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The Governance of Surface Transportation in the 21st Century:

Understanding the Challenges of Implementing New Technologies and New Procurement

Methods

George Washington University

Washington, DC

July 9, 2015

Jonathan L. GiffordLisardo BolañosNobuhiko Daito

Jeong Yun Kweun

George Mason University

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Presentation Outline

• Research question and methodology

• Why transportation and why Virginia Dept of Transportation?

• Challenges confronting surface transportation system

• VDOT´s adaptation efforts

• The barriers to adaptation

• Conclusions

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Research Question and Methodology

• Derthick (1990): ambiguous mandates and loss of control• Fountain (2001): activities persist despite innovations• Stigler (1971), Williamson (1979), Spiller (2013), Moszoro and

Spiller (2015): external opposition due to cost avoidance or opportunism

• Wilson (1989): costly monitoring of outputs and outcomes

What technological and procurement developments have taken place in surface transportation and how have transportation institutions adapted to them?

Research question

The challenges of adaptation

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Research Question and Methodology

• 11 questions: 30-60 minute• Questions oriented to identify the changes in the last 20

years in VDOT, driving forces and implications

• In-depth interviews between March and May 2015• Industry leaders and professionals with extensive

experience in Virginia’s highway sector • 15 interviews out of 22 invited• 7 in the public sector, 8 in the private sector

Interviews

Questionnaire

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Why transportation?

Transportation in the US provides a rich context to test hypotheses on institutional theory

Different transactionsDesignConstructFinanceOperate and maintainRetire

Changing governance mechanismsPrivate tolls and turnpikesCounty and city provisionState provisionFederal financial supportPrivate involvement via P3s

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Why is VDOT context i useful to others?

Responsibilities in urban and rural areas is useful for different types of states

Highways (miles)1,118 interstate8,111 primary highways333 frontage roads48,305 secondary roads

Some issuesLow proportion of locally owned roadsState ownership favors adopting innovations -In methods and materials -In procurement methods

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Why is VDOT context useful to others?

Experiences with political environment may help other states

Considerable political contestabilityShifts in Governor party: 1993, 2002, 2009Shifts in the House majority: 1997Shifts in the Senate majority: 1995, 2008, 2011

High ethnic fractionalization

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Why is VDOT context useful to others?

Experiences developing a competitive market may help other states

P3 market as an exampleMultimodal P3 office outside the DOTManual and Guidelines to provide process certaintyOperators• Ferrovial Agroman, Fluor, Macquarie, Skanska,

TransurbanActive interest from the private sector• 19 teams responded to the I-66 RFI

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Challenges confronting surface transportation system

Challenges and opportunitiesGrowing complexity

Cost increases

New materials, methods, and technologies

Budget constraints

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Challenges confronting surface transportation system

Growing complexity

Deteriorating infrastructureGrowing congestionGrowing urbanizationAging facilitiesInsufficient maintenance

Increased urbanization

Physical constraints in dense areasOther modes of transportationTransit-Oriented Development

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Challenges confronting surface transportation system

Cost increases

Customers expectations Low tolerance for inconvenienceHigh demand for informationAdditional modes of transportation

Regulatory requirements

Complicates buying innovationsComplicates implementing innovationsImpedes providing new services

Other driversNew technologies allow new/demand new servicesIncreased input pricesSlow growth in construction productivity

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Challenges confronting surface transportation system

New materials, methods, and technologies

InnovationsIT development to improve designs for lower costsNew construction technologiesHigher specification safety features on roadsIntelligent Transportation Systems (ITS)

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Challenges confronting surface transportation system

Budget constraints

Funding concernsPressure to ‘reign in’ government since 1980sVirginia self-limitation on debt ceilingsGas tax reform in 2014 was positive but “insufficient” to satisfy demands

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VDOT´s adaptation efforts

VDOT´s adaptationNew focus

Relationship - private sector

Relationship - public sector

Relationship - citizens

New organization & new skills

New management style

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VDOT´s adaptation efforts

A new focus

ServicesTechnology to increase efficiencyMultimodal approachesTransit-Oriented Development (TOD)Operations and maintenance

