for shippers to make modal choices and transportation options 

based on true costs. 

A rail project designed to improve freight mobility illustrates how a project 

can be planned with relatively little federal subsidy. The Alameda Corridor 

Project in the Los Angeles area created a 20-mile, $2.4 billion railroad 

express line connecting the ports of Los Angeles and Long Beach to the 

transcontinental rail network east of downtown LA. The express line 

eliminated approximately 200 street-level railroad crossings, relieving 

congestion and improving freight mobility for cargo. The project was 

48GAO-05-172.

49GAO-05-172.

50Transportation Research Board, Special Report 252 and Special Report 271.
Page 42 GAO-05-768 Freight Transportation

funded through a blend of public and private sources. While the federal 

government contributed to the funding, its share was about 20 percent of 

the total, of which 80 percent was in the form of a loan. Revenues from user 

fees paid by the railroads have been targeted to retire debts. Decision 

makers have planned the project so that fees would be charged to the 

direct users of the system, which, in this case, are the railroads. The 

railroads are paying $15 for each loaded container, $4 for each empty 

container, and $8 for other types of loaded railcars, such as tankers and 

coal carriers. Over a 30-year period, fees will be increased between 1.5 

percent and 3 percent per year, depending on inflation. 

The planning of this rail project contrasts with the manner in which the SSS 

operation in the Northeast was planned. Project sponsors involved with the 

Northeast service planned to subsidize the capital and operating costs of 

the service from the outset rather than through fees charged to the direct 

users of the service. Project sponsors acknowledged that they knew the 

service would experience an operating deficit during the first several years 

of the operation due to the need to achieve a sufficient level of demand to 

be economically viable. 

When public involvement does mean direct financial support for a project, 

benefit-cost analysis allows a public decision maker to determine the level 

of public support to be provided on the basis of the public benefit the 

project is expected to accrue. Therefore, there should not be an 

expectation that public dollars should automatically fund the entire or even 

majority of the project. Rather, costs should be apportioned among all 

relevant stakeholders. This apportionment involves identifying the relevant 

stakeholders, determining the level of benefits they are likely to derive 

from the project, and apportioning costs on that basis. Beneficiaries should 

pay the costs of projects commensurate with the cost of providing the 

service to the users. For example, when users are the direct beneficiaries of 

a project, user fees are the preferred method that should be considered for 

projects that directly benefit the users. When external benefits, such as the 

reduction of pollution or congestion, result from a project, the direct users 

should pay the net cost of the use of the service after deducting the public 

benefit. In the case of the SSS service operating in the Northeast, the true 

costs of the service were not apportioned among all of the relevant 

stakeholders because the service was being completely subsidized with 

public funds—that is, 80 percent with CMAQ funds and 20 percent with 

port funds. However, project sponsors believe that as demand for the 

service increases, the service will eventually meet expectations and rise to 

the level necessary for self-sustainability, which means that operating costs 
Page 43 GAO-05-768 Freight Transportation

will eventually be paid from the fees charged to the direct users of the 

service. 

Step Four: Evaluating the 

Performance of Ongoing and 

Completed Projects

The final component of our public investment approach involves evaluating 

results and incorporating lessons learned into the decision-making process. 

Evaluating the effectiveness of ongoing and completed projects could 

provide public planners with valuable information for determining whether 

intended benefits have been achieved and whether the service should be 

modified. With thorough evaluation of projects, the public sector can learn 

from experience, improve the performance of its infrastructure 

investments, and hold planners accountable for their decisions. 

Comparing the actual results of a project with the project’s projections 

tests the economic rationale for a project, provides a self-correcting 

mechanism, and holds public decision makers accountable for decisions 

made. A federal transit program provides an apt example of how a federal 

program can be designed to require such evaluations. The New Starts 

program provides funds to transit providers for constructing or extending 

certain types of transit systems and is the primary source of funds for new 

transit capacity. The Federal Transit Administration (FTA) has recently 

adopted a requirement for project sponsors to complete before and after 

studies of New Starts projects. Project sponsors seeking federal funding for 

their New Starts project must submit to FTA a plan for the collection and 

analysis of information that addresses how the project’s estimated costs, 

scope, ridership, and operating plans proposed during planning and project 

development compared with what actually occurred. This requirement is 

intended to hold transit agencies accountable for results and identify 

lessons learned for future projects. In another example, federal program 

requirements led to both a prospective evaluation of a proposed project 

and an evaluation of the ongoing project to secure federal funds. Project 

sponsors of the Northeast SSS service evaluated the ongoing performance 

of the service to update estimates of future performance in their bid for an 

extension of CMAQ funds. By monitoring the performance of the service, 

project sponsors have been able to identify problems and devise strategies 

to address those problems. For example, project sponsors are developing 

strategies to reduce some of the operational costs of the service and 

increase demand. Ongoing evaluations of the service also revealed that 

within the first few years of operation, the feeder port was providing a 

disproportionate amount of funding for the service through the local CMAQ 

match, and as a result, the primary port agreed to provide the local match 

for the third year of service operation. Monitoring the performance of the 
Page 44 GAO-05-768 Freight Transportation

service allowed project sponsors to seek ways to improve the service, 

thereby guarding against a waste of public resources. 

