Managing Technology Transfer: A Strategy for the Federal Highway Administration -- Special Report 256 (1999)

This chapter provides an overview of innovation and technology transfer within the highway industry; specific technology transfer activities of the Federal Highway Administration (FHWA) and others are reviewed in Chapter 4. Characteristics of the highway industry and highway research programs that affect innovation and technology transfer are described first. Next is a discussion of FHWA’s role in highway industry innovation and technology transfer. This is followed by a summary of the impediments to innovation in the industry.

The nation’s highway system—consisting of about 6.5 million km (4 million mi) of roads and streets, tunnels, bridges, and other structures—is essentially owned, operated, and maintained by state and local highway agencies.¹ These agencies contract with thousands of private

firms that furnish products, services, and equipment to build, maintain, and operate the system.

Although state and local governments have the primary responsibility for building and maintaining the nation’s highway system, the federal government also plays an important role. The U.S. Department of Transportation, through FHWA, administers the federal-aid highway funding programs and develops regulations, policies, and guidelines to achieve national highway goals in these programs. FHWA administers financial assistance to the states; these funds totaled $21.6 billion in 1997. The primary source of this assistance is the Highway Trust Fund, a dedicated source of funding based on a federal vehicle fuel tax. Money from the Highway Trust Fund is distributed to the states on the basis of apportionment formulas determined by the U.S. Congress.²

Each of the 50 states, plus Washington, D.C., and the Commonwealth of Puerto Rico, has an independent highway agency. These agencies are responsible for those segments of the federal Interstate and primary highway systems that lie within their borders, as well as their own network of state highways; this amounts to about 20 percent of the nation’s total highway mileage. Some of these agencies also have oversight responsibilities for all public and private highways within their states. In 1997 the states provided $55.3 billion for highway-related purposes through a range of means, including vehicle and driver licensing fees and fuel taxes.

At the local level, about 40,000 individual governmental units of varying size and population are responsible for 75 percent of the nation’s highway mileage. The $29.6 billion spent in 1997 by local governments for highway purposes came primarily from local government general revenues; fewer than half the states allow local governments to levy user fees such as local fuel taxes.

The private-sector portion of the highway industry is made up of highway contractors and consultants; material and equipment manufacturers and suppliers; and the professional, trade, and industry associations at the national, state, and local levels that represent those involved in highway construction, operation, and maintenance. Thousands of individual businesses varying in size from multinational corporations to single-person operations provide products and services ranging from

tunnel and bridge construction to snow removal. Approximately half of all public spending for the highway system is on highway design, construction, rehabilitation, repair, and other work performed by private contractors, which in turn purchase materials and equipment from other businesses and hire subcontractors that do the same (TRB 1996).

Reflecting the way the industry is organized, highway R&D in the United States is decentralized and fragmented. Several federal agencies, the state highway agencies, many private companies and universities, and various public and private consortia conduct or sponsor highway R&D programs (TRB 1994). FHWA has the single largest R&D program (in terms of expenditures). Total research funding for the State Planning and Research Program (SP&R) exceeds FHWA’s R&D funding, but none of the individual state programs is as large as FHWA’s. The third major highway R&D program is the National Cooperative Highway Research Program (NCHRP), a pooled-fund program supported by state SP&R funds. As a result of the Transportation Equity Act for the 21st Century (TEA-21), surface transportation research has a budget of $85.7 million for 1999; the research portion of the SP&R program is about $123 million, with the largest state program totaling about $11.3 million. The NCHRP budget is about $22 million. In addition, private research is conducted or sponsored by major national associations of private industry and engineering professions concerned with highway transportation, and by companies that design and construct highways and supply highway-related products. Highway-related private-sector research funding could total as much as $86 million per year (TRB 1994).

