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PANEL REPORTS l97
THE SETTING FOR INNOVATION BY FOSTER L. WELDON Our panel members agreed on a couple of things rather quickly. First, that the setting for innovation was a "lousy" one, and, second, that it was going to be tough to try to improve it. We had little trouble identifying barriers throughout the session, but we had real difficul- ties arriving at recommendations for improvements. This is simply because of the complexity of the thing; a whole potpourri of public and private organizations is interacting within a framework that is really a very dynamic marketplace, but at the same time it is constrained by static laws and static regulations. At a highly aggregated level of all of these components we finally were able to agree on several suggestions for improvement. But attempts to dig into the detailed interactions were not very productive. In what follows I will try first to outline the consensus reached concerning the barriers to innovation, and then I will get to the recommendations for lowering the barriers. First, the barriers that were identified in the executive branch of the government are as follows: l. Fragmentation of authority and responsibility for transportation programs, both across and among the major modes of transportation. 2. Inconsistent and erratic leadership in pursuit of transporta- tion goals and objectives. 3. Lack of systematic approaches to encourage transportation innova- tion. 4. Lack of long-term plans and policy commitments to pursue specific transportation goals and objectives. 5. Faulty coordination among agencies in the management of inter- related transportation activities. In the state and local governments, the major barrier to innovation is simply the great number and diversity of these entities. The primary customer of transportation at the local level is a hodgepodge of city, county, and regional governments, districts, and authorities with ambi- valent perceptions of the needs and mechanisms for, and the desirability and efficacy of, transportation improvement. We then looked at the congressional level of government and identi- fied barriers to innovation that are somewhat similar to those in the executive agencies: inconsistent leadership and lack of long-term plans and policy commitments in pursuit of transportation goals. l99
In addition, two other specific barriers at the congressional level were identified: (l) Too many oversight committees with conflicting objectives and overlapping authority. (2) Uncoordinated transportation-related activities undertaken in response to a variety of constituencies. In the industrial/commercial setting,barriers to innovation are as follows: (l) Size, maturity, and massive infrastructure of the component companies, characteristics that are not generally conducive to agile innovation. (2) The low rate-of-return characteristics of operating companies in the transportation business. (3) The inherent difficulties in predicting market response and economic impact of significant changes in transportation system opera- tion. (4) The high-cost/high-risk nature of necessary full-scale, real- world proof testing. (5) The natural resistance to change that characterizes many individuals and organizations until threatened. In the research setting, academic institutions were singled out for special consideration. This is because of their value as a source of new, innovative talent for the transportation industry. Lack of a steady supply of technically superior talent is certainly a barrier to innovation, and yet it seems that this supply is threatened by scarcity and lack of continuity of funds needed to support academic research activities. Request for proposal grantsmanship for unrelated agency or mission- oriented projects does not solve this problem and may even compound it by absorbing talent and resources that could better be used in more basic research and teaching. Other barriers were identified that are related to legal, societal, and general technological matters. I will just note these quickly. The patterns of laws having some bearing on transportation matters has been established for several decades, and certainly, at least in the areas of patent policies and antitrust legislation, there should be some critical reviews to ascertain the deleterious effects this fact may be exerting on innovation. The general uncertainties in our society, created by such things as inflation and energy worries, certainly also affect innovation by skewing new developments toward small, short-term, low-risk projects. In the general technological area, it was felt that we are not getting nearly enough spin-off from foreign and nontransport R§D activities. These remarks have summarized the barriers. Now I will outline what we think might be done about them. Part A. To provide potential innovators with a sound knowledge of federal priorities, resources, commitments, and philosophy per- taining to meeting transportation needs, DOT should take the following steps: 200
l. Prepare and issue an annual long-range national transportation plan. This plan should spell out policy initiatives, capital assistance priorities, and R§D priorities. Management of the program for meeting these initiatives should be included. 2. Include the interrelationships between DOT and other regulatory agencies in the plan, and, importantly, show a rationale for the evolu- tion of nonoverlapping regulations. 3. Develop program criteria for innovative content, and use them to test the department's initiatives and programs. 4. Define priorities and resource allocations for at least the next l0 years. These definitions should be included in the plan and should relate to DOT's role in sharing information, providing leader- ship to state and local governments, aggregating markets, pursuing high-risk R§D and defining needs and specifications. Part B. Changes in the current process affecting program acceptance and definition and coordination should be made to foster transportation innovation. Therefore DOT should: l. Request the legislative branch to consolidate its authorizing, appropriating, and oversight committees for all modes of transportation, combining the functions in a single committee in each branch of the legislature. 2. Emphasize the sharing of assistance and information with state and local agencies, stressing innovative management approaches rather than technological approaches. 3. Involve operators of transportation systems in the cooperative generation of programs and functional specifications that foster inno- vative products and services. Part C. The panel believes that the government executive and legislative programs, processes, and leadership lack the stability needed to induce innovators to take entrepreneurial risks. To ameliorate this problem, DOT should: l. Define and implement actions to assure continuity of manage- ment and funding for these programs. 2. Relate DOT program structure to mission areas and priorities defined in its annual plan. 3. Create within the office of the secretary an authoritative mechanism responsible for overseeing the roles, functions, and missions of the operating administrations from an innovational point of view. 4. Develop a continuing educational and research program with the academic community. Part D. In view of the fact that transportation contributes a whopping 20 percent of the GNP, the panel believes that Congress should establish a special financial mechanism, analogous to the export/import bank. The bank would be empowered to produce variable-interest loans and/or assistance funds and loan guarantees to communities and to private enterprise to develop and test, over appropriate periods of time, innovative transportation systems and services. Criteria for the selection and evaluation of these projects would be based on national goals with regard to energy, natural resources, environmental quality, society, the economy, and so forth. 20l
Such projects would serve to consolidate disparate local interests and objectives and would provide a powerful stimulus to innovative trans- portation and community development. DISCUSSION BISPLINGHOFF: Now, is there anything anyone would like to say? LIST: I am a little concerned about one thread I see running through what you say. It is that the government created the problem, and somehow in all of its wisdom it will solve it, and that if we could just get a little less government, the prospect for solutions appearing would probably be much greater. WELDON: I did not mean to imply that the government necessarily caused the problems. LIST: Well, I do. WELDON: However, since we are directing this to DOT, clearly, we should be trying to help DOT solve the problems wherever they were created. As I said when I started, it is a very difficult thing to try to improve. BISPLINGHOFF: That is a good comment. Let's have some more like that. PIKARSKY: Along the same line, you started by identifying some of the barriers. You indicated that one barrier was the large number of state and local governments that are diverse in form and that is a key barrier. You indicated that DOT should establish priorities in trans- portation funding. My reaction to that point was that we have substan- tial regional differences and that, desirably, we should have a little less government. We should have the performance requirements of our goals and objectives identified at the federal level, but allow regional areas to resolve their local differences. At the end of your remarks you touched on that by talking about a variation of the import/export- type bank facilities, which indicated we should encourage local initia- tives and innovation. I think that there is a contradiction in that espousal in comparison with federal transportation requirements. WELDON: Well, the two definitely tie together. The barrier state- ment was that there is a great diversity of local opinion within a regional area, and that is an inhibitor to innovation because the customer cannot agree on what is needed. Now, at the end, the intended cure for that is this analogy to the export/import bank, a way through funding to try to get these local objectives together. PIKARKSY: Let me suggest that, perhaps, one of the difficulties at the regional and local level is the specific requirement for agency cooperation and coordination that the federal DOT establishment requires. Let me give a specific example. In the c'ase of coordinated comprehen- sive planning in an agency, DOT and other agencies have tried to define a specific regional entity; one entity for a region. In the Chicago metropolitan area, for example, where we have had at least some politi- cal influence to modify that, we have a series of about 8 or l0 agencies, some ad hoc, some legislatively created, that contribute to 202
that overall coordination. Through that informal activity there has been, generally, consensus among all the agencies in coming up with the unified plans for the area. But this arrangement has come about through a political interaction that is not politically attainable in many other regional areas of the country. So again, it may be that the federal establishment is trying to identify specific forms of structures of agencies, instead of setting performance requirements for coordination, and that, perhaps, creates the problem. WELDON: I am sure that is correct, yes. BISPLINGHOFF: Are there other questions or comments? SHIPLEY: I would like to comment on the diversity question, too. Generally, I think we should not condemn diversity, because very often it is that sort of thing that leads to innovative approaches, or different approaches that stimulate new things. And so, I think you need to say what you are alarmed about in connection with diversity. And one other point was a recommendation to reduce risk. Well, as we become more and more imbued with a philosophy of a riskless society, it seems to me that that is a dead hand that squelches most willingness to change. I think what you are concerned about are the uncertainties because of short-term programs, put up on the part of Congress,and others, which make it very difficult to foresee more than two or three years. Most innovation in transport will require longer than that. So, I think it is not the risk, per se, which would be involved in any kind of innovative development for external reasons, but it is the uncertainty owing to the shortness of certain kinds of programs. WELDON: I have to agree with you. It is a matter of degree, though, I think. It is a question of reducing risk to the point where the industry will put their own money into innovative, real-world experiments, and, on the other hand, we certainly think that our recommendations about the longer-term stability will help in that direc- tion as well. BISPLINGHOFF: Dr. Chesebrough. CHESEBROUGH: In your statement about the customers, I do not think I heard reference to people. You got down to local governments and local operating units, but they are not the customers. It is people who are the customers. Now, admittedly, the local governmental units and operating entities might be the agents of and the spokesmen for the people, but we have plenty of examples in this country in which, because of our political process, they do not always accurately enough reflect the real desires, willingness, and interest of the people. It seems to me that this point deserves a little more mention. WELDON: I agree with you completely. I did not mention people, but I was not leaving them out intentionally. We just did not know what to say about them. You are right. These local government units do not always represent the people, and sometimes that results in a rude awakening in the marketplace later. DEAVER: I just want to double-check what you said, Foster, although it may be somewhat repetitious of things that have been said already. In perceiving the problem of innovation in transportation, the kinds of solutions you come up withâpart of it is simply reorgani- zing what you have, doing a little better planning and coordinatingâ 203