Opportunities Exist for 

Encouraging the Use of a 

More Systematic Public 

Investment Approach

The application of a decision tool such as the one we developed could be 

useful in making more fully informed decisions about transportation 

projects. However, there is no federal or other mechanism that would 

require its use or even ensure that it is considered in evaluating 

transportation investment decisions. This is the case even for projects that 

receive a substantial amount of funding from the federal government. For 

example, for federally assisted highway projects, federal requirements 

specify a wide range of factors (such as safety or environmental impacts) 

that must be considered when selecting a project from alternatives, but 

they generally do not specify what analytical tools should be used to 

evaluate these factors. Federal requirements also do not mandate that in 

making these decisions, cost-benefit analysis be performed and the results 

of such analysis considered. Instead, officials have the flexibility to select 

projects based on their own determination of the community’s priorities 

and needs. In general, decisions about what transportation projects to 

adopt are generally made at the local, regional, or state level. In examining 

how various locations made decisions for highway projects, for example, 

we found that officials used a variety of approaches and often based their 

decisions on different criteria.51 For example, decisions were often based 

on whether to proceed primarily on the project’s perceived indirect 

benefits, such as desirable changes in land use or economic development, 

which are difficult to forecast and were generally not quantified or 

systematically analyzed. 

While federal policy gives transportation planning authorities considerable 

latitude in deciding how to make decisions about which projects to fund, 

there are mechanisms available at the federal level for disseminating 

information about decision-making approaches and encouraging the use of 

approaches that can make the best use of limited public funds. DOT, for 

example, issues guidance and information on a variety of matters for which 

it has responsibility. One such mechanism for doing so is DOT’s 

Transportation Planning Capacity Building Program, which is designed to 

equip decision makers, transportation officials, and staff with tools for 

resolving the issues they face when addressing transportation needs in 

51GAO-05-172.
Page 45 GAO-05-768 Freight Transportation

their communities. This program is a collaborative effort of DOT agencies 

as well as various public and private organizations. Among other things, it 

provides communities with background information, examples of effective 

transportation-planning practices from across the nation, and technical 

assistance. Our approach, which represents a set of “best practices” 

stemming from our previous work and our discussions with transportation 

officials, might be useful as part of DOT’s guidance and information.

DOT has a variety of ways to disseminate such information. One way is 

through its Web site, which incorporates a variety of program resources, 

including detailed information related to the Transportation Planning 

Capacity Building Program. Another way is though its network of seminars, 

training opportunities, and technical assistance. The scope of training and 

assistance includes conferences held over the Internet, classroom training, 

and Internet-based short courses. For example, the Federal Highway 

Administration developed and implemented a Web-based “Talking Freight” 

seminar series on many diverse topics, such as freight data and modeling, 

SSS, and linking freight to economic development. 

Conclusions Expanding the SSS option may be a way to enhance freight mobility by 

supplementing roadways and rail lines, alleviating congestion in 

metropolitan areas and freight corridors, and mitigating the need for more 

highways or rail corridors. However, despite the potential importance of 

SSS to enhance the nation’s freight mobility, its viability as a cost-effective 

approach is uncertain, given the legal and operational issues cited by 

proponents of this option. Also, there is reluctance among shippers to use 

this option, a factor that affects its acceptance and further development.

DOT deserves credit for thinking “outside the box” in looking for ways to 

alleviate congestion in the nation’s growing transportation bottlenecks, but 

the direction it is taking—increasing federal involvement in SSS—needs to 

be more carefully examined. DOT has made the development and 

implementation of SSS a national priority for enhancing freight mobility 

and has undertaken numerous activities but has not articulated a clear 

rationale for what the federal role, if any, should be. Also, the department’s 

draft proposal for greater involvement in maritime transportation (SEA-21) 

calls for financial assistance to further the SSS option. Actions such as 

those in the draft proposal are premature, in our opinion, until a broader 

understanding of the federal role with respect to SSS is defined and the 

potential applications and impacts of such an option on other modes are 

better understood. Otherwise, DOT runs the risk of “putting the cart before 
Page 46 GAO-05-768 Freight Transportation

the horse” and is at greater risk for creating inefficiencies within the 

transportation system and missing opportunities to best apply and leverage 

federal resources.