The three major highway R&D programs have different characteristics (TRB 1994). The FHWA R&D program pursues practical research results that can be readily applied to problems of national significance, are common to many highway agencies, or are unlikely to be addressed by an individual state or private-sector organization. An example is the TRansportation ANalysis SIMulation System, or

TRANSIMS, a project sponsored jointly by the Office of the Secretary of Transportation, FHWA, the Federal Transit Administration, and the U.S. Environmental Protection Agency (see also Box 4-2 in Chapter 4). The purpose of TRANSIMS is to develop a completely new system of travel forecasting models for use by highway agencies and metropolitan planning organizations (MPOs) in estimating the transportation and environmental impacts of highway construction and rehabilitation alternatives. TRANSIMS will replace a set of models that is nearly 30 years old and cannot provide the travel and environmental impact estimates needed to meet current regulations. A research effort such as TRANSIMS requires a major, long-term funding commitment; the cooperation of many agencies; and broad oversight encompassing a strategic perspective.

State highway agency R&D is an important source of innovation in the highway industry. The research portion of the SP&R program is a major part of this activity and is supported cooperatively by individual states and the federal government (TRB 1994). In 1992 Congress took two steps that increased R&D funds available to the states: it increased the percentage of highway construction funds to be spent by the states on planning and research to 2 percent of the total apportionment, and it required that at least 25 percent of this funding be used for research, development, and technology transfer. As a result, about $69 million in SP&R funds was available for research in 1992, as opposed to about $25 million in the previous year. This amount had increased to $77 million by 1998. When TEA-21 increased the overall apportionment to the states beginning in fiscal year 1999, SP&R funding for research rose to a projected $123 million.

SP&R research involves a range of activities, including contract research, in-house research, technology transfer, technical assistance to regional and local transportation agencies, materials and equipment testing, and staff technical development and training. SP&R studies tend to be short in duration (1 to 2 years) and emphasize practical solutions that can be applied quickly to existing programs and problems. Often this research is aimed at correcting unique local problems related to a state’s own conditions, including traffic levels and local construction materials; however, results of SP&R studies are often of interest to other states, especially those in the same geographic region. SP&R studies are

undertaken by state R&D staff or performed under contract by outside research organizations, university researchers, and consultants. Much of the testing, technical assistance, and technology transfer activity performed by state R&D personnel involves direct, one-on-one interaction with staff of other organizations who have specific questions or issues to be resolved. An example of a recently completed SP&R research project is presented in Box 3-1.

NCHRP, which is administered by TRB, is the largest state-supported pooled-fund research program.³ The program emerged soon after construction started on the Interstate system, when many states began to experience similar problems related to highway design and construction. Since 1965 NCHRP has provided more than $175 million in funding for research on a wide range of topics (see Table 3-1 for a breakdown of this funding by category). NCHRP projects are oriented to problem solving and designed to produce results that have immediate application to highway agencies in all states; two-thirds of the member departments of the American Association of State Highway and Transportation Officials (AASHTO) must approve NCHRP research problems and agree to their financial support before they are brought into the program.

NCHRP project results are disseminated to states in a special TRB report series. Implementation is facilitated by the program’s close ties to state highway agencies, which provide volunteers for the project review panels, and to AASHTO, which often develops highway design practices and specifications based on the research findings. (See Appendix B for more information on NCHRP support for implementation efforts.) A recent project resulted in a manual that highway agencies can use in planning, designing, implementing, operating, marketing, and enforcing high-occupancy vehicle systems (NCHRP 1998b).

FHWA has a long and distinguished history in highway industry innovation, beginning with its predecessor, the Office of Road Inquiry (ORI), which was established in 1893. As states and localities started building roads, ORI began gathering information about highway laws,

road-building materials, and the rail rates for those materials. This information was published in bulletins and distributed to the states, which used it in organizing their individual highway agencies.

During the Interstate highway era, which began in 1956, FHWA focused considerable research attention on construction and materials

issues related to the program. As major portions of the Interstate system were opened for use, interest in such topics as emerging concerns about the impacts of highways on urban areas and on the environment resulted in a broader range of FHWA research. With the passage of the Intermodal Surface Transportation Efficiency Act of 1991 (ISTEA), FHWA

entered the post-Interstate era. ISTEA focused attention on the intermodal nature of the surface transportation system and the role of highways in that system.