sound suspicious to me, in terms of adding additional resources. You talk about a bank. This would take resources and, in effect, subsidize a particular aspect of the economy. It sounds as if there would be additional bureaucracy involved in some of these planning and coordina- ting functions. I am not sure it would have to be, but it sounds to me as though we are talking about a bigger governmental role, and a sub- sidy to a particular area. I wonder if that is the direction that this group really wants us to take? WELDON: I do not agree with part of your statement. The analogy to the export/import bank; I would certainly not call that a subsidy. The export/import bank has been very successful and at practically zero cost. Another analogy is the so-called "MIKI" arrangement in Japan, where the consortium of banks, operating with industry and government with federal goals in mind, has been enormously successful in pulling Japanese industry up from really nothing, to a world leader. So, these schemes have been tried and proved productive, and I would not call that a subsidy. I cannot argue with the other parts of your comment. We do not think we are recommending a significant addition to bureaucracy, although we cannot really control that. It depends on how it is done. Hopefully, we are adding very little, and perhaps, with better planning, there will be an opportunity for savings along with it. GREEHAN: I want to make a comment about one point where you indi- cated that the size, maturity, and massive infrastructure were barriers to innovation. That is not necessarily true, although it is frequently true. We have some large industries that are innovative, and they have size, maturity, and a large infrastructure to go with them. I think our airlines are doing pretty well. The telephone industry and the communications industry are both large, and have maturity and large infrastructures. WELDON: I agree with you completely. I did not mean to wrap all components of the transportation industry into that statement. Many equipment suppliers are very innovative. They have to be to keep up with the competition. The reference to infrastructure was the old stuff, 250,000 miles of rail track in place, 42,000 miles of interstate highway. That is pretty heavy infrastructure. Now, I want to add one more thing to that. In my view, if we are innovative enough, the right of way represented by that infrastructure is invaluable for innovation. How in the world could you get that much right of way for guidways and things, if they did not already exist? BISPLINGHOFF: Foster, one of the things that we have struggled with in the committee are the questions of what is different about a desirable setting for environment in transportation vis a vis other fields and how does it differ, perhaps, between the modes. We heard Ward Haas tell us that for consumer goods, the main job of govern- ment is to create a good economic environment and control inflation and then get out of the way. The private sector will then do every- thing that is required. Now, that obviously cannot be said about many of the fields of transportation. As you pointed out a moment ago, the highway system depended on a big government intervention in that 204
business. What do you have to say about that question? It seems to me that it is a pretty fundamental one that we ultimately need to talk to. WELDON: I have puzzled with that one, and there are all kinds of ways you can slice it. I have not come up with a very satisfying answer. I think one difference is that in our society there is a feel- ing of almost a right, a constitutional right, to mobility. And because the government is involved in transportation operations, there are always pressures to keep costs down to preserve this right of mobility. I do not know if that is an important factor, but it certainly is part of the reason why transportation operating companies operate at very low return on investment and many are subsidized, which again, brings in the government and creates a situation that is quite different from free operation of the marketplace. I am no economist, but those are a couple of things that I would mention. BISPLINGHOFF: Does anybody in the audience have any comments on that point? PINNES: I have just a little variation on what Ray was saying. When you lump all of transportation together, I think it is still worth recognizing that we have the best air system in the world. We have the best highway system in the world, and we probably have the worst rail system in the world; yet they all operate under the same general rules. Now, what makes one good and one bad? WELDON: I cannot answer that question. I agree with you. LIST: I would like to make one comment. For one, we do not have the worst rail system in the world. PINNES: The second best? LIST: No, it is probably the best rail system in the world as far as the freight shipper is concerned. The impression that the rail sys- tem is not good comes mostly from the passenger end of the business. It is fair to say that the passenger transportation in Europe is head and shoulders over anything we offer here on the railroad. But the freight transportation is exactly the other way around. We do not want to for- get that. WELDON: May I put in a comment there? I have to agree that the freight part of the rail operations must be pretty efficient or the trip-end problem in pickup and delivery of goods is pretty lousy because I discovered some remarkable statistics the other day. Forty percent of the huge contribution to GNP that freight shipping makes is from local trucking, that is, the pickup and delivery of goods in metropoli- tan areas. Now, contrasted to that, the total cost of line-haul truck- ing nationally is l0 percent less than the cost of local trucking, and, lo and behold, all railroad freight, despite its enormous tonnages, is only about one-third as costly as local trucking. So, it would appear that rail is operating very efficiently in the freight area. BISPLINGHOFF: Foster, one of your points is that there is a lack of long-term plans in the DOT. I wonder if a long-term plan of a federal agency ever has any meaning. I have seen a lot of long-range planning done mainly for the benefit of public relations in the Congress, but when it comes right.down to it, it had little relationship to what actually happens. Is that very important? 205
WELDON1: Maybe you are too close to it, Ray. I think the way I should have stated it is that a perception of stability needs to be sent out there into the world. Innovators, as I mentioned, in these uncertain times are inclined to go for short-term, small, low-risk innovations. If they could just perceive some higher degree of stability in government programs, I think it would help. It does not necessarily have to be so, if the innovators perceive it in that way. CHESEBROUGH: It just occurs to me that perhaps the decline of the passenger rail system in this country is a perfect example of the work- ings of innovation in transportation by private industry. Industry developed different ways of transporting individuals that have more appeal to the individuals, and therefore people are using those innova- tive methods instead of continuing with one that existed originally. I would also echo what the gentleman said about the freight system. I managed a relatively large enterprise in France for a few years. There was a saying over there that if you really wanted to lose something, ship it someplace on the railroad. BISPLINGHOFF: Foster, I wonder if you would be able to tell us what your most important recommendation is? WELDON: I am an innovator, so I like the export/import bank ana- logy and I do not think it would cost much. That would be my favorite, but you ought to call on the other members of my panel. They might not agree. BISPLINGHOFF: Are there other members of the panel here? I see Ed Gray. What is your most important recommendation, Ed? GRAY: Well, as we looked at the situation for the transportation activities of DOT, I was struck by the remarkably small amount of money they spend on research and development in comparison with the part that transportation plays in their total R§D. It is a very minuscule part, and I believe that one of the things that would help stir innovation across the board would be more vigorous and aggressive programsâa better stated program with longer-range objectives of what needs to be accomplished in the whole field of transportation. They should put some money behind an assistance-type program without major strings attached to it and allow for the innovative abilities of the private sector to come up with ideas, and put some seed money behind this in order to get some ideas sponsored and carried to the point where we could see what their contribution to the transportation field might be. BISPLINGHOFF: Good point. 206
INTERACTIONS OF GOVERNMENT. INDUSTRY. AND ACADEMIA BY MARTIN GOLAND Our panel was requested to concentrate on the interactions between government agencies, industry, and universities and how these inter- relationships can be optimized in DOT policies and program planning to further innovation in the transportation areas. As a framework for our discussions, we chose to appraise the role of each of the three participants in turn, with the expectationâas indeed did happenâthat the desirable functions of each would be clarified as the exchange of ideas progressed. Our panel was an exemplary one, including persons with long experience in transportation research, development, and utilization, and a wide variety of past program experiences were brought up to illustrate how university-government-industry collaboration could be made truly effective, as well as instances where the results were less than desirable. It is, of course, impossible to condense in a few minutes the many points raised during a full day of deliberation. I shall try, however, to summarize the principal conclusions we reached, noting that much material recorded in the full transcript is worthy of detailed study. Considering the role of universities, it was unanimously agreed that university engineers and scientists must play a strong role in DOT's formulation of an innovative transportation research program. In addition to the advancement of knowledge and understanding, the univer- sities are also the source of trained personnel who are essential for the future health and well-being of all transportation activities span- ning the spectrum from theory to practice. It was also agreed by the panel members that DOT has thus far not been particularly successful in building sound relationships with the university community. What is needed above all is the establishment of a long-range pattern of DOT-university collaborations based on two essential features- stable programmatic policies and relatively stable funding levels. It was pointed out that DOD has recognized the importance of basic research as a necessary element in achieving its mission objectives and has taken direct action to insure that relationships with university staffs are maintained at a mutually supportive level. A similar situation pre- vails within the NASA program. DOT, on the other hand, has not given this area sufficient attention and in factâas was noted by a university member of the panelâtransportation research and education, with the 207
exception of aerospace technology and a few other special-interest sec- tors, are not particularly visible commodities on the campus scene. In building bridges to the university, the panel felt that the primary roles of the university must be kept in mind. These are the conduct of basic research and education. Too often, university staffs have become occupied with applied research and development activities for which they are not well equipped in terms of either environment or talent, and for this reason their project performance has proved to be inadequate. The terms "intellectual capital" and "intellectual capacity" were used during the discussion to portray the proper roles of the university. The former refers to the university responsibility to en- large basic knowledge and achieve deeper understanding; the latter sig- nifies the university responsibility to train and develop innovative students who will not only serve future university needs, but also flow outward to industry and government to develop and operate the transpor- tation systems of the future. It was noted that support for university research and education is not solely a government responsibility. The transportation industry must also play its legitimate role in providing financial support as well as a continuing dialogue with faculty and students to highlight research potentials and a better understanding of industry affairs. University research, even though basic in nature, should not dis- regard the innovative areas that sometimes lead to inventions. A panel member remarked on the lack of prestige in university circles often accorded the issuance of a patent as compared with the prestige of a peer review publication. As an extension of the university discussion, the panel considered the need for establishing "centers of excellence" in selected transpor- tation areas. These are visualized as R§D organizations established outside the traditional university structure (although they may in some cases be university-affiliated). Their charter would be to conduct applied research on generic (nonproprietary) problems that, for a variety of reasons, are not adequately dealt with by private industrial laboratories. They can also serve as the focal point for establishing the feasibility of innovative transportation concepts by carrying them through the advanced development stage. There are numerous examples of such organizations that have made significant contributions to the advancement of their fields of specialization, and the panel believes that a study is in order to determine whether they are needed to accele- rate progress in selected transportation disciplines. Turning next to the government role, we first appraised the degree of success achieved by federal government sponsorship in various areas of transportation research and development. Why, for example, is the federal highway program generally accepted as successful and cost- effective, in comparison to such efforts as Morgantown and Transbus? In the case of the highway program, the general consensus of the panel was that its relative success arises from two factors. First, the government effort is supported by competent technical staffs at the state and municipal levels. Equally important, the basic funding for the highway program involves cost-sharing by the local agencies. The 208
