Originally Broadcast May 3, 2008

Washington, D.C.

Announcer: Welcome to The Business of Government Hour, a conversation about management with a government executive who is changing the way government does business. The Business of Government Hour is produced by The IBM Center for The Business of Government, which was created in 1998 to encourage discussion and research into new approaches to improving government effectiveness. You can find out more about The Center by visiting us on the web at businessofgovernment.org.

And now, The Business of Government Hour.

Mr. Morales: Good morning. I'm Albert Morales, your host, and managing partner of The IBM Center for The Business of Government.

The constant and efficient movement of people and goods across the U.S. and around the globe is critical to the economy and our lives. Today, our vital transportation infrastructure is showing signs of aging, and we are experiencing unprecedented congestion in our nation's highways and railways, at our airports and at our seaports. Overcoming these challenges will increasingly rest on the development and the deployment of new technologies and cutting-edge solutions.

With us this morning to discuss his department's efforts in foraging a transportation system for the 21st century is Paul Brubaker, administrator at the Research and Innovative Technology Administration, or RITA, within the U.S. Department of Transportation.

Good morning, Paul.

Mr. Brubaker: Good morning, Albert.

Mr. Morales: And joining us in our conversation is John Nyland, managing partner of IBM's Global Business Services Public Sector.

Good morning, John.

Mr. Nyland: Good morning, Al.

Mr. Morales: Paul, let's start by providing some overall context for our listeners. Could you take a moment and share with us a sense of the history and mission of the U.S. Department of Transportation? When was it created, and what is its mission today?

Mr. Brubaker: Sure. DOT, the Department of Transportation, was created back in the Johnson administration, and came into operation, it was signed into law late 1966. And the first day of operation was April 1, 1967.

Mr. Morales: Could you perhaps provide us a little bit more specifics on how the Department is organized, the size of its budget, number of full-time employees, and perhaps a sense of your operations across the country?

Mr. Brubaker: Sure. Well, it is a national department here. We've got operations in all 50 states basically. And we have 60,000 employees and a $70.3 billion budget for air, maritime, and surface transportation missions.

Mr. Nyland: Paul, most of the agencies within the Department of Transportation are modal agencies. That is, they cover a mode of transportation, be it aviation, highway, railroad. But your administration is different. Could you tell us why this is the case? But more importantly, what are your responsibilities and duties as the RITA administrator? And can you provide us some specifics of your organization and how it supports the broader mission of the DOT?

Mr. Brubaker: Sure. You're correct in noting that most are considered modal agencies. And interestingly enough, we were created to really be a cross-modal organization, to look for innovative technologies that could be applied across the transportation modes, which is an exciting mission.

The other thing that we are tasked with doing is actually coordinating the Department's $1.2 billion research investment portfolio under the Norman Mineta Research and Special Programs Improvement Act, which actually stood us up. My role as RITA administrator is to make sure that there is a process in place to manage that portfolio, to make sure that we are acting as the portal for new technologies into the Transportation Department, and that we actually take a very cross-modal, multi-modal view of the transportation infrastructure in terms of moving passenger or freight.

Mr. Nyland: So regarding your responsibilities and duties, what do you see as your top three challenges that you're facing right now, and how are you addressing these challenges?

Mr. Brubaker: Well, RITA's a relatively new organization, so when I basically inherited RITA, there were some basic process issues that really needed to be dealt with, some organizational alignment issues. And what we did is we stood up a process by which we could achieve our statutory obligations under the Mineta Act, and we're in the process of doing those things right now. So I would say linking the research investment to the departmental priorities was a definite challenge that I think we've done a good job of standing up a process to address.

Achieving organizational alignment around sort of our overall strategic plan and our overall strategic objectives was important. I wanted to make sure that everybody in the organization really kind of understood what their role was, what the mission of the organization was, how they played a role in managing on a day-to-day basis, and how they contributed to the function of the mission and the performance of the mission. And also important was to make sure that people understood how they were going to be managed and measured with respect to organizational objectives.

Mr. Morales: So, Paul, I understand that you came to the Department after serving some time in the private sector as well as a previous career in the public sector.

Mr. Brubaker: Serving time, Albert? It makes it sound like --

Mr. Morales: Serving time, yeah.

Mr. Brubaker: It makes it sound like prison, so. It's not, believe me. I enjoy every moment of it.

Mr. Morales: Could you take a few moments and sort of describe your career path for our listeners and kind of tell us how you got started?

Mr. Brubaker: Sure. I came to government as a GS-7 GAO evaluator in the Atlanta Regional Office, so I worked for the General Accounting Office at the time, now the Government Accountability Office, and was trained to really perform cost schedule and performance audits of government programs. So it was great, great background. And after serving in GAO, which I loved, they spent a lot of time training us and providing us with a lot of really good professional development in terms of being able to kind of walk into a project or a department and really getting smart in a relatively short amount of time on what it took to make it tick, and then offer some suggestions for improvement. And that background has really served me pretty well here.

Then after I spent some time at GAO, I worked on Capitol Hill for -- at first I did a GAO detail to the Senate Appropriations Committee staff, which was pretty exciting, and I learned a little bit about the Hill and how things operate. And then I wound up working full-time on Capitol Hill for then-Senator William S. Cohen, a Republican from Maine, on his Senate Subcommittee on Oversight of Government Management, which was a subcommittee of the Governmental Affairs Committee. And there, I was hired on as chief investigator and then became the Republican staff director and worked on things like the Klinger-Cohen Act, which, you know, being a Senate guy, I would tell you that probably should have been named the Cohen-Klinger Act. But at any rate, I worked on that and then spent time at the private sector.

And then Secretary Cohen asked me to join him at the Pentagon to work in the information technology arena and actually, you know, I think his line to me was that, okay, you know, you helped draft this legislation, come over here and help me implement it. So that was a lot of fun and was very rewarding.

And then I went out into the private sector for a number of years and bought and sold a couple of small companies and was engaged in running marketing of a really fast-growing systems integration firm called SI International in Reston, and was working in a small start-up that was focused on collaboration and collaboration capabilities and driving those into leading organizations, both in government and the private sector.

And then I got a call from the White House and asked me if I was interested in joining the administration.

Mr. Morales: That's fantastic.

So Paul, as you kind of reflect back on all these experiences, say, your role as a DoD deputy CIO and perhaps your role as the CEO of a private entity, how have these experiences prepared you for your current role and perhaps shaped your management approach and leadership style over the years? And then finally, could you share perhaps some management lessons you've learned and brought to RITA from your private sector experiences?

Mr. Brubaker: Yeah, you bet. Particularly on the government side, though. Let me just address that first, because like the Pentagon and like the role I had in the Pentagon as the deputy chief information officer, we were obligated to execute a statutory requirement. And the same thing is true with RITA. We are obligated to implement the Mineta Act and all the requirements that underlie it. So what was real important when I walked through the door was to actually read the Mineta Act and understand it, and then make sure that we were aligned as an organization to achieve those objectives. So that was job one. And that's something that you only get if you've really kind of been in government and really understand how to navigate the statutory requirements.

Drawing from both the public sector background and the private sector background, what I knew had to happen was we had to get really clear about what the vision of the organization was. And that's easy because it really kind of reflects -- in a government organization, it really reflects the statutory requirements that you're obligated to meet. But you've got to have not just a vision, but you've got to have a plan. I mean, really kind of what are you going to do from a people, process, technology point of view, organizational point of view? How are you going to align to achieve your objectives? Not just -- when I'm speaking about resources, too, I'm also thinking in terms of people. How do you align your people? How do you align your budgets? And how do you make sure that you put the organization on a path that you can actually achieve and produce some sort of measurable results for the taxpayers?

So those lessons were really, really important. I recognized out of the gate, particularly from the private sector, that you've got to have really clear focus. You've got to be aligned to achieve your organizational objectives. You've got to have a strategic plan, be clear about your mission. And that plan, by the way, drives your process, all your supporting processes, how you align your people and your resources, how you measure effectiveness, and how you reward behavior.

Mr. Morales: So it's really about how to operationalize the vision which is already set forth, largely, in the legislation that you're taking on?

Mr. Brubaker: That's exactly right. That's exactly right.

Mr. Morales: Great, great.

What about the DOT's Transportation Vision for 2030? We will ask Paul Brubaker, administrator at the Research and Innovative Technology Administration within the U.S. Department of Transportation, to share with us when the conversation about management continues on The Business of Government Hour.

(Intermission)

Mr. Morales: Welcome back to The Business of Government Hour. I'm your host, Albert Morales, and this morning's conversation is with Paul Brubaker, administrator at the Research and Innovative Technology Administration, or RITA, within the U.S. Department of Transportation.

Also joining us in our conversation from IBM is John Nyland.

Paul, in our last segment, you outlined some of the key challenges you faced as administrator. If we can just transition a bit here, could you now describe some of the critical transportation challenges facing the country today and perhaps outline for us the current state of this country's transportation system and infrastructure?

Mr. Brubaker: Well, obviously, it's a very aged infrastructure. I don't have to tell the folks sitting around this table or folks listening this morning, probably some of whom are sitting behind a traffic construction site or an accident, that congestion is a major issue in this country. You know, if you talk to our transportation secretary, Mary Peters, she always talks about safety, system performance, and 21st century solutions. And those 21st century solutions are really all about improving the former two. They're all about improving the safety posture, reducing the number of crashes. And as a byproduct of reducing the number of crashes, we can also reduce congestion and actually benefit the environment by reducing greenhouse gases as we keep cars moving. But she also zeroes in on system performance, and that is really related to how we move people and how we move goods across this country.

Again, it's not just about automobile traffic, but it's also about air traffic. It's all about congestion on our waterways and in our ports. And these are really major, major issues. And one of RITA's missions is really to get our arms around, from a measurable perspective, the whole issue of safety as well as transportation system performance. And by introducing 21st century concepts, be it technology or be it economic innovations with congestion pricing, like we're doing through the Urban Partnership Agreements and hope to do it in New York City if the state legislature approves it, as well as San Francisco, I mean, as we begin to look at those types of innovations, it's really going to enable us to use the existing infrastructure much more efficiently and much more effectively.

But even from a research perspective -- I mean, as I mentioned, managing our research portfolio, we're looking at better ways to make informed decisions about resource allocation in terms of replacing roads, replacing bridges, as opposed to sort of the traditional model, which was, we've got a fixed amount of money through the Highway Trust Fund that's, incidentally, funded by gas taxes.

And also, I'd be remiss if I didn't point out the fact that through better fuel economy standards, through transitions to alternative fuels, especially if they're hydrogen, and as we introduce plug-in hybrid technology and electric cars to the mix, that old model is not going to stand up to the future. And we've got to figure out how, from an innovative perspective, how we actually come up with some alternatives to the traditional gas tax. And I think some of the technologies that we're working on and some of the innovation and innovative approaches that we're following are really going to enable a different transportation funding paradigm, a different transportation operation paradigm in the future. And that's what's really exciting about this job.

Mr. Morales: Well, Paul, since you talk about the future here, could you tell us a bit more about DOT's Transportation Vision for 2030? To what extent will it guide future investment decisions and research? And how does it coordinate with the Transportation Research, Development, and Technology Program and the ITS Strategic Plan?

Mr. Brubaker: Well, the entire reason we came up with Transportation Vision for 2030 is because we recognized that even though the Department had a pretty broad strategic plan, we wanted to specifically link in an intermodal or a multi-modal fashion the Department's research and development investments towards some intermodal goals, some cross-modal goals. A lot of the modal plans and what have you really focus in on the modes, and we wanted to take a step back at sort of a higher level, specifically as it relates to research, and figure out, okay, what is it that we should be building towards. And that's why we came up with Transportation Vision for 2030.

We laid out a number of goals, a half a dozen goals, very specific goals, around things like reducing congestion and focusing on safety, as well as some environmental goals, improving environmental stewardship. But we did it in an intermodal way. And we actually focused on four main themes. One was passenger movement. Another one was movement of freight. And then we had innovative financing and public-private partnerships. And then the last one, which was really technology, it was how to introduce technology and innovation across the prior three areas and really take the transportation paradigm to the next level in a set time frame, which is -- you know, we chose the year 2030 because it seemed like a pretty reasonable time horizon; that we can actually begin planning today, planning our research investment today, that will support the vision that we outlined for 2030. And that's just really an exciting opportunity to really link research, our research investment, with a strategic objective.

Mr. Nyland: Paul, could you tell us more about the Research Planning and Coordination Program, and how it ensures that DOT is making the most of its billion-dollar annual investment in research and technology? And more specifically, you referred to the concept of applying the CPIC concept, or the capital planning and investment control concept, to research. Could you elaborate on such an application, and is there a formal process in place to reevaluate and shift the RD&T research strategies and priorities accordingly?

Mr. Brubaker: This is really exciting. The capital planning and investment control process is a mature process that really was defined and required, again, going back to the old DCIO days at the Pentagon, but even more importantly, before that, to the Hill when I got an opportunity to work on the Information Technology Management Reform Act, or Klinger-Cohen, which actually required the development of a CPIC concept, our CPIC process for the federal government.

And my friends accuse me of only having one good idea in my life and I just keep trying to apply it to everything. And there's a certain element of truth to that, but I looked at how we were managing the research portfolio at the Department, and it really lent itself to this type of a process. So rather than reinvent the wheel, we were able to leverage best practices that had been developed over the last decade or so through the CPIC concept, including leveraging GAO's ITIM Guide, Information Technology Information Management Guide, which lays out a really robust maturity model for selecting, controlling, and evaluating information technology capital projects. And we just applied that same maturity model to what I'm calling RPIC, or the research planning and investment control process. It's based on best practices. It's a very mature model. And in some ways, I find it a little easier to apply to research than I do information technology investments, because the business cases are slightly different.

I still would like most of the research or virtually all of the research to really be outcome-based, which is consistent with what CPIC really tries to drive home. So we looked at this model and we thought, you know what, we can really tee this up and manage through our governance process. We've got a governing body called the RD&T Planning Council, and we're actually about to change that name to the RD&T Investment Board. Really, the whole notion there is that this governance body, which is made up of the modal administrators, will have a say in making sure that the research investments across the Department and even within their modes are consistent with the strategic objectives that we seek to achieve as a department. It's criteria-based, it's fairly objective.

We're developing portfolios. We've got nine portfolios that we've developed, all around from a multi-modal and intermodal perspective, dealing with things like human factors research, dealing with things like materials, logistics and supply chain, and really focusing the research investment on an intermodal basis, which is very, very exciting. It's unprecedented, and we're pretty thrilled to be standing up a relatively mature process in a department that really hadn't done it yet. And it's an exciting time for the research community in the Department to really sort of rally around this and take it to a completely different level.

Mr. Nyland: Let me switch gears on you here. From a strategic perspective, could you describe the vision behind the concept of intelligent transportation systems, or ITS?

Mr. Brubaker: Sure. It's real simple: We want to build vehicles that don't crash, and provide drivers with mobility solutions and assistance, presented in a user-friendly manner that doesn't distract the driver, that offers him value added. I mean, imagine if you will going out to your car in your garage, lifting up the garage door, getting in the car, turn the ignition, and then having the car basically tell you, look, John, it doesn't really make any sense for you to drive in the Clara Barton Parkway today; there's been an accident. Your best bet is to drive to a Metro station and get into work that way, and this is about how long we think it's going to take. And by the way, we've already -- you know, if you want, we can prepay your parking and buy you a farecard. So that's the kind of stuff that we're looking at from a mobility perspective.

From a safety perspective, I mean, we've seen a lot of evidence and a lot of research in this area. We actually have technology today that would prevent cars from crashing into each other. The trick is to fine-tune that, make sure that the legal privacy issues are dealt with, install it, deploy it, bring the cost down, and actually work with the OEMs and the automobile manufacturers and the after-market manufacturers to begin deploying these types of solutions. But they exist and they are out there, and we find it very exciting, particularly from the safety perspective.

I mean, if you look at the fact that we have 6 million vehicle crashes every year in the United States, at an economic cost anywhere -- if you look at the AAA study that was just released, I think they said $167 billion a year is the related economic cost of these crashes. We did a National Highway Traffic Safety Administration study back in 2000 that suggested that that annual cost was somewhere in the neighborhood of $204 billion. Either way you cut it, it's a very large number. And if you think about it, it's fatalities, it's injuries, it's medical bills, it's repair costs, it's increases in insurance premiums, it's lost work. There's a huge economic cost that is attributed to these 6 million crashes, not to mention the fact that non-recurring congestion is often the result of a fender-bender somewhere, an automobile accident or a vehicle crash. So the important thing to note there is we can actually, by leveraging these ITS solutions, intelligent transportation solutions, on the safety side really improve mobility.

And also, we know from research that's been done at a number of our university transportation centers that moving vehicles contribute a lot less in terms of greenhouse gases than those who are sitting in traffic, so it actually benefits the environment. So I think the time is right to really energize the intelligent transportation systems program around the safety issue, with the real goal of significantly -- and by "significantly," I'm talking somewhere in the neighborhood of -- you know, this isn't official policy here, but it's what I'm using to sort of drive the discussion inside the Department and outside the Department -- but saying, you know, can we reduce those 6 million crashes by 90 percent over the course of the next 20 years or so? That is a laudable goal.

And if you think about it, if we could reduce those crashes, we could also reduce the number of injuries, and certainly the 42,000 people who lose their lives on the nation's highways every year. You know, if you reduce that by 90 percent, you've got a lot less sad families out there. There's a very clear and compelling business case around intelligent transportation systems.

Mr. Nyland: Staying with this theme, could you elaborate on the national ITS architecture? To what extent does this provide a common structure for the design of intelligent transportation systems and provide overall guidance to ensure that systems, products, services are all interoperable without limiting the design options of the stakeholder?

Mr. Brubaker: Yeah. And as you probably guessed as an IT guy, I haven't met an architecture I didn't love, so in this case, we view it as a real positive. I mean, we want to have a national ITS architecture to ensure interoperability. Most of these projects are going to be rolled out at the state and local level, so we need to make sure that folks are building to appropriate standards.

The only thing that I'm a little concerned with with the national ITS architecture, and we're taking steps to address this, is that it's a little bit rigid in the sense that it hasn't really taken into account advances in communications technology. So we periodically update that, obviously. But it's really kind of wedded to a couple of technologies that, just to get specific, DSRC, dedicated short-range communication, radios, which will absolutely and always be a part of the ITS architecture, but it doesn't take into account things like wifi and mesh networking and Internet Protocol Version 6, which is going to allow self-healing networks and a lot of communications on the move, if you will.

And we're also not necessarily looking toward some lessons learned. And this is also the beauty of having been at the Defense Department. I mean, I look at what the defense community does in the area of Blue Force Tracking and communications on the move, and I truly believe that there are some lessons there that we can take into our national architecture that could really enable some of the outcomes that I described earlier.

Mr. Morales: That's great. So sticking with this sort of theme of congestion, according to a recent Texas Transportation Institute report in 2005, the nation's urban congestion problem resulted in about 4.2 billion hours of travel delay, 2.9 billion gallons of wasted fuel, and a net urban congestion cost of nearly $80 billion.

Could you tell us about the DOT's national strategy to reduce congestion on America's transportation network, which is also known as the National Congestion Relief Initiative?

Mr. Brubaker: Sure, I'd love to tell you about it. Yeah, the TTI, Texas Transportation Institute, report is done by a researcher, led by a researcher down there by the name of Tim Lomax, who is just a first-class individual and has done a lot to really drive home and quantify the debate around congestion and congestion management.

Congestion is one of the single largest threats to our nation's economic prosperity. I mean, there's just no doubt about it. It takes people away from their families, but it also has a huge economic cost. It drives up the cost associated with operating our supply chain, and it is just eating away at national productivity. So we really need to get around this and get around this quickly. And both Secretary Mineta and Secretary Peters are committed to this congestion initiative, which is premised on the fact that there are existing innovations and strategies that can really provide relief now. And we want to leverage some experiences -- overseas, for example, the London Congestion Initiative, which has been very successful in reducing congestion -- and taking those best practices and then adopting them in the United States.

So we can't be all things to all people, but what we wanted to do was essentially identify a number of leading communities that would really compete for the opportunity to have demonstrations funded in their areas. And what we're interested in is better signage, everything that ranges from like better signage to traffic incident management to traveler information to better signal control, and some advances in that area. And we're just really excited about some of the initiatives that we've undertaken under the congestion initiative, and we're already beginning to see some benefits to the dialogue.

And once we begin to roll these out and get some HOT lanes built, like, for example, in Miami, which is one of the cities that we've funded through the Urban Partnership Agreement, you know, we'll see some benefits, some measurable benefits. Once we can see congestion pricing in New York City, I think you're going to see a significant reduction in rush-hour congestion. And we're just very, very excited about the program, and we think we're going to -- well, we know we're going to produce measurable results for the taxpayer, and that's what it's really all about.

Mr. Morales: That'll be fantastic. Paul, in preparation for our discussion here, I came across something called "SafeTrip-21." What is SafeTrip-21, and to what extent will it contribute to the restructuring of the Vehicle Infrastructure Integration Program? Specifically, how will it accelerate the testing and deployment of safety and congestion-reducing technologies? And to what extent will SafeTrip-21 incorporate lessons learned in operational tests currently underway in partnerships with automakers, OEM suppliers, and state and local governments?

Mr. Brubaker: You bet. Well, SafeTrip-21 is really an exciting operational test that is going to deploy soon, November of this year at the ITS World Congress, which is going to be held in New York City the week of November 14th. It's actually an operational test of existing ITS-related technologies, intelligent transportation systems technologies.

VII, vehicle infrastructure integration, is a subset of intelligent transportation systems. So what we've actually done is we've gone out and we've asked the private sector, academia, think tanks, practitioners, state and local governments to bring us ideas and best practices and technologies that they're currently using. And industry's really done a phenomenal job of stepping up to the plate with some really compelling innovations. And what we're attempting to do is integrate these existing technologies and show that we can measurably improve safety and transportation system performance, or mobility, through the integration of existing technologies. And SafeTrip-21 is really designed to do that, to demonstrate that through better use of information, navigations, communications, technologies, and protocols, that we can really make a measurable impact.

Mr. Morales: That's great.

How is DOT advancing bio-based and alternative fuels? We will ask Paul Brubaker, administrator at the Research and Innovative Technology Administration, to share with us when the conversation about management continues on The Business of Government Hour.

(Intermission)

Mr. Morales: Welcome back to The Business of Government Hour. I'm your host, Albert Morales, and this morning's conversation is with Paul Brubaker, administrator at the Research and Innovative Technology Administration, or RITA, within the U.S. Department of Transportation.

Also joining us in our conversation from IBM is John Nyland.

Paul, I understand that one of the major divisions within your administration is the Volpe National Transportation Systems Center. Can you describe for us what its mission is and how it's different from a data center or a research group?

Mr. Brubaker: Sure. The Volpe Center could best be described as a transportation think tank. It's an internationally recognized center of transportation and logistics expertise. And they do a variety of projects for both the Department of Transportation and other government agencies, private sector organizations, and even some international governments and organizations. So they don't have any direct appropriations. They're a fee-for-service organization. So 100 percent of their operating budget comes from sponsored work. So it's really entrepreneurial. It could best be described as sort of a government professional services firm, but really zeroed in, focused on research.

And it's located in Cambridge, a couple of blocks from the Massachusetts Institute of Technology. I think that's your alma mater, isn't it?

Mr. Morales: It is.

Mr. Brubaker: So we're interested in making sure that Volpe has the best and the brightest folks, if you will, and well-trained people, well-trained research professionals in the area of transportation, logistics, supply chain, safety, mobility. And actually, those folks are sort of taking the management lead, if you will, or the deployment lead -- I shouldn't call it "deployment," I'll call it "operational testing" -- the operational test lead on the SafeTrip-21 project that we just spoke about.

Mr. Morales: That's great.

So transitioning a bit here, Paul, there's been a lot of discussion regarding alternative fuels. Could you tell us a bit more about your research in advancing bio-based and alternative fuels, including hydrogen, which you mentioned earlier? Specifically, what role is DOT playing in meeting the President's commitment to developing a hydrogen-powered transportation system?