As the breadth of its research increased, the scope of FHWA’s technology transfer efforts widened as well, in recognition of the fact that implementation of its research products would depend on state and local highway agencies that build, operate, and maintain the nation’s highways. Attempts were made to bring researchers and users together through such efforts and the federally coordinated program (later termed the nationally coordinated program) of R&D. FHWA worked closely with AASHTO and individual states to find ways of accelerating the use of FHWA R&D products.⁴

The close working relationship between FHWA and AASHTO has been instrumental in fostering innovation. As the national association representing state highway and transportation officials, AASHTO also has an important role—both formally and informally—in highway innovation, serving as a coordinator, organizer, and forum for encouraging, reviewing, and priority ranking research activities. AASHTO, through its Standing Committee on Research (SCOR), plays a key role in developing the annual NCHRP research plan and is involved in other state cooperative research efforts. (FHWA is invited to provide inputs to SCOR during the plan development.) Finally, SCOR assists other AASHTO committees in identifying research needs; advocates funding for highway research; and helps coordinate state involvement in national research activities, such as FHWA’s implementation of research products resulting from the Strategic Highway Research Program (SHRP).⁵

As noted in Chapter 2, a number of factors serve as impediments to innovation in the highway industry because they limit or prevent innovation and its potential benefits. First, while innovation involves risk, public-sector decision makers work in an environment that does not reward risk taking. In particular, many public facilities are large with high fixed costs and long economic lives. As a result, construction inno-

vation must be assessed not only within the context of the original installation (i.e., the way the facility is constructed and its initial cost), but also over a very long time period (i.e., whether it will continue to perform as expected and the cost to maintain it). Thus, public officials prefer familiar solutions that limit unexpected consequences. If they are unfamiliar with a new technology or uncertain about its benefits, they are reluctant to use it.

Second, public-sector procurement activity is driven by a low-bid process based on specifications and procedures established to satisfy the need for open competition and accountability.⁶ However, these procedures can discourage contractors with new products or processes because specifications often determine how facilities are to be built, the types of materials to be used, designs to be followed, and construction processes to be applied. New technologies or materials with the potential for improved performance may not meet existing design specifications. Thus, attempts to introduce innovation and reduce life-cycle costs can be stifled. Furthermore, in a procurement environment dominated by selection based on lowest initial cost, the private sector is not motivated to invest in R&D if it cannot retain the ability to capture the financial benefits of the research products.

Another major impediment to innovation is fragmentation within the highway industry. Public ownership of the highway system is spread over more than 40,000 agencies with an assortment of political, regulatory, and administrative characteristics, as well as differences in size, budget, and staff capabilities. “Fragmentation results because no single government agency or organization is responsible for the state of a particular category of public works [such as highways]” (NCPWI 1988, 123). Fragmentation, disagreement among public works constituencies, and competition among public works categories for scarce resources have combined to constrain innovation.

Fourth, public-sector innovation is not subject to the profit motive that stimulates commercial innovation. When public works decision makers seek performance improvements or cost savings through innovation, they are often confronted with certain higher initial costs and uncertain future benefits. Although innovative technology can solve problems and reduce costs, public decision makers, who are often several layers removed from researchers and technology specialists, must

make judgments in an atmosphere of intense public scrutiny and accountability with regard to the technical merits and financial benefits of new technology. If public officials are unfamiliar with the potential of innovative technology or uncertain of its merits, they are reluctant to adopt it.

Innovation in the public sector is constrained still further by a set of factors associated with specific construction-related activities.⁷ Since innovation successes in high-technology manufacturing are often cited as evidence of the potential for innovation, understanding how construction of public works facilities differs from those manufacturing activities can provide insight into ways of identifying, organizing, and focusing technology transfer activities for the public sector. Public facilities are usually built by a temporary alliance of contractors and subcontractors within an explicit professional, social, and political context. The contractor team disbands after the facility is completed, leaving the owner agency responsible for the operation and maintenance of the constructed facility. In addition, construction of public facilities, as opposed to high-technology manufacturing activity, involves considerable variations in local materials and conditions and a generally harsh operating environment, further discouraging divergence from standard design guides and prescribed methods and limiting the use of new ideas and methods (TRB 1994). The size, high cost, and permanence of these facilities make it difficult to conduct many full-scale tests and evaluations of innovations because of the time and expense involved. Finally, highways usually pass through multiple jurisdictions, adding to the need for uniformity and standardization in design and construction.