local agencies (rather than the federal government) are, in effect, the purchasers of highway construction and are responsible for their long- term serviceability as well, and they are directly providing a portion of the total cost with their own dollars. Insofar as Morgantown and Transbus are concerned, the federal government was the funding source, but in neither case was the govern- ment to be in the role of purchaser and operator. Divorced from opera- tional experience, and subject to a variety of political constraints and pressures that distorted original program objectives, the govern- ment attempted to dictate the details of vehicle and system designs, which proved to be unacceptable in the marketplace. In a wider concept, the question arises as to the extent the federal government should become involved in large applied research and development programs in transportation areas where they will be neither the direct purchaser nor the user. Should not the federal government be largely restricted to fundamental research, and to advanced develop- ment of innovative concepts only to the extent of demonstrating feasi- bility? With feasibility established, implementation of a new concept should be transferred to those who must ultimately be responsible for its public acceptance and marketplace success. Another clear example of positive federal government involvement in transportation is in aircraft design and air traffic control. In the former case, NASA (formerly NACA) restricted its role to providing the fundamental information needed to support advanced aircraft con- cepts, leaving it to industry to design commercial transports and to DOD to purchase military aircraft for its own use. In the air traffic control instance, the government is both the purchaser and the user of the system, with direct accountability for its effectiveness. The conclusion must be drawn therefore that when the federal govern- ment plays a controlling role in market-oriented development programs in areas where it will be neither the direct purchaser nor the end-user, the results tend to be less than satisfactory. This is not intended as a criticism of the individuals who represent the government, who are usually highly motivated and conscientious. It appears to be a conse- quence of the political process itselfâof government agencies making decisions in unfamiliar arenas, without the discipline of market forces to insure accountability and determine the level of success. The panel made note of one important function in which the govern- ment is, in effect, a "user," namely, that of regulations. The govern- ment has mandated a multitude of environmental, safety, and other kinds of regulations that are intended to protect the public interest and welfare. The government must therefore take the responsibility for insuring that regulatory specifications are indeed in the overall public interest and as socially cost-effective as circumstances permit. Yet, many regulations have been instituted on the basis of incomplete infor- mation and, in some instances, in an almost arbitrary fashion based on congressional pressures. Even granting that some action is better than inaction in the beginning, the panel noted that government research and fact finding to support regulatory decisions and modifications have been weak efforts, underfunded, and given inadequate attention. Although 209
other examples could have been quoted, railroad safety legislation was raised as a case in point. Another observation made by members of the panel related to the lack, within the Department of Transportation, of an individual at the assistant secretary level or its equivalent who has the responsibility for coordinating and overseeing the technical affairs of the department. The need for a competent technical person with these functions has been apparent on past occasions. It was also noted that external advisory committees are used sparingly by DOT, whereas most other agencies have found it desirable to utilize such groups at both the senior policy and the specialist levels. Finally, the panel turned its attention to the industrial sector. As expected, the earlier discussion had already touched on many of the issues relating to university-government-industry interaction. It was emphasized that the primary role of industry is to produce and operate the transportation systems that people use. The market- place is an unforgiving taskmaster; the private company that produces a theoretically and socially ideal transportation system or product but that does not attract buyers and users will quickly find itself in deep trouble. The free market is still the most sensitive barometer of public acceptance, and it is for this reason that industrial talents, experi- ence, and attitudes should be enlisted to support innovative transporta- tion concepts at the earliest practicable stage. We have, of course, already emphasized this point earlier in the discussion. DISCUSSION BENINGTON: Let me ask a question about the role of the government in applied research. We agree with you in the air traffic control area. We also agree with you in the automotive area where the government has almost no direct hand in the marketplace decisions except for the auto- mobiles it procures itself. In three areas, the rail, the construction of highways, and the urban mass transportation, the government is cer- tainly not the user or the operator. On the other hand, in the case of mass transportation on the highway, the government is involved in the financing. In the rail, there is some financing because of subsidy, and there is certainly a great deal of regulation. But we concluded that if there were no government research and development, no govern- ment active initiative for innovation, then the level of research and development in those three areas would be virtually nil and that the operators, the buyers, and the suppliers are, for a variety of institu- tional and financial reasons, just not able, motivated, or capable at this stage of conducting any kind of noticeable research and development program. Therefore I wonder how your stricture against the government applied research would apply to any of those modes? GOLAND: Well, I am not going to say that this question is one that should be couched in black and white terms, but I am not going to depart very far from our stand. There are other members of the panel here who I hope will contribute to this discussion. In terms of mass 2l0
transportation, first of all, we certainly cannot look at past experience and decide that the government has contributed very much to putting better buses on the road. In the area of high-speed ground transporta- tion I would say there is a legitimate role for the government in explor- ing in a preliminary way new possible modes; magnetic levitation and air cushion vehicles are examples from the past. But let's look at that history. The government had sound plans to start with, but once it became quite apparent that these were uneconomic and undesirable direc- tions, the government programs could not be easily shut off. The inertia of government programming in these areas expended many millions after, early in the game, it became apparent these were not promising directions. I think it would be very desirable if Shef Lang would say a word about the railroad situation. LANG: I do not think we want to get into a long debate on this question. There obviously are people in the audience who, for good reason, have some different opinions on why things are happening the way they are in the railroad industry. But I do not think there is anything in our experience in applied railroad research that would lead to any conclusions that are different from that general one that the panel reached, namely, that the government, where it is neither the user nor the buyer, can be expected to do a bad job of applied research. The experience in the urban transportation program is very clear and very discouraging. The experience in the railroad area, where there has been a good deal of government applied research in recent years, is almost as bad as the urban transportation applied research experience. The experience in the highway area has to be differentiated from the experience in rail and urban transportation. Perhaps, in view of the comments and questions that have come up, a word or two on highway research is appropriate here. A large share of the applied research in highway design, construction, maintenance, etc., that has been done over the years (most of which I think people would count as having been pretty successful in the use of research dollars and research resources) has been done by or at the direction of those agencies that were actually building the highways or maintaining them; that is, by the state and local highway departmentsânot by the Bureau of Public Roads (now the Federal Highway Administration) here in Washington. You could get an argument, and if anybody is here from FHWA I would expect to get such an argument. But I think that on the whole those applied research pro- grams that the Federal Highway Administration has run directly here in Washington have been less successful in terms of their use of resources and the value of their results than those programs that have been managed directly (albeit using federal dollars) by the actual customers or users of the technology in question. John Young, for one, could speak to how this has worked in other areas that have involved government applied researchâbut just in trans- portation we have a rich experience of total, or at best, partial fail- ure of applied research programs managed by government agencies that are not and have not been either customers or users of the resulting technology. 2ll
To go back to the rail case, which you asked me to speak to direct- ly, that has very clearly been our experience. The notion that the railroad companies, individually and collectively, are both unwilling and not competent to manage their own program of applied research is on the face of it nonsensical. The industry is, by any measure, large enough to support its own research program. It has not seen fit to support a large program of applied research, but the kind of incentives that are going to produce an effective program of applied research in rail transportation can come only from the railroad companies, their customers, and their suppliers. There is every evidence that where they have seen fit to research their problems, they have done vastly better than the government in research in precisely the same areas. We have many detailed examples of that. I, personally, cannot find anything in the transportation area to argue against the general conclusions that our panel reached that govern- ment ought to get out of the applied research business where it is not its own customer. It was a conclusion on which I think there was com- plete agreement in a panel that was made up of industry, government, and the academic community. There is one further comment that I think fits in with what you had to say, Martin (Goland). There was also general agreement that the Department of Transportation, which has a legitimate responsibility for innovation in the transportation sector, could, where it has direct financial involvement in programs such as the Urban Mass Transportation Assistance Program, stimulate more innovative activity. It could do so by making its grant money contingent on a certain commitment by the operators and users of transportation and the purchasers of transporta- tion equipment (e.g., the local transit agencies who receive grants from UMTA) to expend some share of that money for something that could be legitimately called innovation. This is, in effect, the procedure that has been so successful in the highway program. I think it was the Highway Act of l962 that explicitly set aside up to l l/2 percent of the federal grant money given to the state for planning and research pur- poses. It was not a requirement that the state spend that l l/2 per- cent, but they were allowed to do so. Most of the states have spent that share of their federal grants or something approaching it. It has not all gone for research. A good deal of it has gone for planning, but the relatively successful highway research program that we have had in this country is in no small part the result of this feature in our federal grant program. There is no question but what the United States is still way out in front in most areas of highway technology. This can be traced back to that financial stimulus and encouragement that was provided explicitly in the federal highway grant program. What our panel was discussing yesterday was the possibility that that principle could be extended to other DOT grant programs, most importantly, the Urban Mass Transportation program. Thus federal money could be used as both a carrot and, to some extent, a stick to get the local governmental units in urban transportation to start thinking in more innovative terms and to start working on their own new technology, instead of sitting back and waiting for the federal government to do it. 2l2