Mr. Brubaker: Okay. Well, as you know, in 2003, the President during his State of the Union Address announced a Hydrogen Fuel Initiative, talking in terms of our addiction to foreign oil and the fact that we really need to be researching some alternatives. What's exciting now is that a lot of this technology has advanced to the point where the vehicles are going through a low rate of initial production. And Honda, for example, has 100 hydrogen fuel cell vehicles that they're putting out on the market out in Southern California. The reason why they're focused on Southern California is because that's where the fueling infrastructure is. In fact, they're focused on three specific cities: Torrance is one, Santa Monica, and I forget the third. But they're focused in on exactly where the fueling infrastructure is because that's what they have to do.

GM, likewise, has a program where they've got 100 hydrogen fuel cell vehicles out on the road being tested in Washington, New York, and Southern California again, because that's where the fueling infrastructure is. We've got a station over on Benning Road, which many of you have probably been by, and we actually have an operational hydrogen fueling facility here in D.C., which is fairly accessible.

So we're doing a lot in the area. And we're very bullish on both biofuels, hydrogen, as well as battery technology that's being developed to really improve the operation of vehicles; reduce our dependence on foreign oil, which is, frankly, job one; and then also it's going to improve the environment. So it's sort of a triple whammy, if you will. It's really exciting to see the developments in hybrid, electric, gasoline-powered, plug-in hybrids, plug-in hybrids that use biofuels, that can use gasoline, that can use -- although our objective long term is to get off gasoline, but can also use hydrogen.

GM at the Consumer Electronics Show back in January rolled out something called the Cadillac Provok, which is a concept vehicle, but it's something that's built on a platform, a very flexible platform, that they can build hybrids on. And it's a plug-in hybrid hydrogen fuel cell vehicle that has photovoltaic cells on the roof. Now, these are planned to be on the market in the 2014, 2015 time frame. But you got to understand that there's a lot of research that's done in support of that.

And frankly, hydrogen is ready for prime time. The long pole in the tent here, which is what we're also experiencing on the biofuels and the E85 area, is the infrastructure, is that fueling infrastructure that needs to be built. And we're right now doing some research and promoting some innovative thinking around how can we actually jump-start the deployment of the infrastructure in a meaningful way so that we can compress the timeline that the vehicle manufacturers currently have to make these vehicles available. And I think we're going to be pretty successful in doing that.

Mr. Morales: That's great. Now, Paul, there's a direct correlation between the volume of freight transportation and an increasing population and increasing economic activity. In fact, during the course of one year, over 19 billion tons of freight valued at over $13 trillion was carried over 4.4 trillion miles within the U.S.

Could you describe the trends in freight transportation and identify the key research being pursued to improve freight safety and reduce congestion?

Mr. Brubaker: Yeah, I'd be delighted to. Obviously, that is critical to our economic well-being as a nation, and it's something that we've been devoting a lot of time and energy toward. You know, as you mentioned, your statistics are spot-on. And our port capacity, our infrastructure around the ports, are creating some pretty significant bottlenecks that really need to be addressed. And the level of innovation and what we've been funding in terms of innovative research is really going to come up with some of the strategies and some of the new ways of moving freight and clearing freight through ports and speeding it to market.

But the congestion, this has also played into the whole congestion equation, particularly as our population's going to continue to grow. Demands for goods and services are going to grow. You know, the value of foreign trade increased nearly 200 percent in the last two decades, including a huge 1,200 percent growth in U.S.-China trade between '89 and 2007. And then you look at in the context of NAFTA and you look at some of the border issues that we're dealing with, we're trying to figure out how we can speed goods into the country and out of the country on our export side, but really making sure that the freight flows freely throughout the country. Because as it gets clogged up, there's a significant problem. So we're funding research right now to really understand, to better understand where those bottlenecks are occurring.

Obviously, I mean, anybody who drives by Long Beach can tell you that there are some infrastructure issues around Long Beach and around the Port of Long Beach. But at the same time, there are some non-obvious bottlenecks that we're aware of based on some research that we're doing at Georgia Tech and some other universities, where freight winds up sitting on rail spurs or on the docks for inland waterways. And we need to really be cognizant of exactly how the logistics system works in the United States. And what we can do -- and we want to make sure that we have the strategies that are based on the real problems, not some of the perceived problems.

So we've done things like we've got the congestion initiative, obviously, which I spoke about earlier, but we've got Corridors to the Future Program, which really gets at a lot of those freight corridors and the movement of goods, both on rail and on the highways, as well as our National Cooperative Freight Research Program, or NCFRP, which we manage. We try to look at the whole freight industry objectively, like I mentioned. We leveraged some of the research that we're doing at the universities to ultimately ensure that freight flows freely across the United States.

Mr. Nyland: Paul, there's been a lot of discussion around the theme of collaboration. And as we noted, the RD&T program emphasizes partnership, coordination, and information sharing across the federal government and with universities, state and local governments, industry, and other organizations. What kind of partnerships are you developing to improve operations or outcomes at RITA? And could you describe some specific success stories that illustrate this approach in action?

Mr. Brubaker: Sure. I can tell you what we're -- one of the key elements of our strategic plan going forward is improved collaboration. And we're aligning, like I mentioned at the outset of the program, to ensure that we're focused on collaboration capability.

I mentioned the portfolios, the portfolio management process that we're engaged in through the RPIC process, research planning and investment control. And I mentioned that there were nine communities of interest. Well, likewise, I mentioned the Volpe National Transportation Center. We're reorganizing the Volpe Center into eight Centers of Innovation. And the reason why there is eight is because there are -- I mentioned nine portfolios. One of the nine portfolios is materials. Well, Volpe doesn't do any materials research, but the remaining eight communities of interest really translate well into the Centers of Innovation that we're standing up, but they're identical.

The whole reason for this is so that we can begin to share knowledge across organizations, be it universities, be it the private sector that we've engaged in in conducting some research, or whether it's the Volpe National Transportation Center around these communities of interest so that we're doing a much better job of collaborating, of sharing knowledge, of increasing the level of research that the Department funds through collaboration and knowledge sharing.

And oftentimes, what I found when I walked into this role is that research kind of gets done on an island. And the folks who are conducting the research, particularly on the university side, aren't necessarily sharing that knowledge with another university who may be engaged in similar, very similar, or in some cases identical research. And what we want to make sure of is that we have a collaboration capability that's built leveraging commercial, off-the-shelf software that we currently own as a department. But we want to create a collaboration capability where we can begin to share that knowledge across what have traditionally been sort of research stovepipes, if you will; or as we call them here in Washington, silos of excellence.

But that's the whole notion behind these nine communities of interest, is really create a framework by which we can actually effectively collaborate and share knowledge among the researchers. And we're doing it out of necessity as well. As I go out and I talk to folks in the universities and in the research community, particularly the younger folks, the Generation Y folks, they really expect collaboration. These are the folks who IM and, you know, instant messaging and are used to wikis and really collaborating. And we've got to provide that kind of capability to them if we're going to attract sort of this next generation transportation worker into this field.

Mr. Morales: Now, Paul, I only have a minute left, but I want to continue this theme. Could you tell us a bit more about DOT's largest university programs, or the University Transportation Centers, otherwise known as UTCs? To what extent does the recent expansion of the UTC program present new opportunities to make even greater contributions to transportation research, education, and technology transfer?

Mr. Brubaker: Well, it's a vital element of our department's effort to make us more competitive in the global marketplace. You know, we mentioned the operation of the supply chain. And what we really want to do is -- and congestion and safety and a number of other issues, and what we really want to do is we want to make sure that we're attracting the best minds in the country to these problems; that we're asking them to develop solutions; and that we're also really training the next generation of transportation leaders in this country. And that's what the UTC program's really all about.

We have -- I've been to a number of these. The Department invests about $77 million every year to fund the UTC program. And in the last 20 years, that program has grown from about 10 regional centers to about 60 centers, involving 120 universities today. So this is really an opportunity for us to basically build a knowledge base, a research base, and a tradition of strong transportation research around the country through this investment.

It's amazing. We require a match on all these investments. And it's amazing that the states have stepped up, the private industry has stepped up, and a number of other organizations have stepped up to match our contribution to the UTC program. And to go out there and listen to these graduate students who are working on some of the most incredible projects -- I was just at UC Berkeley not that long ago, and there was a whole host of Ph.D. students who were presenting their dissertation topics, and it's everything that we just talked about in terms of the major challenges. So they're doing really relevant research and developing some very interesting concepts.

And heretofore, you mentioned -- we were talking about collaboration a minute ago. You know, heretofore, those dissertations would get written and they might wind up on somebody's MySpace page in a virtual library somewhere. But oftentimes, they didn't get to the people, the decision-makers, if you will, to really affect changes in policy and process and thinking that are really going to help us solve these problems going forward. So the UTCs present a phenomenal opportunity for us to reach in to really innovative minds -- both young and old, by the way; there are a number of non-traditional students in these programs -- and get their thinking on how we can best address these solutions. Because Washington, despite our best efforts, we don't have a monopoly on good ideas. So these ideas often come from these universities.

I was just out at Missouri Science and Technology University. That was incredible. The stuff that they were doing. There was a fellow out there who actually invented a hydrogen reformer that takes ethanol crude beer, which is a preproduction or pre-distillation step of biofuels, of ethanol, and he takes it and he converts it, or reforms it, if you will, into hydrogen, pure hydrogen, that can be used in a vehicle. And to me, that's a phenomenal development, because it's a technology that leverages the whole ethanol area, the whole biofuels piece. But it does it in such a way that when it's in the crude beer form, it's not a hazardous material, so it's easy to ship. And that's in the middle of Missouri. I mean, who'd have thunk it, you know? Except those folks from Missouri, who -- it is after all the Show Me State.

But it's phenomenal. It's just absolutely phenomenal. And there are pockets of that kind of innovation all over the country. So we've got to collaborate with those folks. We've got to know what they're doing. I mean, we're funding it, so we ought to do a much better job of figuring out how we can use what they develop and figure out how we can inject that thinking into our transportation plans.

Mr. Morales: That's great.

What does the future hold for DOT's Research and Innovative Technology Administration? We will ask Paul Brubaker, administrator at the Research and Innovative Technology Administration, to share with us when the conversation about management continues on The Business of Government Hour.

(Intermission)

Mr. Morales: Welcome back to our final segment on The Business of Government Hour. I'm your host, Albert Morales, and this morning's conversation is with Paul Brubaker, administrator at the Research and Innovative Technology Administration, or RITA, within the U.S. Department of Transportation.

Also joining us in our conversation from IBM is John Nyland.

Paul, transitioning now to the future, could you give us a sense of some of the key trends that will impact the U.S. transportation system in, say, the next three to five years?

Mr. Brubaker: Sure, I'd be delighted to. You know, one is the financing of the infrastructure. That is going to be very, very critical going forward. As I mentioned before, as we move to alternative fuel vehicles, of plug-in hybrids, of battery-powered vehicles, the traditional source of funding, the Highway Trust Fund, is going to be really significant. So we're going to have to be very, very innovative irrespective of who wins the next political contest for President. We're going to have to be very, very creative in how we address these things long term.

Energy efficiency is going to be a key issue; you know, environmental stewardship. Congestion is just going to continue to affect freight and passenger modes. And we are really focused on those three areas in terms of what we're going to do in terms of innovation, new technology going forward. The other one, of course, is intelligent transportation systems, which enable really kind of all three of those areas.

For example, some of the things that we're doing with transponder technology can really impact -- you know, people can be contributing to the transportation infrastructure through user fees that are mileage-based, and that's an intelligent transportation system application. That will help us address some of the funding issues that we've got with the gas tax as people begin to use less gasoline. Again, ITS impacting energy efficiency, as I mentioned before. Also, the alternative fuels and hydrogen and battery-powered vehicles are going to be pretty significant in terms of energy efficiency and environmental stewardship, and finally get us off sources of oil where we buy it from people who don't particularly care for us or our way of life. And then, again, ITS really will play a role in reducing congestion.

Mr. Nyland: Paul, on a broader basis, what are some of the major opportunities and challenges your organization will encounter in the future? And how do you envision RITA will evolve over the next few years to meet them?

Mr. Brubaker: Well, the first thing, of course, is just people. You know, the people that we hire, the people that we can attract, the people that we can bring on board and get folks interested and involved in sort of that whole transportation research world. I mean, how do we attract the best and the brightest is definitely a challenge that we're looking at from an organizational perspective.

The other piece is really accommodating the velocity of technology. I mean, Moore's Law is alive and well in the technology arena and -- named for Gordon Moore, the former chairman of Intel. And it basically says that the computing capacity doubles every 18 months and the price gets cut in half. Well, accommodating sort of long-range strategic plans in a government organization that's really sort of born out of the industrial age in an information age environment is always going to be a challenge. And the research community, as we sort of lay out two-, three-, four-, five-year research plans, we've got to understand that they need to be flexible enough to adjust. And that's going to be a challenge to not just our organization as RITA, but as DOT and as the United States government as a whole tries to take sort of its industrial age structure and achieve information age results.

Mr. Morales: So, Paul, you've had a very successful and extensive career within the public service. What advice might you give someone who perhaps is thinking about a career in public service?

Mr. Brubaker: I would just encourage them to do it and to be patient. The reason why I say "be patient" is, getting a job in the U.S. Federal Government, particularly if you've got a lot of talent, is hard relative to the other options that you have. The process is slow. It's somewhat cumbersome. You know, you still have to fill out an SF-171. You know, we haven't done a particularly good job of streamlining the hiring process for federal employees, whereas we're competing with the same people. Particularly when we're looking to achieve some of our hiring goals, we are often competing with the private sector, who can do on-the-spot hires of people who they recognize as being very talented and have the right resume for the job.

I had a circumstance like this a few days ago, where I was actually talking to somebody about the potential of joining the federal government. The person had a number of offers on the table. And I said, well, you've got a great resume. You've got a great background. You'd be ideal for this. But I've got to have you -- you're going to have to go through a competitive process. And as much as we like you, you may not get this job. And that tends to -- that's frustrating for all parties.

I mean, we've got a mission to achieve. And we've got to make sure that at least in the future and this will be a problem for another administration, although, you know, I definitely have some views about it, so I'd be happy to talk to whoever winds up getting the OPM job, but we've got to really streamline that process and make it a lot more agile and a lot more responsive to what the hiring realities are out there in the world.

And if there are jobs to be had, then, you know, the federal government is kind of, you know, the hirer. And we can sort of look at our processes and say, yeah, that's fine. But -- and we're accomplishing the mission and being able to hire folks. But as I say this out on the road all the time, I say to work in the U.S. Federal Government at this point, you've either got to be incredibly dedicated or exceptionally incompetent, one of the two, to wade through that process and wait the kind of time frames that we're asking you to wait on in order to get hired.

So I view that as a competitive disadvantage. But if somebody wants to work here, it's the best job in the world. I mean, nowhere else can you -- and I go back to my days as a relatively young GS-7 working at the U.S. General Accounting Office, and I think there is nothing better than that kind of an experience for a young person, or even somebody who's mid-career or thinking about a second career, to get involved and roll up your sleeves and really make a difference for the American taxpayer. There's nothing more rewarding than that.

Mr. Morales: That's wonderful.

Paul, unfortunately, we have reached the end of our time. I want to thank you for fitting us into your busy schedule. But more importantly, John and I would like to thank you for your dedicated service to our country, both in your roles at the DoD and now the Department of Transportation.

Mr. Brubaker: Yeah, my pleasure. It's just been a delight to be here and talk about these things that are obviously pretty near and dear to us as we head out and we try to make a difference for the taxpayer. If anybody has any questions, I'm fairly easy to reach: paul.brubaker@dot.gov. And if you have any questions or comments or want to take a look at more about what we do, hitting our RITA website is a good place to do it. And Transportation Vision for 2030, which we talked about a lot, is actually on that site. So if you go to www.rita r-i-t-a .dot.gov, you can access our website.

Mr. Morales: That's fantastic.

This has been The Business of Government Hour, featuring a conversation with Paul Brubaker, administrator at the Research and Innovative Technology Administration, or RITA, within the U.S. Department of Transportation.

My co-host has been John Nyland, managing partner for IBM's Global Business Services in the public sector.

As you enjoy the rest of your day, please take time to remember the men and women of our armed and civil services abroad who may not be able to hear this morning's show on how we're improving their government, but who deserve our unconditional respect and support.

For The Business of Government Hour, I'm Albert Morales. Thank you for listening.

Announcer: This has been The Business of Government Hour. Be sure to join us every Saturday at 9:00 a.m., and visit us on the web at businessofgovernment.org. There, you can learn more about our programs and get a transcript of today's conversation.

Until next week, it's businessofgovernment.org.

Originally Broadcast November 3rd, 2007

Washington, D.C.

Welcome to The Business of Government Hour, a conversation about management with a government executive who is changing the way government does business.

The Business of Government Hour is produced by The IBM Center for The Business of Government, which was created in 1998 to encourage discussion and research into new approaches to improving government effectiveness.

You can find out more about The Center by visiting us on the web at businessofgovernment.org.

And now, The Business of Government Hour.

Mr. Morales: Good morning. I'm Albert Morales, your host, and managing partner of The IBM Center for The Business of Government.

Transportation congestion represents a very serious threat to this nation's economic prosperity and quality of life. Whether a truck stalled in traffic, cargo stuck at overwhelmed seaports, or airplanes circling over crowded airports, congestion costs Americans an estimated $200 billion a year. Congestion also robs us of time which is better spent engaged in more fruitful activities.

With us this morning to discuss his Department's efforts to reduce transportation system congestion is Tyler Duvall, Assistant Secretary for Transportation Policy at the U.S. Department of Transportation.

Good morning, Tyler.

Mr. Duvall: Good morning, Albert.

Mr. Morales: Also joining us in our conversation from IBM is Pete Boyer, director of federal civilian programs.

Good morning, Pete.

Mr. Boyer: Good morning, Al.

Mr. Morales: Tyler, perhaps you could share with us a sense of the history and mission of the U.S. Department of Transportation. When was it created, and what is its mission today?

Mr. Duvall: The Department officially came to being on April 1, 1967, to serve the United States by ensuring a fast, safe, efficient, accessible, and convenient transportation system that meets our vital national interests and enhances the quality of life of the American people today and into the future. The short answer, though, I think, is the Department's mission is to cobble together various programs, policies, and regulations, and really ensure that the nation's transportation system is working correctly and safely.

Mr. Morales: Now, that's obviously a fairly broad definition, a very broad area for the country, so how is DOT organized? And can you give us a sense of the scale through the size of its budget, number of employees, its geographic footprint?

Mr. Duvall: The Department's budget in 2006 was about $65 billion. We have about 53,000 employees. A huge chunk of those employees work for the Federal Aviation Administration. So we are organized by mode, for the most part, or regulatory activity. The Federal Aviation Administration, as I said, personnel-wise is the largest. Budget-wise, however, the Federal Highway Administration is the largest. That agency makes out grants to state and local governments for highway construction.

The third largest by budget size is the Federal Transit Administration, which makes grants for public transportation systems in urban areas. And then we have regulatory agencies in the areas of pipeline safety, railroad safety, hazardous materials safety, and we also then have what's called a research organization, the Technology Administration, that's a standalone agency intended to bring together all the research activities of the Department.

As you mentioned, the scope is extremely broad. And in fact, that has been the single biggest challenge for the Department in its 40-year life, is to really integrate these modes of transportation under a common idea and common policy.

Mr. Boyer: Tyler, now you provided us with a sense of the larger organization. Could you tell us more about your area and role within DOT? Specifically, what are your responsibilities and duties as the Assistant Secretary for Transportation Policy? And could you tell us about the areas under your purview, how you're organized, the size of your staff, the budget, and how it supports the mission of the Department?

Mr. Duvall: My job is to basically be the primary surface transportation policy advisor along with our Under Secretary for Transportation, Jeff Shane, who's been at the Department a number of years. He and I provide policy advice, strategic direction to both the Secretary and then we work directly with the heads of all those agencies I just referenced within the Department to set policy direction. We work on legislation development, regulatory development. And we really try to give the Secretary information, advice to guide policy development within the Department.

It's a very small office. We have approximately in my office about 30 employees. On the other side, there's specifically an Aviation and International Affairs Office that does policy in those areas. It has about 90 employees. But overall, we're a fairly lean operation. We don't have significant budgetary resources, but we have a significant mission: to really make sure we know everything that's going on in the Department at all times. It is a classic case of policy interacting with kind of day-to-day operations. And I think the Secretary relies extensively on our office to make sure she knows what's going on in the Department at all times.

Mr. Boyer: As a follow-on, regarding your responsibilities and duties, what are the top three challenges that you face in your position, and how have you addressed those challenges?

Mr. Duvall: Well, the top three challenges are -- I'd say one is because we are not handing out grants, directly regulating ourselves-- the main value we add is our expertise, our knowledge. And to the extent that we are not informed, have not done adequate reading, or not relevant to the day-to-day decision-making needs of the Secretary and all the modal administrations, we simply will not be effective. So the biggest challenge is to stay informed, stay engaged, stay relevant in the activities of the Department.

The other big challenge we have as an ongoing challenge is our budgetary resources. Because they're so limited, our ability to do our own research, to acquire our own policy expertise is limited, and so we have to rely extensively on others throughout the Department.

And I guess the third challenge is really driven by the organization itself, which is because of the diversity of the organization, as you mentioned, it's been called the stovepiping of the Department of Transportation -- that's been the criticism over the years. It's a very difficult challenge to try to integrate the different policies across the modal administrations. So we may be successful in one area implementing policy direction, and then we find that other administrations either are doing different policies or frankly just haven't been integrated successfully. And that's our challenge is to really try to integrate all these different ideas that are kicking around the Department. Because one day you'll wake up and realize somebody's pursuing a policy which on its face doesn't appear to be inconsistent with another policy, but it turns out to be inconsistent. So getting buy-in for all these diverse policies I think is a difficult challenge.

Mr. Morales: Now, Tyler, you came to the Department from the private sector. Could you describe your career path for our listeners? How did you get started?

Mr. Duvall: Well, I graduated law school in 1998 from the University of Virginia School of Law, and started fairly immediately at a law firm here in Washington, D.C., Hogan & Hartson. I worked in the Tysons Corner office doing corporate securities work, and I did that for about 3-1/2 years. Tremendous exposure, a great law firm. I got really, I think, well skilled in the areas of transactional practice, and this is the tremendous exposure to commercial life in the United States, particularly in an area as sophisticated as Washington, D.C.

I started in the Department in the same office I'm in now as the lowest-level political appointee you can be, a Special Assistant to the Assistant Secretary at the time. Longest title in government. At the time, I was basically providing policy assistance to him in his carrying out of the duties that I have now, and writing speeches, preparing policy statements. The exciting thing about it at the time that I joined the Department is it was the beginning of I would say the ramp-up of the debate over the first surface transportation reauthorization legislation at the federal level, something that eventually became known as SAFETEA-LU. And so it was a fascinating exposure to big legislation. This became a $284 billion piece of federal legislation that obviously has huge impacts across the surface transportation system. So I was the primary policy development person for the Assistant Secretary on that bill and it was just a great, great experience doing that.

And then I got promoted in October of 2003 to become the Deputy Assistant Secretary, and I held that position for a number of years. Became the Acting Assistant -- I've basically held every political title in the Office of Policy right now other than the Under Secretary.

Mr. Morales: That's fantastic, Tyler. So tell me, how have these various experiences prepared you for the current role that you have right now? But more importantly, how do you think it has shaped your management approach and your leadership style?

Mr. Duvall: Well, policy is an area that, in my view, in government, you really need to have some legal understanding. I'm not saying you need a law degree. I'm fortunate to have one. But I think you need to understand the law. The law obviously drives so much of the policy in government, and obviously, we are creatures of the law. At the end of the day, we only exist because of it. And I think to really understand how statutes work, how to implement those, and then how, frankly, agreements are enforced, property law, contracts, those are fundamental underpinnings of doing policy. And particularly in the area of transportation where you have so much commercial activity, I think that that commercial training was very important.

And then I think the other kind of area that I've become a passionate learner, I think, of is economics. I was an economics major. I think economics forms an underpinning of much of our legal system, so I think those two areas have really guided my thinking, the way I approach problems. And I've found that others who approach these problems come with similar educational backgrounds, come to similar conclusions about policy solutions. So educational training and legal training I think are fundamental.

And then I think from a management perspective, because our office is so small and because we're not implementing programs, my approach has been to really liberate creative people, is to try to turn our office into kind of a think-tank within the Department, to really embrace people who are coming forward with creative ideas. Our main value to the Department is adding thoughts, concepts, asking tough questions. And if we are not doing that, if we're simply kind of coming in and reading the mail, I think we are not going to be an effective office.