Life-cycle costsConcern with infrastructure deteriorationTrade-off: cost and asset-lifeDecisions on materials and procurement

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VDOT´s adaptation efforts

Relationship with the private sector

DBB DB DBFOMFocus on process controlRisk on public sector

Focus on cost and delivery dateShared risks with private partner

More private involvement in definition and objectivesRisk-sharing requires a specialized skillIncentives allocated to achieve on-time and on-budget completion

Changes in the relationship

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VDOT´s adaptation efforts

Relationship with other public agencies

Image: http://www.fairfaxcounty.gov/westox/mpstoc/images/pstoc-front-sign-web.jpg

Shared facilitiesShared technologiesShared operational informationIndividuals and institutions interact 24x7

Changes in the relationship

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VDOT´s adaptation efforts

Relationship with citizens

New modes of communicationIncreased interaction through informal information meetings

Changes in the relationship

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VDOT´s adaptation efforts

Changing the organization and the mix of skills

Organizational changes“Ossified” organizationDownsizing (1994-2014): 15K (1994) down to 7.5K workersShift to private contractors

New skills neededContract managementFinancial engineeringPublic relationships

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VDOT´s adaptation efforts

Changing the management style

Performance managementPrevious focus on proceduresPerformance management to improve resultsDashboard for publicly procured projects -Clarity on what is being managed -Clarity on goal achievement -Efforts to break-down silos

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VDOT´s adaptation efforts

Image: http://dashboard.virginiadot.org/

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VDOT´s adaptation efforts

Changing the management style

Managing P3sDashboard not appropriateNot monitoring ´every ton of asphalt´Focus is on the concept and the delivery A new agency had to be established -Concentrate responsibilities -Specialized skills -Multimodal approach

Image: http://www.p3virginia.org/

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The conflicts from VDOT´s adaptation

Conflicts from VDOT´s adaptation

External opposition

Internal resistance

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The conflicts from VDOT´s

adaptationThe conflicts

Internal resistanceResistance to citizen prioritiesEngineering mentalityHigher budget obviates need for P3s

External resistance

High-cost projects attract attentionUrban projects may affect more peopleTolls are unpopularSome benefits are hard to appreciate

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The conflicts from VDOT´s

adaptationWhat is causing the conflicts?

VDOT transactions are more sophisticatedIncreased uncertainty, complexity, and new risksEfforts to assure qualityEfforts to gather citizen support Efforts to gather political support (budget, project, program)

Losing the ability to control and measure performancePublic outreach may not win community support P3 project may go bankrupt due to a national recession

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The conflicts from VDOT´s

adaptationExplaining the conflictsWilson (1989): how to avoid shirking in the absence

of residual profits

Types of organization

OutcomesExpected results

Easy to measure Hard to measure

OutputsDay-to-

day actions

Easy to measure

Production organizationsE.g., IRSFocus on measurable outcomes

Procedural organizationsE.g., Army at peaceFocus on standard operating procedures

Hard to measure

Craft organizationsE.g., Army at warGenerate a sense of duty

Coping organizationsE.g., SchoolsBalance situational imperatives and constraints

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The conflicts from VDOT´s

adaptationExplaining the conflict

Production organization

Coping organization

Observable outputs & outcomes

Unobservable outputs & outcomes

Operators: situation imperativesManagers: budgetary and political constraintsIn bad times: external pressure to add more constraints

Shift is expected to generate conflict

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Conclusions

• Through in-depth interviews our goal was to understand

• What technological and procurement developments have taken place in surface transportation and how transportation institutions have adapted to them?

• Findings• VDOT faces rapid urban growth, public funds shortages, and higher

expectations• The adoption of transportation innovations implies higher

uncertainty and complexity• This is caused by a loss of control and a lower ability to measure

performance• VDOT faces external and internal conflict that pressures the

agency to focus again on tasks that are easier to control and measure

• NIE provides a useful framework for understanding VDOT changes

Center for Transportation Public-Private Partnership Policy

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George Mason University

School of Policy, Government, and International Affairs3351 Fairfax Drive, Arlington, VA 22201 USA

jgifford@gmu.edu / +1(703)993-2275 29

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