Freight Transportation:

Short Sea Shipping Option Shows Importance of Systematic Approach to Public Investment Decisions

GAO-05-768: Published: Jul 29, 2005. Publicly Released: Jul 29, 2005.

Additional Materials:

Contact:

Susan A. Fleming
2025128984
contact@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

A dramatic increase in freight moving on the nation's highways and rail lines, coupled with growing congestion and infrastructure limitations, has prompted DOT to explore new mobility-enhancing options like short sea shipping (SSS)--transporting freight by water between domestic ports, either along the coast or on inland waterways. This report describes (1) why SSS is being considered and factors affecting its viability, (2) the department's role in the development of this option, and (3) issues that should be considered by public transportation decision makers when making investment decisions about this option or other types of projects for addressing freight mobility challenges. This report is based on a review of pertinent studies, federal activities, and an examination of two new SSS operations.

Transportation experts have cited numerous benefits, such as congestion mitigation, for developing short sea shipping, but they have also noted numerous obstacles, such as shippers' reluctance to try a different mode for transporting their cargo, that impede its development. Absent in-depth information on the benefits and obstacles, opinions vary on how to proceed. Some stakeholders favor extensive public involvement, including federal funding for projects while others see a more limited public role, such as addressing regulatory provisions that may interfere with its development. The two new services GAO examined provide insights--but no clear answers--about the viability of this approach. The Department of Transportation (DOT) has made short sea shipping a high-priority option to enhance freight mobility and has drafted a policy proposal to provide potential federal funding. So far, the department's efforts have been too narrowly focused. Before determining that federal funding should be applied to its development, a thorough understanding of key issues is required, such as the potential effect of federal involvement on the competitive balance among all transportation modes, lessons to be learned from recent start-up services, and actions that could mitigate identified obstacles, particularly with respect to reluctance to use this option. Public transportation decision makers are also actively considering short sea shipping in the context of a range of other options to address freight mobility challenges in their jurisdictions. Improving freight mobility, however, is a particularly complex challenge because the freight transportation system encompasses many modes on systems owned, funded, and operated by both the public and private sectors. In light of growing budget deficits, public decision makers must guard against waste of limited public resources when making investment decisions. This report contains a four-step approach for helping public decision makers define the rationale for public involvement, assess the merits of projects, determine the appropriate level and type of public support, and evaluate project results.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: The Energy Independence and Security Act of 2007 required DOT to establish a short sea shipping program that, among other things, will provide funding for marine highway projects determined to provide the greatest benefit to the public. In developing this program, DOT has taken initial steps to establish an investment decision tool. Specifically, in interim regulations on the new program, MARAD included criteria for evaluating applications for funding of marine highway projects that are based on principles that are very similar to those used in the decision tool developed by GAO for its report. For example, criteria for assessing project applications will address overall benefits of the proposed project (including scope, impact and public benefit) and return on investment/feasibility (including offsetting costs, feasibility and cost effectiveness). While there is currently no federal funding for the program, the adoption of these criteria will help ensure that, should the program receive funding in the future, decisions about federal investments in marine highway projects will be based on recognized economic and management principles.

    Recommendation: To further both federal involvement with SSS and greater use of systematic approaches to making public investment decisions, the Secretary of Transportation and the Administrator of the Maritime Administration should, to foster greater use of systematic approaches, use existing mechanisms and communications channels to encourage public transportation decision makers to evaluate SSS and other freight projects using an investment decision tool--such as the one we developed--that incorporates recognized economic and management principles.

    Agency Affected: Department of Transportation: Maritime Administration

  2. Status: Closed - Implemented

    Comments: The Energy Independence and Security Act of 2007 required DOT to establish a federal short sea shipping program and to create a board consisting of agency and other public and private officials to develop a more comprehensive understanding of the key issues involved in short sea shipping. DOT has taken some initial steps to address the Act's requirements and GAO's recommendations, including issuing interim regulations on the new program that state that DOT will establish a board to determine the key impediments related to short sea shipping. This board will help DOT and MARAD ensure that they have a comprehensive understanding of the issues involved in developing a short sea shipping program as well as a defined federal role before expending substantial federal resources on the program.