So my management style has been somewhat loose in terms of welcoming and accepting of people to come forward with different ideas, but also really challenging and going towards trying to identify the people in the office that are willing to do the tough work and the creative work. This is the beginning of a new era of transportation and policy in the United States, and our office has got to be I think willing to be at the forefront of that change.

Mr. Morales: Excellent.

What is congestion pricing? We will ask Tyler Duvall, Assistant Secretary for Transportation Policy at U.S. Department of Transportation, to share with us when the conversation about management continues on The Business of Government Hour.

(Intermission)

Mr. Morales: Welcome back to The Business of Government Hour. I'm your host, Albert Morales, and this morning's conversation is with Tyler Duvall, Assistant Secretary for Transportation Policy at the U.S. Department of Transportation.

Also joining us in our conversation from IBM is Pete Boyer.

Tyler, what is congestion pricing? And sometimes this is called value pricing. And can you elaborate on the four main types of this congestion and value pricing strategies? And can you elaborate more on what are the benefits of congestion pricing, and highlight perhaps some examples in the U.S. where this is being put into place?

Mr. Duvall: Albert, thanks for the question. This is one of the top policy priority areas that the Department has been talking about across all modes of transportation, and that's a new approach to dealing directly with congestion. And before I answer what congestion pricing is, I think it's important to note why we have congestion. I mean, as most economists have long understood, it's a basic supply-and-demand imbalance in which you have a fixed set of supply for something, a network, any network -- it does not apply only to highways or aviation -- in which you have too much demand relative to the available supply at the certain periods of the day, or across all periods of the day. It results in lines. We saw those lines in the '70s when we had rationing of gasoline. We see those lines in other areas of the economy in which there's too much demand at a given level of supply. So what we have said increasingly is that this concept called "congestion pricing," in which prices vary based on time of day, based on demand levels, to ensure some flow conditions on the facility.

So say you have a highway that you want to achieve a condition of 50 to 55 miles an hour at all times. Currently, during peak periods, for instance on the Capital Beltway, you're 10 to 15 miles an hour. What we have said is pricing can basically provide the signal to users about the scarcity of the available supply, so that during 8:30 in the morning, it costs a lot more to be on an urban highway than it costs society to be on that highway at 2:00 in the morning. In fact, the average number is -- it's about $1 per mile is the cost that you and I are imposing every day when we drive on an urban highway during peak periods. Without some price mechanism to basically send a signal to drivers about what the true costs are of traveling during those periods of the day, users obviously take advantage of the fact that the prices are significantly lower than that. In fact, the average price to be on the Beltway during peak periods is about 2 to 3 cents a mile.

So what we have said is with technology, we can now basically charge drivers the true cost of driving, the true cost of that scarcity of being on a highway during peak periods. And as I said, the prices will vary based on traffic levels. So in peak periods of the day, you see prices can rise substantially, and in other periods of the day, prices can be reduced substantially. And I think our position is that this is a far more efficient way than the alternative, which is right now rationing or queuing. Basically, we wait in line as a way to allocate this scarce resource. And the reason that is, in our view, inefficient is because certain people have very high values of time; other people do not. We're very different. Preferences are very different for time and reliability, and that without some price mechanism, we have no means to basically differentiate among people's preferences.

And so, again, thanks to technology, we now have mechanisms in place in the U.S. and around the world to use pricing, either through a schedule -- one road in Southern California today has a schedule that basically varies the price every 30 minutes based on demand levels. It can get up to $9 during the peak of the peak to take a 12-mile trip. It can lower down into the 50 to 25 cent range for off-peak. We are seeing that happen around the globe as well. Several major European cities have implemented this concept of variable or direct pricing of highways during peak periods. The city of London has done it. The city of Stockholm has done it. The city of Singapore has done it. All with tremendous success.

And I think one of the issues is that people, I think, before they see this implemented, do not really believe that people will respond to prices. And what we have found is that people are actually very highly price-sensitive, that if you give them some opportunity to shift trip times between an hour or even two hours, you see huge increases in traffic speeds. One study that just came out showed that on average about 40 to 45 percent of the people on a rush hour highway in an urban area are not commuting, that they're taking some other trip. That doesn't mean it's all discretionary, but the number that the Secretary of Transportation Mary Peters has quoted is that about 25 percent of those trips are taken by people who are retired.

So what we'd like to do is really start to figure out what people's true preferences are for traveling at high speeds. We now have the technology available to do it. And the Department has offered an enormous amount of both financial and technical assistance to states and localities that want to explore this.

The same concept, however, applies on all of our other network utilities. And I think people's understanding of how we pay we pay for electricity directly. In fact, there are numerous electricity providers in the United States that provide obviously price benefits to people who use electricity during off-peak. We're seeing in the Northeast the electricity grid moving towards congestion pricing because of the same problem. And now in aviation we're seeing the same issue arise. The airports in the New York/New Jersey area are some of the most congested in the country. We've seen huge delays. And I think at the end of the day, those delays really are a reflection of the fact that prices are not correctly set to align supply and demand.

So the technology, though, is the key underpinning. This was known as far back as the mid-1950s. An economist named William Vickrey, who ended up winning the Nobel Prize, kind of the godfather of this concept -- he asserted that this would work. The problem is before the last 5 to 10 years, we just didn't have the technology to implement these things.

As your question notes, there are different types of pricing. You can basically do pricing based on just a flat rate -- you pay X-dollars to use this highway all day long. You can have variable pricing based on a computer that reads how much traffic is on the road at that time and adjusts prices accordingly. You can have a schedule in advance. We want states and localities exploring all these different mechanisms. And we also want them to look at integrating their other transportation policies: transit policy, policies of employers to allow telecommuting. And then the information itself, we are seeing a proliferation of real-time traffic information being provided directly into automobiles. All of that is going to work together to improve the performance of our existing transportation systems.

Mr. Boyer: Now, Tyler, on a related topic, would you tell us about the DOT's national strategy to reduce congestion on America's transportation network, also known as the National Congestion Relief Initiative? Specifically, could you give us a brief overview of the six-point plan to reduce congestion in the short term, and to build the foundation for successful longer term congestion reduction efforts?

Mr. Duvall: Yes. About January of 2006, the Department's senior leadership got together off-site and had kind of a moment in which we said we need to decide what we're doing here for the next several years, or the remaining several years of the administration. And at the time, the Secretary of Transportation was Norm Mineta, our Deputy Secretary Maria Cino, really brought the Department together and said we need a strategic focus on the most serious issues, the most pressing problems.

And one of the problems throughout the Department is our continued need to focus on what's the most important thing. And in government, as you all know, day-to-day crises can always consume your time to focus on the serious problem. Everybody has known congestion has been a growing problem. We knew that obviously at the beginning of the administration. Previous administrations have known that. But I think what we concluded is you need to really focus directly on that as the problem. In fact, the Department's strategic plan at the time was -- mobility was kind of the strategic objective. And what we said was of course, mobility's the objective, but the problem is congestion. And so we rewrote the strategic plan to focus on congestion.

And then we said let's come up with a direct, implementable plan related to congestion. And we said where are the problems the most serious? And first and foremost, urban areas, obviously metropolitan areas. The surface transportation systems of those areas have experienced rapid decline in the last 30 years in their performance. The Texas Transportation Institute is the leading annual entity that observes the cost of congestion, and we've seen just a 300 percent increase in time delays and wasted fuel in the last 25 years.

And what we did is we said let's cobble together whatever resources we have to offer them out to cities, major metro areas, to basically compete for these innovative solutions. And we called it the 4 Ts at the time: tolling, variable pricing of highways; telecommunications technologies basically to provide better information; transit to basically provide more efficient use of transit during rush hour; and then, as I said, telecommuting, encouraging employers to use flex scheduling much more than they do today.

So we said here's the basket of ideas we have to deal with congestion. Here are the resources we have available to us. And we said to cities in America, compete for these resources. Ultimately had about $1 billion in discretionary resources that we cobbled together from a wide array of departmental programs.

And this goes back to my original point. This took a lot of interdepartmental coordination that had never really been done before. And we got approximately -- I think 26 cities applied for funding. Several months ago, we selected five major U.S. cities New York, Seattle, San Francisco, Minneapolis, and Miami to be the award recipients, and we are now in the process of implementing this. But that was the objective there, was to focus on metro areas with the strategic emphasis on congestion.

We then said, well, where else is the congestion threat most serious? And we said I think along interstate trade corridors, you're seeing huge growth in truck traffic along the major interstates of the United States, both on the East Coast, West Coast, and up the middle of the country. The future effectiveness of the interstate highway system really depends on a different approach to expanding capacity. What we said is we are not going to build 40,000+ miles of interstate highway ever again, but what we do need is a strategic addition of capacity along the most congested corridors. Again, we are going to designate up to five major interstate corridors, multi-state corridors, and we selected those also several months ago. Those were I-95 here on the East Coast, I-5 on the West Coast, I-10 that runs from California to Florida, I-15 that runs out of California, and then I-70, which runs in the middle of the country. We said basically we have got to get the Department's resources and efforts focused on these corridors.

We also said, however, that funding of these capacity enhancements in these corridors will not take place using traditional mechanisms. So what we're going to do is try to organize an effort, reach an agreement basically with these multi-state areas to finance and build these projects in a completely different way using tolling -- we think direct user fees are going to be the wave of the future. In fact, every single project over $500 million in the United States right now that's in the planning phases is projected to be a toll road. So in many ways, new capacity projects, that is already the dominant model for providing.

We also think private capital is going to be central to expanding capacity in the U.S. We have seen in the last two years an enormous growth in interest by the private sector. Long-term institutional investors, pension funds look to infrastructure as a new asset -- an emerging asset class is what they call it. And I think they're now recognizing that highways, airports, and seaport infrastructure are central to that. So what we are trying to do is cobble together what I would call financial packages and process streamlining packages to these major interstate corridors, and that will be ongoing for the next several years. We hope to enter into agreements with each of these corridors by spring.

Those are the two main areas that we focused on initially. We had four other components, as you mentioned. Aviation congestion was another huge area of focus. We've got a big pending reauthorization proposal in front of the United States Congress that would overhaul the way we finance aviation systems in the United States, with the clear benefit of reducing aviation congestion.

We then also focused on borders. It is clear that border crossings and ports of entry in the United States are major problems. You've got a lot of container traffic that's grown with trade with China and the rest of Asia in the last 15 years that are creating a massive amount of bottleneck problems at these ports of entry. So we wanted to really focus resources there. And then last, we really wanted to stress more of an educational effort to stress the operational improvement opportunities for states, that obviously physical capacity is part of the solution, but that technology is going to be a major component of the long-term solution to congestion. And we have got a lot of available technologies now. The only question is how do you get the political leadership at the state and local level to recognize how cost-beneficial these technology investments can be. So we have engaged in a nationwide education campaign to stress that.

Mr. Boyer: Related to the education efforts, some have expressed concerns that value or congestion pricing is inequitable towards low-income motorists, is an invasion of motorists' privacy, and also may lead to adjacent free roads becoming more congested due to diverted traffic. How do you address these concerns?

Mr. Duvall: These are legitimate public policy questions. In fact, I think some in the transportation community have kind of moved too quickly beyond those. And in my traditional cocktail party test, it's clear to me that the public still views these are very important issues.

There are several responses to the low-income point, and the first one is, any question about whether a proposed solution is fair should be compared to current approaches and whether those approaches are more or less fair. And I think there are a lot of arguments as to why congestion itself or declining system performance is not good for low-income people as a policy matter. And I think increasingly what we're seeing in major metropolitan areas is that you've got congestion driving up obviously housing prices, real estate prices that are closer to the work centers, forcing middle- and low-income people to live further and further away. We are seeing, I think, transit policies not precisely targeted to help low-income people as many of them were intended over the years. So it's not clear at all that low-income people are doing particularly well under the current approach to managing transportation systems. So that's the first response is compared to what?

But the second response is also that the price of basically relieving congestion does not need to be robbing low-income people of mobility. And what we had said is if you want to preserve low-income mobility, which we do, targeted subsidies, particularly now using these new technologies, and with transit investments, are really effective ways to lessen the burden on low-income people. We have offered and proposed in numerous jurisdictions that you can basically, through transponders that are now in cars, such as E-ZPass, you can supply credits to communities of people that you want to ensure they have mobility. You can actually even allow them to trade and sell those credits if you supply it to them directly.

The price of ensuring low-income mobility, though, does not need to be that we have a transportation system that collapses. In fact, by implementing policies that do not recognize that people are different and have diverse preferences, we ultimately I think really rob low-income people of the same benefits and ability to move quickly on the highway system. And I think politically what we have found is that public opinion polls show that low-income people use congestion priced facilities just as much as high-income people do, and in fact prefer them at a rate comparable to high-income people. And that's because they have time value as well.

The example that the Secretary of Transportation uses, Mary Peters, is low-income people who may have a child at a day care facility that imposes punitive costs on being late to that facility. That time value is very clear to somebody. If you're going to pay a late charge of $25 for being two minutes late to pick up your child from day care, it's worth it to pay $2 to $3 to get there on time. And I think we just need to recognize that people are very diverse, have diverse preferences, and that if we want to protect low-income people, we can target subsidies in an efficient way.

As far as the question about privacy, I also think that is a very important issue that needs to be addressed directly. We have encouraged states and localities that are looking at this to develop privacy protection mechanisms, to confront the privacy issue head-on, so to speak. In some places of the country, it's more important than others, so I think a national policy on privacy is probably inappropriate. In some jurisdictions, people are more than willing to give up privacy in connection with the benefits that come with free-flow highways. In other parts of the country, you're going to want to see assurances that obviously information will not be used for other purposes. I think our main responsibility at the federal level is to really encourage a rigorous policy debate about that exact question.

What is absolutely clear, however, is that the technology currently available to protect privacy works; that you can develop mechanisms now to ensure that information is not stored, to ensure that information is not shared with other government agencies. If that's your policy objective, that can be done. We recognize that as an issue. We just need to acknowledge that technology advanced to the point to solve that problem.

Mr. Morales: Now, Tyler, you've used the term "technology" several times now. And I only have about a minute left, but I'm curious, can you give us an example of some of the advances in technology that would play into a national strategy to reduce congestion and expand the capacity of the existing infrastructure?

Mr. Duvall: Right. I think that the single most powerful technology obviously from a pricing standpoint is a technology that is currently being used right now on a road in Minneapolis, that has sensors, that basically is reading traffic flows and adjusting prices based on those traffic flows. So as the computer observes more traffic building up on the network, it basically then flashes up on a sign that the price has increased. And as the computer observes that traffic has declined on the network, then prices are reduced. And providing that information directly to drivers through overhead signs will ultimately be replaced by providing that information to drivers through their handheld devices, directly into devices on their dashboards.

So as you're driving around the system you will see basically various routes, real-time prices of those routes, and then also real-time information about what the speed is on those routes. There are several companies in the United States right now that are perfecting technologies to basically provide not just real-time traffic information so that you know exactly how long it will take you to go from A to B, but also predictive traffic information.

What is clear is that drivers in the next 5 to 10 years, and the automobile companies are recognizing this as we speak, it's becoming more of a standard feature on most new automobiles. Information is very valuable to drivers. And I know that even two years ago most of the people I talked to did not go onto the Internet before a long trip to see how long it would take or what the traffic conditions were. Today, that is not true.

The other kind of big technology I think that is worth mentioning is traffic signalization technologies. One of the banes of many urban drivers is the lack of synchronized signals as they drive down city streets. That is also simply a problem of lack of technology deployment. The technologies exist now not only to synchronize traffic signals more efficiently, but also to read traffic conditions themselves and synchronize. Again, though, the question is not whether the technology is available, but whether you can get the policy and the political leadership to understand that these are really good investments to make. Too often, I think these investments are competing against other investments that don't provide the same benefits to drivers.

Mr. Morales: Great.

about the increasing interest of private sector investment in U.S. highways and public transportation systems? We will ask Tyler Duvall, Assistant Secretary for Transportation Policy at the U.S. Department of Transportation, to share with us when the conversation about management continues on The Business of Government Hour.

(Intermission)

Mr. Morales: Welcome back to The Business of Government Hour. I'm your host, Albert Morales, and this morning's conversation is with Tyler Duvall, Assistant Secretary, transportation policy, at the U.S. Department of Transportation.

Also joining us in our conversation from IBM is Pete Boyer.

Tyler, how do you account for the increasing interest of the private sector investing in U.S. highways and public transportation? Specifically, what factors lead to the rise of private sector interest in financing U.S. surface transportation infrastructure?

Mr. Duvall: This is, in my view, one of the most exciting and fascinating areas of policy right now in all of government, and obviously within transportation, I think it's one of the most important policy issues. There is a confluence of factors that have taken place in the last I'd say 18 to 24 months that have really propelled us to this point where the private sector around the globe is looking to invest in U.S. infrastructure: highways, airports, seaports, and public transportation systems.

First and foremost, I would say, is the declining state of the nation's transportation systems. The performance that I referred to, the congestion, the growth in costs associated with the transportation system failures, have really propelled state governments to look for new ways to invest in those systems, to expand them, to manage them more efficiently. At the same time that is happening, there's been a flattening out obviously of revenues associated with taxes that traditionally go into transportation, and those include gasoline taxes, diesel taxes. We are seeing, frankly, for the first time in about 30 years, a flattening of travel demand in the United States that's producing fewer revenues for state governments. So the revenues available to state governments to improve these transportation systems has flattened at the exact moment that the private sector around the globe has started to amass capital for long-term investments.

And so as I mentioned earlier, major pension funds across the world, major long-term investors, are really looking at infrastructure broadly, but transportation specifically, as a good intermediate investment tool between, I would say, a real estate investment and a Treasury bond. And so if you can earn returns in the 9 to 14 percent range on these assets, you can really supply very stable revenues to investors over a long period of time. And by "long period" I mean 40- to 75-year investment horizons we're looking at here. So these things have all come together.

And then I think the other critical component is what we were just talking about previously, the technology to charge people and generate those revenues has emerged also within the last two to five years in a very exciting way. So it's really just this confluence of forces that have emerged at the exact moment.

Now, the policy and political issues are substantial, and we at the U.S. Department of Transportation have focused heavily on ensuring obviously that the policy mechanisms done to do this are done in a way that benefits drivers, users, and investors obviously are part of this, too. And I think if I had to kind of rank the policy issues, the first and most pressing issue is how do you regulate the pricing of the system itself? And we have seen in other areas, obviously regulated utilities like telecom and electricity, that you've got a private entity that provides the core service and then a government entity that regulates how they price it and how they charge for it. Through contracts, long-term agreements with the public and private sector, the same mechanism is emerging in transportation.

So several major transactions have already been completed -- one in Chicago, one in Indiana -- for existing toll roads. And these are long-term leases of those roads to the private sector in exchange for very large up-front payments of cash that the public sector can then reinvest in other things. We are seeing major development of new highways. The state of Texas is building a number of extremely large new highways using extensively or entirely private capital to pay for the up-front cost. And in fact, some of these private entities are actually paying Texas for the right to construct these facilities.

The most important policy question is, do the prices that are prescribed or regulated under that contract, do they relate to the cost/the risks of investing in these assets? Do they provide a windfall to the private sector that drivers bear the cost of? And I think what we're seeing is the emergence of a regulatory regime through contracts, and that includes basically regulations in the contract dictating what prices can be charged and when they can be charged. And we have obviously been supportive of ensuring that the public interest is protected in connection with these. But what we don't want to do is constrain the innovation and the development of infrastructure by unnecessarily regulating state and local governments.

And we've got a large tension I think emerging at the federal level about what is the role of the federal government in regulating these transactions at a state and local level. And I think our view in the administration is that governors, state leaders are well-equipped to judge the public interest considerations on their own, that the federal government's role should basically be to disclose information, provide expertise. And to the extent we're providing grants or loans to those projects, which is something that we do, that we insist on the public interest factor is being taken into account.

So it's a very exciting time. The conservative number I've heard is that about $100 billion of capital has been floated around the globe in equity that could be leveraged up to about $400 billion. So there is tremendous money. The real question is can you get the policy framework correct to deploy it into the system?

Mr. Boyer: Tyler, as you previously mentioned, the Urban Partnership Program is part of the Bush Administration's comprehensive initiative launched in May 2006 to confront and address congestion through the nation's transportation system. Would you elaborate on the specifics of the UPP? And how do the urban partnership agreements enable cities to implement broad congestion pricing or variable toll demonstrations?

Mr. Duvall: Right. This was probably the focal point, the most significant of all the elements of this major congestion issue that we've undertaken. And the Secretary, Mary Peters, announced in August that we had selected five cities nationwide to pursue demonstrations. And I think that's the important point here is that we are at a moment of demonstration in the United States. We have seen tremendous system performance problems emerge in our major cities, as I said. And it's time that we recognize that embracing demonstrations or experiments is what we need to do. We're not announcing that this is a wholesale shift of policy that's needed, but we do need to be willing to experiment.

And what we said to major cities is that we've got four areas of experimentation we'd like you to pursue. And in exchange for that, we'll offer you federal grants, federal loan assistance if you have projects that you need loans on, process streamlining for decision-making, and obviously departmental political expertise, experience, support. That's the package of support we had. We had approximately $1 billion in assistance we made available.

And I think this was one of the great success stories from my perspective was that we cobbled together I think approximately 13 different programs, all of which were considered standalone programs with broad eligibility to improve transportation. And we said -- I mean, these were housed under the Federal Transit Administration and the Federal Highway Administration. And so what we said is let's pool these programs together; invest them on a strategic way, not on a peanut butter approach, as the Secretary says, which is investing small amounts in every city in America. We said let's do a strategic investment to encourage demonstrations.

And the four areas, as I mentioned, that we really want to see these cities focus on is variable tolling. We want to demonstrate to the world that this concept of variable tolling works, that they like it, that the public will accept it. That is the central element of the Urban Partnership Program. And the most comprehensive proposal we got was in the city of New York. Other elements are very important, too. Because what we've said is that highway pricing needs to be combined with a transit policy in urban areas that accommodates free-flow conditions on the highways. Obviously, rail systems are important. We need to keep investing in our rail systems. But once you create free-flow conditions on a highway, you can really expand the opportunity to improve speeds of buses in particular. You know, there's a classic stigma, I think, that a lot of people don't want to ride buses, that they're not clean, they don't function correctly, they're not on time. Well, one of the problems is congestion itself. And so what we have found throughout the world is that if you can create free-flow conditions on highways, you have high-tech, clean buses, people will ride them. If you can go 65 miles an hour on a highway, you're more likely to take a bus. Nobody wants to sit on a bus any more than they want to sit in a car in traffic. So what we want to do is probe that even further and see if we can integrate this highway pricing concept with high-speed public transportation during peak periods. So those are the two main elements.

And then the other elements are to really get employers and states realizing that technology can be an enabling force to allow flex scheduling of workers. We have already seen that in the federal government. In fact, for those of us who commute on Fridays in Washington, D.C., we see the benefits of flex scheduling by the federal government. Very small percentages of federal employees taking what they call a regular day off, working 9 days out of 10, produces huge decreases in traffic. I just drove in on Friday the other day, free-flow conditions. The Thursday conditions were significantly worse. That is almost entirely as a result of the federal telecommuting policies, or flex scheduling policies.

A lot of employees love telecommuting. A lot of employers are nervous about it. What we've said is technology obviously can allow not only telecommuting, but basically staggered work schedules. And very small percentages of traffic removed during peak periods produces huge increases in traffic speeds. The numbers we have internally are about 5 to 8 percent reduction in traffic can reduce congestion by about 50 percent. So we are very close to solving most of the urban congestion problems.

And then, again, finally, real-time traffic. Not only do you need to provide more free-flow conditions, but you need to provide drivers and users of the system more information about how that system is performing. We have great information about virtually every area of our lives. In fact, we have information overload in many areas of our life. But we do have -- we are relatively ignorant about our transportation systems are performing on an hour-by-hour, minute-by-minute basis. Again, that's not a technology problem. The technology is widely available now to start doing that. It's really a political and policy problem to get that implemented.