BISPLINGHOFF: Mr. Rogers, you had something you wanted to say? ROGERS: I would like to see if I can assist the past discussion by making the following observation: We are really talking about two different things: one is the proper role of the federal government in a given area (such as applied research or technological development) and the second, a related but separate subject, is how well that role is being discharged. They are two quite different things. For instance, I would point out that in the most recent war that the country has had, the United States did not win. Whatever other conclusions we may have drawn from that result, we did not conclude that therefore there was no role for the military forces in the defense of national objectives. Another instance relates to agriculture. Government does not purchase, to any great extent, agricultural products, but the basic and applied research that the country has done over the past century in the agri- cultural area is probably one of the outstanding examples of all time of how government can assist such an area. If we are concerned about the present arrangements of organization, or scope, or staffing, or even about the way that the funds are provided, to transportation- related research and development activities, then these matters should be examined. But I do not think at this point that, because of what is described as poor performance, it necessarily follows that there is no role for government in this area. The second observation I would make goes back to a different sub- ject, and I should preface my comments by saying that I love everybody, particularly my friends and colleagues in the universities. I heard said that the research-related funds that had been given to universities in the past, and accepted by them, were not used in a satisfactory fashionâthat is to say, so as to increase the universities' capacity and to increase basic transportation knowledge--and that those funds were therefore misspent. I have held positions in the federal establish- ment where I have had the responsibility for passing out funds to universities for the conduct of research. I can assure you it would have been a very short meeting if any senior university person had come back to my office, after having taken the federal taxpayer's money and having spent it, and told me I should not have given it to him; it would have been a very short meeting, indeed. If the universities are con- vincedâand I do not look to the past, I look to the futureâthat the things that they are being asked to do by the Department of Transporta- tion, or others in the transportation area, are not what they should be asked to do, then I would suggest that these senior university people should be exerting their efforts (l) at home to see that their colleagues do not take such funds and therefore misspend them and (2) in Washington, with the Department of Transportation and other offices, to see that the funds are spent under more appropriate and, from the universities' and the country's point of view, more productive circumstances. GOLAND: I think I can answer rather briefly a couple of points you have made. First of all, there is not any question that the agricultural extension service has been an enormously successful program. But, for historical reasons--and history is important in its own rightâit does not constitute a model of the kinds of problems we have today. Witness 2l3
the attempts in several analogous government programs to institute a similar type of service to meet the technological needs of small industry; the State Technical Services Act is one example. You may have your own opinions as to how successful they have been in attempting to follow the agricultural model. My opinion is that they have not been very successful at all. Now, in another transportation field, let's take an outstanding example on the positive side. The old NACA used to have as one of its strictures that NACA does not build airplanes, although later in their program they did contract with industry to construct a series of experi- mental aircraft to clarify certain full-scale effects. But the imprint of NACA (now NASA) is on every airplane that flies anywhere in the world. They developed the information that the industry itself used for new designs and for product improvement. I will carry the philosophic argument further. Remember all the dire predictions that United States industry could never develop another transport airplane because govern- ment consortia abroad, with government money, would overwhelm our private company capabilities? Yet, who is today laying down a series of excellent new-generation transports? Boeing and other members of private industry. In terms of this university support question, I do not think we were being critical of any of the partiesâat least I hope not. We were making an observation of trends to which all parties have contri- buted and that go beyond DOT policies alone. It is that we believe universities have gradually moved away to some extent from what their central role should be. I would rather that be an observation than a criticism. It is simply an issue we think needs reconsideration. BISPLINGHOFF: Very good. Dr. Goldie, you had a comment? GOLDIE: I would like to take just one narrow area and attack it in specific. The suggestion that the urban mass transit funding use the same l l/2 percent idea that the Federal Highway Administration has used. We did discuss that in our panel, but let's take a specific case. Let's take the case of a city that has not now or ever had any mass transit, other than buses. It would like to enter into the con- struction of a subway system or, perhaps, a people-mover system--what- ever. And let's say that the scale is $300 million, just for a number; l l/2 percent of that is $4.5 million, if I have calculated correctly. Now, are they going to take that $4.5 million and develop a new and innovative concept for mass transit. No way! It is going to cost $l50 to $200 million to develop a new and innovative concept. This is one problem. The second problem is who, in that city, is technically capable of leading that kind of an activity? The city engineer? Have you ever met any of them? I have. They are not. Is the political structure capable of managing this kind of activity? The only contracting mode they know is fixed price. You do not develop new innovations on that basis. Although I agree with your fundamental principle, we have to bend our principles to face facts. There is no way of inspiring development in mass transit, other than through UMTA. BISPLINGHOFF: Martin (Goland), do you want to comment? 2l4
GOLAND: Well, I would rather have the audience comment on that. I think I have made my point. The record of UMTA has scarcely borne out your conclusions. Sorry! LIST: As a mass transit innovator, I may not be readily reconized, but I am working in the area and my inclination is to agree with the panel l00 percent. BISPLINGHOFF: Dr. Herwald. HERWALD: My comment is, I believe, related at least to the last discussions on mass transit RfJD. One of the problems is the turf that you are operating on. Innovators do very well when they can operate on virgin turf, that is, in an area not yet developed. They can always scramble and get enough money to proceed. If the innovators succeed, the payoffs are generally good because the development can be replicated on virgin turf in other places. One of the big differences between inno- vation in the transportation system and that in some other areas, is that no single innovator anywhere can make anything but a minor dent in the existing transportation system. He cannot revolutionize it by himself. He cannot gamble by himself. He cannot do what Colonel Sanders did, start out on a different approach, a new idea, that did not directly replace something else, and replicate it over and over again. In that kind of circumstance, it is a little hard to see how government inter- vention is either needed or will help. However, I happen to agree with the conclusions you have come to about how the government ought to intervene; in the transportation case it cannot be done everywhere. In the current transportation modes the infrastructure is basically in place. There is no way it can be replaced quickly, but it might be done over a 25- or 30-year period if you had that brilliant innovative idea. There- fore the idea of planting a transportation innovation as a demonstration-- and this comes back to the subject we are onâin order to see if it might work if replicated, is one that makes sense. While I can think of arguments on either side of the last debate, I believe that in certain cases, such demonstrations should be attempted, but I must add that I think they could be done better in the future than has been the case in the past. LIST: I was interested in your comment about the importance of developing intellectual capital, which I will interpret broadly. I think one of the reasons, in addition to what Shef Lang mentioned, why the highway program went well in the period in which it was important for it to develop was another early requirement in the federal aid high- way legislation. Provisions in the legislation required that to be eligible for federal aid, the states must develop competent highway departments. This, along with the Highway Planning and Research l l/2 percent funds, very often on the planning side directed in quite some degree by the Bureau of Public Roads with a hands-off but cooperative attitude, was I think responsible for the advances that were made. And, on the planning side, to distinguish that from the technological or physical research, the Bureau of Public Roads, with the statesâbecause of the states' participation as users and therefore their willingness to adopt these things and try themâmade enormous advances in the metho- dology in transportation planning. In fact, they laid the basis for the 2l5
whole field of transportation planning we have today. I think it was the combination of these two things, the stick and the carrot, that required a competent user, and at the same time helped the user to develop what was necessary. PIKARSKY: As someone who has been in the urban mass transit industry for many years and is considered within the industry to be an innovator, I think there is a fundamental defect in this panel's comment about new technologies of the future. I believe that most marketing studies indicate that the greatest factors influencing the use of tran- sit are convenience, time, and dollars. There is the perception within the industry that we have to be spending time to increase the reliability of components, the attractiveness of the system, and on-time performance, and that the perfection of these will increase ridership. This is not true. There is resistance in the industry to complementary, non-fixed- route, service. There is a perception that there are ways of increasing the performance and accessibility of the existing systems through auto- matic vehicle monitoring and control, schedule changes, and many other actions that are, perhaps, underfunded at the present time. We should be using the states of the art as they exist and pressing to improve them, rather than trying to be in an exploratory mode in most of the technology that we have not used. It is not a wise investment to press to develop new states of the art when we have not really managed ade- quately to develop the technology we have now. I know that in this particular instance, one of the major industrial giants, IBM, had made a commitment to go into an automated personal rapid transit development, but after evaluating the market they backed out completely. They did so on the basis that the direction for transit should be in improving many of the state of the art mechanisms that we now have. 2l6
ECONOMIC INCENTIVES TO INNOVATION IN THE TRANSPORTATION SRHTOR BY BRUCE S. OLD The subject of economic incentives to transportation largely involves regulatory policy, tax policy, and antitrust policy matters. Therefore, this panel decided to concentrate on these three subjects. Since there are very complex questions that have been studied by successive federal administrations for many yearsâin fact, the tax business has been studied by Treasury since l789âwe do not presume to provide definitive answers as a result of this short workshop. Rather, we would hope to illuminate, based on our extensive multidisciplinary discussions, some important areas for further consideration by qualified groups of experts The transportation sector is different from most other sectors of industry in that it includes the public and the government as well as industry. Both the government and the public sector tend to bring pressure on the limited capital available to the industry sector by forcing it to spend a disproportionate amount on mandated capital ex- penditures, rather than elective capital expenditures, which include innovation. Another difference faced by the transportation sector is that it has been surrounded over many years by numerous restrictive regulatory actions and agencies. These have had the effect of preventing change and discouraging innovative management. The findings of our panel I will now summarize; first in the area of regulation. In transportation, the regulatory activities include the following: safety standards, environmental standards, mileage standards, and rate and route restrictions. Over the past three decades, prices in transportation have seldom, if ever, reflected true costs. Now, rather suddenly, we find ourselves faced with rising fuel costs and safety and environmental standards, which require many changes in the automotive field, our major mode of transportation. Due to bureaucratic procedural complexitiesj frequently unrealistic and rapidly changing or escalating standards, the cost of developing regulated new products and processes has increased alarmingly, without necessarily bringing commensurate benefits to society. The large mandated capital investments required by the automotive companies have overburdened the limited internally generated capital to the extent that the corporate life of some of the industry is in danger. Because of the uncertainties introduced and the unavailability of capital, only limited investment has been devoted to self-determined innovation to improve productivity in products. 2l7
