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KEYNOTE ADDRESS: STIMULATING TRANSPORTATION INNOVATIQN—THR FF.DF.RAI, ROLF. BY HENRY ESCHWEGE The General Accounting Office (GAO), under the leadership of the comptroller general, Elmer Staats, is an arm of the Congress that re- views the programs and policies of the federal government and makes recommendations for improvements. In this process, we sometimes step on people's toes. Even helpful criticism is not always welcome. But our intent is positive. We believe that government can be efficient and effective and that constructive oversight and program evaluation by the Congress and its support agencies can help the federal government serve the American people better. What role does the General Accounting Office have in a debate on innovation? The answer to this question lies in the extensive influence government policies and programs have on innovation—whether or not it is encouraged, suppressed, or ignored. GAO has a unique opportunity to identify impediments to innovation and to recommend improvements. But before I get involved in suggesting approaches to solutions, let us ask ourselves, what is the problem? We are constantly reminded that the United States is losing its competitive edge in world markets because of declining innovation and productivity, that private invest- ment in long-range research and modernization of capital plant and equipment is decreasing, that we are becoming an increasingly "have not" nation in critical resources such as energy, and that our friends in Western Europe and the Far East have more efficient transportation sys- tems. What of solutions? I begin on a note of optimism. It is true the U.S. reputation for technological superiority and innovativeness has been somewhat tainted. Yet recent efforts by Jordan Baruch, assistant secretary of commerce, and this workshop attest to our determination to reverse any negative trend. A sizable portion of GAO's resources, for example, is devoted to reviewing the programs and policies of the federal agencies involved in the U.S. transportation system. These efforts, logically, lead us to an assessment of how state and local governments, industry, and other parts of the private sector are affected by federal actions. From this vantage point, let us consider the question: What can the federal government do to encourage transportation innovation and productivity? First, let us briefly explore what we mean by transporta- tion innovation and how transportation innovation is related to 3

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productivity and new technology. I suggest that one of the most impor- tant meanings of transportation innovation is using existing ideas more effectively. Second, I will discuss some of the barriers to transportation innovation and productivity within the federal government and in the private sector. My purpose is to describe changes needed to encourage innovation and productivity and to suggest issues for discussion by this workshop. Finally, I will cite some recent GAO studies that suggest ways that federal transportation programs can be made more productive through needed changes in government organization and enabling legislation, and through improvements in operating methods and procedures. A dictionary tells us that the word "innovation" means "something newly introduced, a new method, device, et cetera," and also "the act of introducing a change or something new." Obviously, this neutral definition is not really what most of us mean when we use the term "transportation innovation." We usually mean an improvement in our transportation system, a change for the better. In particular, we tend to perceive the kind of improvement that increases economic productivity, that increases the quality or quantity of goods and services produced from a given level of resources. When we talk about transportation innovation, we also tend to mean new technology—new transportation systems, new devices to improve fuel economy or protect lives, new telecommunications systems that can sub- stitute for physical transportation of passengers and mail. We tend to emphasize scientific and engineering improvements. We lay particular stress on whether something is new. The connotations influence the way in which we think about trans- portation innovation. Obviously, new transportation technologies and new ideas in applied science and engineering are important aspects of transportation innovation, but many of our transportation problems are due to our inability to make effective use of the ideas that we already have. For example, from a engineering point of view, we are now able to make automobiles that are much more fuel efficient than the average automobile produced in the United States in l979. Our biggest national problems in this area have to do not with the technology but with (l) convincing more American motorists that fuel efficient cars are desirable, (2) the reluctance of American automobile manufacturers to move too far ahead of consumer preferences, and (3) institutional prob- lems within the federal government that prevent the development of a cohesive policy toward the automobile. Therefore one of the most important meanings of transportation innovation should be, as I said, using existing ideas more effectively. This is perhaps a less glamorous subject than potential scientific breakthroughs, but in the near term it is a more practical objective for federal transportation programs. Possible issues for this workshop include the following: How can the federal government and the private sector cooperate more productive- ly so as to encourage transportation innovation? What improvements can

