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OCR for page 95
FINANCE AND THE VISIBLE HAND OF TECHNOLOGY 83 nesses well beyond traditional traffic problems. How way authority already does this when it outsources might the public sector play a role in this movement, and maintenance work, with part of the compensation what implications might this have for how we manage dependent on the lack of congestion as measured by the and fund transportation? amount of time that design speeds are met. Let me return to the finance question once again. IMPLICATIONS Today, highway travelers in the United States pay a low average rate--only pennies per mile traveled. This is If, through some bizarre twist of fate, I were named much less than the 35 cents per mile that it costs to own benevolent transportation czar, I would want to manage and operate their vehicles. Financing is based on the and fund my transportation system a bit differently. I long-term average cost of highways, with a correspond- would take a lesson from the best of the private firms ingly average quality of service. The ability to provide and set a big hairy objective. Why not work so that all high-quality service begins with the ability to measure important trips are completed on time--or at least bet- performance, but it allows a price that more closely ter than the airline industry? Such an objective would reflects the value of the completed trip. have implications for a very different transportation sys- The technology to measure highway performance on tem, both in how it is managed and in how it is funded. a link-by-link basis also opens the door to a host of What might such a transportation system look like? financial and performance initiatives. This creates the opportunity to unleash some of the creativity and man- Part of this would involve having information on agement techniques that the invisible hand of the mar- system reliability that could be communicated to trav- ketplace stimulates in other industries. elers in advance so that they could manage their own The gains from this could occur along several dimen- travel. I am not naive enough to believe that this would sions. While only one of these changes has a direct link cause people to shift modes, but they could to increased funds, each should improve the financial Change the time they travel, health of the transportation agency. The following are Shift routes to take full advantage of available examples: capacity, and Call ahead to minimize disruption. Improved customer satisfaction. Most travelers Part of this would mean that I would manage my take traffic for granted as something imposed on their system to a preset performance standard: daily lives, much like the weather. Direct measurement of Average speeds better than 50 mph, for example; highway performance will permit a host of changes that All routine maintenance and construction work will show that the DOT cares--money-back guarantees in off-peak hours; and in case service is poor. All incidents cleared in X minutes, and so forth. Improved day-to-day management. Most DOTs Part would involve a more personal relationship rely on important but indirect measures. A more direct with the traveler. I would even go so far as to provide set of measures--such as average speeds during the rebates if performance standards were not met. Again, morning commute--will result in improvements. technology in the form of transponders offers a direct Increased revenues. Higher-quality service is not way to implement a "money-back guarantee." free. The technical ability to charge travelers more Part would involve knowing the relative value of a when the service is better (the flip side of a money-back timely trip completion (just-in-time inventories provide guarantee) will generate more resources. This will be a direct example for freight). independent of automobile fuel economy and the motor Part would involve direct cooperation with cer- fuel tax in general. tain major transportation customers, ranging from A more efficient economy. The combination of sporting events, to job locations, to individual indus- performance measures related to travel times by indi- tries. This knowledge would provide a source of money viduals and corporations and financial incentives to (as shown by the use of variable tolls on SR-91 and the encourage improvement should also improve economic San Diego high-occupancy toll lane to ensure a given productivity. quality level). It would also require direct cooperation between the transportation provider and its customers. The rapid progress in the development of these tech- Part would involve a different set of internal stan- nologies sets the stage for providing better service to the dards for district engineers. For example, knowing that surface transportation industry's customers. Yes, cus- it was possible to measure the average speed for the tomers. Not motorists or travelers or taxpayers but cus- morning or afternoon commute would change the tomers. The distinction is key if you want to pursue incentives for the district engineers. The British high- performance pricing successfully. If you are going to be

OCR for page 95
84 T R A N S P O RTAT I O N F I N A N C E successful in running surface transportation systems in what you are selling is greater than the price you are an efficient way and charge fair prices for using the ser- charging. The goal of creating customers is just as vice, industry management must develop a service ori- important for public entities as it is for the private sec- entation and consider those who use surface tor. How do you create customers? By heightening the transportation systems as customers first and foremost. perception that what you are selling is worth more The customer is someone who is a willing buyer of than the price you are charging. You can do this in the what you have to sell at the particular price you are surface transportation industry by using these new charging. What makes someone a willing buyer? The technologies to improve the quality of what you are judgment about whether the value to him or her of selling.