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Innovation in Transportation Proceedings of a Workshop September 24-26, 1979 National Academy of Sciences Washington, D.C. Conducted by Committee on Transportation Assembly of Engineering National Research Council with the participation of the Industrial Research Institute Research Corporation NATIONAL ACADEMY OF SCIENCES Washington, D.C. 1980 NAS-NAE AUG 311981 LIBRARY

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The National Research Council was established by the National Academy of Sciences in l9l6 to associate the broad community of science and technology with the Academy's purposes of furthering knowledge and of advising the federal government. The Council operates in accordance with general policies determined by the Academy under the authority of its Congressional charter of l863, which established the Academy as a private, nonprofit, self-governing membership corporation. The Council has become the principal operating agency of both the National Academy of Sciences and the National Academy of Engineering in the conduct of their services to the government, the public, and the scientific and engineering communities. It is administered jointly by both Academies and the Institute of Medicine. The Academy of Engineering and the Institute of Medicine were established in l964 and l970, respectively, under the charter of the National Academy of Sciences. NOTICE: This report is a compilation of the presentations and comments of the individual participants in the Workshop on Innovation in Trans- portation. The views and interpretations are those of the individuals concerned and are not necessarily those of either the supporting agencies and organizations or the National Research Council. The workshop and this proceedings were supported under Contract No. DOT-RC-92002 between the U.S. Department of Transportation and the National Academy of Sciences. Available from Ofder frw11 , Committee on Transportation National Technical Assembly of Engineering Information Service, National Research Council Springfield, Va. 2l0l Constitution Avenue, N.W. 22161 f->a tfW* - Washington, D.C. 204l8 Order No ' ^*

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PREFACE The papers collected in this report constitute the proceedings of a workshop on innovation in transportation organized and convened by the Committee on Transportation of the Assembly of Engineering, National Research Council, September 24-26, l979, at the National Academy of Sciences in Washington, D.C. The purpose of the workshop was to stimu- late wide-ranging discussion among a diverse group of participants con- cerned with the issues surrounding innovation in transportation, and to isolate some of the most important of these issues for concentrated attention. More than a hundred people (listed by panel under "Participants") took part. The numbers of people from the various transportation sectors were: four from foreign governments, 42 from the U.S. Government, 36 from industry, and 30 from university, not-for- profit organizations, and the legal profession. The interest in having fairly large numbers of participants from each of the major sectors was to obtain balance in the representation and to elicit ideas from as many different sources as possible throughout the transportation com- munity. These views are those of the participants, are not necessarily consistent with one another, and are not necessarily those of either the supporting agencies and organizations or the National Research Council. The workshop is part of a comprehensive examination of innovation in transportation undertaken by the committee in the course of advising the U.S. Department of Transportation on matters of policy and techno- logy. The committee has set two preliminary objectives for this examina- tion: 0 To identify barriers and incentives to innovation in transportation . o To develop recommendations for detailed analysis and evaluation the Department of Transportation might under- take to encourage innovation in transportation. The committee expects to issue a report on its examination in l980. It should be noted that the ideas presented in this workshop will be con- sidered by the committee, along with ideas developed through other sources. The recommendations made by panel chairmen should be con- sidered preliminary, and the resulting final committee report may have a different emphasis in certain instances. iii