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be made in the efficiency and effectiveness of the routine operations of our transportation systems so as to increase their economic pro- ductivity? As we consider these issues, we should bear in mind the following maxims: New ideas are not always the most useful ones. Useful ideas must be used to become productive innovations. Productive innovations require changes. Changes involve risks. People and institutions, by and large, prefer to avoid risks. It is just as sure a recipe for fail- ure to have the right idea 50 years too soon as 5 years too late. An example might be truck weight limitations. GAO's recent study of weight limitations for trucks traveling the nation's highways raised challenging questions about the net benefits of increasing weight limits to conserve fuel. On first consideration, the idea of achieving fuel savings by resorting to heavier truck shipments is impressive. But the price we pay in terms of increased highway maintenance and maintenance of vehicles trying to traverse deteriorated highways may make this idea neither useful nor productive. Also, at a time when we want automobiles to be smaller, the idea of larger, heavier trucks seems to run counter to our efforts to make driving safer. In GAO reviews of federal transportation programs, we have found a number of formidable barriers to productive changes in the U.S. trans- portation system. One of the worst barriers to transportation innova- tion is the lack of trust and the mutual antagonism that frequently undercut productive cooperation between government and the private sec- tor. There are those in government who tend to assume that the private sector is no better than it has to be, a collection of selfish indivi- duals and profit-obsessed corporations that can only be forced to do the right thing by stringent government controls and regulations. Many in the business community see the government as the enemy pursuing un- realistic and overly moralistic goals at the expense of practicality and common sense. And there are private citizens deeply committed to a particular personal cause or goal who view both government and business as dangerous adversaries to be supported only if they completely agree with one's personal goals and to be harshly condemned if they disagree. These problems are deeply rooted in our society, and it is clear that simple solutions are unlikely. This workshop ought to consider ways in which mistrust and antagonism between government and the private sector can be reduced so as to improve the climate for transportation innovation. Possible issues for discussion include the following: Can citizen understanding of government and decision-making in business be improved? Can government give better consideration to the views and needs of pri- vate citizens and private industry? Can business give better considera^ tion to the public's views and interests? A second barrier to transportation innovation is fragmentation within the federal government. Some of you may have seen an article in the New York Times Magazine earlier this month quoting a secretary of commerce who said, "I have found that the brown bears are under the jurisdiction of the secretary of agriculture. The grizzly bears are

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are under the care of the secretary of the interior. And the polar bears are under my protection." This was not the present secretary of commerce, Juanita Kreps, but Secretary Herbert Hoover, in l92l. In the transportation area, one of the most troublesome examples of government fragmentation is found in federal programs and policies involving the automobile. According to a report issued earlier this month by Resources for the Future, the passenger automobile uses l3.l percent of total U.S. energy consumption or slightly over half of the energy used by the entire transportation sector. From a technological point of view, there are some very good pro- spects for energy savings by improving auto fuel economy, by diverting motorists to more efficient modes of transportation, and by making more efficient use of the passenger car itself. I have already mentioned some of the barriers in the private sec- tor to more efficient use of the automobile. The American motorist has strongly resisted efforts to lure him into mass transit and car pools and only recently has begun to show any real preference for cars that save fuel. Moreoever, the American automobile industry has been under- standably unenthusiastic about moving too far ahead of consumer pre- ferences. But in the present economic climate of sharply increased gasoline prices and potential unavailability of gasoline, these barriers have been somewhat reduced. Still with us is the problem of fragmented federal policies and programs for the automobile. Responsibilities for auto fuel economy are divided between the Department of Transportation and the Department of Energy. Automotive air pollution control is the responsibility of the Environmental Protection Agency. Auto safety programs are administered by the Department of Transportation. From a technological viewpoint, fuel economy, pollution control, and safety are closely interrelated. Yet there is no comprehensive federal policy that links and integrates these programs. In practice, this organizational fragmentation has thrust the burden of integrating federal policies for the automobile on the automobile industry itself. Since these policies are diverse and potentially conflicting, the auto industry has felt beleaguered and defensive, and progress toward necessary environmental safety and fuel economy goals has been slower than it might have been. Issues for discussion by this workshop include the following: How can federal programs for auto fuel economy, safety, and pollution control organizationally be brought closer together? Can a unified federal policy toward the automobile be developed that would improve the cohesiveness and consistency of our auto-related goals and objec- tives? Can federal automotive policies and programs be coordinated so as to improve cooperation and trust between the government and the auto industry, both in long-range strategic planning and in day-to-day operating relationships? How can we bring together the results of research conducted by government, industry, and the universities in support of innovation without running afoul of antitrust laws and legitimate proprietary interests? A third barrier to transportation innovation is government regula- tion, both excessive regulation and inconsistent regulatory policy.