So we announced these cities. New York City, I think it's safe to say, was the most comprehensive. Mayor Bloomberg announced that he was going to -- he's proposing basically what's called a "cordon toll," drawing a ring around the center of Manhattan, and he wants to charge people $8 a day to cross into the center of Manhattan. He's run travel numbers that basically shows significant reduction in congestion associated with that, that people will respond by either taking mass transit, traveling during different hours -- his proposal is 6:00 a.m. to 6:00 p.m., I believe are the times associated with is proposal -- or basically telecommuting or working from home through technology. And I think it's not clear exactly what each person would do, but what's clear is the shifts would be significant. They are now as we speak debating this exact concept in New York City. There's been a commission formed to decide on whether to proceed.

We have given them a deadline of the end of March to get legislative approval to do this. If they get legislative approval, they will get approximately $350 million of federal funds. If they don't, those funds will be reallocated to other cities willing to pursue similar demonstrations.

That's the most comprehensive, but it's also important to note that four other cities, as I mentioned: Seattle, San Francisco, Miami, and Minneapolis, are all pursuing I would say smaller concepts related to this concept of pricing and integrating transit policies. And we will see that play out over the next two years.

The theme of the initiative, just to be clear, was that we can solve congestion in the short-term. That this is not -- we don't need to have a 25-year capital plan to really start to reduce traffic congestion. And I think we are on the cusp of demonstrating that, and we're very excited about what each of these cities is doing.

Mr. Morales: Now, Tyler, using your New York example, the Mayor not only has called for the cordon pricing as a way of mitigating traffic congestion, but he also stated as part of a broader sustainability plan to create the first environmentally sustainable 21st century city. So to what extent is tackling traffic congestion not only good transportation policy, but also good environmental policy?

Mr. Duvall: That's a great question, Albert, and it's an era obviously where environmental considerations have become front-page news, as they should be. I think this is the great link that has been missing in the major public policy debates here in Washington and it is about to emerge. And I think Mayor Bloomberg was absolutely right to talk about the health benefits, the air quality benefits associated with reducing traffic. And it's not simply the idling vehicles, which obviously pollute more than vehicles running on more free-flow conditions, it's also the start-stop cycle associated with congestion. It produces more accidents and it also consumes significantly more fuel.

We've done some internal analysis at the Department about the fuel savings associated with some major pricing demonstrations, and I think in our view, you would save approximately the same amount of fuel that we will save under a major new fuel economy regulation that the Department put out for light trucks in 2006, that you would save approximately the same amount of fuel by simply doing congestion pricing in two to three major U.S. cities. So enormous fuel being wasted in congestion. And obviously, the fuel waste correlates extensively to greenhouse gas emissions, to the emissions of traditional pollutants.

So what we have found, interestingly enough, is that the environmental community has been one of our biggest proponents. We've got the environmental defense organizations, we've got the Sierra Club, major other environmental organizations are looking at the inefficiency of transportation systems as a great mechanism to reduce greenhouse gas emissions. I think that traditionally we've looked at the fuels themselves and the vehicles, but this is kind of the third prong of the environmental test. And we are very supportive obviously of telling the world about the environmental benefits of this concept.

Mr. Morales: That's fantastic, because clearly, there is a linkage there.

What does the future hold for U.S. transportation policy? We will ask Tyler Duvall, Assistant Secretary, Transportation Policy, at the U.S. Department of Transportation, to share with us when the conversation about management continues on The Business of Government Hour.

(Intermission)

Mr. Morales: Welcome back to The Business of Government Hour. I'm your host, Albert Morales, and this morning's conversation is with Tyler Duvall, Assistant Secretary for Transportation Policy at the U.S. Department of Transportation.

Also joining us in our conversation from IBM is Pete Boyer.

Tyler, I'd like to transition now and look towards the future. The U.S. Department of Transportation has been the world's largest investor and regulator of highway infrastructure, bearing almost 50 percent of the capital costs for U.S. highway investments. Now, going forward, what trends will have the most impact on U.S. transportation policy in, let's say, the next three to five years? And how will the DOT need to adapt to some of these changes?

Mr. Duvall: Great question. I think the single most important thing is state and local governments' willingness to try different approaches, and recognizing that previous approaches, previous financial policies, previous delivery mechanisms for projects really need to be rethought at a fundamental level. And what we are seeing across the country is I would say this groundswell of support from political leaders to do exactly that. It's going to take some time, a number of years. But transportation, particularly surface transportation policy -- and I would draw a significant distinction between service and aviation in this area -- surface transportation policy is going to be reformed only through state and local efforts and willingness. The federal government's role, in our view, should be to accommodate those people, to embrace creative people at the state and local level, and to really give them whatever resources and support they need to implement different approaches.

So the Secretary, Mary Peters, has spent extensive amount of time with governors, with state transportation leaders, with cities' mayors, and others to really impress upon them that we are here willing and able to help them, but that the federal government -- frankly, it's not appropriate that we would intervene extensively into a local decision-making matter, but that we are there with tools and resources available to help them.

On aviation it's, I'd say, a dramatically different story. You've got the federal government, which owns and operates the nation's airspace. The air traffic control system is operated by the FAA. You've got major federal investment into airports. I think there, federal policy ultimately needs to drive reform. And I think what we've said through a major piece of legislation that we've submitted to Congress is that the way we pay for aviation, primarily through ticket taxes and other mechanisms that have nothing to do with the costs in providing air traffic services, needs to be overhauled; and that we need to pay for air traffic services just like we pay for all of our other public utilities, which is directly. And so we've said user fees directly should be put in place and that these other indirect tax mechanisms should go away.

That proposal is pending before the U.S. Congress. The purpose of it is not only to drive short-term efficient behavior in the system, but also then to graduate from a ground-based radar system for managing air traffic control to a satellite-based system. So it's called Next Generation Air Traffic. That also is technologically doable, but again, if the financial and policy framework is not right, the United States will find itself lagging behind other countries who've developed new technologies for managing air traffic for many, many years. So again, very different policy issues in aviation and surface transportation.

And then I guess finally, maritime. The U.S. Department of Transportation's role in the maritime sector is quite different than it is in aviation and surface transportation. We are more promotional in nature. We do not fund major seaport activities. We do not regulate most of those activities. The Homeland Security Department is probably the lead agency in terms of grants and other regulations affecting seaports.

So what we have said is that the maritime sector generally can be a great reliever of surface transportation congestion. You've got huge amounts of capacity on our waterways that could be used more effectively. We've worked directly with port authorities to try to encourage that. But that, too, will require different infrastructure. And the types of ships that would move cargo up and down the East Coast, for instance, are very different than what you see now, which are major, extremely large ships coming in from Asia and Europe to access these ports.

So again, we are at the beginning stages I think of an infrastructure revival in the United States, a very different future for us. And it's a very exciting one, but it's also one that's going to require us to recognize that current approaches are not working very well.

Mr. Boyer: In a similar vein, would you tell us more about the National Surface Transportation Infrastructure Financing Commission? What's its mission and charge?

Mr. Duvall: There are actually two different commissions that have been formed. One is the Infrastructure Financing Commission, and the other is what's called the Policy and Revenue Commission. These are two commissions that Congress formed in the most recent federal transportation legislation that is designed to do exactly what I talked about: look at fundamentally new approaches; try to solve the financial problem that is emerging in transportation.

The Highway Trust Fund, which provides funding for approximately $50 billion a year of investments into highways and public transportation in the U.S., is projected to go into deficit in 2009 for the first time. So there is a tremendous urgency at the federal level to figure out what are the tax mechanisms to finance federal investment into transportation in the future. And so this commission and the Policy and Revenue Commission are charged with basically coming up with recommendations to the Congress and to the administration and the next president with ideas about how this system should work in the future.

We have relied entirely on a federal gas tax and diesel tax. I would say a 90 percent reliance on those two taxes over the last 30 to 40 years. And I think what's clear is the time has come to really fundamentally reassess whether those taxes are providing, one, the amount of capital needed to invest in the system; but two, the right performance incentives for users of the system.

Mr. Boyer: Now, given your perspective, Tyler, what emerging technologies hold the most promise for improving U.S. transportation infrastructure and operations for the 21st century?

Mr. Duvall: I think in terms of national system changes, I think this move from a ground-based air traffic system to a satellite-based air traffic control system as an idea holds the single largest potential to transform the way we move in the United States. It would be a doubling or a tripling of air traffic capacity to basically move to this model. I'm not a technology expert in this area, but from what I understand, it would significantly expand our ability to manage airplanes in closer proximity. We obviously now, for safety reasons, have to control airplanes to certain distances. This new technology would allow complete awareness about where every airplane is at all times, what their relative distances are, and is something that I think that FAA is working aggressively on.

The problem, again, is how do you pay for it and how do you deploy the technologies in a business way? I think we have tried extensively to move the FAA towards a business model, to recognize that they are the manager of a massive amount of technologies right now, and to really get a business mindset similar to what you've seen with some major companies in the U.S. to how they manage and deploy technologies.

On the surface side, again, I think the technologies really for system management are the ones I mentioned previously about real-time traffic, electronic charging. Those hold enormous potential to change the way we interact with the system.

And I think really part of it is just getting people to understand, to imagine. And I think the Secretary, Mary Peters, has used this expression -- this failure of imagination that we have in transportation. We have a history of thinking of transportation as kind of a -- you know, we lay down the highway, we build it, we engineer it, we design it, and then we kind of move on to the next project. And I think what is clearly changing is we need to bring forward a culture of systems management, the same culture that you see all the other major U.S. networks using today, managing more efficiently, expanding capacity within the existing framework. I think we just have got to get a lot more creative about how we deploy technologies, and recognizing that technology can supply huge increases in efficiency with relatively little cost.

Mr. Morales: Now, Tyler, this transformation, or revival to use your words, creates new competitive areas, and must create a huge demand for new competencies. So to that end, what steps are being taken to attract and maintain a high quality technical and professional workforce at the DOT?

Mr. Duvall: Great question. It's something that we have focused on. This Secretary, the previous Secretary, the Inspector General of the Department has really looked at whether the Department's core competencies are the right ones for the future. And I think it's safe to say that we're going to need to change in the future to respond to this. We have really worked hard to develop financial expertise. As we move I think increasingly from what I would call a pay-as-you-go model for infrastructure financing in which you collect a lot of tax revenues and then once you get enough revenues, you start and build the project, to the way that every major U.S. corporation finances capital investments, which is through capital markets, through borrowing, and obviously through equity contributions. We are going to need to really develop different financial expertise. The state departments of transportation themselves I think are going to have to invest heavily in acquiring new financial expertise.

And then, as you said, the technology itself requires people who have different backgrounds, not only civil engineers. We need to attract a lot of people in the technology sector that are currently not thinking about transportation as kind of a cool future. If you go to a kind of a telecommunications conference, you'll see the best and brightest from the major universities, MIT graduates. Unfortunately, transportation conferences, you don't see that yet, and I think that's coming. I mean, it's just a matter of time.

One of the reasons that the Department and the Congress created this new organization called the Research and Innovative Technology Administration is precisely to do that, to put an emphasis on technology and research also. And also what we're researching I think needs to change in the future.

So the pool of human capital the Department needs to attract is going to change in future years. Organizationally, we're looking at that as we speak. And I think our hiring practices, certainly in my office, are reflecting this need for different skill sets in the future.

Mr. Morales: Now, Tyler, you've only been with the federal government now for a relatively short period of time. But clearly, you are very energized around the work that you do. So I'm curious, what advice would you give to someone who perhaps is thinking about a career in public service?

Mr. Duvall: My first advice would be to do it. I really have just loved my time in government. I grew up in the Washington, D.C., area. I was exposed to government in various ways. Obviously a rabid reader of Washington newspapers and observer of government. And I never really fully appreciated, though, what government's role was, why government was doing what it was doing, the complex interaction between Congress and the Executive Branch, and I just think it's a tremendous experience. Anybody who can spend some period of time in government I think will gain an entirely different appreciation for how the world works.

Obviously, the business sector, too. I think those -- you know, significant experience with the business sector and significant experience with the government I think are two essential things to anybody who wants to succeed in the United States.

The federal government's role also with state and local governments is an area that I did not fully appreciate. The federal government is driving enormous amounts of state and local policy even as it does not own and operate or manage directly a lot of the systems obviously of state and local administrations. So it's a fascinating area. I think the federal government obviously has a lot of problems with it, but there are a lot of extremely good people who are as dedicated as any I've ever been around. And I think it's an experience that anybody who has any desire to have a broad-based understanding of the way the world works should do.

Mr. Morales: That's fantastic.

Unfortunately, Tyler, we have reached the end of our time. I want to thank you for fitting us into your busy schedule. But more importantly, Pete and I would like to thank you for your entry into federal government and your dedicated service to our country.

Mr. Duvall: Thanks, Albert. Yes, and one thing I definitely wanted to mention was that our website, fightgridlocknow.gov, is now up and running, and we're going to try to maintain that on an ongoing basis, in which we provide all the information about the various activities we're doing with respect to congestion. We'd really like to stimulate a lot more public engagement on this and to really start to change this mindset that congestion is not a solvable problem. That they broadcast traffic and weather together, weather may be a somewhat unsolvable problem, but we think traffic is a very solvable one.

Mr. Morales: Great, thanks.

This has been The Business of Government Hour, featuring a conversation with Tyler Duvall, Assistant Secretary, Transportation Policy, at the U.S. Department of Transportation.

My co-host has been Pete Boyer, director of federal civilian programs at IBM.

As you enjoy the rest of your day, please take time to remember the men and women of our armed and civil services abroad who can't hear this morning's show on how we're improving their government, but who deserve our unconditional respect and support.

For The Business of Government Hour, I'm Albert Morales. Thank you for listening.

This has been The Business of Government Hour. Be sure to join us every Saturday at 9:00 a.m., and visit us on the web at businessofgovernment.org. There, you can learn more about our program, and get a transcript of today's conversation.

Until next week, it's businessofgovernment.org.

Originally Broadcast February 2, 2008

Washington, D.C.

Announcer: Welcome to The Business of Government Hour, a conversation about management with a government executive who is changing the way government does business. The Business of Government Hour is produced by The IBM Center for The Business of Government, which was created in 1998 to encourage discussion and research into new approaches to improving government effectiveness. You can find out more about The Center by visiting us on the web at businessofgovernment.org.

And now, The Business of Government Hour.

Mr. Morales: Good morning. I'm Albert Morales, your host, and managing partner of The IBM Center for The Business of Government.

The quality of our lives, the shape of our communities, and the productivity of our nation's economy rests on the existence of a safe, secure, and efficient transportation system. Today, the U.S. Department of Transportation stands at the forefront in promoting an efficient and interconnected national transportation system.

In doing so, it relies heavily on the use of information technology to both sustain the nation's transportation system and make it safer.

With us this morning to discuss his efforts in this area is our special guest, Dan Mintz, chief information officer at the U.S. Department of Transportation.

Good morning, Dan.

Mr. Mintz: Good morning.

Mr. Morales: Also joining us in our conversation is Pete Boyer, director in IBM's federal civilian industry practice.

Good morning, Pete.

Mr. Boyer: Good morning, Al.

Mr. Morales: Dan, I always like to start by providing our listeners some context about the organization; in this case, the Department of Transportation. Can you just take a minute to give us an overview of DOT's history and its mission today?

Mr. Mintz: Glad to do so. The idea for the Department of Transportation began in the mid '60s, when under President Johnson, the thought was that there was a need to have a focused department dealing with these transportation concerns. It was proposed in 1965; passed in 1966. The first official day of operation was, of all dates, April 1, 1967.

It was taken a large part initially from the Department of Commerce. And in fact the Under Secretary of Commerce for Transportation became the first Secretary of Transportation. The strategic goals for the Department -- currently there are five of them. One is safety, making all the modes of transportation safe. The second is the reduction of congestion. The third is global connectivity, understanding that transportation goes across the world. The fourth relates to environmental stewardship; that is making sure we protect the environment. And the fifth regards security, both of the passengers and commerce, and the information associated with them.

The current focus, in particular, that the current Secretary, Secretary Peters, and our Deputy Secretary Barrett have relates to congestion, safety, and making sure that we use 21st century solutions associated with them.

Mr. Morales: That's great. Now, to provide our listeners a sense of scale, can you more specifically describe how DOT is organized, give us a sense of the size of the budget, number of full-time employees?

Mr. Mintz: We have approximately 56,000 employees, a budget of almost $67 billion. We are broken into organizational units which are called operating administrations or modes, and I believe we will use that terminology during this discussion. That stands for the modalities of transportation we use. There's a significant number of employees, in terms of location, in the Washington area, both the departmental headquarters is here, a block and a half from the new baseball stadium that will be opening later this year. And also the FAA headquarters are a couple of blocks away from that. We have offices all around the country, including, of course, with the Federal Aviation Administration at all the airports around the country.

Mr. Boyer: Dan, now that you've provided us with a sense of the larger organization, perhaps you could tell us more about your area and role within the Department. Specifically, what are your responsibilities and duties as the chief information officer? And could you tell us about the areas under your purview, how you organize the size of your staff and budget?

Mr. Mintz: First, I'm the departmental chief information officer. So each of the modes within the Department also have a chief information officer that have responsibility for optimizing the investment and managing it within the mode.

I have sort of two broad areas; the first is policy-related. That is the creation and management associated with policy across the Department. That has three pieces to it. One is information assurance, or security, and that would include privacy issues. The second, I call business partnership. That would include things like our enterprise architecture, which is a way of describing how we do the business architecture at the Department, and the second part being capital planning, that is how we manage our investments.

And the third piece, which is a piece we've really stood up this year, is focused on project management, so that we have coherence in terms of how we implement processes, make them repeatable across the Department. The term that's used a lot these days is called earned value management, a way of tracking whether the project is being performed in a way that the earned value that we expect to achieve is achieved with the right amount of investment over the right amount of time.

The other part of my responsibility, it relates to operations, or we call it shared services. That is shared amongst all the operating administrations. And that's another group.

We have approximately 250 staff people that are part of my office. Most of them are actually contractors, and a lot of them are associated with our shared services operation. We interface to the IT staff in each of the operating administrations.

We have -- from my staff, approximately a $12 million budget that supports the policy creation, about $65 million that is associated with the operational activity. The entire Department spends about $2.4 billion a year on IT. So relating to that dollar amount, we have policy impact, but the implementation is done by the CIOs at the operating administrations, and in some cases, by the business leaders within the administrations.

Mr. Boyer: Great. Now, regarding your responsibilities and duties, what are the top three challenges you face in your position, and how do you address these challenges?

Mr. Mintz: It's interesting you ask that, because almost from the first day I started at the Department, I would put out a one-page list with a list of bullet points with my top priorities. And typically they've had about six, and this year even though my office still has those six, I've limited it down to three, coincidentally. I will tell you last year, we may talk about this a little later, probably the most distracting responsibility I had was moving to our new headquarters building, and I think we'll touch on that.

So I have three priorities. The first priority is relating to security, that is information assurance. The goal there is to come up with a sufficiently robust approach in implementation that we can protect the information and the applications that we're running. And that's across the entire Department. We've done a number of things there; for example, one of the things we did was we have what's called a cyber oversight function -- the ability to look into the computer systems and decide whether or not there's -- some bad guy has gotten in, or something is going wrong. And that's called the cyber cert operation.

We used to have two of them: one of them at the FAA, one of them at the departmental level, which didn't make a lot of sense really. We merged them together and we created a joint oversight board consisting of senior leadership again from the FAA, and then representing the rest of the Department, to manage it, which is working really well. We just started this October 1st of this fiscal year, and that's a big plus.

Second, we are trying to move the organization from being purely tactical, that is responding to day-to-day activities, and looking more at strategy and context. And that's a very difficult problem that we face. The third is -- and this is one of the focuses that are going on right now -- is we are trying to re-look our whole approach to how we physically deal with the network. It's sort of grown over time, we want to bring a more -- a better approach to how we place systems, how we protect them, create different zones of security, so that there might be some that have a very high protection level, some that have a less protection level. This deals with risk investment. We don't have infinite money, so we have to be very careful about where we put our resources. So we have to decide what we have to highly protect as opposed to that we want to do somewhat, but it's open, perhaps more open to the internet or the public.

My second priority is a governance priority. It's a challenge in terms of making group decisions. The problem there is that everybody has a day job, and it's hard doing that job. So to say that we want everyone to stop for a moment, get together, put together a group plan, which takes time, because there will ultimately be a reward to that by being more efficient, better security, more optimal behavior, it's hard to not take the step and wait. So we've done a lot of work in terms of enhancing our governance

We revised our chief information council to add a representative to help run it from the operating administration so that we had more buy-in from them. We've revamped our investment review board and done a lot of activities to make that robust. And the third priority, unfortunately, is our day job. The reality is that every day, something happens that we have to deal with, that we have to get done. And the balance we always have to do is balancing out the tactical demands of getting through the day with these more strategic long-term goals.

Mr. Morales: Dan, I understand that you came to the Department directly from the private sector. Could you tell us a little bit about your career path and how you got started?

Mr. Mintz: I stumbled onto computers while I was in high school, and I was sponsored by Vitro Corporation, and they allowed each of us to do something technical. And I didn't know what I was asking, but I asked them, could I have some time to learn to program on their IBM 704 computer in FORTRAN II.

Mr. Morales: Wow.

Mr. Mintz: And I wrote a program to bid bridge. My career I guess I divide into sort of three pieces, though I've noticed the third piece has gotten longer. The first piece, I was very technical, I did a lot of programming work and systems analysis, worked on operating systems. The second part, I moved into management, system analysis, RAM projects and things like that. And the third, I expanded my activities, got involved with marketing and project -- how do you sell both internally and externally; how do you deal with the management issues in technology. And really the focus at that point became much more involved with the business issues; that is, how you could use technology relating to business. And I will say that through all that activity, I was lucky enough in terms of this job to be supporting federal business often during that in my entire career. So that's made it a little bit easier.

Mr. Morales: So Dan, from this vast wealth of experiences, what lessons have you learned and have brought to the culture at Transportation, say, from your private sector experiences?

Mr. Mintz: Two things. First of all, I want to say that the general rules associated with management are not so different between private and public sector. The things I learned from the people I respect in the private sector were to respect individuals and to treat them well and to give them the ability to be successful. And I think that's very important, to be transparent in terms of how you act, to try and do a good job in terms of defining goals. And I think that works in both areas.

The challenge you have I think in government, which I've tried to bring some of what the lessons are -- is that the government has a very complex set of stakeholders. In private industry, you have a relatively simple existence -- you have to make a profit. But in the government, you have many masters, and you have to satisfy them all at once. And often, they have contradictory demands on you.

What happens because of that is there tends to be a focus on process, which stays the same, as opposed to goal, because not only is it difficult to define what is the precise goal of the government program, but in addition, the goals change, so that people will make a big investment and then two years later, the goals have been moved.

So it tends to make it harder to get people to focus on the goals. But at the same time, that's very important. So the things I've tried to do is to make sure we understand that at the end of the day, we have to realize we are trying to accomplish certain things. So you have to define them. The second is, we have to be transparent in what we are doing, sharing of information, good or bad. And the third is to make sure people have some kind of ownership that they feel comfortable enough that they'll take responsibility for their work.

Mr. Morales: That's great.

What about Transportation's IT strategy? We will ask Dan Mintz, chief information officer at the U.S. Department of Transportation, to share with us when the conversation about management continues on The Business of Government Hour.

(Intermission)

Mr. Morales: Welcome back to The Business of Government Hour. I'm your host, Albert Morales, and this morning's conversation is with Dan Mintz, chief information officer at the U.S. Department of Transportation.

Also joining us in our conversation from IBM is Pete Boyer.

Dan, can you tell us a little bit more about the IT strategy at the Department? Specifically, could you elaborate on the efforts to align information technology to support the departmental and modal business goals and strategic priorities?

Mr. Mintz: I'd be glad to, and I want to start by saying you have to look at why this is a problem. People tend to jump into answering it, they don't think through why does it happen, and there is a number of complications with it. The first is, one of the issues -- and it's certainly true at the Department, but it's true, I think, in a lot of the civilian agencies -- is that to some extent there are conglomerates of responsibilities. So you have to think through what are in fact the broad strategic goals.

One of the things that's been very good for us in terms of Secretary Peters is she's defined a relatively small number of strategic goals that we can focus on. If you don't do that, there may not be an obvious theme that you can talk about in terms of the goals. There's often disagreement about that.

The second problem that you face is that there's a tendency to be outward-focused related to that. We get a lot of demands put on us in terms of initiatives and requirements. And so what happens is the focus tends to get to satisfy that demand, as opposed to looking inward -- that is, how does that requirement allow us to do our job better. And so you have to change the focus to also look inward a lot more.