State and local public transportation officials are the primary decision 

makers for planning and financing projects, such as SSS, to enhance freight 

mobility, and they will largely determine the extent of public involvement 

in SSS projects and the amounts and types of public subsidies for that 

purpose. Ideally, a sound investment approach—one based on recognized 

economic and management principles—is needed to make this 

determination. But many public transportation entities lack a consistent 

and comprehensive investment approach to identify, evaluate, and 

implement competing projects, including potential SSS projects. Having a 

sound investment approach is critical to better ensure that available 

resources are used cost effectively to address the most pressing freight 

mobility needs. The approach we developed based on our past work and 

extensive literature research will be helpful, we believe, in guiding public 

investment decisions. DOT can play a role in promoting this approach by 

interacting with public entities using established communication channels 

and other mechanisms. 

Recommendations for 

Executive Action

We recommend that the Secretary of Transportation and the Administrator 

of the Maritime Administration undertake the following two actions with 

regard to further federal involvement with SSS and greater use of 

systematic approaches to making public investment decisions: 

1. Before expending substantial federal resources on SSS activities or 

developing a formal program for federal involvement in helping to fund 

this approach, establish a comprehensive understanding of key issues 

to determine whether there is a genuine need for federal involvement 

and what the role of the federal government should be, if any. Such a 

determination could, for example, involve consideration of the 

following issues.

• To determine whether the private sector would likely undertake SSS 

projects on its own, policymakers could explore several areas in 

depth. For example, gaining a better understanding of the conditions 

and circumstances under which existing SSS started and are being 

sustained and the potential impact of the regulatory, administrative, 

and operational barriers to the development and implementation of 
Page 47 GAO-05-768 Freight Transportation

SSS are both important in determining whether federal involvement 

is necessary. 

• To better define an appropriate federal role, if deemed necessary, a 

number of areas could be explored, including (1) an assessment of 

the state, local, and private resources that may be likely available for 

SSS projects; (2) quantitative and qualitative analyses of nonmarket 

or external factors with respect to SSS, such as reduction in the costs 

of congestion, pollution, and accidents, that the private sector will 

likely not be willing to fund; and (3) an evaluation of potential 

financing mechanisms and incentives to best leverage federal 

resources, develop an equitable cost-sharing framework among 

public and private entities, and ensure that users and beneficiaries of 

SSS services pay for these services commensurate with the costs of 

providing them. 

2. To foster greater use of systematic approaches, use existing 

mechanisms and communications channels to encourage public 

transportation decision makers to evaluate SSS and other freight 

projects using an investment decision tool—such as the one we 

developed—that incorporates recognized economic and management 

principles. 

Agency Comments and 

Our Evaluation

We provided a draft of this report to DOT and MARAD for review and 

comment and met with a number of officials, including the Assistant 

Secretary for Transportation Policy, the Deputy Assistant Secretary for 

Transportation Policy, and MARAD’s Associate Administrator for Ports, 

Intermodal, and Environmental Activities. DOT and MARAD agreed with 

our recommendations and assured us that efforts within the department to 

gain a more detailed understanding of key issues surrounding the SSS 

approach will be undertaken before requesting federals funds for it. The 

department also provided clarifying comments and technical corrections, 

which we incorporated, as appropriate. These officials reiterated that while 

the freight demands placed on the nation’s highways and rail systems 

continue to grow, the marine transportation system remains underutilized. 

They said there is a need to explore innovative, potentially viable options to 

increase the capacity of the nation’s transportation system in order to 

expedite the flow of goods and support economic growth. These officials 

stressed that the maritime freight capacity option has received scant 

attention (with the exception of two small demonstration projects using 

CMAQ funds to support barge moves of cargo), because ISTEA, TEA-21, 
Page 48 GAO-05-768 Freight Transportation

and the proposed TEA-3 are essentially surface transportation bills. 

According to these officials, the department is using a range of actions and 

discussions, including a thorough vetting of maritime capacity options, to 

“press the envelope” on freight capacity deliberations as the country 

continues to experience serious and growing freight congestion issues on 

key highway and rail corridors. 

The DOT officials told us the department has begun to explore SSS as one 

means to accommodate growth in freight shipments, given the capacity 

constraints of the national transportation system and the high cost of 

increasing surface transportation capacity. DOT has also been working to 

raise awareness of this option among potential industry participants and 

throughout the government. Further, these officials explained that DOT is 

now conducting detailed and rigorous studies of the potential for SSS and 

has been drafting possible policy options as a means to stimulate discourse 

on the topic within the administration. They maintain it is not premature to 

conduct these activities since it is necessary to act with an understanding 

of the considerable lead times involved. They assured us that any request to 

the Congress for funding related to the SSS initiative will be made only 

after the option and its implications are fully and rigorously explored and 

well understood. 