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The subject of the committee's second objective was introduced into the workshop by the keynote speech on the federal role in stimu- lating innovation in transportation. To ensure that an ample basis was laid for ensuing discussions, three broad sets of issues were addressed by the principal speakers: the transportation community and the possibilities for innovation in transportation, the external climate for innovation, and labor and public interest considerations. To inform subsequent panel discussions and narrow their focus, each panel chairman proposed a brief list of items for the panel dis- cussions to follow. The meeting then divided into panels to hear and discuss papers that had been provided to participants before the work- shop on five subjects under consideration: the setting for innovation; interactions of government, industry, and academic institutions; econo- mic incentives for innovation in transportation; procurement and inde- pendent research and development; and technology and R§D policies to stimulate innovation. Each paper received comment from a discussant. By this method of presentation, and by providing all research papers to all participants in advance, the committee hoped to prevent an artificial separation of issues that are closely bound and mutually dependent. The economic and other incentives that encourage innovation in transportation, for example, cannot be understood in isolation from the interactions of government, industry, and academic institutions. Each chairman reported his panel's principal conclusions and recommendations to the assembled participants on the third day of the workshop following the deliberations in panel sessions, and these were discussed. A brief summary is provided here of significant points raised in the workshop and the panel chairmen's reports and recommendations. The views expressed by the participants (related in the summary) are their own and do not necessarily reflect those of their organizations, the Committee on Transportation, the National Research Council, or the Department of Transportation. Summary The workshop was convened to illuminate and discuss the principal issues in innovation in transportation. The summary should be read with that understanding; individual participants may (and do in the recorded pro- ceedings) disagree. The speakers emphasized that "innovation" is not synonomous with "invention" or "the introduction of novelty," but encompasses the successful introduction into the economy of a new or changed product, service, or manufacturing process resulting from the development of a discovery, or a suggestion arising from review and analysis. Some chose to emphasize particular aspects of this definition for innovation in transportation: the representative of labor, for example, pointed to innovative change in the workplace as equally important to the applica- tion of new technology in improving transportation services. The impor- iv

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tance of market demand in creating pressure for innovation was under- lined with examples by a number of speakers; others chose specific instances of technological research and development creating pressure for innovation. These were framed in the context of pull and push fac- tors of equal importance by other speakers. Several problems that encumber innovation in transportation sur- faced repeatedly: the extensive, and frequently frustrating, influence of government; the incremental and disjointed nature of innovation in transportation; the decline and overall insufficiency of investment in the activities vital to innovation, compounded by the pressures of in- flation. Several avenues to solution were proposed and discussed in the course of the workshop: o The urgent need to direct attention to the transportation system as a whole, to understand it in the context of present and changing local and national needs, as a funda- mental part of our society. The recommendation emerged from various discussions of the workshop to undertake the collection and analysis of information that would lead to a long-range plan for innovation in transportation, to be updated at frequent intervals. 0 The need for collaboration among government, industry, academic and other research organizations, and similarly, among regulators, management, and labor, to stimulate innovation. These were elaborated and discussed in panel sessions and reported in the final plenary session. The preliminary recommendations, as reported by the chairmen, are briefly summarized below. Many of these prompted lively discussion. Setting for Innovation The chairman of the panel outlined the barriers to innovation in trans- portation in government, in industry, and in the university community and listed the panel's suggestions about how these barriers might be overcome. In the executive branch of the federal government, responsibilities and authority are fragmented; leadership changes bring changes in goals and objectives. There is no long-term plan nor regular, updated trans- portation policy. Each of these states of affairs may act as a barrier to innovation. The great number and diversity of state and local govern- ments create confusion and hinder progress toward transportation inno- vation. In the legislative branch, there are too many oversight, authori- zing, and appropriating committees. Organization along these lines gives rise to many constituencies, results in much overlap and compro- mise, and impedes the appropriation process. In the industrial and commercial field, the characteristics of large mature companies with massive infrastructures are not conducive to inno-