And the final piece problem is that a lot of times you have to build up to accomplish these goals. So what happens is you may have to do what I call a two-step process, make a series of investments that may or may not have obvious reward in order to achieve the strategic goal. This is a problem, by the way, that's in the private sector also. People want the immediate return.

Mr. Morales: Immediate satisfaction.

Mr. Mintz: Immediate satisfaction, and what happens is with the two-step processes, you have to make an investment, and then the second step is to get the satisfaction. It's very difficult to get that investment to allow you to do that. Having said all that, I'm trying to get to what I call an 80-20 goal. That is that 80 percent of the time we're doing the right thing collegially, and only 20 percent of the time is because we have to impose some kind of structure as opposed to the reverse, because at the end of the day, if the staff don't take ownership of what the goals are, they're not going to do it. You can't impose it completely from on top. I'm trying to get to that collegial activity.

One of the ways we did that is we added a modal CIO to take over ownership of the CIO Council, working with me on that to get more buy-in from the staff across the Department. The second is, there's always a tension when you have a single agency that's an enormous part of the Department; the FAA is approximately 80 percent of the IT spend of the Department.

So what I've done, and what the FAA CIO and we have done working together is that we focused on the value-add proposition. That is, rather than fighting over whose territory is what territory and who has control over what budget, we've identified those areas which would be of mutual benefit to the entire Department, and help the individual agencies, including the Federal Aviation Administration, and those are the things that we work on.

The final thing is, one of the recent initiatives that OMB has wanted us to focus on relates to performance measurements, and the performance measurements initiative. I'm not sure that the CIO community and people in general realize how important that is in the long term, because that's a mechanism really for the first time if done correctly -- to start tying a lot of these activities into strategic goals, because this is -- now you have the opportunity to do that, because you can see how making these investments can eventually have an impact on results.

Mr. Morales: Right, the cause and effect.

Mr. Mintz: Yes.

Mr. Morales: Now, not to get too controversial here, but it's been my experience that information technology is an area that's sometimes noted for its turf battles and proprietary views. Could you elaborate on your efforts to foster a more enterprise view that enhances the overall IT governance at the Department?

Mr. Mintz: I've mentioned a couple of the activities already. That is -- again, the goal you have to get to is how you can get the staff in general to buy in to working together. Steve Kelman, who is now a professor at Harvard, wrote a book about how to effectuate change in large organizations, focused on particularly the government. And what you find is that you will have a number of change agents that actually want to accomplish the goal that you just articulated. You'll have a small group of people who will be interested in these turf battles. And then you have a large number of people who really just want to do their job and swing back and forth.

One of the goals you have to do is identify those change agents, and then figure out how to empower them and then grow that desire, because I think you'll find that people do want to accomplish good things. The other challenge -- and this is still a work in process -- is how you set up a governance organization and process that allows the touch point for this decision process to happen at the beginning, because typically what happens is we tend to put it at the end, yes, no; that's far too late. You have to set it up so that as these individual people start doing their planning on their projects, how do you set it up so it's at that point or close to that point that you start having the dialogue to see how there's value add that will actually make them successful too. We're not there yet, but that in fact is one of the top goals I have, as I mentioned earlier, for the rest of this calendar year.

Mr. Boyer: Dan, we understand your Department's information technology capital investment portfolio is in the hundreds of millions of dollars. Would you elaborate on how you have strengthened the Department's IT capital investment process to assure that investment decisions are mission-aligned and cost-justified, and what role does your DOT CIO Council, which you mentioned earlier, play in establishing a robust results-oriented investment review process?

Mr. Mintz: Actually, the total IT investment is in the billions of dollars every year. It's really a major component of the Departmental work. The CIO Council is critical; most of the alignment to the individual mission is done at the operating administration, the modal level. So one of the focuses we've had over the last year and a half has been how do we make sure that that process is sufficiently robust and moving in a more robust direction. That is that they are integrated with the business owners within the operating administrations supporting the mission correctly. And in fact, we've made a lot of progress in that area.

The second step relates to then, now that we have that working, how do we bring it together so that when there are commonalities, that they can be dealt with in a more efficient fashion. And we're just -- we're really don't -- we do it but we don't do it as well as I would like right now. And that will be a focus going forward this year.

Mr. Boyer: Now, the E-Government Initiative is a critical component of the President's Management Agenda, which seeks to improve and expand services to citizens, businesses, and agencies alike. Would you tell us about your Department's efforts in this area, and what are some of the challenges faced and what remains to be done?

Mr. Mintz: First, I want to emphasize, I'm a very strong supporter of the e-government programs within the federal government. I suspect it's not been a very easy road over the period of years. I know over the year and a half that I've seen it that it's been often difficult -- the kinds of turf battles that you've referenced and things like that have been a problem. We are a center of excellence in the financial area, so we have experience both in terms of being a participant and a provider.

The challenges that you have are fundamentally cultural. One problem it seems in this city, in Washington these days, being reasonable seems to be perceived as a weakness. So that the problem you have sometimes is you have to be somewhat dictatorial to cause things, which as I've indicated a number of times I think is not the most efficient way of doing it, but sometimes is necessary, unfortunately.

The second problem you have is people have that darned day-job, and therefore, doing e-government means they have to now be involved in a planning process, working with other agencies, how to work together. It means you add that second step, you make what seemed to be a one-step process into a two-step process. Even though the result might be better, people don't enjoy having to take that second step.

The other thing is that there's a lot of learning that had to go on. We are asking people to work together, but the other thing we're asking is we're asking government agencies to be service centers, and it takes a while for people to learn how to do that. I think there were some growing pains, but right now, I think it's working much, much better. The other thing is it's countercultural -- my experience with all organizations, but perhaps -- it's certainly true in the government, too, people have a sense that the bigger their budget, the more span of control they have, the more powerful they are, which in fact is often not the case, but this means giving that up for a greater gain. And that's hard for people to get used to. It makes them question what's the value that they then bring.

The other issue that we've had to wrestle with -- in fact, OMB has been sensitive to this, and we've had some conversations about it -- is you have what I'll call a horizontal versus a vertical problem. We're creating what I would call vertical integration. We take all of the issues regarding rulemaking, for example, which is something the Department of Transportation just finished up its transition with. And we make it into a vertical application. At the same time, we've integrated some of these applications horizontally within the Department itself, so we have to make two adjustments.

First, moving it to another -- to the center of excellence, but second, figuring out how do we then make sure that this horizontal integration within the Department is still optimized. And we're still learning how to do that together, and I think you're going to see the second wave of e-government will start being more sensitive to that goal.

Mr. Boyer: Now, from a technology perspective, can you tell us about the federal government's migration to Internet Protocol version 6, or IPv6?

Mr. Mintz: Yes. Tim Schmidt, who is my chief technology officer for the Department, has been the co-chair of the IPv6 activity, and has been a leading thinker related to it, which has helped the Department a lot.

For those people who are not familiar with the issue, everything on the internet has an address, just like you have an address for a letter you send in the post office. The internet has grown so much that we're literally running out of addresses, which is an amazing thing. There was a commercial I saw one time where the person got to the end of the internet and then he didn't know what to do. Well, unfortunately, amazingly, we are in danger of getting to the end of the internet.

So what this does is, in the same way the number of digits in your address at home, if you make it longer, it gives you more flexibility, we're going to increase the size of the address dramatically in the internet address. So one of the things it's going to do is allow us more addresses, and that's important just to survive in the internet.

It turns out in the transportation sector, that's a very important thing also for our stakeholders, because what's happening on the internet is we're moving away from just person-to-person connectivity, but person-to-thing and thing-to-thing connectivity. You know, when you have a GPS locator in your car or even a cell phone, you have internet connectivity, and you may have, you know, your car now someday talk to something in your house. So you now have to do thing-to-thing addresses -- or you may want to manage the car. GM announced that they are going to come out with a car that can drive itself in some number of years.

So you need all that additional connectivity to allow all those things to address other things. You have some other peripheral benefit related to it. It turns out that by having this longer address, you can build in additional security, you can also build in some optimizations so that the transport of information across the internet becomes more efficient.

Mr. Morales: Now, along similar lines, new social networking ideas and technologies are redefining the relationships of citizens with their government, both at the federal level and certainly at a local level. So to that end, what is the private virtual world, and what are some of the potential business applications that you're identifying?

Mr. Mintz: There's a joke that Don Tapscott, who was one of the co-authors of a book called Wikinomics says if you want somebody to understand these concepts, ask them if they remember when a man first stepped on the moon. If they answer yes, disqualify them. So the private virtual world, anyone under 35 knows exactly what you'll be talking about with a private virtual world, because they have an avatar, which is a representation of a person, they've played some game online where they were a person, or they were in a second life, or they've done one of these things already. People who haven't used it, it's almost like trying to explain the color green to somebody who is colorblind. You have to try it to understand the power.

Psychologists have studied the brain response, and it turns out the human brain relates to the human interaction in these virtual worlds in a way very similar to human interaction in the real physical world, which may not be such a good thing, but it's true. We in fact have created what I call dotworld, though people are trying to get me to change the name, a very small virtual world. We're almost finished with it, it will just be a couple of classrooms and an auditorium internally. And we're going to use it for training for employee -- as an experiment initially, a pilot. We're going to use it for employee orientation, training in general.

One of the things that other people are using these kinds of things for is for emergency situations and emergency simulation. When you do these very large exercises in simulating a potential emergency, the reality is you can't invest in making all the alternatives happen, you can't do that in the real world. Generally, these are set up to be successful, but in fact, emergency training is supposed to teach you how to deal with the situation you don't expect. The question that really is being asked is what do you do when you don't know what to do.

In a virtual world, you can simulate anything, and therefore, you can do with much less investment, do much better or more complex, or more varied kinds of training. So that's something eventually you want to tag on to when that becomes more robust.

The challenges to the government is that the -- and this is a problem with the internet and what we call Government 2.0, which is becoming a focus of OMB and the Federal CIO Council, is that it's unpredictable and to some extent uncontrollable. And in fact, that's why you do it, because you're coming up with unpredictably interesting responses and ideas. That's a problem with government, because we have policy requirements, we have privacy requirements that are very serious and very important to us. They do not go away, so when you combine an unpredictable environment with the policy requirements, it's a little bit difficult to figure out how to deal with it.

Mr. Morales: Interesting.

What about Transportation's cyber security efforts? We will ask Dan Mintz, chief information officer at the U.S. Department of Transportation, to share with us when the conversation about management continues on The Business of Government Hour.

(Intermission)

Mr. Morales: Welcome back to The Business of Government Hour. I'm your host, Albert Morales, and this morning's conversation is with Dan Mintz, chief information officer at the U.S. Department of Transportation.

Also joining us in our conversation from IBM is Pete Boyer.

Dan, given the composition of the Department which you described earlier, and the various modal agencies, there must be many opportunities to employ shared services, which you also talked about. Could you elaborate on how the Department approaches the use of shared services, but more specifically, how you identify Department-wide IT activities that would benefit from this type of centrally-managed approach?

Mr. Mintz: First, it might make sense to talk a little bit about what my goals currently are related to shared services, because I suspect I may take a slightly different prioritization in terms of the goals than a lot of people that I have talked to do. We have a fairly active shared services organization at the Department right now.

The reason I think we want to do shared services in general is -- there are three. The first is, by having some consistency in terms of how we approach the IT infrastructure activities, we are able to have a more robust security architecture. So one of the issues we have -- and I think government in particular has a great responsibility for -- is making sure that we have sufficient levels of security that people deal with us are confident that their information is being protected appropriately.

The second is, we have to optimize the human resources at the Department. The reality is, for all the talk about budget issues, the biggest scarcity we have is talent. There is retirement issues associated with that. We are going to lose a lot of the institutional memory. So the question is, how do we optimize the human resources?

When they're focused on things that we can centralize and manage that are -- activities that are not directly related to the mission -- for example, video conferencing, do we need video conferencing worried about by staff and every one of our operating administrations, or would it make sense to centralize that activity and have them focus on how that operating administration can do a better job of supporting the American citizen and their stakeholders? It makes sense to me to optimize people.

The third area is, if we do it right, we can have better service level agreements; that is, we can do a more professional job, and if we work hard at it, we can save money. People tend to emphasize that last piece the most. But it's actually not the most important value we bring. We obviously can't spend more money, that's not what we are optimizing. We are optimizing the human resource, which is the precious resource within the organization.

Right now we're doing desktop and network infrastructure at the Department. We have combined information assurance, that is cyber oversight with the FAA - we do e-government initiatives, if you really think about it, are shared services activities. We also have a number of initial projects, one related to document management, and the other is, we're doing a study with the FAA in terms of how we can bring in more coherent approach to data centers in general. We have a lot of different data centers run by a lot of different parts of the Department, and so we're working on how we can best consolidate the management and deal with it more intelligently.

The issue you ask is how do we identify Department-wide IT activities that benefit from central management. In fact, it's a discussion I'm trying to change, because that historically has been the approach -- that is, what is it now we can centrally manage? And in fact, when you start with that approach, there's 1,000 reasons why you don't want to. I think the approach has to be different. And this is the hard part. We have to start with the approach that what shouldn't be centrally managed. We should start with the assumption that anything that is not completely tied directly to the mission should be centrally managed.

So therefore, we're trying to change the dialogue -- this is what's going on right now -- let's start by assuming everything should be done centrally. And by the way, centrally doesn't necessarily mean by my shop. We could centralize it in a center of excellence within the Department. We could centralize it at our Federal Highway's operating administration, or the FAA, or wherever. I mean, it doesn't all have to be with me, but we want to centralize it for the Department.

So let's start with the assumption everything should be centralized, then look at those things that we have to break out. And we're going to try and change that dialogue, we're having a lot of discussions right now as to how can we take that concept which everyone has begun to believe in, but then how do we take that and make that a practical process.

Mr. Morales: Interesting approach.

Dan, I want to go back to something that you mentioned earlier in our first segment, which was the move to the new headquarters building. And I think I saw you twitch in your seat when you mentioned that. Could you tell us a little bit more about this effort and how it affected your IT operations, but more importantly, what were the benefits of the move and some of the lessons learned?

Mr. Mintz: So let me take care of that in those three parts. The first is to just give a sense of the sizing, we moved something over 5,600 desktops and phone systems, and we had to move the individual desktops desk-to-desk. Everyone kept their same extension, both in the old building and the new building. We moved over 40,000 data connections. At the very same time we were doing that, there were something over 700 application servers that were scattered around the old headquarters building. We moved them all for the first time to a central data center out in Frederick, Maryland.

So we were doing that, and at the very same time, we were decommissioning the building under the lease terms, the headquarters building, which had been occupied for over 30 years, had to be restored in a state approximately that at the beginning of the lease. All being done at the same time, while we are moving a Cabinet-level Secretary that had to have constant communications working all the time. It was an impressive process. We reflect on it, and we're not quite sure how we got from there to here.

The IT space, the second part of your question, we in effect created a parallel organization, because it required so much focus that we needed a group of people that really were paying attention to that. Unfortunately, because we always have limited resources, a lot of the people underneath the management structure were the same people. And so we did have two separate focuses, but we actually -- unfortunately, people had to go back and forth between the two. So for a while, we actually were running two different infrastructures; one at the old headquarters building, and one at the new headquarters building, both at the same time. It is a compliment to all the people involved and to the employees of the Department that we got through it, because it made everything much more complicated. And people were very, very patient. I think the reasons why are the lessons learned; we tried very hard to be transparent in whatever we did. We tried to treat the management and the staff with the respect I talked about at the beginning of this discussion. They deserve to know the good news and the bad news.

And as long, in my opinion, as we kept them informed as to what was going on, they worked with us to make sure it happened. And we treated them all with respect in that way, that we knew they'd be trying their best.

The other thing in addition to transparency -- and if I had one lesson to learn, it's the transparency part -- as part of our IT effort, a very detailed project plan mapped out. There's always unknown activities and surprises that occur, but if you don't have the vast majority planned, then everything is a surprise. The other thing is, when you are communicating the information by having a plan, you allow people to understand where they fit in, and they appreciated that.

It actually had some side benefits in terms of the move. We were in the process of doing a lot of this consolidation that ended up with the shared services organization, a lot of that actually was enhanced. I don't know if we would have -- been as easy to get all those service in one building except that we had to move. The other thing is it created a lot of teamwork between the IT group and the staff with -- across the Department. This whole effort made -- it showed that people could work together and do it successfully. And having evidence on the ground is always better than having a philosophic discussion about some gold at the end of a rainbow when no one yet can see either the rainbow or the gold. And proving that it was possible to be successful made the Department stronger.

Mr. Boyer: Dan, I understand at one point your Department had issued a moratorium on upgrading desktops and laptops with the most recent operating system. Would you elaborate on your rationale for pursuing such a course of action, and what is your current plan in this area?

Mr. Mintz: One of the things that surprised me was, doing something that made sense, such basic sense, which was, come up with a plan before you do something, caused such a reaction. So the answer is, and I want to emphasize, this had no reflection on the software at all.

My issue was we have tens of thousands of employees, we're spending a couple of billion dollars on IT a year, we have mission critical systems all over the place, my feeling was we should not take a step until we put together a plan. So what I said was we should take a breath, let's hold up right now, everything is working okay. There are features that we want to look at that would be of value to us. Until we come up with a transition strategy, I don't want us to move, and I certainly want us to move coherently as a Department, and that takes time.

The building move got a little bit in the way of putting together the transition plan. So we are still working on that. My expectation right now is sometime in calendar 2008, we will put together a plan that will deal with the issues of what we want to do with the operating system and what we want to with the versions of office. We'll pass it through our CIO Council and then we'll do that. So we have not yet made a decision, we are still exactly where we were when that came out.

Mr. Boyer: Previously, you had mentioned the importance of security and information assurance as one of the key goals in your department. Now, technology has clearly enhanced the ability to share information, but it has also made organizations more vulnerable to unlawful and destructive penetration. Could you describe your efforts around encryption of data, and specifically your strategy to strengthen the protection of personally identifiable information?

Mr. Mintz: Yes. First of all -- and I'll get to the encryption. We have to understand that most of these issues are fundamentally cultural. There was a study done where people called up an organization -- and I don't remember right now whether it was private or public. But they called up an organization. And it was people in the IT shop, and the phone call was hello, I'm from the help desk. We are resetting your password and -- I mean, this is true. That we are resetting your password, and we need your ID and password just to confirm it so we can do the reset correctly. Fifty percent of the people gave it.

The point of that being, I don't care what technology you put in place or what protections you put in place or how you do identity management, that is, identifying who is signing on or accessing the system. When somebody does that, they're let into the system and they can do anything they want. So the problems are fundamentally cultural.

With encryption, one of the things -- when I looked at some of the problems that have happened across the government, there were at least two or three things that came about that occurred to me when I looked at the lessons learned. So one was just a technology issue, that is encrypt the data. So certainly, everything in particular that's mobile is encrypted now at the Department, it has been for some time. We were very aggressive in following the mandate that was given to us by OMB. I thought was it was a good one, and we do that now.

Second, one of the problems was communications. A lot of times, people are afraid to bring bad news, and one of the comments is when you punish the messenger, you end up having no messages. So we've tried to create a culture where we can deal with bad news and not -- and deal with the news, as opposed to who brought it to us. In some cases, it took weeks or months before the bad information made its way up the management chain.

I have a policy that I inform senior management at the Department essentially at the same time we report any incident into the Department of Homeland Security, what's called US-CERT, where we report incidents. I have a commitment that I report it to them very shortly thereafter whether I have perfect information or not, so they were alerted to that. And that's -- luckily I work for a group of people that are able to handle that kind of interaction.

The third thing is an auditing activity. Typically, we put these policies out and we create what I call policy on a shelf. And what I mean by that is we create these huge three-ring notebooks or the functional equivalent of three-ring notebooks on the web, and no one knows which ones to follow, and we don't check to see if they are actually in place. So one of the things we're doing is we are doing a lot more aggressive job of going back and auditing each of the policies to make sure they're effective.

We do a lot of training programs associated with this topic, we have a week-long security conference which has existed really for many years at the Department. FAA does a security conference. We've done a lot more online training trying to make that more robust.

Mr. Morales: So Dan, along similar lines, there's obviously a rise in telecommuting and working from home, and many government employees are accessing IT infrastructure via non-government PCs, which increases the potential for system vulnerabilities. Now, my understanding is that peer-to-peer software applications resting on home PCs is one of the major reasons that increases the security risk.

First of all, can you tell us a little about what is the peer-to-peer software, and what are some of the challenges and benefits represented by these applications, and how you are dealing with them?

Mr. Mintz: Peer-to-peer software is software that allows multiple computers to access each other's disk drives as if the disk drives were all connected to the computer doing the access. And like a network, peer-to-peer -- because each computer is a peer of the other -- a lot of it's used for copying music and things like that, which are other activities that you really don't want to encourage.

We've taken a number of steps to try and deal with it. First of all, we have a policy that says you can't keep personally identifiable information or sensitive information on non-government computers anywhere. Second, the software we use that accesses our own systems prevents data from being downloaded on their home computer, though a user who wants to can obviously go around that requirement by just copying and taking it.

We are doing education processes to discourage people from doing that kind of activity associated with peer-to-peer work. We discourage people, frankly, from using that kind of home use peer-to-peer software. In addition, we scan for that software on our own networks to make sure that it doesn't exist on the Department's.

packages that merely do peer-to-peer work are not good applications in general for us to use. The security dangers are much too great related to that.

Mr. Morales: So your main line of defense here is really the education of the employees and making them aware of the dangers and the policies.

Mr. Mintz: Yeah, that, and the final thing is, we also have started changing the policies of the Department for those people who are doing a lot of telework, we are encouraging their primary computer to be a laptop, a government-provided laptop. So while we can't afford typically two computers, we can afford the one, and so more and more of the time, the primary computer's becoming a laptop.

Mr. Morales: What does the future hold for the U.S. Department of Transportation?

We will ask Dan Mintz, chief information officer, to share with us when the conversation about management continues on The Business of Government Hour.

(Intermission)

Mr. Morales: Welcome back to The Business of Government Hour. I'm your host, Albert Morales, and this morning's conversation is with Dan Mintz, chief information officer at the U.S. Department of Transportation.

Also joining us in our conversation is Pete Boyer from IBM.

Dan, given the critical role IT plays in mission and program delivery, could you give us your view on how the role of the CIO has evolved, and what are some of the key characteristics of a successful CIO going into the future?

Mr. Mintz: I see the CIO function breaking into two directions. One direction will be those CIOs that will focus on technical issues and potentially operational issues. And the second will be those CIOs that will focus more on strategic and policy issues, and I think over time that actually may separate out.

The characteristics of the CIO, therefore, will depend on which person, which role they have. The latter role, which I think is the more interesting -- I think people have to have experience with business issues and business background. Technology is a useful piece of knowledge to have, but will not be the primary driver of the CIO function. Their ability to translate between technology and business goals I think will be what they have to bring to the table.

Mr. Boyer: Now, continuing our focus on the future, can you give us a sense of some of the key issues that will affect CIOs government-wide over the next couple of years, and given this perspective, what emerging technologies -- and we've talked about some of them already -- hold the most promise for improving federal IT, and any advice you would give to the next administration in this area.

Mr. Mintz: My opinion is the biggest -- and it's in a sense not an emerging technology, but the technology I think that the CIO function needs to pay the most attention to is the continuing impact of the internet on organizational structure. Historically, the technology challenge has been how to optimize technology, which however difficult, is actually manageable and understandable.

With technology being completely pervasive, the issue now becomes how do you optimize organizations? That's a particularly difficult problem in the government, where making organizational changes is very, very complex.

Mr. Morales: Is this the flat-world issue?

Mr. Mintz: To some extent, yes. What happens is it empowers the people at the top who have much greater visibility into an organization; it empowers the average employee, which is a good thing, particularly for younger employees, because they have access to policy and things like that they otherwise wouldn't have. But the vast number of people in the middle who historically have -- get value by passing information up and down the organization, their self-worth is under attack. So the question becomes how do you make sure that they are able to give a valued contribution to the organization, because they have great talent.

Mr. Boyer: More specifically, Dan, what are some of the major opportunities and challenges your organization at DOT will encounter in the future -- and this is pulling out your crystal ball, but how do you envision your office will evolve over the next five years?