    Recommendation: To further both federal involvement with SSS and greater use of systematic approaches to making public investment decisions, the Secretary of Transportation and the Administrator of the Maritime Administration should, before expending substantial federal resources on SSS activities or developing a formal program for federal involvement in helping to fund this approach, establish a comprehensive understanding of key issues to determine whether there is a genuine need for federal involvement and what the role of the federal government should be, if any. Such a determination could, for example, involve consideration of the following issues. To determine whether the private sector would likely undertake SSS projects on its own, policymakers could explore several areas in depth. For example, gaining a better understanding of the conditions and circumstances under which existing SSS started and are being sustained and the potential impact of the regulatory, administrative, and operational barriers to the development and implementation of SSS are both important in determining whether federal involvement is necessary. To better define an appropriate federal role, if deemed necessary, a number of areas could be explored, including (1) an assessment of the state, local, and private resources that may be likely available for SSS projects; (2) quantitative and qualitative analyses of nonmarket or external factors with respect to SSS, such as reduction in the costs of congestion, pollution, and accidents, that the private sector will likely not be willing to fund; and (3) an evaluation of potential financing mechanisms and incentives to best leverage federal resources, develop an equitable cost-sharing framework among public and private entities, and ensure that users and beneficiaries of SSS services pay for these services commensurate with the costs of providing them.

    Agency Affected: Department of Transportation: Maritime Administration

  3. Status: Closed - Implemented

    Comments: The Energy Independence and Security Act of 2007 required DOT to establish a federal short sea shipping program and to create a board consisting of agency and other public and private officials to develop a more comprehensive understanding of the key issues involved in short sea shipping. DOT has taken some initial steps to address the Act's requirements and GAO's recommendations, including issuing interim regulations on the new program that state that DOT will establish a board to determine the key impediments related to short sea shipping. This board will help DOT and MARAD ensure that they have a comprehensive understanding of the issues involved in developing a short sea shipping program as well as a defined federal role before expending substantial federal resources on the program.

    Recommendation: To further both federal involvement with SSS and greater use of systematic approaches to making public investment decisions, the Secretary of Transportation and the Administrator of the Maritime Administration should, before expending substantial federal resources on SSS activities or developing a formal program for federal involvement in helping to fund this approach, establish a comprehensive understanding of key issues to determine whether there is a genuine need for federal involvement and what the role of the federal government should be, if any. Such a determination could, for example, involve consideration of the following issues. To determine whether the private sector would likely undertake SSS projects on its own, policymakers could explore several areas in depth. For example, gaining a better understanding of the conditions and circumstances under which existing SSS started and are being sustained and the potential impact of the regulatory, administrative, and operational barriers to the development and implementation of SSS are both important in determining whether federal involvement is necessary. To better define an appropriate federal role, if deemed necessary, a number of areas could be explored, including (1) an assessment of the state, local, and private resources that may be likely available for SSS projects; (2) quantitative and qualitative analyses of nonmarket or external factors with respect to SSS, such as reduction in the costs of congestion, pollution, and accidents, that the private sector will likely not be willing to fund; and (3) an evaluation of potential financing mechanisms and incentives to best leverage federal resources, develop an equitable cost-sharing framework among public and private entities, and ensure that users and beneficiaries of SSS services pay for these services commensurate with the costs of providing them.

    Agency Affected: Department of Transportation

  4. Status: Closed - Implemented

    Comments: The Energy Independence and Security Act of 2007 required DOT to establish a short sea shipping program that, among other things, will provide funding for marine highway projects determined to provide the greatest benefit to the public. In developing this program, DOT has taken initial steps to establish an investment decision tool. Specifically, in interim regulations on the new program, MARAD included criteria for evaluating applications for funding of marine highway projects that are based on principles that are very similar to those used in the decision tool developed by GAO for its report For example, criteria for assessing project applications will address overall benefits of the proposed project (including scope, impact and public benefit) and return on investment/feasibility (including offsetting costs, feasibility and cost effectiveness). While there is currently no federal funding for the program, the adoption of these criteria will help ensure that, should the program receive funding in the future, decisions about federal investments in marine highway projects will be based on recognized economic and management principles.

    Recommendation: To further both federal involvement with SSS and greater use of systematic approaches to making public investment decisions, the Secretary of Transportation and the Administrator of the Maritime Administration should, to foster greater use of systematic approaches, use existing mechanisms and communications channels to encourage public transportation decision makers to evaluate SSS and other freight projects using an investment decision tool--such as the one we developed--that incorporates recognized economic and management principles.

    Agency Affected: Department of Transportation

 

Explore the full database of GAO's Open Recommendations »

Sep 23, 2014

Sep 12, 2014

Jul 31, 2014

Jul 23, 2014

Jun 25, 2014

Jun 24, 2014

Jun 18, 2014

Looking for more? Browse all our products here