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vation. There is low return on investment in many transportation firms, compounded by the high costs and risks of the full-scale, real-world tests needed for successful marketing. The mechanisms by which support is gained for research can act against innovative ideas. For example, the request-for-proposal (RFP) process is time-consuming and expensive. The chairman noted that the panel offered suggestions to improve the setting for innovation. The Department of Transportation should issue an annual long-range (probably looking at least l0 years ahead) National Transportation Plan, identifying goals, initiatives, capital assistance, and research priorities. The department should work with the Office of Management and Budget and the legislative branch to con- solidate, or at least to reduce in number, the committees now involved with transportation. It was clearly stated that this would be a very difficult, long-term task. The department should develop even closer cooperation with state and local governments and industry. Both the executive and the legislative branches need to provide greater stability in goals, programs, and funding to reduce uncertain- ties in the industrial sector, according to the panel. There is a pressing need for long-term loans, or loan guarantees. A mechanism somewhat analogous to that of the Export-Import Bank might be used to permit local governments or private enterprises to undertake innovative projects. Careful consideration of criteria, and evaluation based on national goals,would guide the selection of recipients. Interactions of Government, Industry, and Academia The chairman observed that in the panel's view, university engineers and scientists should play a strong role in the Department of Transpor- tation's formulation of an innovative transportation research program. A long-range pattern of department-university collaboration should be established by stable programmatic policies, and with relatively stable funding levels. The chairman noted that universities should be careful about going too far into the applied research and development that industry is better equipped to pursue. Universities should concentrate on developing intellectual capacity and intellectual capital by train- ing and developing students, and enlarging basic knowledge. An exten- sion of these ideas was a suggestion that there would be a need for establishing "centers of excellence" to conduct applied research and development in selected areas of transportation. These could be R§D organizations outside the universities (although in some cases they might be university affiliated). Where government has been the developer and buyer, or buyer and user of equipment or systems, it has generally been more successful than when it conducts the R§D, develops an item, then depends on another agency to buy and use it. Examples of the former include the Department of Defense for its systems, the Federal Aviation Administration for its air traffic control equipment and system, and research conducted by the vi

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Department of Transportation related to issuing and enforcing safety, environmental protection, and other types of regulation. A successful government program that might provide guidance for developing inter- governmental relations that encourage innovation is the Federal High- way Program. This effort is supported by competent staffs at state and municipal levels, developed through specific provisions of the Highway Act. State agencies not only share in the cost of highways, but supervise their building. Examples of the case in which the federal government may develop,but not buy and use, a system are the large develop- ment and demonstration projects (such as for new buses or rail systems) in intercity or urban transportation where users are expected to be industry, or state and local governments. The chairman suggested that great care be given to research, development, and system evaluations when DOT is not the user. There is now no Individual within DOT at the level of assistant secretary who has the responsibility for coordinating and overseeing the technical affairs of the department. Adding such a technical person at that level could help improve the innovation process. The chairman noted that,in his view, the transportation industry's primary role is to produce and operate the systems that people use. It was his opinion, and that of a number of other participants, that the free market is still the most sensitive barometer of public acceptance, and it is for this reason that industrial talents, experience, and attitudes should be enlisted to support innovative concepts at the earliest prac- ticable stage. Some important areas of applied research and development could fail to receive the sustained attention they deserve. Finally, it was suggested that industry, as well as government, contribute finan- cial support, and join in continuing dialogue with faculty and students in universities to develop better understanding and interchange of ideas. Economic Incentives The panel concentrated on regulatory, tax, and antitrust matters. The panel noted that,over the past three decades, prices for transportation have seldom reflected true costs. Now, rising fuel costs and increas- ed capital investments to meet safety and environmental standards have overburdened the limited, internally developed capital available in some of the auto industries, and in others. The chairman reported that the panel endorsed Executive Order l2044. In essence, that order requires that the public be made aware of the risks, costs, and benefits of regulations before they are enacted; that priorities be established; that alternative choices be made clear; and that the regulations be systematically reevaluated. The chairman noted that the panel concurred with the prevailing tax rules applied to R§D, but urged early moves to liberalize depreciation rules on equipment and machinery. There were several views expressed about the actual number of years on which de- preciation should be based, but the suggested reconsideration of such existing provisions was agreed to in general. Although there was general agreement that reconsideration of present depreciation rules should be undertaken, there were views expressed questioning the overall vii