Mr. Mintz: I wouldn't be surprised that the challenges in five years are going to look a lot like the challenges today. The focus right now -- there are three focuses, two of which I've already talked about. One is how do we make sure that we have architecture that supports security needs, particularly when we have all these other emerging technologies and the internet breaking apart the relationships internally and externally.

which is how do we relate operational responsibilities and policy responsibilities, and how will that evolve over time.

Mr. Morales: And then you touched upon this a bit earlier, but you know, the pending retirement wave is a big issue across the government, and certainly within your organization. So more specifically, how are you handling this issue, and how are ensuring that you have the right mix of staff to meet some of the future challenges that you've outlined?

Mr. Mintz: I suspect that one of the issues evolving with retirement, because we are losing some very senior and valuable people -- the solution may be possible if we can figure out how to have more robust relationships from a variety of different external resources, because I'm not sure we can hire fast enough to replace all of them.

I think, however, in many ways the major problem is with the people we still have right now, because the nature of what their job role is just changing dramatically because of this internet impact. We have people who are used to working in a hierarchical relationship and are relatively comfortable with it. We need to move that to being able to deal with a horizontal relationship with partners. It takes different skills.

When you look at the private sector, a lot of the companies who failed at outsourcing failed because they didn't know how to relate two horizontal activities. And they didn't realize it was a core value that they had to develop.

The government will need to figure out how to interface to private partners more, academic institutions, state governments, international organizations, in ways that people may not yet be comfortable with. We also have to be spending, I think, a lot more focus on that human capital issue. And I think we need to spend actually a little bit more on that. And that's what we are doing right now in IT.

Mr. Morales: So it really comes back to your point about different organizational modes, and different ways of managing the business.

Mr. Mintz: Yes, and I think the private industry is moving much faster, and eventually government will be forced to catch up because all of its partners will be doing this.

Mr. Morales: So Dan, given the wide breadth of experiences that you've had in your migration from the private sector over to federal government, I'm curious, what advice might you give a person who's out there considering a career in pubic service?

Mr. Mintz: I'd highly recommend it. I mean, I've had a wonderful challenge. One of the things I say when I speak in different groups is this is honestly the first job I ever had where I love coming to work every day. I've obviously had jobs that I've enjoyed, but I can honestly say every day I've been at the Department, I love coming into the office.

And it's a rare opportunity. There are great people within the government, you have a sense of mission; you're trying to accomplish something that's really helping the citizens and the public, which is a very wonderful thing. It's the best job I've ever had.

Mr. Morales: Dan, that's great advice. Unfortunately, we have reached the end of our time together. I want to thank you for fitting us into your busy schedule today, but more importantly, Pete and I would like to thank you for your dedicated service to our country at your role at the Department of Transportation.

Mr. Mintz: I'd like to thank you for having me here. I love to talk about the Department and my office. For those people who want to know further information about the Department, they should access www.dot.gov.

Mr. Morales: Thanks.

This has been The Business of Government Hour, featuring a conversation with Dan Mintz, chief information officer at the U.S. Department of Transportation. My co-host has been Pete Boyer, director in IBM's federal civilian industry practice.

As you enjoy the rest of your day, please take time to remember the men and women of our armed and civil services abroad who may not be able to hear this morning's show on how we are improving their government, but who deserve our unconditional respect and support.

For The Business of Government Hour, I'm Albert Morales. Thank you for listening. Announcer: This has been The Business of Government Hour. Be sure to join us every Saturday at 9:00 a.m., and visit us on the Web at businessofgovernment.org.

There, you can learn more about our programs and get a transcript of today's conversation.

Until next week, it's businessofgovernment.org.

October 26, 2005

Arlington, Virginia

Mr. Morales: Good morning and welcome to The Business of Government Hour. I'm Albert Morales, your host and managing partner of The IBM Center for The Business of Government. We created the center in 1998 to encourage discussion and research into new approaches to improving government effectiveness. You can find out more about the center by visiting us on the web at www.businessofgovernment.org.

Mr. Chew: Good morning.

Mr. Morales: And joining us in our conversation, also from IBM, is Pete Boyer. Good morning, Pete.

Mr. Chew: Well, sure. The FAA is really here to provide the safest and the most efficient airspace system in the world. Now, about 80 percent of the FAA is the Air Traffic Organization, and the Air Traffic Organization really is the one that provides service to those who use the national airspace system. And there's a lot of services that are provided. The most common one that everyone thinks about is air traffic control, but the reality is there's a lot of other service as well. There's weather briefings, there's navigation signals, communications systems and things like that. In fact, what people don't know is that the Air Traffic Organization is, in many ways, a large telecommunications company within itself. We have things like microwave towers and things so that we can effect communications among all our of various facilities and communications from those facilities to the pilots who are using the system.

Mr. Boyer: Is this primarily a U.S.-based organization or are there people internationally also?

Mr. Chew: Well, there's U.S. interests internationally, like in Puerto Rico, Guam -- where we actually provide services there as well. But for the most part, most of the services are in the United States.

Mr. Boyer: Your listeners may not know that you're relatively new to the FAA and, in fact, relatively new to government service. Can you tell us a little bit about your career?

Mr. Chew: Yeah, I'm actually new to government -- completely new to government. I started off in the private sector. I did my undergraduate studies at Stanford University, I did my graduate studies at University of Southern California, and got interested in aviation while I was in school and actually completed most of my private pilot's license through my flight instructor while I was in undergraduate and graduate school. Following that, I came out and went on into the non-Schedule 121 cargo industry and ended up flying charter Lear jets. And from there, I got hired to American Airlines, and I spent about 18 years at American Airlines. And at American Airlines, I started out as a pilot, but within a couple of years, I was -- started into management there. And I started in pilot management at a crew base, ultimately ending up in systems and development because I have a background in many of studies in information technology. And that led to regulatory business and ultimately running the daily operation at American Airlines; that's where I actually ended up before coming to the government.

Mr. Boyer: You talked about ATO being about 80 percent of the FAA. What's the size and budget of your specific organization?

Mr. Chew: So the Air Traffic Organization is about 35,000 people. About 17,000 of those are actually in the -- kind of the traffic side of the business. About 7,000 or so are in the maintenance, engineering, infrastructure part of the business. It's different than the private sector -- we look in terms of budgets -- but it's -- in terms of budgets, it's about a $9-billion organization annually. About 6-1/2 of that is our operating budget, and about 2-1/2, or a little less than that, is our capital budget. We operate about 50,000 flights a day -- or we handle about 50,000 flights a day. About 30, 35,000, depending on how busy the day is, are our air carrier flights.

Mr. Boyer: Russ, that's an impressive organization. Can you tell us more about your responsibilities and duties as a COO and how you support the mission of the ATO?

Mr. Chew: Well, being the first chief operating officer for the FAA -- and really, the Air Traffic Organization is only a couple of years old -- my role was mainly to bring businesslike practice into what was a government organization that was really in the service business. The service model, which is a business model that's age-old, is a model based on the fact that you have customers that you're delivering services to and that you have owners that have certain expectations of what the characteristics and quality of that service is. Then you have employees, for the most part, are responsible for delivering the actual service itself.

Now, in the service model, the balance between those three main stakeholders in that model is a very important balance to reach. What you find out when you really look at how government runs is not necessarily the clarity of what a service model is and why those three things have to be in balance. You instead have one of them taking priority over another, depending on the budget, the pressure on the budget, the political environment at the time, what's happening externally in security and safety, and a lot of perceptions. And so to keep your eye on the ball and to move the business forward, you really have to have discipline around what exactly you define as your business and how you execute it, and that is not a characteristic of a typical -- or I shouldn't say "any typical" because I don' t know. I'm new to the government, and this is the only government agency I've been involved with, but when I arrived, after three or four months of assessment, it became pretty clear that a standard discipline around a business model was not there. The organization tend to react on an annual basis to the priorities that just happened to be present that year, and it was very hard for it to execute a strategy for the long term.

Mr. Boyer: Shifting the discussion to performance-based organizations, why is this type of change needed within the government?

Mr. Chew: Well, I think about 10 years ago or so, the FAA came under a lot of criticism. About that time, there was a system called the Advanced Automation System, and it really was supposed to be the air traffic system of the future. And it failed. I mean, they shut the program down around the mid-90s and had spent what was purported to be about $2 billion or more on that program. And so following that in the late 90s or the year 2000, there was an alarming increase in the number of passenger delays. If you remember the scare stories or horror stories of being on an airplane and being stranded in that airplane for hours and hours waiting to take off or waiting to get to a gate or sitting in the terminal, those horror stories were rampant in the summer of '99, the summer of 2000.

And so, it was during that time, really, that there was a commission that was established to look at that, and this Congressional study determined that they should create an organization that was performance-based organization, because they saw that as the solution to these problems, and that the FAA establish a chief operating officer to run that. And hence the Air Traffic Organization was born. Since then, and even during that time, there was also a recognition that the operating costs of the organization were rising -- in fact, they were rising even though traffic was falling after 9/11 -- so all those factors put together really motivated everyone to try to do something different.

Mr. Morales: Russ, you use terms such as "performance-based organizations" and "service-provider model." What's been one of the greatest challenges in bringing these concepts and this lexicon to your role now in the government?

Mr. Chew: Well, the government process itself. Now, even though we have both personnel reform and procurement reform with the FAA, the way those are designed are -- were still designed around what I would call government process, and that process is based upon how money flows in the government and how priorities flow. Now, typically, a government organization is personality-driven because we elect officials and things like that and fairly risk-averse because anyone appointed to run an agency or to run anything in the government is sometimes measured by not the output of the organization, but managing to stay out of trouble with the organization because there are a lot of political things and oversight that occur that could damage one's future -- and particularly if you're a political appointee. So a performance-based organization is intended to supersede that. To go from a risk-averse culture to a performance-based metrics-driven culture is a very, very important aspect of the Air Traffic Organization but is very, very difficult to actually achieve in the government process-oriented organization.

Mr. Morales: Great. How is the ATO becoming a performance-based organization? We will ask COO Russell Chew to share with us when the conversation about management continues on The Business of Government Hour.

Mr. Morales: Welcome back to The Business of Government Hour. I'm your host, Albert Morales, and this morning's conversation is with FAA Chief Operating Officer Russell Chew. Also joining us in our conversation is Pete Boyer.

Mr. Chew: Sure. The -- a business -- I mean, any successful business has a strategy that surrounds what it does, and those businesses that are most successful can execute that strategy with precision and can keep that going year after year after year. And it really provides the focus, that really drives the business and everyone in it.

When you look at that the Air Traffic Organization set out to do, it was really to get a focus around not just one element of its business, like capacity, or one element, like safety, but all the elements of the business so that on a comprehensive basis, every wheel, every dollar, every resource, every gear that's turning in that organization is turning the right way and in the same direction. Now, that's hard to do when you're either large, complex, or sprawling all over the United States, which we are all of the above. And so what we set out to do was set up a balanced scorecard approach to that strategy. Now, of course, it's anchored in the service model with customers and owners -- what I call owners -- where I came from, it was called shareholders, but here call them owners -- and employees. And in the balanced scorecard process, you couple that by setting up what exactly are your goals for each of those constituents, and then you define the processes with which you grind out the output and measure that output and see if you're making progress.

So setting that up is not a trivial exercise. I mean, that is a very difficult exercise because you can't do that at the top only, you have to do that through the whole organization. Now, so far, we've -- the organization is only about a year-and-a-half old, and we have the strategy at the executive layer, and it's really built around four pathways. First of all, operating excellence, which is, we need operate safely and efficiently, and we have to deliver those kinds of things the owners expect; they expect a safe operation, they expect an efficient operation. The customers expect their efficiency and their level of service to be what they want, and the employees are expected to be taken care of so they can deliver that service. Then you set up those processes and develop metrics for every one of those.

The second pathway is financial management, which really didn't exist before. We had budget management. So we want to manage costs, not just budgets. To do that, you have to actually use a cost accounting system to understand your costs. Now, financial management is more about managing costs forward, investing in things that can help reduce your costs while you're improving your service. That means all your capital programs have to be joined up with the operation. In addition to financial management as a pathway, the organizational change that we put in place actually merged the capital programs and those who managed it with the operating units that deliver the service. Before the organization, those two were separate, and when they're separate, those who buy the equipment aren't connected with those who have to use it and deliver the service, and what happens is you waste a lot of money on things you don't need, and you don't have enough money on the things you do need. And the capital program's not moving the metric, which is ultimately moved by the operation, not by those who buy the equipment.

Mr. Boyer: Russell, I do what to probe this concept of financial management a little bit more, but just to clarify, you use terms such as "customer," you use terms such as a "shareholder/owner," and you use terms such as "employees." I think I get the employees ones, and I think most of our listeners probably got that one, but can you describe to us, when you use the term "customer" and you use the term "shareholder/owner," who are you referring to?

Mr. Chew: That's a good question because when I got to the organization, nobody knew who the customer was, or there was a lot of differing opinion who they are. We use -- in this business, we use "customer" as any entity who actually consumes the service we provide directly. So if it's an airline who uses the system to run a business, the airline is the customer. If it's in general aviation, where there's a pilot who actually owns the airplane that's flying through the system and using its services, then it's that pilot as the owner of that airplane. Our customers are varied as well. I mean, the -- actually, the military is a customer of ours. In many ways, we're partners, so the military has kind of a dual status in the model. But certainly while the military provides services to our customers at some sites, we actually provide a lot of services to the military because a lot of military airplanes fly in the system at any given time.

The owners are those who actually control what they want out of the system, and they're, for the most part, represented by the three branches of government, although two of them stand out -- the administration -- the Executive Branch -- and the Legislative Branch. Now, the challenge, as I think -- and this is where the ambiguity in government ownership comes about -- is that the administrative -- or the Executive Branch and the Legislative Branch don't necessarily agree on what our priorities should be. And so they come to some compromise, usually that culminates in an authorization and an appropriation of funds to the various activities that we have. Our challenge is that those appropriations are not performance-based, and so we have to convert those programs and those funding streams to a performance-based organization, and that's very, very challenging. Now, what we're setting up is the processes on how to do that, and financial management is all about that.

So customers really are the ones who receive the service, and the owners are the ones who dictate what we're supposed to be doing with the service and what we're supposed to be funding as part of the service, and really, ownership ultimately then becomes the American citizen, who ultimately funds this thing through taxes.

Mr. Morales: You used the word "compromise," and I was reminded of a saying that says that flying is a lot like a group of compromises moving in tight formation.

Mr. Chew: Well, the first thing is actually pushing that down doesn't change it. Pushing it down to -- not just program management, but all managers, whether they're in the field or at headquarters, is a byproduct of the process we use to get to results. So if you become a results-based organization or a performance-based organization, you actually have to set up processes that make it most efficient. If you try to manage the budget from Washington, D.C. -- where most of your people are actually in the field -- I use the analogy that you manage with an ax. You make a decision at a high level, and while you may achieve ultimately -- you want to control or cut costs here or improve or enhance funding somewhere else -- you do it with an ax, and there's a lot of collateral damage in that, and there's a lot of waste and inefficiency that goes along with it.

The idea behind driving things down, not just in budgets, but also in accountability, is to manage that at a lower level. But you can't just give them the money and say, spend it however you think is right, you have to set up a lot of targets and guidelines and metrics so they understand what their goal is. And that's why you need a scorecard that goes all the way down to that level. And you actually can't push that responsibility or accountability down until you actually get the money connected with it so people have a budget to work with, and they understand what their responsibility is with producing results with that budget that they're giving. We're several years away from really achieving all that. We have pushed at least down one level already. We have 10 service units in the Air Traffic Organization; some include things like terminal -- that's the -- you know, the control towers and terminal radar control facilities. Then we have en route, and there's 22 en route air traffic control centers. That's under two separate lines of business, and each vice president has been given a budget now, and they have to manage that budget, and they're also given goals to reach.

That's actually a collaborative process at the executive level. We've actually formed an executive council which is composed of the 10 vice presidents of our service units, and this is new. Rather than the COO making all the decisions, the executive council, which is this group of 10 vice presidents, have to deliberate on all the strategic decisions for the organization so that it's not one person, who could leave -- right? -- and bring someone in new, making all the decisions, but, in fact, a collaborative balance between the needs of the 10 service units.

Mr. Boyer: Well, Russ, as you previously mentioned, the FAA publishes quarterly performance measures and ranks itself on a scorecard. How do the performance metrics contribute to operational efficiencies and what kind results are you seeing?

Mr. Chew: The FAA has a scorecard that's quarterly, but the FAA scorecard is not comprehensive. What we have underneath that is an ATO scorecard, if you want to call it that. So the organization itself has a comprehensive business plan that feeds the flight plan, which is reported quarterly. Now, our business plan -- because it's comprehensive -- is fairly large, and in fact, we have a dashboard at the executive level of the dozen or so metrics that we look at on a monthly basis and we track. And then every level has that same scorecard, and they have metrics that contribute to that. We're already starting to see -- because we're focusing on it -- improvements in the quality of service we provide. That includes things like airport capacity -- to make sure that we are providing capacity and making it available -- airport efficiency, or how well we actually deliver traffic at the rates that call; productivity, or how many people it takes to deliver how many flights; overhead rates, or how many people we have in overhead versus people who are delivering service; and what we call the line organization. Our direct employees we define, for instance, as the people who deliver the service -- that's a controller or technician -- and the first-line supervisors. Everyone else is considered overhead or indirect. We're managing those ratios.

So once you put those metrics in place, and you drive them down and you say, I want you to come up with ways to improve those ratios, then the managers at every level begin to work toward that, and just the focus alone and the fact that you decided to measure it actually starts to change the behavior in the organization. Now, that only is good for a year or so, after which you really have to think about innovative ways to do that, and of course, that's where capital spending comes in. Capital spending isn't just to spend on incremental improvement in the quality of the service; the capital spending has to be there also to improve your cost ratios so that you can continue to provide the service -- a better service -- with more safety, more quality of service, at an ever-decreasing unit costs.

Mr. Boyer: Now, clearly the topics we've discussed so far require a large amount of cooperation from the employees of the ATO. How do you encourage your team to change, and what kind of steps is the ATO taking to motivate staff to change?

Mr. Chew: So -- the answer's really it's a -- like any changed management effort that you put forth. There's two elements to it; there's a top-down element and a bottom-up element, and they're different. You don't actually directly motivate employees, but you have to actually tell a story that fulfills the needs for employees to understand and behave differently. And it really kind of boils down to three things, and in government, what I found, there's actually a fourth one there.

The first thing is, you have to tell them why you're doing this, and it has to be a compelling reason because people, by nature, don't really want to change. You know, why would I want to change who my boss is and all the things that make them comfortable with -- gee, I'm successful today, you might change something that might make me unsuccessful in the future. So you have to give them a pretty compelling reason to change. Our reason was that our budgets were increasing and the available funds were decreasing, and so if we didn't change the way we worked, we didn't have a sustainable way of projecting our future other than for asking for more money, which really wasn't happening. And we looked at -- in spite of the fact we were asking for all this money over the last 10 or 12 years, we really never gotten it. And so there's been a slow degenerative spiral on the number of people in the organization, which has been retreating away.

So that's the first part, is just to tell the story. Then you have to tell them what you want me to do, and that's of course where this balanced scorecard comes into place. Well, we want you to move these metrics and to get them to understand that things we're going to measure are things that are very, very well-defined. Metrics has never been a weakness of the FAA, it's just they had so many, and they would focus on different ones, depending on what the priority was that year. We're trying to create a system of really basic fundamental metrics for the business that will transcend those changes. They'll always be there.

Now, once you -- once they feel like, well, we better change, and you tell them what is it they need to do, you always have to ask and answer the basic question. Every employee's going to say, what's in it for me. And so you have to give them a reason to move from where they were to where you want them to go on an individual basis. That's the most challenging. And the way you accomplish that is through a lot of communication, and to make them uncomfortable where they are today. So we set out to create that level of discomfort. Now, the restructuring itself does that automatically -- you restructure, and everybody's boss changes -- but we restructured in a massive way. This kind of massive reorganization takes a long time, it can take five or ten years to really achieve. But it makes everyone very, very uncomfortable and very, very anxious. But through that, you give them a light at the end of the tunnel, and that becomes something that they would like. You have to put in recognition systems, you have to put in what I call safety systems -- what we call psychological safety is something that will make them feel better. And we're in that process now. If you were to look at the organization today, you would find they're still in a very anxious stage, and we have a window of opportunity when they're in that anxious stage to bring them to the other side.

Now, the fourth part is what I would call more of a government-oriented characteristic of changed management. There's a tendency to look at political leaders as transient, one party to the next, one election to the next, one Congress to the next, one year to the next. And you have to overcome the natural tendency to wait it out. Now, that's difficult to do because they're right, there is transience to it. So in our messaging, you have to convince them that whatever the situation is, it's going to be here after these particular leaders are gone and no matter what administration's in place. And if you can convince them that that's the case and that the only solution is for them to take action and for them to be part of the solution, then you've actually established a way to solve that fourth characteristic of change management. Now, that is -- that's not easy to do, but it's absolutely essential to do.

Mr. Morales: This is great advice for any organization going through the massive change that yours is.

Mr. Morales: Welcome back to The Business of Government Hour. I'm your host, Albert Morales, and this morning's conversation is with FAA Chief Operating Officer Russell Chew. Also joining us in our conversation is Pete Boyer.

Mr. Chew: Sure. I mean, organizationally, splitting the lines of business in to things that made sense from the customer point of view was the first step because most government organizations tend to be organized in what we do. You'd have a section on weather, you'd have a section on traffic, you'd have a section on procurement, and moving those and merging those in a sense so that they were oriented along very specific output was an important part. And that's still actually very hard for them to understand. For instance, a terminal or a control tower or a terminal radar control facility is really more about through-put to and from an airport. And so you would measure their performance in terms of the number of operations, takeoffs and landings per hour. En route, which manages the upper airspace, is more about how much controlled flight hours that you can produce per person or for so many dollars. And so the actual metric that you use to measure their performance is different.

Another one was flight service; flight service used to be kind of buried as a suborganization on a geographic basis under an air traffic control center, which managed upper airspace. Well, those services were very different; they provided weather briefings, weather reports, advisories to general aviation pilots and some corporate pilots and some military pilots as they flew over that airspace or landed at an airport that didn't have a control tower, but had some flight service personnel there. And so they had a very different type of output, which is the quality of the weather briefing, how many weather briefings an hour that you were able to disseminate, electronic dissemination of that kind of information, processing of flight plans from general aviation on electronic way or a manual process, and flight service was particularly problematic because being kind of a lower priority for an en route center, their facilities suffered more, their staffing suffered more, their equipment and technology was suffering a lot.

Mr. Boyer: Russ, much like the rest of the federal government, I would imagine that FAA is facing potential turnover problems with its air traffic controllers, perhaps as an aging workforce issue or for a variety of other issues. What is your human capital strategy to address this expected turnover in the workforce?

Mr. Chew: Well, you know, actually, this problem has been approaching for some time. It's pretty well known that in 1981, all the air traffic controllers were fired by the President of the United States. Back then, they were represented by a union called PATCO, I think it was. Following that, a lot of new people were hired, and of course, they were hired all around the same age because there were age restrictions on the hiring of air traffic controllers. And so we're facing a wave of retirements in our air traffic control work group, and also our technicians -- not as much, but our technicians that keep all the infrastructure running. And that wave of air traffic control retirements that are on the horizon -- because there is a mandatory retirement age for controllers -- is here now. And even though we've known it for some time that it was coming -- because it's not run like a business, but it's run on a reactive basis -- they would hire as many as the budget would allow. So what we set out to do was create a workforce plan, and the first thing you have to do is actually create a workforce model that has a lot of fidelity to it, that can estimate with some degree of accuracy the number of retirements, where they're going to occur and be able to be updated on an ongoing basis. So it has to be a dynamic model.

So we set out to do that the very first year that we started the ATO, and last December produced the first workforce plan for controllers. And it's very important because it projects retirements out for the next 10 years, and what you find out is more than half -- or, actually, over 70 percent of the controllers will actually become eligible to retire in the next 10 years, so you have a very, very important task to take on, which is how do you get controllers hired, trained, and certified to replace those who are going to retire. And it's a very, very specific skill you need to train to, and the talent that they have to have. And so your screening processes, your recruitment processes are all part of that plan. For us, the plan includes having to train to certification in a terminal in two years and in a radar/en route facility in three years. And that's very challenging for us because in the past, it's taken longer than that. So we have to apply better training disciplines around how we train and how we certify and how we get them the experience they need so that they can be certified in that amount of time. And for us, that's very important, otherwise we'll end up with too many trainees at a facility and not enough certified people, and then we'll have to slow the traffic down so that we don't have any kind of problems with the quality of our service.