Construction innovation is also constrained by professional, social, and political factors that affect how innovation takes place. “Because constructed facilities directly influence the safety, health, and well-being of the population, all portions of a facility’s life cycle (design, construction, operation, and decommissioning) are circumscribed by codes and regulations” (Slaughter 1998, 227), such as procurement procedures, design specifications, and safety and environmental guidelines.

Finally, the way public agencies are organized affects the speed of adoption of innovations. Local agencies are often hindered by limited knowledge of new technologies, lack of funds for initiating new programs involving innovative technologies, and limited staff technical

expertise ( Jacobs and Weimer 1986). “Full information about what has been learned about a problem is frequently not assembled” and often underevaluated (TRB 1998, 6). Relevant public works R&D programs have been described as generally underfunded; scattered; and directed at diverse, specific program objectives (COTA 1991). As a result, public agencies are limited in their ability to identify, evaluate, and utilize innovations.

Table 3-2 summarizes many of the barriers to highway industry innovation. Overcoming these impediments requires considerable effort from both the private and public sectors. Some impediments to innovation, such as low-bid procurement or detailed design specifications, were put in place to ensure financial accountability or to avoid the use of inferior materials or products. Changes or modifications to allow the use of new technologies must be made in a manner consistent with the goals of these policies and procedures. In some cases the new product or tech nology necessitates a trade-off between conflicting goals or requires the public sector to assume a higher level of risk.

Achieving innovation in the highway industry is a difficult task because the industry is highly fragmented and decentralized in all aspects, including its R&D activities. Moreover, although FHWA has the largest single highway R&D program, it does not implement the products it develops and promotes. Rather, those products are implemented by state and local highway agencies, construction companies, contractors, consultants, and others, making information about specific applications and benefits difficult to obtain. Consequently, FHWA must work closely with the technology users if research products are to be implemented.

Implementation of innovations in the highway industry faces a range of impediments that exist throughout the public sector. Many of these impediments stem from the need to ensure public accountability and safety for major public investments. While the public sector and the highway industry are working to overcome these barriers without compromising accountability or safety, much remains to be done in this regard.

AASHTO American Association of State Highway and Transportation Officials

COTA Congressional Office of Technology Assessment

NCHRP National Cooperative Highway Research Program

NCPWI National Council on Public Works Improvement

TRB Transportation Research Board

AASHTO. 1997. Primer on Contracting 2000. Washington, D.C., Sept.

COTA. 1991. Delivering the Goods: Public Works Technologies, Management, and Financing. Congress of the United States. Washington, D.C., April.

Jacobs, B., and D. L. Weimer. 1986. Inducing Capacity Building: The Role of the External Change Agent. Pp. 137-150 in Perspectives on Management Capacity Building (B. W. Honadle and A. M. Howitt, eds.). State University of New York Press.

NCHRP. 1998a. Research Results Digest 225: Putting Research into Practice: A Synopsis of Successful Strategies and Case Histories. Washington, D.C., June, 18 pp.

NCHRP. 1998b. NCHRP Report 414: HOV Systems Manual. Washington, D.C., 817 pp.

NCPWI. 1988. Fragile Foundations. Washington, D.C., Feb.

Pisarski, A. E. 1987. The Nation’s Public Works: Report on Highways Streets, Roads and Bridges. National Council on Public Works Improvement. Washington, D.C., May.

Slaughter, E. S. 1998. Models of Construction Innovation. Journal of Construction Engineering and Management. American Society of Civil Engineers. Vol. 124, No. 3, May/June.

TRB. 1994. Special Report 244: Highway Research: Current Programs and Future Directions. National Research Council, Washington, D.C., 120 pp.

TRB. 1996. Special Report 249: Building Momentum for Change: Creating a Strategic Forum for Innovation in Highway Infrastructure. National Research Council, Washington, D.C., 57 pp.

TRB. 1998. Transportation Research Circular 488: Transportation Technology Transfer—A Primer on the State of the Practice. National Research Council, Washington, D.C., 95 pp.