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effectiveness of such a move as a stimulant to innovation. While a liberalization of the depreciation rules on equipment and machinery should increase capital funds available, it should be pointed out that this would not necessarily guarantee that such funds would be earmarked for expenditure on innovation. Careful study of all aspects should be included in the reconsideration. The suggestion was made that as the Civil Aeronautics Board (CAB) and possibly the Interstate Commerce Com- mission (ICC) are gradually phased out, the Department of Justice may assume many of their residual responsibilities. It was suggested that Justice consider allowing the formation of some integrated, intermodal transportation companies—a step that could stimulate more efficient services. Procurement and Independent Research and Development (IR§D) The chairman reported consensus on the panel that the Department of Transportation should take an interest in all contractor programs where there might be an element of Independent Research and Development (IR§D), to identify it as an important part of the contractor's activity, to maintain respect for the importance of independence in IR§D, and to encourage the contractor to direct some portion of this IR§D into acti- vities of interest to DOT. IR§D is now associated with the federal procurement part of transportation funds and these are less than a fourth of DOT's budget. About $l2 billion of the department's annual $l7 billion budget is expended in the form of capital, or other types of grants. In making grants to states or local agencies, the department might add a condition that a small portion be used for innovative analy- sis. Such an approach might be an additional tool in encouraging inno- vation. The chairman noted that the provision in procurement contracts re- quiring that the contractor repay the R§D costs of ideas developed under contract from which they make money discourages innovation. The depart- ment was urged to follow the new Federal Acquisition Regulations (FAR) that eliminate cost-sharing on goods or services developed for govern- ment use, and that provide for R§D recoupment, only if it is clearly in the national interest. The general thrust of the regulations is that recoupment should rarely be required. The chairman suggested that changes are needed in patent and data rights, and noted with approval a bill now before Congress that would impose a uniform policy on all federal agencies. The proposed policy is that the ownership of patents and data rights remains with the con- tractor. The government gets royalty-free rights. The chairman reported that the panel urged the adoption of a pro- posed Federal Acquisition Regulation that encourages submission and expeditious handling of unsolicited proposals. The practice has been to translate unsolicited proposals into requests for proposals, to publish them, and invite bids. This discourages those who have novel Vlll

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ideas from seeking support. Finally, DOT was urged to streamline the administrative process of procurement that is now unduly lengthy. Technology and R§D Policies to Stimulate Innovation The panel remarked that the percentage of its budget spent by the Department of Transportation for research and development is much smaller than the percentage spent by other agencies, such as the Depart- ment of Defense or the Department of Energy. The department's efforts in research and development need strengthening, according to the panel, and it reaffirmed the recommendation of other panels for a high-level officer and supporting personnel in research and development. This new function should be designed with a great deal of care. To provide out- side views, the panel recommended that the department set up a full- time scientific advisory board to provide critical appraisal and ideas. The panel urged the department to develop a set of objectives and per- formance requirements, rather than solutions, and to bring its criteria for research grants and contracts into line with these objectives and requirements. The panel called for an annual mobility assessment to give an in- dication of how well the transportation system is performing (in the view of passengers, operators, shippers), how much it costs, how well industry is doing, and where significant gaps or problems are being experienced. Among other recommendations, the panel singled out some pressing needs for research and development now being experienced in various modes of transportation: the need to gain an understanding of what is required to achieve significant improvement and growth (perhaps increas- ing ridership from 4 percent to about 20-30 percent) through a much im- proved system of urban mass transportation, for example. The panel thought such an effort should receive more attention and research money. Other examples the panel offered include the need for research in high- way maintenance, an examination of the feasibility of automating enroute air traffic control of aircraft, and more research to support the govern- ment's regulatory functions. The valuable participation of many individuals during this review is gratefully recognized by the committee. The panel members and parti- cipants are listed on pages 240 to 245. The committee expresses special appreciation for the many contribu- tions during the planning for this workshop by Dr. James R. Nelson before his death April 30, l980. I, Raymond L. Bisplingnoff Chairman Committee on Transportation IX