Mr. Boyer: Russ, on a related topic, we understand the FAA has outsourced the automated flight service stations. Could you describe this for our listeners, and specifically, what has been your experience with competitive sourcing and what have been the results to date?

Mr. Chew: Yeah, there's a lot of interesting things that surround this, and there's a lot of myth versus reality on what outsourcing means to any government agency. The FAA actually for years has outsourced many things -- I mean, we don't own our own telephone lines and things -- and over the course of time have established certain efficiencies by sourcing competitively different service infrastructure things that we have going on. But the reason this one was so visible is because this was one of the services that the outside customer actually wants, and very visibly, we deliver. And this was the weather briefings that I mentioned that we created its own line of business. And so once you create your own line of business and you understand those costs, the outside world looks at it and says, well, why is that so expensive for that kind of service that you're giving us, and hence, the focus on A76.

Now, oddly enough, it began long before the Air Traffic Organization was actually established, this notion that this was a service that even could be considered in a competitive sourcing. We would still control the service, but rather than delivering it with our own people, we would have and hold a contractor potentially accountable for it. And you ran a competition. You ran a competition by forming your own internal bidder, what we call the most efficient organization. So we try to compete against the outside bidders and see whether or not we can do a better job, as good a job as an outside bidder. So the outcome of a competitive sourcing initiative is either an external source will do it better and so you select one, or your internal organization can do it better, and you get a more efficient internal organization. So there's a good outcome either way.

Now, obviously, this means that you really have to be careful in what you set up as the requirements for these -- this initiative and what kind of quality of service do you have, what kind of escalating procedures you have to remedy problems that you might have, and metrics on how you would measure the quality of the service you're providing. So we set out to do that, and the competitive sourcing was set up. We had set up a most efficient organization, and when the selection time came, the winner of the bidding process was Lockheed Martin. And not too long ago, that was actually executed and, that service today is now being provided by Lockheed Martin through us -- or by us -- by -- under our control. Now, we're measuring their quality of service, and the initial results are quite promising that the average wait time on a phone call is down and the average number of dropped calls is down. So the quality of the service is improving so far. The transition will take the better part of 18 months to complete, but in that time, at the end of that 18 months, the service will be virtually completely provided by Lockheed Martin with our oversight. The expected reduced cost is very significant. Over 10 years, the savings -- is being tracked, but the savings is expected to be over $2 billion.

Mr. Boyer: Now, with this experience and these results, what advice would you give to other agencies that are considering outsourcing one of their functions of their organizations?

Mr. Chew: Take care of your people. One of the most important things you need to do is exercise all avenues you have to provide a soft landing for the employees. Now, that's difficult to do because, generally speaking, the savings that you're going to get are based not just on the technology and the facilities -- which, in our case, was getting very old -- but also in a reduced number of people because you're going to be productive. We worked very hard with Lockheed Martin to try to guarantee as many jobs for our people as we could. We put in early retirement provisions, we put in what we call priority selection processes to make sure that anyone who was being displaced by this initiative would be the first to be considered for a job that might open in the FAA -- any part of the FAA, not just the Air Traffic Organization -- and will continue to provide some priority to those, if they were to be displaced, when Lockheed Martin continues to become more efficient that any open positions we have in the FAA and the Air Traffic Organizations for which they're qualified, that they would get priority in being reviewed for that -- considered for that position.

All of those things are important because if you don't, I think there'll be a lot of people -- a lot of owners and potentially even some customers who would say, you're not -- you know, this is not good and -- for anyone and you ought to -- they'll try to stop it, which, of course, there's always going to be those who try to stop it. But you know, you really can't stop progress. Even if this one didn't happen, sometime in the future when the world passes you by that far, there's going to be a lot of demand that we spend taxpayers' dollars more efficiently. So I don't see A76 as an end point; it's kind of a continuous process of improvement where you can use an A76-like initiative to help improve your own efficiency, even if it's not an outside bidder who wins.

The circular that A76 really describes -- I mean, we call it A76, it's really competitive sourcing -- has been changed over the years to try to make sure that we take care of our employees and to make sure that there are enough controls around it so that we don't arbitrarily outsource things that we really shouldn't or wouldn't be good as outsourcing alternatives. So my advice would be take care of your people, one, and two, follow the circular closely because it'll help protect you from making mistakes in the process.

Mr. Morales: That's great advice. What does the future hold for the Federal Aviation Administration? We will ask Chief Operating Officer Russell Chew to peer into his crystal ball when the conversation about management continues on The Business of Government Hour.

Mr. Morales: Welcome back to The Business of Government Hour. I'm your host, Albert Morales, and this morning's conversation is with Russell Chew, chief operating officer of the Federal Aviation Administration. Also joining us in our conversation is Pete Boyer.

Mr. Chew: Well, that -- you know, the future of any business lies with its capital programs, and that's what capital's all about. It's about funding things that can change your business forward, and that business affects not only the quality of the service you provide, but the costs that are associated with those services. Aligning capital and operations was about making sure that every capital dollar we spend has an important and a measurable effect on what's going to happen to the operation and the quality of service forward. We spent a lot of money on a lot of things. I mentioned we spend over $2 billion a year in capital. Now, if you think about that, in the private sector, how many operations or how many businesses do you known of that have about 6-1/2 or about $7 billion in revenue and spend $2 billion in capital? That's a lot of capital. Well, we have a very large infrastructure, and that infrastructure is deteriorating. Most of the facilities we have are very, very old, and they need to be restored, replaced, or consolidated in some way. Those are all the things you look forward because all of these are long-term investments, and whatever you invest in today, you're kind of stuck with for the next 25 years. So making those investments wisely is important to the future of the organization, more importantly to the future of the quality of the services it provides, and the demands that are going to be placed upon it in the future.

Mr. Boyer: How will the performance-based approach you described -- setting goals, developing metrics to measure your progress towards these goals and others -- affect the decisions about future capital investment?

Mr. Chew: Well, what we've done is we've taken the balanced scorecard and used those pathways I mentioned earlier to rank and rate our capital programs. That way, we take our capital portfolio and balance it across all the requirements for the business strategy going forward. That really wasn't done before; capital projects in the past were rated upon what effect it would have on the customer, and that was it. So if you looked at our capital programs prior to Air Traffic Organization's establishment, they didn't really have anything to do with reducing our unit cost at all. And of course, that impacts your ability to continue to provide services into the future -- unless you assume there's an endless stream of capital at an ever-increasing rate, which, of course, is not a good assumption in these days with the federal deficits that are out there.

Mr. Morales: Interesting.

Mr. Chew: Well, coming from an airline business, change is every year.

Mr. Boyer: That's certainly true.

Mr. Chew: There are challenges every day, every month, every year, and I have been lucky to be part of a very dynamic business where the business models are challenged -- the basic business model is challenged every few years. That's what's really transformed my company that I came from, American Airlines, in 1983 from, even then, on the brink of bankruptcy to the hub-and-spoke models, which is now changing. You saw computer reservation systems use frequent flyer miles -- things like that -- as ways of changing their model of customer loyalty and market share and things like that. Well, that's all changed.

Now, contrast that to the government where, really, things are meant not to change. In fact, I think most processes are designed to make sure change doesn't happen to quickly, and for good reason in many cases. That kind of experience, when you bring it to a government agency, can be very beneficial because you're going to try to invoke a culture of change, continuous improvement into a culture of status quo. So I found my experience to be very applicable to what we're trying to accomplish with the new Air Traffic Organization.

Mr. Boyer: Russ, you've been now with the government for just a few years. What advice would you give a person who's thinking about starting a career in public service?

Mr. Chew: That's a good question. I'd say buckle your seat belt.

Mr. Boyer: Buckle your seat belt, that's great.

Mr. Chew: You're in for a rough and a challenging ride. In some ways, it's very frustrating, but in other ways, it's very, very rewarding. One of the things that always impressed me, whenever I go around and talk to all the people in the organization, is how committed they are to the mission -- and it's my commitment as well to public service -- that we're here for a greater purpose than ourselves, and that's what I would leave anyone with as far as what it's like to be in public service. It's very rewarding because literally, the country's future is at stake, and you're going to have an impact.

Mr. Morales: That's fantastic. We've reached the end of our time, and that'll have to be our last question. First, I want to thank you for fitting us into your busy schedule today. Second, Peter and I would also like to thank you for your service to the public as your current role and also to thank you for your service in the airline industry.

Mr. Chew: Well, thank you very much for the opportunity to talk about this. Of course, I have a lot of passion around it. And actually, if you're interested in some of the inner workings of what we're doing in the Air Traffic Organization, you can go to our website, which is at ato.faa.gov, and we allow public access to that currently, and you can learn a lot about what we're trying to accomplish.

Mr. Morales: Great. This has been The Business of Government Hour featuring a conversation with Russell Chew, chief operating officer of the Air Traffic Organization of the Federal Aviation Administration. Be sure to visit us on the web at www.businessofgovernment.org. There you can learn more about our programs and get a transcript of today's fascinating conversation. Once again, that's www.businessofgovernment.org.

Thursday, November 4, 2004

Arlington, Virginia

Mr. Lawrence: Good morning and welcome to The Business of Government Hour. I'm Paul Lawrence, partner in charge of The IBM Center for The Business of Government. We created The Center in 1998 to encourage discussion and research into new approaches to improving government effectiveness. You can learn more by visiting us on the Web at businessofgovernment.org.

The Business of Government Radio Show Hour features a conversation about management with a government executive who is changing the way government does business. Our special guest this morning is Marion Blakey, Administrator of the Federal Aviation Administration.

Good morning, Mary.

Ms. Blakey: Good morning. Nice to be with you, Paul.

Mr. Lawrence: Thank you. And joining us in our conversation, also from IBM, is Dave Abel.

Good morning, Dave.

Mr. Abel: Good morning, Paul.

Mr. Lawrence: Well, Marion, let's start by filling our listeners in on the FAA. Could you talk to us about its mission?

Ms. Blakey: Well, the FAA's mission is to ensure that the traveling public, when they're flying, can be assured it's safe and efficient. We run the largest, most complex aviation system in the world. Of course, Air Traffic Control is a big part of that. But we also do a great deal in terms of setting the regulatory standards for what aircraft operators must meet; new aircraft coming into the system, and we also work, of course, to make sure those operations day-in and day-out are inspected and overseen in a way that, again, ensures safety.

Mr. Lawrence: How do you describe the size of the FAA; the network, the people, the budget. How would you describe it?

Ms. Blakey: Well, it's an agency of about 48,000 people scattered all over the country and around the world, really, because, as you can imagine, aviation is a global business, and that's the business we're in. The budget right now is around $14 billion, so again, one that both ensures the ongoing operation of the system and makes investment in the modernizing of the system and the future generation of the system.

Mr. Lawrence: 48,000 people. Can you give us a little bit about the range, the skills these people have? I immediately think of sort of heavy technical engineers, and the aircraft and the like, but I suspect it's much broader.

Ms. Blakey: It is broader. You know, we have a wide variety of professions involved. Everything from highly technical people who are pilots and engineers; people who can go on board an aircraft and inspect for all the right things; people who know how to control traffic and who are able, in fact, to look at the most efficient ways to design our air space. And then we have people who are policy folks, who are out there looking at issues of congestion management; what should we do in the future in terms of designing the revenue streams for a system like the one we have. Obviously, people who are in international fields, working with our counterparts in other countries around the world so that we have a seamless global system that works. A lot of different things. If you're an economist, if you're in policy, lawyers, all those are part of the FAA's workforce.

Mr. Abel: Marion, when you were describing the mission of the FAA, there's a vast number of stakeholders, and they fit into a number of different groups. What's the relationship with a couple of these groups? Let's start first with the airlines. What's the nature of the relationship between the FAA and the airlines?

Ms. Blakey: We look at the airlines as our customers. I think it's fair to say that because they provide the service to the vast majority of the American public that flies, we want to make sure that the service we're providing, both in terms of air traffic control and the overall approach we're taking in terms of operations in the system, meets their needs. At the same time, of course, we also regulate their work. We oversee safe operations, and so we place requirements on our customers as well. So it's a combination of things, but I think it's important to stress that it has to be a strong partnership, because after all, they're out there every day on the front lines and we're trying to ensure that they do the best possible job for the flying public.

Mr. Abel: How about some other organizations within the federal government, say the Department of Defense. I know there's a strong relationship between FAA and DoD. What's the nature of that relationship as well?

Ms. Blakey: Glad you mentioned it, because, you know, when you really look at the domestic air space, a lot of it is also devoted to military operations. Needs to be -- particularly in these days after 9/11, when the safety and security and surveillance missions are all caught up together. So we work very closely, particularly with the Air Force, as you can appreciate. We have military controllers out there who control some of the airspace as well as our own federal employees. And we try very hard to make sure that all of the regulations we do and requirements also meet the needs of our military. And in some cases like commercial space, we also work on commercial space launches, whether they take place from a federal Air Force facility or a private sector facility now.

Mr. Abel: I would imagine there needs to be a relationship with the Department of Homeland Security as well?

Ms. Blakey: A very close one, as you can appreciate. A large part of the work force that initially went over to the Department of Homeland Security came from the Department of Transportation. That's our parent agency. And, in fact, a number of them were involved with security on the aviation front at the FAA. So we've worked very closely, because they're the ones who have to assess what the threats are; they obviously do all of the surveillance in the airports of passengers as people get on the planes, but we're the ones who control the airspace. So we work very hard to make sure that when operational changes need to occur -- when there are, for example, areas where flights are restricted -- as you can appreciate, we've had a number of those with big events that go on, certainly during the Presidential election, we had to be certain when there were areas where we really didn't want to have flights at a low level over those areas, we work very closely with Homeland Security to figure out how to do that well.

Mr. Abel: Let's talk a little bit about your role. Can you tell us a little bit about the job and the responsibilities as Administrator?

Ms. Blakey: Well, I would like to say that this job involves sort of both being a pitcher and a catcher. I think the pitcher part, of course, is that you do try to look at the needs of the aviation system over the long haul. And a part of what I've spent a lot of time on is developing a strong business plan for the agency that looks strategically at where the system is going to go. I'm very proud to say that we are in fact developing a plan now that will be going to Congress in December for the next generation system of our aviation system here in this country. So there's a lot of that that's involved. But, certainly, day-to-day manager, and being, as I say, a catcher of the issues that you never expect and come your way; all of that's a part of it. I think most important, fundamentally, it is strong management skills that are required for the job.

Mr. Lawrence: Let's take a little look at your experiences before becoming Administrator of the FAA. Can you tell us about some of the previous positions that you held before this role?

Ms. Blakey: Well, I can. Certainly recently, they were all involved with transportation in various stripes. But, I'll tell you, I'm also very proud of having been a civil servant for many years. I started as a GS-3 clerk. Wasn't even a clerk-typist, because I couldn't type. So you can imagine I was pretty far down the totem pole. But liked government for many reasons including the broad scope of issues, the feeling that you really do have an impact on the lives of people all over this country. So I worked in a number of departments and agencies and had some great opportunities. Worked in the White House, Department of Commerce, Department of Education many years ago. But became fascinated by Transportation, and had the opportunity to head the agency that regulates the automobile industry.

I had a firm in the private sector that was all focused on transportation issues, a communications and public affairs firm that I'm proud to say flourishes to this day: Blakey and Agnew. It was Blakey and Associates then. But worked on a number of public policy issues with a number of corporations, all focused on transportation. And then came back into government as the Chairman of the National Transportation Safety Board that investigates accidents. It gives you a very fine appreciation, of course, as you can imagine, for the safety issues of our system. And I was very surprised but delighted to be tapped by President Bush to be head of the FAA. So I guess that's the quick version.

Mr. Abel: You mentioned that one of the responsibilities and one of the areas that you need to manage now is reacting to things that happen on a daily basis. How have those roles prepared you for the responsibility in FAA of management, of reacting to events on a daily basis?

Ms. Blakey: You know, you have to again try to look at the broad picture, and every day, frankly, go in and say, how am I going to move the agenda that I believe is important on the two, three, four things that you really set in front of yourself as goals and objectives in that job? It's very easy to get caught up in all of the pressures of the issues, concerns, problems that everyone brings to you. And so I do think you really have to start out, as I say, with trying to see if during that day and that week -- I can't say I accomplish it every day -- but at least during that week, you feel like you have actually moved toward the goals that you're setting and at the same time, trying to be responsive and nimble. One of the things that I certainly found in my years in the private sector is you have an appreciation for how important it is to be able to react quickly, to size something up, to make decisions.

Government doesn't always engender the kind of culture that prompts good, strong and efficient decision-making. And so you try, I think, in the kind of role that I play as Administrator, to try to make those decisions on a basis that then people below you can be responsive and react in a way that's timely.

Mr. Lawrence: Let's continue along that path. You were just contrasting the public sector and the private sector, and having been in both those sectors. How about some other comparisons in terms of management approaches from all your experiences.

Ms. Blakey: In terms of management in the private sector, of course, you do have the feeling of being much more nimble, much more able to react to forces quickly, and frankly, decisions are not ones that you have to look at a variety of overseers before you can make them in a way that holds. That is all very refreshing. I will also say that many of us in the private sector look at ourselves fundamentally as salesmen, as people who are advocates, as people who are promoting an agenda in a very direct way. It doesn't hold true for all jobs, but certainly ones that I have had. And I have prized that.

I have to tell you that I've enjoyed the opportunities to really set a marker out there and go for it in a way that -- sometimes within government, it's much more of a process. So those are the things that I would say from a private sector standpoint you can appreciate and try to employ as you move in to the public sector and to public policy. But of course, public policy, as I say, the opportunity to work with a variety of organizations, whether it's the Congress, OMB, the Administration, more broadly, other agencies, is a genuine challenge that also is very reinforcing, because again, the impact and scope of what you can accomplish that way is enormous. And that's something that I think many of us who have enjoyed our tenure during our life in government, it is all about that kind of scope and impact.

Mr. Lawrence: That's an interesting point, especially about the contrast.

Air travel is up significantly in the last couple of years, returning to the point where many airports are close to their pre-9/11 volumes. What does this mean for FAA operations?

We'll ask Marion Blakey, the FAA's Administrator when The Business of Government Hour returns.

(Intermission)

Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence, and this morning's conversation is with Marion Blakey, Administrator of the Federal Aviation Administration.

Joining us in our conversation is Dave Abel.

Mr. Abel: Marion, in the last segment, we talked a little bit about the size of FAA. I'd like to ask a little bit about the size of the FAA's mission. About how many people fly in commercial and private air carriers each year?

Ms. Blakey: Well, if you look at it basically in the area of commercial, because private is sometimes hard to know because a lot of those folks are out there flying VFR, and we don't tally them up each time they leave a small air field. But if we're talking about commercial passengers it is somewhat under 700 million. 689 million was the last figure that I had for the last year we were counting, which was, you know, pretty accurate.

Mr. Abel: Over the past two years since September 11th, we've started to see a significant increase again in the volume of people who are flying commercial aviation. What type of impact does that increase of volume or demand have on the FAA?

Ms. Blakey: Well, certainly, we have to stay up with demand, and since we are an operational agency, the more folks up there flying, typically, the more services we have to provide, the more people it requires to do it, et cetera. One of the interesting things that's a phenomena now in aviation is we have seen very different patterns of traffic since 9/11: much more point-to-point flying, much more use of regional jets. And so what that means from our standpoint is we have a high number of operations that we have to provide the air traffic control for, the services on the ground for, and yet they are not carrying as many passengers as they might have with the widebody's bigger aircraft that you saw more of before 9/11.

So there's a shift in the fleet. And as we're looking at some of the things that are coming at us, we're going to be seeing even more of that with what are called Microjets, the very small aircraft that are coming online in the next few years. And of course, then there's UAVs. So there's a lot out there coming at us.

Mr. Abel: So what are some of the things that -- in your strategy, what are some of the things that you're looking to be able to do over the course of the next couple of years to address this increase in demand of operations, in addition to the increase in passengers?

Ms. Blakey: It is to have the FAA be a very flexible agency in the sense of where we assign our work force, how we allocate our resources, because obviously, as there's a dynamic in the airline business and in aviation that's changing, we really have to stay up with it. As I say, we see ourselves as providing an important customer service, if you will, and so that means we have to match the demand. At the same time, we've also got to invest in the system, and a fair amount of time that I spend, of course, is looking at the way that we are investing in technology; are we getting a good return on that investment; are we modernizing our system. So that in fact, it's going to anticipate the requirements in the future, and frankly, use our air space and our airports and ground infrastructure ever more efficiently, because as traffic continues to increase, which it will, and as aviation is an enormous driver on our economy nationally and it will be internationally, we had better provide the infrastructure and the service that will match it, and that means we are going to have to invest smartly.

Mr. Abel: So if you think about it from a very simple perspective, in order to be able to manage the demand for air transportation, we have to look at flight delays and capacity. What are some of the things that the FAA is doing to be able to increase capacity at airports. Is it as simple as building more runways?

Ms. Blakey: Well, runways are a lot of it. I'll tell you, there's no substitute for pavement. And in fact, I am very pleased with the way our country is really stepping up and recognizing that, because it takes a lot of on the part of city fathers and communities to make the political headway and then the investment that's required to put in new runways. But we're seeing a lot of that. Over the course of the last five years, we've had eight major runways go in, and that's a big thing. You know, places like Houston, Orlando, Miami. We've got them coming in, you know, in places like St. Louis. It's a great thing.

And of course, Chicago O'Hare, one of the real challenges in our system, because so many of our flights go through Chicago -- they're planning a major modernization of O'Hare as well. So there's a lot of pavement that is involved in ensuring that we're going to have the infrastructure there to support the passengers that are coming through. At the same time, technology is a great part of it. We also need to really have a system that has new technologies there so that we can use the air space more efficiently. And we've worked pretty hard on that as well.

Mr. Abel: What are some examples of some of the potential new technologies that may help to be able to more efficiently manage the air space?

Ms. Blakey: One of the big things, basic. We have a change out going on on what we call the host, if you will, the central nervous system of our air traffic control system. This is a major thing. And as you can appreciate, over many years, that system was developed, the software was written. The software right now is still written in a language called Jovial. There aren't many people out there who write Jovial anymore. So we are changing all of that, and that is a big multi-billion dollar investment.

Another thing that we're doing is in the terminal air space. I'm sure some of our listeners have seen those round scopes; you know, the old air traffic control radar. You don't see that now. What you're seeing more and more is new, very impressive screens that look a lot like the big computer screens at home, full color; where we are not only able to fuse radar coming in from as many as 16 different sources, but we also are able to infuse weather information for the controllers. Other kinds of very critical information so that they're able to sequence flights and with greater and greater precision, control them.

Another thing that's going on which our listeners will begin to have the benefit of in January of this coming year is that we're reducing the vertical separation between flights in the air space. Now, I'm sure that might cause some concern for some folks. You know, lots of space is good, but the more efficiently we use the air space, obviously, the more we're going to be able to handle increased traffic without delays, with the kind of reliability people want. And the air space, the upper air space is now going to be used in thousand mile vertical separation rather than two thousand mile. It's done around the world. The United States is moving to that. And again, that's going to offer some real efficiencies.

Mr. Abel: You describe for us the increase in demand and the increased requirements on the FAA to be able to manage that demand. And the listeners may assume that that means that there's a lot more money to be able to manage the organization, but we certainly know that not to be the case. You've focused a lot recently on the efficiency and effectiveness of the Air Traffic Organization, or ATO. What is the ATO?

Ms. Blakey: The ATO is a new performance-based organization within the FDA that brings together several of our major, what were formerly lines of business, in an integrated streamlined way. The concept, of course, is to develop a organization that has layers, that is very service-oriented, and that operates to specific performance metrics. We have targets that we are setting for our organization that go to issues that reduce delay, on-time performance, using the infrastructure to the best possible capability there, and, of course, indications of safety and the kind of performance that we'll always require from that standpoint.

But we do believe that having those kinds of targets, and frankly, cost efficient measures. We are looking at cost accounting, being able to understand, really, for the first time, what it costs to undertake air traffic control of a given airplane. How much does it cost to control over an hour in upper air space the flight of an airplane? Because, obviously, as you're thinking about service and how you provide it and what things cost, you really do need to be able to get it down to unit cost. That's what the private sector does. And we can do it in government as well. It makes us much more accountable and transparent as to how we're using our resources. All of that is part of the air traffic organization.

