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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.
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Highlights

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.

Recommendations

Recommendations for Executive Action

Agency Affected Recommendation Status
Department of Transportation 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.
Closed – Implemented
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.
Maritime Administration 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.
Closed – Implemented
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.
Maritime Administration 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.
Closed – Implemented
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.
Department of Transportation 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.
Closed – Implemented
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.

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BargesDecision makingFederal aid for transportationFreight transportationFreight transportation ratesInland waterwaysMarine transportationPublic roads or highwaysShipping industryTransportation planningTransportation policiesMerchant vessels