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COMMITTEE ON TRANSPORTATION Raymond L. Bisplinghoff, Chairman, Tyco Laboratories, Inc. James M. Beggs, General Dynamics Corporation Harmer E. Davis, University of California, Berkeley (retired) Aaron J. Gellman, Gellman Research Associates, Inc. Harold L. Michael, Purdue University James N. Morgan, University of Michigan Edward K. Morlok, University of Pennsylvania James R. Nelson, Amherst College Paul 0. Roberts, Massachusetts Institute of Technology James P. Romualdi, Carnegie-Mellon University William K. Smith, General Mills, Inc. William M. Spreitzer, General Motors Corporation John G. Truxal, State University of New York at Stony Brook Alan M. Voorhees, Summit Enterprises, Inc. Panel William L. Garrison, University of California, Berkeley S.W. Herwald, Westinghouse Electric Corporation (retired) Samuel Z. Klausner, University of Pennsylvania Wilfred Owen, The Brookings Institution (retired) Milton Pikarsky, IIT Research Institute Staff John R. Fowler, Executive Secretary Stanley Y. Kennedy, Assistant Secretary Marion C. West, Administrative Assistant

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CONTENTS WELCOME l G^urtland D. Perkins KEYNOTE ADDRESS: STIMULATING TRANSPORTATION INNOVATION— THE FEDERAL ROLE 3 /Henry Eschwege SPEAKERS ll THE TRANSPORTATION COMMUNITY AND POSSIBILITIES FOR INNOVATION l3 v/Kobert A. Charpie THE EXTERNAL CLIMATE FOR INNOVATION 2l /Ward J. Haas LABOR AND PUBLIC INTEREST CONSIDERATIONS 35 /Villiam B. Saunders V REMARKS BY CHAIRMEN ON THE SCOPE OF PANEL DELIBERATIONS, PRESENTATION OF BACKGROUND PAPERS, AND DISCUSSANT'S COMMENTS 45 THE SETTING FOR INNOVATION 47 Remarks s/Foster L. Weldon Innovation and the Structure of Transportation Activities 50 ^/William L. Garrison Discussant's Comments 75 fforn C. McGrath, Jr. v INTERACTIONS OF GOVERNMENT, INDUSTRY, AND ACADEMIA 8l Remark ./Martin Goland Interactions of Government, Industry, and Academia 84 /David S. Potter Presenter: Craig Majrks Discussant's Comments-^ /hn G. Truxal xi

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ECONOMIC INCENTIVES TO INNOVATION IN TRANSPORTATION l03 Remarks \xtfruce S. Old Incentives to Innovation in the Transportation l94 Sectr , Gellman Presenter: Edwin H^efele Discussant's Comments l35 Harvey E. Bz'azer PROCUREMENT AND INDEPENDENT RESEARCH AND DEVELOPMENT l39 Remarks / Allen E.-Tuckett A View of U.S. Government Contracting Policies as They Relate to the Support of Innovation l42 William L. ^denbaugh and W.B. G>st Discussant's Comments l52 James E. Carpenter TECHNOLOGY AND R§D POLICIES TO STIMULATE INNOVATION l55 Remarks Herbert Dy^enington Technology Research and Development Policies of the Federal Government and Transportation Innovation / l60 Edward K.^'Morlok Technologies and R§D Policies to Stimulate Innovation / l8l Lawrence A. /Goldmuntz Discussant's Comments l92 Howard K. Nason PANEL REPORTS l97 THE SETTING FOR INNOVATION l99 Foster Weldon Discussion 202 INTERACTIONS OF GOVERNMENT, INDUSTRY, AND ACADEMIA 207 Martin Goland Discussion 2l0 ECONOMIC INCENTIVES TO INNOVATION IN THE TRANSPORTATION SECTOR 2l7 Bruce S. Old Discussion 2l9 PROCUREMENT AND INDEPENDENT RESEARCH AND DEVELOPMENT 22l Allen E. Puckett Discussion 228 xii

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TECHNOLOGY AND R§D POLICIES TO STIMULATE INNOVATION 23l Herbert D. Benington Discussion 236 WORKSHOP CHAIRMAN'S CLOSING REMARKS 239 Raymond L. Bisplinghoff PANEL MEMBERS, PARTICIPANTS, AND OTHER ATTENDEES 241 Xlll