The administration has now recognized this major problem and the president has issued Executive Order l2044. In essence, this order requires that the public must be made aware of the risks, costs, and benefits of regulations before they are enacted; that priorities should be established; that alternative choices should be made clear; and that regulations should be systematically reevaluated. Our panel unanimously endorsed these aims and also pointed out that the government should further endorse innovation by utilizing performance rather than design standards in procurement. The rate and route regulatory entanglement has affected other por- tions of the transportation sector in a different manner. For example, it has so stifled and nullified management initiatives that management capable of inserting new and innovative developments is just not attrac- ted to the railroad industry. Motivation to change this situation will be mentioned briefly under the antitrust section. It was noted that advances by the Canadian National Railroad are, indeed, occurring and have followed the deregulation of railroads in Canada. Now, as to tax policies, the Department of the Treasury is consi- dering changes in depreciation rules in order to increase badly needed cash flow in the transportation and other sectors. This problem has been compounded by the recent increase in inflation. There is a bill before Congress called the Jones-Conable bill, which is currently being debated. The DOT appears to be taking the attitude that it should tilt depreciation liberalization toward equipment and machinery, rather than toward structures. By this tilting, I mean that the current discussions consider that depreciation periods as short as about five years should be assigned to equipment and machinery. It may even be that the link between depreciation and life of assets will be broken. DOT is not in- clined, at this time, to change the current tax rules with regard to expensing research and development. Our panel concurred with the policy of retaining current R§D tax rules and urged early moves toward liberalization of depreciation rules on equipment and machinery. This should increase the capital funds available, but it should be pointed out that this would not guarantee that such funds would be earmarked for expenditure on innovation. It was recognized this would not favorably affect the railroads, except in rare cases, as they now pay few taxes. On the matter of antitrust policiesâtwo regulatory agencies with which the transportation sector has had to contend for many years may, indeed, disappear. The Civil Aeronautics Board has been placed on a termination schedule, and it appears that the Interstate Commerce Commi- Commission may follow about five years later. A possible problem is that the residual responsibilities of these agencies may be assumed by the Department of Justice. Our panel endorsed the demise of the regula- tory agencies just mentioned, although not all railroad or trucking groups agree. However, we urge the study of policies that Justice should adopt. Justice should spur development of the transportation sector rather than attempt to restrict productive growth. For example, we believe some integrated, intermodal transportation companies might be organized that would excite and stimulate efficiency in service and 2l8
attract key management personnel to an otherwise unnecessarily restrict- ed and unchallenging industry. Finally, a miscellaneous point: we began to compose a list of those agencies and congressional committees with which we might have to confer, if indeed any of our findings are to be translated into positive action. DISCUSSION PIASECKI: I think that money is the basis of most of our problems, and I think that taxation is perhaps the mechanism for redistributing our money. I sincerely feel that money is perhaps the very foundation for innovation. We must provide the capital that is urgently required for the higher-risk and longer-term investments in innovation by indi- viduals, by small business, and by large businesses. Personal surplus wealth has been the source of capital in this country for new techno- logical enterprises. But that has been taxed away. The government can stimulate such capital development by methods that have been tried, and have been proved. A fundamental step is to reduce personal income taxes. That would include reduction of various taxes on income from personal savings and other investments. We all want that. I do not know of anyone against it. The second fundamental involves mechanisms to provide special means of financing, such as we had in the Reconstruction Finance Corporation. The law reconstructing the country after financial bankruptcy in the l920s and l930s was enacted and continued through World War II. It pro- vided loans where banks could not provide them. If you have a small business like mine, you will find that no matter how good the innovative idea is, the banks will not lend that money on such a risk. Another way to raise innovative capital would be to call upon the large foundations such as the Ford Foundation or the Rockefeller Founda- tion whose wealth came from innovation and have them lend funds or guarantee loans to new, independent, private, not-for-profit, and other types of corporations. Such an approach might take the form of loan guarantees to the local banks that might, in turn, lend to companies in the high-risk area of innovation. That approach might require congres- sional authorization, as you pointed out. Another possibility might be to restructure government tax and regulatory laws to provide equal oppor- tunity for small business. I am sure we are going to hear from the next panel about IR§D. I would like to point out that the IR§D, which is independent research and development provided as part of overhead under government contracts with the Department of Defense and some other depart- ments, only occurs if you have production contracts. God bless theml I am on that side of the fence. That is good. But the little guy, the innovative guy, who does not have production contracts, is therefore up against a stacked deck. Perhaps graduated taxes should be eliminated for the individual, and maybe for the lower levels of small corporate earnings, to make more capital available to the individual entrepreneur and to small business. 2l9
We certainly concur with what you have just said about the change of the federal tax laws to permit accelerated depreciation over two years as an exampleâI do not see any reason why it should be as many as fiveâto allow small business owners to defer taxation. In particu- lar, we need changes in the law that IRS and the accounting standards groups have promulgated and applied to industry in our country, the law requiring write-off of research and development funds in the year in which they were incurred. I think we need capital for innovation, and these are some ideas for obtaining it. 220
PRfirilRFMF.NT ANH INDEPENDENT RF.SF.ARfH AMD nFVFinPMFMT BY ALLEN E. PUCKETT One of the first ideas that occurred to the panel in talking about the field of procurement and independent research and development (IR§D) was the fact that it is very difficult to generalize with respect to trans- portationâeither the U.S. transportation system as a whole or just the activities of the Department of Transportation. The Department of Trans- portation, in its present form, has not existed for very long. Although all of its elements deal with some aspect of transportation, they are all quite different. For example, the functions and the responsibilities of the Federal Aviation Administration fit into a very special category. The functions of the Coast Guard are in quite a different category, although it cer- tainly deals with an aspect of transportation. The functions of the Federal Highway Administration are in still another category, as are the functions of the National Highway Traffic Safety Administration. And the Federal Railroad Administration is, again, quite different. Each of these elements has its own problems and its own different interaction with the marketplace and with the industry. I believe our panel agreed that attempts to generalize across the board can be very tricky. Having said that, I will go ahead and generalize. The first com- ment has to do with IR§D, which is one of our specific topics. I think we can dispose of this fairly quickly. Our conclusion comes out something like this: In any of the pro- curements that DOT may make in any of its administrations, whether they are procurements for hardware or for R§D, there may or may not be an element of IR§D present in the cost accounting or in the program of the contractor. We recommend that the Department of Transportation take an interest in this element of the contractor's program. And I say, "take an interest," see if it is there, recognize it, and identify it as an important part of the contractor's independent activity. In particular, recognize that IR§D is an allowable element of his overhead costs and encourage him to direct some portion of his IR§D into activities of interest to the Department of Transportation. In fact, what we are really saying here is no more or less than to follow the lead of the Office of Federal Procurement Policy (OFPP) in their proposed new 22l
federal acquisition regulation. It has been out for public comment. We hope and expect it will be issued before too long, and will recog- nize IR§D as a proper element of overhead. In fact, the actions of the Cost Accounting Standards Board and the OFPP have, to some extent, over- taken some of the studies and recommendations that have been made by others in the past. The last comment on this IR§D subject would be, again, from the standpoint of DOT or of any federal agency, to maintain a respect for the importance of the "I" in IR§D. The independent aspect of IRfiD is critical. The important fact is that its real value lies in its manage- ment and control by the company, the corporation, and the industry in- volved, and that it really is a key opportunity for new ideas and for sources of new concepts that may really lead to innovation. The second topic may be a little bit outside of our charter. How- ever, we chose to be a little elastic. It turns out that this particu- lar topic was also mentioned by one of the previous speakers, and it has do with the way in which grants are made and controlled or not con- trolled by DOT. This would be especially pertinent to the Federal Highway Administration, the Federal Railroad Administration, and the Urban Mass Transportation Administration. Each of these makes large grants. You may remember the total expenditures for the Department of Transportation. Out of their budget of $l7 billion, I think about $l2 billion, a major portion of that budget, simply flows through in the form of grants. So this is far in excess of any of the procurement dollars that are managed through a normal contractual arrangement. Therefore to the extent that dollars are a tool of DOT, the grant pro- cess is certainly an important tool. In sheer volume and leverage, it is far larger than the procurement process, itself. We therefore chose to view grants as a sort of adjunct to the pro- curement process. It occurred to us that the funding of large programs through grants to, say, state and local governments, may present an opportunity for DOT, in some way, to encourage innovative activities on the part of the grant recipients, and on the part of the contractors and industries, in turn, with whom they work. We will have to be a little vague about how to do this because we do not really know. We can see an opportunity, and we want to propose a concept. We would suggest that DOT give some atten- tion to the possibility of implementing this approach. One of the ideas we had was to put "strings" on grants. An example in use right now, as we understand it, is that in certain cases, before a grantee is awarded his grant, he may be asked to submit a study of some alternative approaches to the resolution of his problem, whether it is in the mass transit area, the highway area, or the railroad area. A presentation of his study of alternatives is a nice place to start. It is possible, perhaps, that the process of continuing the grant might include some additional phases in which further effort is expended in what I will call prototype analysis and design (and when I say "proto- type," I do not know whether I am talking about a new type of highway bridge, or a highway control system, or a bus system, or a new railway car, or whatever). This follow-on phase of the grant could be managed 222
