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NCFRP NATIONAL COOPERATIVE FREIGHT RESEARCH PROGRAM REPORT 1 Sponsored by the Research and Innovative Technology Public and Private Administration Sector Interdependence in Freight Transportation Markets

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TRANSPORTATION RESEARCH BOARD 2009 EXECUTIVE COMMITTEE* OFFICERS CHAIR: Adib K. Kanafani, Cahill Professor of Civil Engineering, University of California, Berkeley VICE CHAIR: Michael R. Morris, Director of Transportation, North Central Texas Council of Governments, Arlington EXECUTIVE DIRECTOR: Robert E. Skinner, Jr., Transportation Research Board MEMBERS J. Barry Barker, Executive Director, Transit Authority of River City, Louisville, KY Allen D. Biehler, Secretary, Pennsylvania DOT, Harrisburg Larry L. Brown, Sr., Executive Director, Mississippi DOT, Jackson Deborah H. Butler, Executive Vice President, Planning, and CIO, Norfolk Southern Corporation, Norfolk, VA William A.V. Clark, Professor, Department of Geography, University of California, Los Angeles David S. Ekern, Commissioner, Virginia DOT, Richmond Nicholas J. Garber, Henry L. Kinnier Professor, Department of Civil Engineering, University of Virginia, Charlottesville Jeffrey W. Hamiel, Executive Director, Metropolitan Airports Commission, Minneapolis, MN Edward A. (Ned) Helme, President, Center for Clean Air Policy, Washington, DC Will Kempton, Director, California DOT, Sacramento Susan Martinovich, Director, Nevada DOT, Carson City Debra L. Miller, Secretary, Kansas DOT, Topeka Neil J. Pedersen, Administrator, Maryland State Highway Administration, Baltimore Pete K. Rahn, Director, Missouri DOT, Jefferson City Sandra Rosenbloom, Professor of Planning, University of Arizona, Tucson Tracy L. Rosser, Vice President, Regional General Manager, Wal-Mart Stores, Inc., Mandeville, LA Rosa Clausell Rountree, CEOGeneral Manager, Transroute International Canada Services, Inc., Pitt Meadows, BC Steven T. Scalzo, Chief Operating Officer, Marine Resources Group, Seattle, WA Henry G. (Gerry) Schwartz, Jr., Chairman (retired), Jacobs/Sverdrup Civil, Inc., St. Louis, MO C. Michael Walton, Ernest H. Cockrell Centennial Chair in Engineering, University of Texas, Austin Linda S. Watson, CEO, LYNXCentral Florida Regional Transportation Authority, Orlando Steve Williams, Chairman and CEO, Maverick Transportation, Inc., Little Rock, AR EX OFFICIO MEMBERS Thad Allen (Adm., U.S. Coast Guard), Commandant, U.S. Coast Guard, Washington, DC Peter H. Appel, Administrator, Research and Innovative Technology Administration, U.S.DOT J. Randolph Babbitt, Administrator, Federal Aviation Administration, U.S.DOT Rebecca M. Brewster, President and COO, American Transportation Research Institute, Smyrna, GA George Bugliarello, President Emeritus and University Professor, Polytechnic Institute of New York University, Brooklyn; Foreign Secretary, National Academy of Engineering, Washington, DC James E. Caponiti, Acting Deputy Administrator, Maritime Administration, U.S.DOT Cynthia Douglass, Acting Deputy Administrator, Pipeline and Hazardous Materials Safety Administration, U.S.DOT LeRoy Gishi, Chief, Division of Transportation, Bureau of Indian Affairs, U.S. Department of the Interior, Washington, DC Edward R. Hamberger, President and CEO, Association of American Railroads, Washington, DC John C. Horsley, Executive Director, American Association of State Highway and Transportation Officials, Washington, DC Rose A. McMurry, Acting Deputy Administrator, Federal Motor Carrier Safety Administration, U.S.DOT Ronald Medford, Acting Deputy Administrator, National Highway Traffic Safety Administration, U.S.DOT William W. Millar, President, American Public Transportation Association, Washington, DC Jeffrey F. Paniati, Acting Deputy Administrator and Executive Director, Federal Highway Administration, U.S.DOT Peter Rogoff, Administrator, Federal Transit Administration, U.S.DOT Joseph C. Szabo, Administrator, Federal Railroad Administration, U.S.DOT Robert L. Van Antwerp (Lt. Gen., U.S. Army), Chief of Engineers and Commanding General, U.S. Army Corps of Engineers, Washington, DC *Membership as of June 2009.