The efforts taken to date by DOT and MARAD to begin exploring the SSS 

option provide a good first step to gain a better understanding of key issues 

with respect to developing this approach. As DOT and MARAD proceed, we 

think it is critical that they do so thoughtfully, taking the time to thoroughly 

consider the implications on other modes and on current SSS operations. 

Until a thorough assessment is completed in this regard, proceeding with 

federal intervention such as providing regulatory relief or financial 

assistance to SSS projects is premature.

We are sending copies of this report to congressional committees with 

responsibilities for transportation issues; the Secretary of Transportation; 

and the Administrator, Maritime Administration. We will also make copies 

available to others upon request. In addition, this report will be available at 

no charge on the GAO Web site at http://www.gao.gov.
Page 49 GAO-05-768 Freight Transportation

If you or your staff have any questions about this report, please contact me 

at heckerj@gao.gov or (202) 512-2834. Contact points for our Offices of 

Congressional Relations and Public Affairs may be found on the last page 

of this report. GAO staff who made key contributions to this report are 

listed in appendix II.

JayEtta Z. Hecker

Director, Physical Infrastructure Issues
Page 50 GAO-05-768 Freight Transportation

Appendix I

Objectives, Scope, and Methodology ApApenednxidexiIs

To determine why short sea shipping (SSS) is being considered as an 

alternative method for transporting freight and factors that may affect its 

viability as an approach, we conducted a literature review of reports and 

studies related to freight transportation issues; interviewed freight 

transportation stakeholders representing all levels of government; 

interviewed private-sector stakeholders involved in various aspects of the 

freight transportation system; and examined two existing SSS operations. 

Our literature review included reports and studies issued by public- and 

private-sector organizations, nonprofit organizations, and academia; 

articles from relevant trade journals; and position papers reflecting the 

views of freight stakeholders. To supplement the information obtained 

through the literature review, we interviewed transportation officials 

representing ports on the East and West Coasts and the Gulf of Mexico; 

officials involved in transportation planning at the local and state levels; 

and federal officials from the Department of Homeland Security’s Customs 

and Border Protection agency. We also interviewed private-sector officials 

from the trucking and rail industries and other private officials involved 

with the movement of freight, such as third-party logistics providers. To 

supplement the information obtained through our literature review and 

interviews, we examined two existing operations. We selected one publicly 

subsidized operation in the Northeast and one private operation in the gulf 

region from information we received from our interviews as well as 

information we obtained through our literature review. The services were 

also selected because they were operating in regions of the country that 

handle a significant portion of the nation’s freight. Because we evaluated 

only two existing operations, however, lessons learned from the operations 

may not be transferable to other operations. It is also important to note that 

because our review focused on existing services, it provides no indication 

of whether other operators may have considered a service but not followed 

through because of perceived obstacles to SSS implementation. 

To determine the federal role in the development of SSS, we conducted inperson interviews with U.S. Department of Transportation (DOT) officials, 

as well as officials at its operating agencies; analyzed documents supplied 

by DOT and its operating agencies; reviewed GAO reports on 

transportation systems and infrastructure projects; and reviewed studies 

and reports issued by transportation experts. At the department level, we 

interviewed officials from the Office of Freight and Logistics, Office of 

Environmental Activities, and Office of the Secretary. At the agency level, 

we interviewed officials from the Maritime Administration and the Federal 

Highway Administration. Our work also included an analysis of documents 
Appendix I

Objectives, Scope, and Methodology

Page 51 GAO-05-768 Freight Transportation

supplied by DOT and its agencies, including strategic plans, budget 

documents, and studies and reports on freight transportation issues.

To identify issues that should be considered when making public 

investment decisions, we analyzed the results of our review of SSS and 

built on the perspectives gained from our past work in transportation 

systems and federal investment strategies. We also analyzed reports and 

studies completed by various federal agencies and other independent 

experts on public investment strategies. 

We conducted our work from July 2004 through June 2005 in accordance 

with generally accepted government auditing standards.
Page 52 GAO-05-768 Freight Transportation

Appendix II

GAO Contact and Staff Acknowledgments ApendxiI

GAO Contact JayEtta Z. Hecker, (202) 512-2834

Staff 

Acknowledgments

In addition to the individual named above, Jason Berman, Jay Cherlow, 

David Hooper, Elizabeth McNally, Sara Ann Moessbauer, Alex Sarapu, Stan 

Stenersen, Seyda Wentworth, Randall Williamson, and Susan Zimmerman 

made key contributions to this report.

(544095)
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