under some kind of control with some kind of "strings" attached. It could provide more incentive to the recipient to engage in that kind of innovative analysis activity, rather than making some preconceived, routine, or blind assumptions at the start about the direction in which that activity eventually is going to go. So the use of grants as an additional tool in encouraging innova- tion may possibly be something of interest. To return specifically to the procurement area, to the extent that the department does engage in contracting for R§D, or for prototypes, or for hardware, there are a few particular recommendations we would make. We learned that in some casesâ! do not know whether this is frequent or notâthe contracts written by DOT may include a clause requiring recoup- ment of R§D costs or of the costs of that contract in the event that the products resulting from the contract end up in the commercial market. So, in effect, there is an override, a royalty, or a return of investment to the DOT required under such a clause. We suggest that this may be a deterrent to contractors with inno- vative ideas, as well as a deterrent to their contracting with DOT. That kind of a provision decreases the contractor's chances of a compe- titive position in the commercial market and makes it less attractive for them to go that route. We suggest that DOT follow again the new pro- posed Federal Acquisition Regulations (FAR), which specifically forbid cost-sharing on goods or services for government useâI am paraphrasing this a little bitâand then also provide for the possible recoupment of R§D costs if it is clearly in the national interest. But the general thrust of the regulation is that the decision on such a provision should be made very judiciously, and, I guess I could say, rarely, if ever im- posed. Another recommendation has to do with patent and data right clauses in DOT contracts. Most of you know that the practices in government concerning patents vary considerably from agency to agency. For example, the Department of Defense, the Department of Energy, and NASA have, in each case, a different kind of patent policy. As we understand it, DOT does not have a specific policy. It is better to refer to it as a collection of practices. In this particular area, it may turn out again that events have overtaken us a little bit. There is a bill in the Congress right now, the Schmitt bill (Sl250), which does propose a uniform policy and a uniform practice for the treatment of patent and data right clauses in all government procurements. The general pattern proposed in this bill follows pretty much the lead of the Department of Defense. The essence of that, as most of you know, is that the ownership of patents and data rights remains with the contractor. The government gets a royalty-free license for its own use, but at least the contractor has the incentive to apply his best ideas with the possibility of other applications. So if the Schmitt bill comes along in time to give the department the guidance it needs in this area, that is fine. Otherwise, we suggest that the department take a good look at the DOD practice and policy to see if that might not be a practical uniform basis for their own use. Our next recommendation has to do with unsolicited proposals that may or may not lead to a procurement from DOT. We learned that the 223
â¢present DOT practiceâ! do not know whether this is uniformly true, or generally true, or often trueâis that upon receipt of an unsolicited proposal, there is a tendency to convert that proposal into a request for proposal (RFP), which is then put out for competitive procurement. I suppose this is in response to some kind of feeling for the over- riding necessity to have competition in everything. Of course, the net result is that nobody with a really interesting new idea that may include some proprietary aspects, or that is expected somehow by virtue of the innovation to give the innovator a little edge on the rest of the market, is going to bring an unsolicited proposal to the Department of Transportation. It is a very effective "stopper." It does seem to us that this particular practice is not necessary, and that there is a place for the consideration of unsolicited propo- sals. There could be thoughtful evaluation, and where desirable and appropriate, the DOT could enter into contracts based on those unsoli- cited proposals without the necessity of going out with an RFP. In fact, what we really propose here is nothing more or less than the adoption of another proposed new federal acquisition regulation, which again is in draft form. It is out for comment. It does encourage, in the case of government procurement generally, the receipt and con- sideration of these unsolicited proposals without the necessity for subsequent competitive RFPs and procurement. Unlike a lot of federal policies, this one is so short and it is so neat that I am going to read it to you. There is a preamble to define things, but the proposed policy in this FAR reads as follows: "Agencies shall encourage the submission of unsolicited proposals and avoid organizational or regulatory constraints that may inhibit genera- tion and acceptance of innovative ideas from prospective contractors." So somebody has already done the homework, and we just suggest that this acquisition regulation be anticipated and that DOT practices be changed accordingly. The next area for consideration, I have called "guidance for inno- vation." This topic also was touched on by one of the previous speakers. Early in our panel meeting, it occurred to us that, whereas we were asked to examine the processes of innovation in the transportation sys- tem and to find ways to encourage innovation and remove the barriers to innovation, nobody was really able to tell us what it is that needs innovating. I asked what might be the particular areas where some great need was felt and what the urgent pressures are to do something different. What are the areas in which we would really like to do something different? I suppose we all feel instinctively that there must be many such areas. None of us would be willing to say that we are completely satis- fied with the transportation system across the board as it is, although I do not feel completely dissatisfied with it, unless I lose my bag at the airport or something like that. We really could not get a clear picture of the goals and objectives, as seen at least by the Department of Transportation. Now, the Depart- ment of Transportation happens to be the one agency in the government that might have a responsibility to try to identify those goals. In 224
the end, it is going to be the public that does. The public has really got to tell us what they think their goals are. Maybe we have to help them make up their minds. In any case, our recommendation came out something like this: Give industry better insight into national goals in the transportation scene by assembling and publishing on some periodic basis a list or a state- ment of goals and objectives and also deficiencies (another way of put- ting it; a deficiency might suggest a goal) as related to the Department of Transportation missions. Earlier, a similar recommendation was made. I think it was called a long-range plan. A statement of goals and objectives is not necessari- ly a long-range plan, although the two have some relation. A long-range plan has no value, in my opinion, unless it is changed on a periodic basis. Maybe it should be changed every six months or maybe only once a year or even less often. A long-range plan is really nothing more than the instantaneous direction of a vector that is going to keep changing all over the place from year to year. At least one ought to know the direction of that vector momentarily. The goals and objectives that I might see today in the Department of Transportation are very likely not going to be the same next year and the year after. But perhaps it is not unreasonable to ask the department, as best it canâtrying to see the world through its own eyes, through the eyes of the public, through their understanding of technologyâto give us a list like that. It might be only a page or two; I do not mean a l00- page document. I have a related comment. We spent quite a lot of time on this, and I think it does relate to the problem of developing this statement. Find ways to improve communication between industry, the public users, state and local governments, and, in turn, the federal government. We did not really know how to tackle this one at all. We did perceive it as a problem, and we used the word "disconnect." There is a little disconnection at any given moment between what the public thinks it wants, what the federal government thinks the public ought to want, and what the local government may, in its wisdom, believe is good for the city or the public. The communication is just not good enough. I cannot suggest how to improve it. We suggest that DOT take a look at it. The next issue is in the congressional area. It is a fact that, for historical reasons, each of the agencies in the present Department of Transportation has to work with different committees in the Congress, both in the Senate and in the House, on their authorization and appro- priation bills. So from the standpoint of the administration of the Department of Transportation as a whole, or from the standpoint of look- ing at transportation as a system, this obviously creates a very awkward situation in the management and budgeting for the DOT program. We recommend that DOT work with the Office of Management and Budget and with the Congress to regroup these fragmented budgets and congres- sional authorization and appropriation committees in the transportation areas to focus more specifically on programs in support of DOT's missions. 225
I do not have any illusions about how easy that may or may not be, or even whether it is practical. In fact, if this were a debating society, I think I could make an argument on the other side. The present committees have develorjsd sone continuity and expertise, each in its own area. The committees that deal with the FAA know quite a lot about the FAA, but they sure do not know anything about the railroads, and so on. I do not know how one puts these together. From DOT's standpoint, it would clearly be very nice if these committees were all together. Whether it is feasible to do that in a way that would create a useful, effective, and competent collection of congressmen and senators, and an effective interface, I do not really know. But it is something to take a look at. Another recommendation that we offer relates to some of the present procurement procedures in DOT. We have the impression that even though procurement in DOT may be for R§D, or hardware (prototype, and so on), the procurement procedure is a bit ponderous, and there is a long elapsed time between the consideration of proposals, and all the things that go on in the process, and the final signing of the contract. That ponderous process, that lapse of time, and the uncertainties in between, and the slowness of that process may be a deterrent to attracting the interest of contractors in participating in DOT work. Therefore we suggest that as an administrative procedure, the department take a look at ways of streamlining that procurement proce- dure, and that they try to simplify the mechanics so that the process can take place in a shorter time. Perhaps that change might result in attracting more innovative potential contractors to the field. The next recommendation has to do with urban mass transit. Some- how we kept coming back to this, both from considerations of failures and from the consideration of other projects with opportunities to do something innovative. This is an area where there is perhaps the most debate about various ways of solving the problems. One way is good for Los Angeles; another way is going to be good for Detroit, or Chicago, or New York. I am sure this could be a very controversial topic. We were try- ing to think of ways of avoiding the Transbus debacle that was mention- ed earlier. That resulted from a procurement based on a highly detail- ed government-prepared design specification, without really adequate consideration of all the problems, the interests, the public, the cost, etc. Consequently, nobody bid on the program. We are trying to find a way that will allow the Department of Transportation to provide some kind of a useful centralized function, but that still leaves the ultimate decision-making control at the level of the local governments. It may be that there is room for DOT to undertake the procurement of prototypes of some competing vehicles, to procure two or three different prototypes to functional specifications and to qualify these. By qualify, I mean to put them into service tests in some communities, not necessarily on an Aberdeen Proving Ground kind of test track (a "Munson" course test). Rather, they should qualify them in terms of local service, and also in accordance with some criteria that might have general applicability such as reliability and functional 226