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Excessive regulation can be seen in some of the federal paperwork re- quirements placed on American business. In a recent study for the Joint Economic Committee of the U.S. Congress, GAO found that federal reporting and recordkeeping requirements take up 69 million hours of business time per year and cost over $l billion. The Department of Transportation, Interstate Commerce Commission, Civil Aeronautics Board, and Environmental Protection Agency are among the l4 federal agencies with the most burdensome reporting requirements. While many of these requirements are needed to meet legitimate regulatory objectives, it is apparent that some regulatory reporting requirements are excessive and too costly for the benefits they produce. Excessive regulation has two adverse effects on transportation innovation. First, the direct costs of complying with unnecessary regulations require staff and capital expenditures that otherwise might be used more productively. Second, and even more important, excessive regulation creates an economic climate that discourages risk-taking and places a premium on adjustment to the status quo. The railroad industry is an example. The cumbersome regulatory requirements that govern whether rail lines can be abandoned or freight rates and services modi- fied have discouraged railroad managements from adopting needed improve- ments in operating methods and procedures. Inconsistent regulatory policies also discourage transportation innovation. I have referred to the problems created by lack of a cohesive, consistent federal policy toward the automobile. Similar in- consistencies can be seen in the federal government's economic regula- tory policies for surface freight transportation. Although the various freight transportation modes are in competition with one another, federal regulatory controls vary from almost total coverage of the rail- road industry to partial coverage of the trucking industry to minimal coverage of the barge and pipeline industries. These inconsistencies often make parts of the surface transporta- tion industry, particularly the railroads, less competitive and less profitable, and handicap them in taking the initiative to make needed investments in modern equipment and facilities. Recent initiatives by the administration and the Congress to overcome regulatory inconsisten- cies and balance the cost of regulation against perceived benefits have begun to reduce the regulatory burden. GAO's l977 study of fare reductions to be achieved from less air- line regulation suggested savings of $l.4 billion to $l.8 billion annually. The congressional debate that followed resulted in legisla- tion to phase out airline regulation. The positive results from this legislation have encouraged similar efforts in the field of surface freight transportation. GAO has a complex study underway to simulate the impact of freight deregulation that we hope will contribute to the current congressional debate on this important issue. The maze of federal and state government procurement regulations can be another barrier to maximizing innovation. The prevalent pro- curement practice favors the lowest bidder who offers products meeting acceptable quality or minimal, but complicated standards. In many cases, the public would be served better by "best-buy" competition bas- ed on superior or innovative performance and life cycle costs. 7

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Issues for discussion by this workshop include the following: Can the paperwork burden required to meet legitimate regulatory goals be re- duced and made more cost effective? What are the excessive or incon- sistent government regulations presenting barriers to transportation innovation and how can they be removed? Let me mention a few more recent GAO studies that address the problems of making federal transportation policies and programs more effective. For the most part, these studies focus on needed changes in government organization and in enabling legislation, and on ways to improve operating methods and procedures. I would argue that these are precisely the kind of modest improve- ments and innovations making effective use of existing ideas that are most needed to make our transportation system more productive. In a report released earlier this month, we observed that aircraft delays cost U.S. airlines over $800 million in l977, detained the travel- ing public by 60 million hours, and caused the airlines to use an addi- tional 700 million gallons of fuel. Generally, aircraft delays result from excessive air traffic and bad weather. GAO recommended that the Congress authorize the secretary of transportation to decrease air traffic during peak periods and that the secretary use peak surcharges and/or quotas to implement this authority. In a report about to be issued, GAO discusses efforts by the Depart- ment of Transportation to encourage better use of existing urban trans- portation systems through planning and coordination of local actions affecting autos, taxis, transit, pedestrians, and bicycles. We found that innovative transportation projects were not successfully competing for federal funds with traditional projects such as highway construc- tion and bus replacement. We will propose changes aimed at encouraging more innovative pro- jects by state and local governments. We also will propose integration of Federal Highway Administration and Urban Mass Transportation Admini- stration planning and review functions in this area, so as to provide better federal guidance to urban areas. In another study now in progress, GAO is examining the causes of railroad freight car shortages. One of the most important causes appears to be the very poor rail car utilization rate of some railroads. In other words, rail cars are sitting idle for long periods waiting to be loaded and unloaded. This is unproductive time during which they are basically functioning as miniature warehouses. Cutting down this unproductive time would free up a substantial number of rail cars and go a long way toward solving the rail car shortage without requiring costly investment in new cars. In conclusion, let me express some words of satisfaction coupled with the traditional language of caution you might expect from an auditor. The array of talent you have assembled here today from industry, academia, and government promises to generate the kind of debate and understanding that are sorely needed if we are serious about removing barriers and providing incentives to innovation. As President Perkins pointed out, however, beyond this workshop there is the need to translate your ideas into actions. Your 8

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suggestions for innovation must be convincing to the different sectors of society. Implementation of your ideas by government must be pursued through the political process so that needed changes in attitudes, policies, and processes can be achieved. We in the General Accounting Office have more than a passing interest in your efforts. We believe we can help each other to bring about transportation innovation.

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