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NATIONAL COOPERATIVE FREIGHT RESEARCH PROGRAM NCFRP REPORT 1 Public and Private Sector Interdependence in Freight Transportation Markets IHS GLOBAL INSIGHT Lexington, MA Subject Areas Planning and Administration Aviation Rail Freight Transportation Marine Transportation Research sponsored by the Research and Innovative Technology Administration TRANSPORTATION RESEARCH BOARD WASHINGTON, D.C. 2009 www.TRB.org

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NATIONAL COOPERATIVE FREIGHT NCFRP REPORT 1 RESEARCH PROGRAM America's freight transportation system makes critical contributions Project NCFRP-01 to the nation's economy, security, and quality of life. The freight ISSN 1947-5659 transportation system in the United States is a complex, decentralized, ISBN 978-0-309-11790-6 and dynamic network of private and public entities, involving all Library of Congress Control Number 2009931570 modes of transportation--trucking, rail, waterways, air, and pipelines. 2009 Transportation Research Board In recent years, the demand for freight transportation service has been increasing fueled by growth in international trade; however, bottlenecks or congestion points in the system are exposing the COPYRIGHT PERMISSION inadequacies of current infrastructure and operations to meet the Authors herein are responsible for the authenticity of their materials and for obtaining growing demand for freight. Strategic operational and investment written permissions from publishers or persons who own the copyright to any previously decisions by governments at all levels will be necessary to maintain published or copyrighted material used herein. freight system performance, and will in turn require sound technical Cooperative Research Programs (CRP) grants permission to reproduce material in this guidance based on research. publication for classroom and not-for-profit purposes. Permission is given with the understanding that none of the material will be used to imply TRB, AASHTO, FAA, FHWA, The National Cooperative Freight Research Program (NCFRP) is FMCSA, FTA, RITA, or PHMSA endorsement of a particular product, method, or practice. a cooperative research program sponsored by the Research and It is expected that those reproducing the material in this document for educational and not- Innovative Technology Administration (RITA) and administered by for-profit uses will give appropriate acknowledgment of the source of any reprinted or reproduced material. For other uses of the material, request permission from CRP. the Transportation Research Board (TRB). The program was authorized in 2005 with the passage of the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU). On September 6, 2006, a contract to begin work was executed between NOTICE RITA and The National Academies. The NCFRP will carry out applied The project that is the subject of this report was a part of the National Cooperative Freight research on problems facing the freight industry that are not being Research Program conducted by the Transportation Research Board with the approval of the Governing Board of the National Research Council. Such approval reflects the adequately addressed by existing research programs. Governing Board's judgment that the program concerned is of national importance and Program guidance is provided by an Oversight Committee comprised appropriate with respect to both the purposes and resources of the National Research of a representative cross section of freight stakeholders appointed by Council. the National Research Council of The National Academies. The NCFRP The members of the technical committee selected to monitor this project and to review this report were chosen for recognized scholarly competence and with due consideration for the Oversight Committee meets annually to formulate the research balance of disciplines appropriate to the project. The opinions and conclusions expressed program by identifying the highest priority projects and defining or implied are those of the research agency that performed the research, and, while they have funding levels and expected products. Research problem statements been accepted as appropriate by the technical committee, they are not necessarily those of the Transportation Research Board, the National Research Council, the RITA, or the recommending research needs for consideration by the Oversight Federal Highway Administration, U.S. Department of Transportation. Committee are solicited annually, but may be submitted to TRB at any Each report is reviewed and accepted for publication by the technical committee according time. Each selected project is assigned to a panel, appointed by TRB, to procedures established and monitored by the Transportation Research Board Executive which provides technical guidance and counsel throughout the life Committee and the Governing Board of the National Research Council. of the project. Heavy emphasis is placed on including members The Transportation Research Board of the National Academies, the National Research representing the intended users of the research products. Council, the Federal Highway Administration, the Research and Innovative Technology The NCFRP will produce a series of research reports and other Administration, and the National Cooperative Freight Research Program do not endorse products or manufacturers. Trade or manufacturers' names appear herein solely because products such as guidebooks for practitioners. Primary emphasis will they are considered essential to the object of this report. be placed on disseminating NCFRP results to the intended end-users of the research: freight shippers and carriers, service providers, suppliers, and public officials. Published reports of the NATIONAL COOPERATIVE FREIGHT RESEARCH PROGRAM are available from: Transportation Research Board Business Office 500 Fifth Street, NW Washington, DC 20001 and can be ordered through the Internet at: http://www.national-academies.org/trb/bookstore Printed in the United States of America