acceptability. Once having qualified these prototypes, DOT could pro- vide to the local governments a kind of a generalized functional speci- fication, a sample specification, that could then be used in the local procurements. In other words, the DOT in this model tries to be help- ful to the local governments, without preempting the local functions or decision-making responsibilities by providing qualified products for consideration. I am sure we can get a lot of argument on that, but we throw it out as a suggestion to consider. If an opportunity seems to present itself, that kind of an approach perhaps may make more sense than the kind used for Transbus. Our next suggestion has to do with organization. It is an interest- ing fact that today the Department of Transportation office of the secretary has no senior official with a technical responsibility or a technical title. We could recommend very specific things, such as appoint an assistant secretary for science and technology or for systems development and technology. The title has been changed a couple of times. We chose a rather more general form of this recommendation, suggesting that somebody smarter than we are in DOT or in the administra- tion should figure out how to play the titles game. We recommend that DOT have a senior technical official, for example, maybe a deputy secretary who has some authority. Specifically, we were thinking of authority to review and approve R§D budgets and pro- grams and to oversee the technical activities of the various administra- tions. Our final suggestion is not really a recommendation, but is some- thing to think about. It occurred to us again and again that no matter what our interests may be in airplanes, trucks, railroads, and so forth, the automobile still dominates the personal transportation scene. There is a real question as to what the role of the DOT, or of any part of the federal government, with respect to the automobile may be. We see the regulatory function, obviously. We have talked about that. We see the Department of Energy taking a big interest in the possibility of improv- ing fuel consumption, in new types of engines, in electric cars, and in many things like that. It is a fact that the involvement of the government in the future of the automobile is somewhat scattered, to say the least. It appears in all these various agencies. Perhaps someone should consider, at least, as an alternative, whether or not all of the various federal interests in the automobile should be collected in a more centralized way into a single agency. Again, I would not be prepared to argue the merits of that idea, pro or con. But the fact that a given situation exists and we see an alternative does suggest to me that someone wiser and more skillful should take a look at whether there is any value in the alternative. That completes our list of recommendations, unless I left some of them out. If I did, I am sure one of our panel is going to stand up and remind me. The only other thing I will add is just a little comment on Martin Goland's report. He referred to the centers of excellence. That 227
somehow popped up on our little list of questions to look at: whether centers of excellence are a good idea and how they relate to federal procurement. Perhaps we do not even understand the problem, or perhaps we did not understand what centers of excellence are. But there was a view, or a conception, that a center of excellence meant a new organization, a quasi-federal sort of thing. It might be partly run by industry, and partly run by the government, and it might be a "set-aside" center of excellence doing its thing all by itself. Our panel seemed to have a fairly strong consensus that this was not a very good idea. Of course, there are notable exceptions we could mention. I think our fear here is that we have seen at least some examples of how a federal laboratory, or a quasi-federal laboratory, set up for a particular purpose, has tended to become more of an end in it- self than a means to an end. One of its chief aims in life, one of its chief objectives, becomes that of self-perpetuation, rather than serving a purpose. It is a thing of which we should be fearful. DISCUSSION ROGERS: I have one comment. I would like to encourage, and in- deed urge, the Department of Transportation to pay careful and respon- sive attention to the innovative suggestion of this panel (and I think another panel as well) that the federal grant programs in transporta- tion be looked at as a source of support of transportation RDT§E acti- vities. It should be appreciated that there are important precedents for so doing. The highway trust fund is one example: l l/2 percent of the highway trust fund may be used for research, development, test, and evaluation. And the HUD 70l(b) clause, contained within the Com- prehensive Metropolitan Planning Act, allows up to 5 percent of the funds authorized and appropriated under 70lâit was about $50 million a year, a few years backâto be used for RDT^E. This is a way of, in principle, perhaps doubling the amount of RDT§E funds to be made availa- ble to improve the efficiency and the effectiveness with which those federal grant monies are being spent. And, with these funds, universi- ties, local professional groups, and local commercial and not-for-profit groups could be called upon, and supported, to study transportation problems. It would also free up, thereby, much of the federally contracted RDT§E dollars from support of smaller, more local studies, and allow their focus upon the larger national problems that might warrant especially large-scale central study. The second element of such a strategy would come into play down- stream. Once having conducted sound RDT§E programs, from which, as a result, improved program efficiency and effectiveness can be demonstra- bly achieved, the secretary of transportation, working with the admini- strators, can do a very simple thing. In communicating with those who are asking for large federal transportation equipment, construction, and operating grants, he simply points out that he had perhaps l0 times 228
as many requests for such funds as he has appropriations to fulfill them. Now, he would not suggest to those state and local bodies who would use such grant funds to develop, construct, install, and operate their transportation systems how to do so, but he would point out that DOT has developed analyses, components, subsystems, whatever, that improve the efficiency and the effectiveness of those transportation systems if sensibly employed. And, naturally, those who evidence a willingness to achieve such increased efficiencies and effectiveness could expect to have their requests put on the top of the pile, for in this fashion, the taxpayer would be getting more for his money. This could be a very powerful strategy. 229
TECHNOLOGY AND RSD PQLTfTF.S TO STIMULATE INNOVATION BY HERBERT D. BENINGTON I would like first to comment on the constitution of the panel. Since I am very skeptical about the role that the federal government can play in research and development unless it is, in fact, the user of its development products as is the Department of Defense, I was delighted that there were on the panel a large number of others who were also skeptics. It tended to be a panel of entrepreneurs, of people who want- ed to be cautious about the government role and who recognized how easily bureaucratic mistakes are made, people who are very wary about technocratic solutions in complicated areas, and people who are concern- ed about good management and accountability. So, from my point of view, it was a responsible and cautious group. The panel wanted me to make some observations. We noted that the Department of Transportation research and development budget is only 2.3 percent of its budget, and that compares with something like ll percent for DOD and almost 50 percent for the Department of Energy. We recognize that one should be cautious about such overarching statements. But we noticed that the DOT R§D budget is also declining at a rate of about 8 percent a year. And we noticed, too, that the position of the Assistant Secretary for Systems Development and Technology was abolished. We also sensed in talking to some of the individuals in the Office of the Secretary of Transportation (OST) from the department, and from our own experience, that all of this has led to a very poor climate and a poor attitude within the highest levels of OST toward technology and technologists. There appears to be relatively little confidence in and little use of people with scientific and technical backgrounds in some major decisions. Further, procurement practices have evolvedâAllen Puckett gave excellent examplesâin ways that we think are quite rigid. The process may be good for buying boots, but it is not good for helping the innovative climate. There is often weak support of the R§D pro- grams at OMB and on the Hill. As I said earlier, in my remarks during discussion of a previous paper, we recognize very well that there were some real difficulties when one of our objectives was to use aerospace technology to help solve trans- portation problems, particularly surface transportation, including rail and urban mass transit. There were many technologically naive people in the government, and in industry, who thought that we could use this talent and make great progress in transportation R§D. Many unsuccessful programs resulted. 23l
However, it seems to us that if that represented one end of the swing of a pendulum, the pendulum has gone about as far in the other direction as it can go. Given some of the very major national problems that we have now in energy, in the environment, in the urban areas, in balance of payments, and in the health of U.S. industry, a judicious strengthening of the technological arm at OST in DOT is urgently needed. So, we talked about an assistant secretary for R§D. We would emphasize that this should not be an office that does detailed manage- ment of the modal R§D programs. We have seen examples in which this just does not help. It slows things down. We would emphasize that it is very important that the leaders in that office not be thoughtless supporters of technology. There is a history of such support on occa- sion. There is still a lot of skepticism concerning such an organiza- tional arrangement within the government, on the Hill, and within the OST. So considerable prudence and statesmanship are required in making changes. We do believe that this office could play a major role in shaping plans and policies that are conducive to innovation, and that extends beyond Rfp. It gets into such things as procurement practices, or ways of shaping the grants process. Probably the most important aspect of this idea is the need to apply research and analysis to the whole business of regulation, to make that business more coherent, economical- ly justifiable, accountable, and successful in achieving sensible goals. We think that this science and technology office could take the lead in discovering intermodal opportunities and in seeing that these get proper emphasis and it could also identify what we call the no-modal opportunity, for example, pipelines. There is no regular DOT mode representing pipelines. Is it possible that some activity could be spurred there by the federal governemnt? We would establish a full-time scientific advisory group, analogous to the Defense Science Board (DSB), and make sure that that group had people as highly qualified as those in the DSB and the President's Scientific Advisory Committee (PSAC) have been in the past. We would make sure that that group is given access to the problems and given freedom to criticize and to suggest ideas. Finally, we would change the procurement practices. Puckett touch- ed on one of the most important aspects, the case of unsolicited pro- posals. We would lower the threshold of authority in awarding sole source grants or contracts. We would increase the use of the performance requirements specifications in procurements. Rather than determining a solution and attendant design specifications, the government should state the objective and the performance requirements being sought. We would also stimulate joint ventures. We believe that the entire policy and planning function in OST needs very much to be strengthened. Implicity, we were supporting the notion of the national transportation plan. I second Puckett's comment that plans are made to be changed. On the other hand, they also pro- vide a visibility and a comprehensiveness of thought that can be very useful. We thought that there should be something called an annual mobility assessment. This mobility assessment would tell us annually how well 232
we think the system is doing: in terms of the users of the various modes, the services, the costs; in terms of the operators, how well they are doing; in terms of the suppliers, how viable the industry is, and what is happening to it. This mobility assessment would obviously have to be put together by many elements outside of DOT, in the federal government, in state and local governments, and in private industry. There was some discus- sion within the panel on how to achieve it. I think a majority felt that it would be done independently, as in a continuing commission, if you will, producing this annual report, independent of the DOT. My own inclination is that it is important that it have an adequate staff and a strong connection to DOT. I would like to see a more regularized role for DOT in mobility assessment. Let me now turn to the issue of the R§D programs of the various modes. This discussion relates to Martin Goland's earlier remarks, and those of others, concerning the differences in the ways in which the modes operate and the resulting differences one sees for handling R§D. We, too, made the distinction that air traffic control and the Coast Guard are cases in which DOT is the user/operator and needs to take the lead in doing the research and development. In the case of the auto and aircraft, we were very skeptical about any active R§D role. In our discussions of rail, urban mass transit, and highway, we thought there was certainly one case where there was a very important opportunity for a strong federal program, not large in terms of many of the programs that the country has undertaken, but nonetheless a large one. This program would have the aim over the next four or five years of really increasing our system understanding of a much improved urban mass transit technology. Let me give the background to our thinking there. In looking at the use of urban mass transportation, it seems to us that modest incremental improvements in performance, service, or cost are not going to increase the ridership significantly. Ridershipâuse of urban mass transport versus other meansâis something like 4 or 5 per percent of the total, and we think it will stay there, from the way the program is going, over the next l0 to 20 years. At the same time we see, within the city, very major problems. This is certainly one of our major national problem areas and involves congestion, environment, economics, crime, and other factors. We also sense a political commit- ment to urban mass transportation and that does not gainsay Charpie's comment that everybody is in favor of it and nobody wants to ride it. The fact is that there are political forces behind it. On the other hand, we do not deny the dismal record of some of DOT's attempts to apply aerospace technology to improving transportation. There is much fundamental agreement on that aspect. However, let us now make a technical, engineering, and economic observation. It seems to us that if we are to increase ridership from 4 percent to 20 or 30 percent in our large and congested cities, we must do it by making the transportation much more accessible. One must be able to get to his destination much more quickly, and stations are going to have to be closer to where you are and where you are going. We cannot 233
