Freight Transportation: Short Sea Shipping Option Shows Importance of Systematic Approach to Public Investment Decisions
Published: 2005-07-29T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: 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.
section_title: What GAO Found
paragraphs: 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.

section_title: Letter
paragraphs: 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  because increasing freight volumes were affecting service levels. The 2002  Mid-Atlantic Rail Operations Study, 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. Freight railroad expansion efforts,  which are largely a private-sector endeavor, are also costly. The Mid- Atlantic Rail study estimated that it would cost $6.2 billion to address  freight rail capacity needs in that region. These problems are only  exacerbated by difficulties in accessing federal, state, and local funding  sources for freight projects. Public officials have noted that inadequate  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. 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  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. We  performed our work from July 2004 through June 2005 in accordance with  generally accepted government auditing standards.
subsections: section_title: Background
paragraphs: 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  (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 higher- value 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-and- barges, 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.
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.  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  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 Code to fund and finance surface transportation projects with user  tax receipts credited to the Highway Trust Fund and distributed to states  through annual apportionments according to statutory formula. 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, 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 program- 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. Through its National Freight Action Agenda, DOT  has specifically identified SSS for accelerated development. 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. 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.
section_title: Transportation Stakeholders See Short Sea Shipping As Having Multiple Benefits, but Also Cite Obstacles That May Impede Development
paragraphs: 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.
subsections: section_title: Benefits Cited Include Improved Freight Mobility, Improved Air Quality, and Reduced Infrastructure Spending
paragraphs: According to stakeholders, the development of SSS operations may  produce a number of public benefits. (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.
section_title: Potential Obstacles Cited Include Legal, Operational, and Acceptance Issues
paragraphs: 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 well- established modes, such as trucking and rail—even if SSS can be shown to  be a competitive option—can present a barrier to SSS development.
subsections: section_title: Legal Requirements
paragraphs: 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, 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  commercial vessel in a U.S. port. 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,  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.   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.
section_title: Operational Issues
paragraphs: 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  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.
section_title: Acceptance-Related Challenges
paragraphs: 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  contracts with trucking companies for many years, they may be unwilling  to shift business to SSS operations regardless of perceived benefits.
section_title: SSS Services Examined Were Operationally Different, but Both Attempted to Address Similar Freight Capacity Concerns
paragraphs: While the two SSS services we examined—one in the Gulf Coast and one in  the Northeast—differed in many ways, 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.
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  cycle around the Gulf of Mexico, the Gulf Coast service uses a self- propelled 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.
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 provider 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  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 docks 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.
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.
subsections: section_title: Northeast Service
paragraphs: 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  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.
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. 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. 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. 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. 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  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.
section_title: Effect of Potential Obstacles Varied for the Two Services
paragraphs: 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. 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  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-and- barge option in which the U.S. and foreign-built versions, compared with  self-propelled vessels, are more similarly priced.
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  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.
section_title: The Department of Transportation’s Role in the Development of SSS and Freight Transportation Improvements Needs More Careful Study
paragraphs: 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?
subsections: section_title: DOT Has Identified SSS Development as a National Freight Priority before Determining Why the Federal Government Should Be Involved
paragraphs: 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. 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  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  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. 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.
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 SEA- 21 and appears to be committed to its eventual enactment. 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.
section_title: If a Federal Role Exists, Key Policy Issues Merit Close Consideration
paragraphs: 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. This program is also important in any discussion of  providing federal support to advance freight improvements in that freight  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.
subsections: section_title: Determining How Federal Aid Could Be Applied to Projects That Provide Benefits to the Private Sector
paragraphs: 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  state departments of transportation and local metropolitan planning  organizations, 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. 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 equitably 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 that federal funds or support are being applied in the most effective way.   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  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.
section_title: Determining Whether Funding Levels Should Be Increased and Sources of Funding Expanded
paragraphs: 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  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.   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. 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  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.
section_title: A Sound Investment Approach Is Needed to Guide Current and Future State and Local Public Investments in Freight Improvements
paragraphs: 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.
subsections: section_title: The Complexities of the Transportation System and Growing Fiscal Constraints Present Challenges for State and Local Decision Makers
paragraphs: 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. 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. 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.
section_title: A Public Investment Approach Can Help Public Decision Makers Guard against an Inefficient Use of Public Resources
paragraphs: 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. 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.
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, public- sector 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  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. 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. 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.
subsections: section_title: Step Two: Developing a Framework to Evaluate the Merits of the Proposed Project
paragraphs: 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  constructing new highway capacity and whether it is the most cost- effective 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. 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.
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. 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 not be easily considered in traditional benefit-cost analysis. Nevertheless,  as we have recommended in an earlier report, the increased use of benefit- cost analysis can provide important information that can be used to inform  discussions on transportation investments.
section_title: Step Three: Determining the Level and Type of Public Support to Be Provided
paragraphs: 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. 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  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  will eventually be paid from the fees charged to the direct users of the  service.
section_title: Step Four: Evaluating the Performance of Ongoing and Completed Projects
paragraphs: 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  service allowed project sponsors to seek ways to improve the service,  thereby guarding against a waste of public resources.
section_title: Opportunities Exist for Encouraging the Use of a More Systematic Public Investment Approach
paragraphs: 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. 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  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.
section_title: Conclusions
paragraphs: 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  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.
section_title: Recommendations for Executive Action
paragraphs: 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  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.
section_title: Agency Comments and Our Evaluation
paragraphs: 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,  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.
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.
section_title: Objectives, Scope, and Methodology
paragraphs: 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 in- person 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  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.
section_title: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: 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.