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COOPERATIVE RESEARCH PROGRAMS CRP STAFF FOR NCFRP REPORT 1 Christopher W. Jenks, Director, Cooperative Research Programs Crawford F. Jencks, Deputy Director, Cooperative Research Programs Michael Salamone, Senior Program Officer Eileen P. Delaney, Director of Publications Kami Cabral, Editor NCFRP PROJECT 01 PANEL Paul Nowicki, BNSF Railway, Chicago, IL (Chair) Christina S. Casgar, San Diego Association of Governments, San Diego, CA Robert Gould, Wilson, Price, Barranco, Blankenship & Billingsley, PC, Montgomery, AL John T. Gray, Association of American Railroads, Washington, DC Sue L. Lai, Port of Los Angeles, Los Angeles, CA Rakesh Shalia, FedEx Services, Memphis, TN Edward L. Strocko, FHWA Liaison Leo Penne, AASHTO Liaison Elaine King, TRB Liaison

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FOREWORD By Michael Salamone Staff Officer Transportation Research Board NCFRP Report 1: Public and Private Sector Interdependence in Freight Transportation Markets is a primer into the complex relationships between public sector and private sector stakeholders in the freight transportation industry. The report introduces the reader to the freight industry through the use of examples, case studies, and a broad-based presentation of the mutually dependent issues facing public and private investment decision makers. This report will be most useful to public agency decision makers who may not have a background in freight yet are involved in freight planning issues. In particular, the report will describe differences between the public and private sector in freight transportation, as well as discuss approaches to overcome them. Decisions about the future of the U.S. freight transportation system should be based upon a thorough understanding of freight markets, trends, and the relationships between public and private sector organizations. There is a perception that the public sector and private sec- tor are two distinct cultures and possess different socioeconomic decision drivers. This report intends to shed light upon each of these perspectives so that both can improve com- munication and freight policy planning. Fundamentally, investment decisions affecting the future U.S. freight transportation sys- tem should be based on an understanding of the market, a clear vision of trends, and a thoughtful awareness of the relationships that exist between public investment decisions and private investment decisions. This report intends to show readers from both sectors that there are real differences in criteria when making important investment decisions and even in how the other sector conducts its "due diligence" or fact-finding investigation prior to making decisions. These differences are often unrecognized by the other sector, and one sec- tors' response to decisions made by the other may puzzle or confuse. This report provides information on areas where these two groups have worked well. Under NCFRP Project 1, the research team was asked to investigate and report on cur- rent practice and accumulated knowledge of the investment decision interdependencies shared by the public and private sectors. Through a structured workshop discussion, the research team and project panel heard disparate perspectives from each sector on common issues facing the freight industry, as a whole. This valuable step helped shape the presenta- tion of the research results, adding value, utility, and significance. This primer was prepared by a research team led by IHS Global Insight, with Cambridge Systematics, Inc., the American Transportation Research Institute (ATRI), and Atherton, Mease & Co., as subcontractors.

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CONTENTS 1 Preface 2 Section 1 U.S. Economy Depends on Freight Transportation 2 Introduction to the Freight Transportation Industry 2 Free Flow of Goods Essential to Economic Competitiveness 3 Users and Beneficiaries of Freight Transportation 3 Trends Behind Fast Growth in Freight Transportation 3 Globalization, Growth in Trade, and Increases in the Volume of Goods Shipped on U.S. Freight Infrastructure 7 Supply Chains Are More Complex and Sophisticated 10 Most Freight Activity Happens Outside of Public View 11 Operation of Freight Systems 12 Consequences for Public Sector Officials 13 Section 2 Freight Transportation Decisions and Considerations 13 Decisions That Affect Freight Transport and Which Sector Makes the Decisions 13 Different Types of Decisions 14 Public Sector Decision Making 16 Private Sector Decision Making 16 Decision-Making Categories 17 Levels of Decision Makers 17 Intersection of the Public and Private Sectors 21 Consequences for Public Sector Officials 22 Section 3 What Can Be Done to Better Align Public and Private Freight Interests 22 Summary of Lessons for Successful Cooperation from Case Studies 22 Hire Qualified Public Agency Decision-Making Support Staff 23 Improve Communication and Education 23 Benchmarking Progress 23 Public-Private Task Teams Develop Project Milestones 24 Forge Public-Private Financial Partnerships 24 Conclusions 25 Appendix A Glossary of Terms and Definitions 30 Appendix B Frequently Asked Questions 32 Appendix C Reference Resources 49 Appendix D Case Studies