have the long access times and transit times and waiting times that we have today. In looking at the bus option it seems to us that buses, anyway you go, are going to be manpower intensive, both in terms of operation and probably in terms of maintenance. Therefore a lot of good work could be done in that area. We ask the question, "Is it possible to get a capital intensive system for cities that would make the transportation much more accessi- ble to the rider and that would increase the ridership significantly by an order of magnitude, 3, 5, or l0?" I want to emphasize here we are not talking about improving the component state of the art. We are talking about improving the system state of the art. It seems to us that there are technologies coming along whereby if we use some of the state-of-the-art mechanical technologies and the rapidly advancing electronic technologies, we could get systems that would provide automatic-group-rapid-transport or personal-rapid-transit, or a combina- tion of these. The cost of development of these systems would beâif one wanted to have a program in the next five yearsâmuch more than the $50 million or so that is currently programmed by DOT. It might cost as much as $500 million in the next five to eight years to develop such a program. That is about a third of the cost of one fleet ballistic missile submarine. We do not guarantee that if we undertook this large program we would definitely get something that would succeed. One of the expectations we talked about, for example, was that we should, for the cost of a metro system, be able to increase the ridership by a fac- tor of, say, 5. It appears possible that a well-managed program that showed con- cern about the market and that brought along the right technology could produce this kind of quantum step forward. And it seems to usânotwith- standing the failures in technology in the past and the management problems in the past--that this country has done some large R§D projects that have turned out to be extremely successful and this option should be recognized and should be deliberately considered by the Department of Transportation and other people in the government. We also felt that some progress has been made in the highway tech- nology area. We had some experts who identified many areas in which considerably more could be done and result in a large payoff. We talked about the materials problem, asphalt and concrete, where there has been a lot of progress in the last l0 years, but now we know a lot more things that we would like to look into further--questions such as light- ing of roads and access and questions of maintenance technology and standards. It seemed to us that much more progress could be made in these areas. Certainly, the maintenance of the highways is one of the major challenges we are now finding. In the case of FAA, we felt that the automation of the en route control function should be given very high priority. As you probably know, today the surveillance function is heavily automated, including the processing of flight plans. But the control function itself is virtually completely manual. It seemed to us that the technology is in hand to have a much higher degree of automation of this control 234
function and that by doing this one would be able to get from New York to Washington flying on instruments in bad weather as fast as it can be done by flying visually. This would really help the airlines and the passengers. Automation would lower the number of controllers needed, even though there is increasing air traffic, particularly in general aviation. If the machine is properly programmed, and we are convinced that can be done, then it is going to be more attentive through the hours than the air traffic controllers can be. We think that this is an area that requires a high priority for development. In fact, in a mechanism that I will mention in a minute, all the user/operator/supplier elements of the industry seem to feel that this should be pushed ahead. I have mentioned already the great importance of a stronger techni- cal input into the regulation process. There are many cases in which we have not had good analysis. There has not been good economic analy- sis, data have been faulty, and experiments have been needed. I think one of the big advantages of having a much stronger technical arm in the OST would be to point out those cases, point out that the decisions are being made on the basis of fluff and prejudice and that they just cannot be justified. Hopefully, this will force people to do more rigorous homwork. I think also that something like Transbus, which has been mention- ed several times, might not have happended as easily if there had been a strong technical, acquisition-oriented voice that could have pointed out some of the problems in that procurement. Finally, we make three recommendations that are independent of modes. First, we support the general involvement of the federal govern- ment in basic research in those technologies that underpin the trans- portation business across the board. Many agencies could play a role here: NASA, DOE, EPA, DOD, and NSF included. We believe that it is DOT's responsibility to make an assessment of the funding that is taking place in those various agencies, find out where the gaps and the oppor- tunities are, and then recommend to them or undertake the right basic research programs. In this connection, it seems to us that the kind of program that is being talked about for automobile research, about $50 million a year, makes a lot of sense. Second, we think that DOT must place much greater emphasis on test and evaluation. One of our panelists told of the case where we raped the cities by giving them devices that were developed in part or in full by government funding that did not work adequately. Such cases give the whole approach a black eye. We would stress that where the department has been responsible for the development of an element, it also make sure that that element does undergo rigorous test and evaluation before it gets deployed. We also see a role where the department could provide some test facilities, such as it is now doing in the rail area, and somewhat in urban transit, that would facilitate the industry itself in undertaking better development and evaluation. The final recommendation of my report has been noted by other panels, and we also think it is very important. We believe that in order for R§D and technical decision making to be more relevant, there 235
must be much better communication among the DOT, the operators, the suppliers, the users, and some of the other interest groups. We think that the work that has been done, for example between the Association of American Railroads and the Federal Railroad Administration, is an excellent example of good communication. Another recent case has been the Federal Aviation Administration. Under pressure from the Hill to seek broad inputs on the future of air traffic control, the FAA esta- blished a committee that looked into different aspects of the air traffic control business. The committee came up with a surprising degree of consensus after very good communication, and now we know much better how to make progress in that area. DISCUSSION THOMPSON: I think everybody in this discussion is assuming that innovation is a good thing. I would like to put in a counterview. I listed six innovations in the transport field. One is the transverse engine with front wheel drive on cars. Another is the jet engine. The third is a hovercraft. The fourth is the high-speed train. The fifth is the linear induction motor for dragging anything along a rail. And the sixth is carbon fibers. I think it would be worthwhile for somebody to study why it is that the original innovator in all of these so far has not made any money on them. You could argue a good case that the way to success is to be second, not to be first. BENINGTON: I think one could also give some cases where companies themselves seem to have succeeded by being second. NEJAKO: I hope most people in the room recognize that the Urban Mass Transportation Administration spent some $30 million developing a test and evaluation capability that is part of the Transportation Test Center in Pueblo, Colorado. It is open to use by the rail transit supply industry. I think they are recognizing its availability much more frequently now. But I want it generally understood that that is a recommendation we began to implement back in about l972. CHESEBROUGH: I may sound like a cracked record, but I would like to speak as a self-appointed chairman of panel 6, representing the people. This country developed and became great by respecting people's freedoms, including freedom of choice. I hope we stay that way. I would like to remind the people that innovation in transportation will proceed only as fast as the emotional interests and pressures of people either demand or accept these innovations. We can create all kinds of sophisticated, technically sound, scientifically logical systems. But if the individual people do not recognize that these fall within their concept of what they want, such systems will become monuments similar to many of the marble buildings we have in this town. I want to reiterate that this is a facet that must continually be kept in mind. It is extremely difficult to determine in advance what people will accept, emotionally. They, themselves, cannot tell us. If questions are asked of consumer or buyer preference research groups, 236
one does not, very many times, get the right answers. That has been proved time and again when carefully researched marketing plans, pro- duct development plans, collapse upon hitting the market. So do not forget this element. I have been prompted to say this by a comment that was made, I know in good faith, that we must somehow or other find a way to get urban mass transit ridership up to the 20 percent level. I agree with that. But we had better make sure that 20 percent of the people feel the same way about it. LIST: As a second member of panel 6, I also hope that people's views are not neglected. DOT may be in many fields where they have no business, but assessing mobility, one of the recommendations of the panel on technology and R§D policies to stimulate innovation, panel 5, would be a very good logical function for DOT to perform. But assess- ing mobility is right in the middle of their mandate, and this is where the public comes into the picture. In other words, the ultimate criteri- on is whether it is useful. We have not paid enough attention to that. GORHAM: I want strongly to endorse the recommendations of at least two panels for the restoration of a center of responsibility for science and technology in DOT. There were many reasons for its aboli- tion. One was the primary desire to reduce the head count in the Office of the Secretary. But we lost a great deal when that was done. One of the recommendations of the panel on economic incentives, panel 3, in which I participated, may not have come through clearly. It was that now we are getting to a point where the rate of development of innova- tion in individual transit modes in some cases may be running out of steam. The big opportunity for development in innovation at the present moment is in the intermodal field. This can only be accomplished if we have some center within the Department of Transportation that looks across modes and considers the transportation functions of all of them. BISPLINGHOFF: Ladies and gentlemen: I want to thank all of you for your participation: the speakers, discussants, chairmen, and especially those who stayed with us to the finish. No one knows for sure what results will come from a conference of this kind, but I think we all agree that this kind of examination must be carried out if there is to be progress. The proceedings of the conference, we hope, will be published early next year. There also will be a committee report later in l980. It will include the ideas developed in this workshop, as well as information derived through other activities of the committee. We will do our very best to bring all of the suggestions brought forth in this workshop to the attention of people who are in a position to implement the ideas. We will do everything we can to bring these views to the attention of officials of DOT. In the past we have been able to do that at the highest levels of the department. Although there have been many changes in DOT in the past few weeks, we will present what you have told us to as many of the appropriate people as we can in the Department of Transportation. We plan to go to the leader- ship in the Congress in the transportation area, and to bring these recommendations and ideas to their attention. 237
We will certainly make this effort, and hope the net effect will be positive. Again, I express my gratitude to all of you for taking the time from your very busy schedules, and from the many other important duties you have, to be with us. We appreciate your attendance and your contri- butions. 238