Mr. Abel: What has been the impact of the implementation of the ATO so far. It's a relatively new organization. How's it going so far?

Ms. Blakey: Well, it's going well. We have been working very hard, for example, to streamline our operation at the top tier of management and in headquarters, dropping the number of layers from around 11 down to 5 or 6. We're doing a number of things to align the question of how you invest in new capital improvements in the system, with also the people who have to operate the system. It used to be that the FAA made research, acquisition investments in one part of the FAA and the folks who are operating the system were off in another part. When these new improvements, technologies, were then handed over to the operational folks, sometimes we found that they didn't align too well. Sometimes we found that the issues of how much it costs to maintain over time, how much it costs to really operate it, we did not have a good integration between those two sides of sound decision-making. So the Air Traffic Organization has now put those decisions again in the hands of people who have to both operate the system and have to think long-term about the return on investment. And by integrating that, I think we're going to get a much more efficient system.

Mr Lawrence: The FAA has several initiatives underway to better regulate and enforce safety standards, to include improving customer satisfaction. Could you tell us about these?

Ms. Blakey: Yeah, we have found all along that we needed to be more consistent in the way we provided interpretations of our regulations, the way we provided guidance on how those who are out there both developing aircraft, modifying aircraft, doing the kind of maintenance that's involved, what those standards and certification requirements were. And there has been the impression; certainly, that I think has been real in some cases that different parts of the FAA in different parts of the country operated differently.

The guidance was not always consistent, wasn't always as reliable as it needed to be. So what we've done is, we've provided to all of our organizations out there a required code that says these are the kinds of things that to be responsive to our customers, you need to do. And if someone comes in and believes that the guidance that they've been given, the decision they were given on a given issue problem, aircraft, they want to appeal it, it also provides the information to our customers on how you take it up to the next level, and guarantees a hearing, so that if there are issues of consistency from one place or another, as it moves up, we are able to address those and understand that they're there. That kind of accountability, I think, we're having good reactions from all those out there that the FAA touches and affects.

I'm also very proud of the fact that the customer satisfaction survey that we do has been consistently going up. We're getting good grades from pilots out there as to how well our Air Traffic Control is working, how we're touching a number of our customers now. And that matters to us.

Mr. Lawrence: Most FAA employees are in a pay for performance situation. What does this mean to the employees and its leaders?

We'll ask Marion Blakey of the FAA for her thoughts when The Business of Government Hour continues.

(Intermission)

Mr. Lawrence: Welcome back to The Business of Government Hour, I'm Paul Lawrence, and this morning's conversation is with Marion Blakey, Administrator of the Federal Aviation Administration.

Joining us in our conversation is Dave Abel.

Mr. Abel: Marion, in our first segment, you talked about the need for you to balance between strategic planning and operations. We talked a lot in the last segment about the operations of the FAA and the increase in demand. Let's flip back and talk a little bit about strategic planning. How in the organization do you do strategic planning?

Ms. Blakey: Well, you know, it's pretty challenging in an organization that is really required to keep up with transactions, millions of them a day. In other words, unlike a lot of agencies of government, the FAA really operates a system, and both achievements and occasional mistakes are very public, so it's hard to pull back and then to say, nope, we're going to take a longer view, and we're going to set goals and then attach not only metrics to those goals so we can tell whether we are meeting them or not, but we're going to tie our budget to those goals and see what it's costing us, and see whether we can afford to do this and continue to keep up on it on a week-in week-out, month-in month-out basis.

The way we tackled it was that we decided that we would construct a flight plan for the FAA, a rolling five-year plan that was going to, as I say, be tied to performance measures and tied to our budget. That does, believe me, get the attention of all your executives in a hurry, because that means that everything is going to be run by a strategic plan, a business plan. As many of us know in government, I think there are probably strategic plans all over town that are gathering dust on shelves. You have one, you post it on your web site and that's the end of that.

Ours is one that we developed over the course of about six months. It was a very arduous process of really trying to determine what the kind of goals and initiatives were that would genuinely improve our system, that would genuinely advance safety, and how you would measure that; how you would measure our achievements internationally, because we wanted the FAA to be much more proactive internationally -- frankly, set the standards globally for aviation -- and how we were going to set standards of organizational excellence that really would put us first in government. That's the goal there, and we're not shy about saying so. But we work very hard internally, and then we had the plan in draft put out there for comment by all of our stakeholders, we hold town hall meetings, we encourage comments from our employees, and then we posted the plan on our web site and said we are going to be measured by this.

I hold meetings every month where all of our executive team comes together. We spend a full day together going over all of those metrics. Are we hitting it or we not? Are we making our numbers or are we not? And we are then accountable on a quarterly basis just like a corporation, for whether we're doing it or not. We use a simple system: red, yellow, green. For people who want to click into it, we have a good software-based system called PB Views that allows people to go as deeply as they want to into the specific initiatives and performance measures of the FAA, and see specifically how we're doing on those.

And because we do tie our pay at the FAA, the annual awards and bonuses that frankly are automatic just about everywhere else in government, in ours, we have to make our numbers. Last year, we didn't make all of our numbers, and as a result, we only awarded 85 percent of what is usually the annual increases, the quality step increases, all of that, which we combined for our organizational success increase. We only awarded 85 percent, because that was really what we made on our numbers. This year, for '04, I'm just doing the assessment right now with our executive team. We're going to do better than that. But we're still not hitting every goal, and that's because they're strict goals. But we intend it to be that way.

We have just published our new draft plan, we'll be rolling it out soon, and at this point, I'm pleased to say we've had over a thousand comments and suggestions on it. That's good, because that means both our stakeholders and, very significantly, our employees, 85 percent of the comments came from my employees; they've got ownership in it, and that makes a huge difference.

Mr. Lawrence: Who participated in the initial development of the plan?

Ms. Blakey: You know, it started out with executive-led teams. But then we worked it out through our facilities, and then we asked our customer base to come in and meet. The FAA is not short on having advisory groups and people we can count on to help us with good advice, and frankly, it really was a big group effort. I don't take any personal ownership in this. It's something that needed to be developed organically, and I think that's one reason why it's working.

Mr. Lawrence: Could you provide us with a couple of examples of things that you measure? What would be some example measurements that are in the plan?

Ms. Blakey: Well, I certainly can. One of them, for example, is to reduce the risk of runway incursions, two planes getting too close together on a runway, vehicles getting out there, and I'm proud to tell you that we set specific numbers that we were trying to drive down the numbers of those incidents, because we believe it has very fundamental affect on safety. Reduce the number of Alaska accidents. You might say why Alaska? Well, because, frankly, that was where we saw the greatest incidence of accidents and fatalities. Being a pilot in Alaska used to be a high-risk profession, largely because of terrain and weather. But we knew we could take on some of those issues with new technologies, and we did.

When I look at questions of how we operate the system, we looked at things like on-time performance; how are we doing from the standpoint of actually being within 15 minutes of the time passengers expect to arrive at the gate? We don't control it entirely. That's also a part of weather and the way the airline is scheduled. But we've got specific metrics. Frankly, that was one last year we didn't make. So I could go on, but that gives you some idea, you know. These are not soft goals.

Mr. Lawrence: You mentioned that a number of the employees; in fact, a large percentage of the employees, are rewarded based on being able to meet these metrics. Are they rewarded on meeting all of the metrics, or ones that apply to their specific job?

Ms. Blakey: We do it on two levels, if you will. I am proud of the fact that 75 percent of the FAA's workforce, and this includes our unionized work force to a very significant degree, is on a pay for performance system. We have what we call an organizational success increase, which means that out of the 30 goals that we have for the FAA, we're expected to meet 90 percent of those if in fact people are going to get the full OSI, as we call it. Then there are specific also awards that go for the more-detailed duties that each individual employee has. And those increases also are really tailored to their responsibility, so they vary from one part of the FAA to another.

Mr. Lawrence: As long as we're talking about the employees of the FAA, can you tell us a little bit about some of the human resources challenges you face in the organization today?

Ms. Blakey: Well, you know, I bet like much of government, from what I understand, we're dealing with an aging workforce, and that's not surprising, particularly for the FAA, because of two things. One is that when you think about the folks you want out there inspecting airplanes and providing oversight from the standpoint of certifying aircraft and all of that, needless to say, you draw on very experienced people. A lot of them come out of the industry. They're highly trained, but that means it is an older work force on the whole.

Another phenomenon was that for our air traffic controllers, the PATCO strike meant that large numbers were hired in the early '80s, because President Reagan fired over 10,000 air traffic controllers, and the need to replace those all happened within a few years. Those folks are reaching the maximum retirement age, which is 56, as the system is set up. So we're going to see large numbers mustering out over the next ten years. And that means we're going to be hiring lots of people, and we have to figure out a plan that both figures out how to begin to step that up, and how we can train highly efficiently so that you move people into the system well.

Mr. Lawrence: How long does it take -- when someone decides to become an air traffic controller, how long does it take before they can actually work in the system? Is it a long lead cycle or is it relatively short?

Ms. Blakey: It depends, of course, on the experience base that they bring. We recruit from the military, where they've been controlling live traffic; we recruit from schools around the country where they may have spent four years in an undergraduate degree learning a lot. But we also recruit people straight in. Average is three to five years to be a fully certified controller, particularly at the more complex facilities. Now, fully certified means that you can work all positions in some of our most complex facilities out there.

We think probably, as we need to step up the pace on this, we're going to use simulators, for example, which is something that has been highly successful, as you know, in the training of airline pilots. The FAA hasn't relied on it as much. We believe in simulating all sorts of circumstances that hopefully controllers will never see in their actual air space that they're going to control. We'll be able to bring people through the system more quickly, and that would be a good thing.

Mr. Lawrence: In 2002, the FAA won an award for the most improved government agency. I'd be curious about some other awards you've won as well, and I guess, sort of even, how you continue to improve to win these awards.

Ms. Blakey: Well, you know, we do focus on that a lot. I really do believe that it is important to have people recognize the excellent performance and the real steps that we're taking to be a performance-driven organization. For example, we were very pleased that we were, with the Department of Transportation, top agency of government in terms of the President's Management Agenda. Four out of five of the key scores, we were green on. So we were right up there in the very top tier, and the FAA drove a lot of that because we're a big part of the Department of Transportation.

The Association of Government Accountants, in this last year, gave us award for our performance in financial report. We're very proud of that. We're proud of the fact that we have had clean audits for the last three years, and believe me, we're working very hard to get another one this year. Customer satisfaction index, as I say, this continues to go up, and we're looking at expanding that so that we have the real measure of how people feel we are doing in terms of being responsive to their needs.

So all of these are the kinds of things that, you know, as I look at it, we're working very hard, I'll tell you this, to get off the GAO's high risk list. I'm sure there are folks out there who know government agencies are often targeted there. The FAA's financial performance has been there for a while, and I'm very hopeful that we're going to move off of that as a result.

Mr. Lawrence: That's interesting.

What are the implications for the FAA of things such as commercial space travel? We'll ask Marion Blakey from the FAA for her thoughts on what the future holds for the FAA when The Business of Government Hour continues.

(Intermission)

Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence, and this morning's conversation is with Marion Blakey, Administrator of the Federal Aviation Administration.

Joining us in our conversation is Dave Abel.

Mr. Abel: Over the past ten years, most businesses have gone global, but none more than commercial aviation. What is some of the impact now of the international nature of air transportation on operations of the FAA?

Ms. Blakey: Well, you know, it is a global system, and it is very much in the interest of the American flying public that we encourage open skies, the ability of not only of our carriers to fly routes all over the globe, but also to co-chair with foreign carriers so that in fact, you know, you don't have to have expensive service everywhere, because you could link up with a lot of others. That drives the price of tickets down, but at the same time, we have to be sure that it is not only a seamless system out there, but a very safe system. And parts of the world, as you know, safety challenges in aviation are much greater than they are in the United States. So we're trying to raise the bar on safety in a number of places.

We're also very convinced that American technology, American safety, is something we should be exporting. It's one of the great aspects of the fact that the United States has been a leader in aviation since the Wright Brothers. So in markets like China, for example, we're working very hard on both air traffic control systems and procedures, satellite-based systems. We have a satellite-based system now that we believe uses our GPS system, that will extend all the way from India through, we hope, China. Certainly Japan has already committed to it, and around the globe into the United States. It's going to be a great boon for aviation.

So we're working hard to expand those benefits, and frankly, that also benefits the United States economy in a variety of ways, our companies and our passengers. It's a big part of our goal these days.

Mr. Lawrence: Does the FAA have a single counterpart in Europe, or are there multiple organizations?

Ms. Blakey: I'm glad to say that with the European Union's advent, they have now developed an agency that's brand new called EASA, the European Aviation Safety Agency, that actually is going to be officially opening its doors in Cologne before the end of this year. So that's a good thing, because that brings all those countries together for us to work with on a joint basis. We are also encouraging safety on a regional basis in a number of parts of the world. Because, especially less developed countries with fewer resources, if they combine forces and we can provide them technical assistance across national boundaries that will work well in Latin America, in Africa and other parts of the globe. So that's another thing that we're doing. But we work very closely with our European counterparts

Mr. Lawrence: Now a bit earlier, you talked about some of the things that are coming in the future of commercial transportation, and just to pick out a couple of fun ones, you were present as Spaceship 1 completed its second trip into space earlier this year. What was it like to witness that?

Ms. Blakey: Wow, I'll tell you, that was the longest period of sustained goose bumps I've ever had in my life. No, it was fabulous standing out there in the Mohave in the early morning, freezing cold, watching that flight. When Mike Melville took it up, really into space, really expanded what has happened in terms of a privately developed, privately piloted aircraft that all of a sudden can go, not only into space, but come back, and has the capability to carry passengers. I was there with Richard Branson, who has decided that Virgin Galactic is going to begin carrying passengers into space in the next couple of years. So you can imagine, from the FAA standpoint, I see a lot of challenges coming together. I believe, of course this is very exciting in the future of aviation and aerospace, and we need to enable it. But there are issues of risks to passengers, issues, of course that we have to protect the safety of folks on the ground. So it's a challenge.

Mr. Lawrence: Do you have an organization today that's focused on space travel within FAA?

Ms. Blakey: Absolutely, our commercial space organization within our organization actually has ensured the safe launch of 167 commercial launches already. Now that we're getting into the reusable vehicle area, of course, that's got new challenges. But we're very proud of that track record.

Mr. Abel: You also mentioned a bit earlier a new type of travel called Microjets. What is a Microjet?

Ms. Blakey: It's a small, high performance aircraft. There aren't any out there on the market, but there are two companies, Eclipse and Adam, and there are several others coming along, which are using composite materials and very high performance small jet engines, to provide transportation for four to six people typically, that can be right up there with commercial jets. Glass cockpits, all of the kind of safety and navigation features that you really see, you know, in a Boeing 777. And what that's going to do is it's going to allow air taxis to flourish. Service to a lot of smaller airports, because a small number of people on a cost efficient basis can go on a non-scheduled basis point to point. Over time, it is really going to infuse transportation in this country with a lot more flexibility and cost efficiency than you have right now, when you're restricted just to the large commercial jets.

Mr. Abel: So if we put a couple of these together: we have microjets, space travel, increased demand for commercial aviation today, even just based on these regional jets versus larger jets we were saying before, how long can the FAA continue to operate as it is today, or are there plans for a new way of being able to business in the future.

Ms. Blakey: Well, Dave, I'm glad you asked that, because it's one of the things I've really spent a lot of time thinking about with some smart people. The system is not infinitely scaleable. In fact, we're getting to the limits of it. When you think about the fact that we use active ground to air control, voice communications, you can appreciate, as the traffic gets more and more dense -- UAVs coming into the system, a lot of things -- we're really going to have to change this.

The next generation system, we are bringing out a plan, in fact, again, before the end of this year, that I think is going to address what a next generation aviation system, both in terms of air traffic control, much more emphasis on satellite-based, satellite to aircraft, aircraft to aircraft separation; much more on automation; much more in terms of controlling traffic as managing exceptions with automation; looking to ensure the safety routinely, and in point of fact, we are also going to have to see a much better use of our infrastructure in terms of airport infrastructure, where do we need them for the years to come?

You know, it's not all going to be where it is right now. And so, the "build it and they will come," we've got to build it and anticipate where it's going to be. And so we're working very hard on those kinds of things, as well as what will a really stepped-up safety system be all about. The Europeans have already developed such a plan. So we're going to be moving out on this because, again, we believe that the leadership of the United States overall, both for our domestic health as well as internationally, depends on it.

Mr. Abel: What is the timing of a plan like that? What type of horizon would you look at as far as the time that it would cover?

Ms. Blakey: It covers out to 2025. That sounds like a long way away, but remember that the aircraft that are rolling off the assembly line right now will be flying in 2025. It typically can take as long as seven to twelve years to build a runway, so this kind of planning, it's not so far out there. And what I will also tell you is that this is an inter-agency process, which we rarely see in government. We are doing this with the Department of Defense, Homeland Security, Commerce, because, of course, they have the Weather Service, and weather's a big factor in aviation, along with the White House, in terms of our science and policy shop over there, so we've got really a lot of folks who are working with the Department of Transportation and the FAA on this. And NASA is a big part, of course, of that partnership as well.

Mr. Lawrence: Is there participation of commercial entities as well, airlines or cargo carriers, or other users of transportation as well?

Ms. Blakey: Absolutely. Our stakeholders really have to be involved and say, yes, we see the system serving us in the future, and that's going to be a big part of it, and frankly, such a plan will be governing our federal investments. One of the things that I think is exciting in this is, as we all know, the tremendous advances that have occurred in the Department of Defense in terms of the use of satellite-based navigation, air control systems that can translate into the civil side and benefit all of us. So this kind of joint effort together for surveillance, navigation, communication -- it's going to yield real dividends, and it will begin to govern our investments, not only looking at 2025, but in the near years, because you've got to have a smooth transition.

Mr. Lawrence: Marion, in our first segment you talked about your career beginning as a GS-3 and now working up to the Administrator, and cutting across both the public and private sector. What advice would you give to someone interested in a career in public service?

Ms. Blakey: Well, I would certainly say that I've found it tremendously personally rewarding. The mission orientation of the opportunities that you often have in government service; the ability to get up in the morning and know that you genuinely make a difference in people's lives. That's a tremendous engine, I think psychically for all of us in terms of -- do you like to come to work, do you care about what you do? Do you feel like you're making a difference? I can tell you that my career in government has really given me the ability to answer that affirmatively every time, but never more so than at the FAA, because we obviously have a mission that touches everyone's lives.

Anyone thinking about careers broadly, but certainly in terms of public service, I think it's also important to be open to opportunity. I would never have projected that my career would have taken the turns it has. I could not have anticipated some of the opportunities that one career in one agency would then lead to another. And it's been very exciting to realize that sometimes, the way that mentors, the way people see you that are above you in government, may not be the way you see yourself. But in fact, that opens opportunities; that opens challenges that you rise to.

And I have found government to be a wonderfully supportive environment from that standpoint, of being able to move into arenas, that as I say, I wouldn't have anticipated, but it's been tremendously rewarding. I would also say this: that I would encourage anyone who is interested in public service to look at the FAA. I'd like to see them go to www.faa.gov, because there, they'll be able to see what we're doing. Look at our flight plan. See how we're doing on our performance. But they can also look at the careers we have at the FAA. I think they're terrific.

Mr. Lawrence: Thank you very much for joining us this morning, Marion. I'm afraid we're out of time. That will have to be our last question.

Do you want to mention the web site once again?

Ms. Blakey: The web site is www.faa.gov. And I'd love to have people go there. You can even get good information about how the system is doing on a given date. You can even access it from your wireless, from a PDA, to see how your airports out there are doing, if you want to know if there are delays in the system. It's a great site.

Mr. Lawrence: This has been The Business of Government Hour, featuring a conversation with Marion Blakey, Administrator of the Federal Aviation Administration.

Be sure and visit us on the web at businessofgovernment.org. There, you can learn more about our programs and get a transcript of today's fascinating conversation. Once again, that's businessofgovernment.org.

This is Paul Lawrence. Thank you for listening.

Arlington, Virginia

Friday, March 7, 2003

Mr. Lawrence: Good morning, and welcome to The Business of Government Hour. I'm Paul Lawrence, the co-chairman of The IBM Endowment for the Business of Government. We created The Endowment in 1998 to encourage discussion and research into new approaches to improving government effectiveness. Find out more about The Endowment by visiting us on the web at www.businessofgovernment.org.

The Business of Government Hour features a conversation about management with a government executive who is changing the way government does business. Our conversation this morning is with Jenna Dorn. Jenna is the administrator of the Federal Transit Administration in the U.S. Department of Transportation. Good morning, Jenna.

Ms. Dorn: Good morning.

Mr. Lawrence: And joining us in our conversation is Dave Abel. Good morning, Dave.

Mr. Able: Good morning.

Mr. Lawrence: Jenna, let's have some context. Could you tell us about the FTA and its mission?

Ms. Dorn: Certainly, Paul. Since the earliest day of our government, the federal sector has supported transportation, because it has recognized that it is indeed the engine that drives economic growth and it is so important to connecting communities. From the Boston Post Road that connected the east coast to the Transcontinental Railroad that helped develop the West, there was a real recognition that there is an important and an appropriate role for the federal government to support.

So in 1968, Congress created what was then called the Urban Mass Transportation Administration or UMTA. Many years later it was changed to the Federal Transit Administration, recognizing that public transportation support is both urban and rural so, thus, the name Federal. What we do at the FTA is to support public transportation in communities across America. By that public transportation I mean buses, subways, light rails, vans, trolleys, and even ferries in appropriate states.

Each year the FTA gives about $7 billion of grants to every state and to about 600 transit agencies. Most of this money goes to support the purchase of capital equipment like buses or maintenance facilities, but also we create brand-new rail systems for smaller communities as well. We also provide technical assistance because as you can imagine, when you're building hundreds of millions of dollars, and in some cases, billion-dollar projects, the environmental planning, the community outreach, the construction oversight, is a very complicated matter. So technical assistance is a big part of our role as well.

Mr. Lawrence: Give us a sense of the budget, and also the number of people, and I was curious as you described the different functions, the skill sets of the employees.

Ms. Dorn: It's a very diverse group, and that's what makes it such a fun and challenging opportunity for me as its leader. We have about 500 full-time employees. In addition to that, we have about 200 private-sector experts who help us with one of the best, I'm proud to say, oversight programs in government.

We have a great team, and it's diverse, as I mentioned. Many planners and engineers who help local communities find transit solutions and ensure that the investments are really a value added. And like every government agency, we have policy makers, lawyers, marketers, budget experts as well.

Mr. Abel: So what are your duties and responsibilities as the administrator?

Ms. Dorn: Fundamentally, I need to make sure that the Federal Transit Administration's policies and practices do what the President asks, and that is that we be results-oriented, customer focused, citizen centered. Part of that job is listening to stakeholders and to help ensure that in fact the way that we provide the money and the oversight that we offer really does provide a value added to taxpayers.

Public transportation provides terribly important benefits to communities, everything from making sure that we are mobile across to the community, to relieving congestion, to providing environmental benefits and saving energy costs. So that piece is a responsibility that all of us on the FTA team take seriously. We then need to advise the secretary about the policies and the projects, and that's my job to make sure that every dollar we spend makes a difference.

Mr. Abel: Can you tell us a little bit about your previous experiences before you were the administrator, particularly your roles in government previous to this responsibility?

Ms. Dorn: I've had a rather eclectic sort of career, Dave, in terms of I've had the privilege of serving in the Executive Branch in two different cabinet agencies in three different administrations. And I've also worked in the Legislative Branch in Congress, and have been an executive in the not-for-profit world. So it really has helped me a lot do each of my jobs by having that diversity of experience.

Prior to serving in my current job, I had the privilege of serving under George W. Bush's father, 41, as they affectionately call him, as the assistant secretary for labor. Prior to that, I was the associate deputy secretary at the Department of Transportation under President Reagan. I had the opportunity to help a private-sector entity get its start at the Department of Transportation as well, where I was head of what was called the Commercial Space Transportation Agency. Under President Reagan he was eager to privatize the opportunity to get to space, so they moved that from the NASA environment to the Department of Transportation, and that was a really fun and enjoyable job.

I had the privilege to get an overview of the microcosm of policy by serving in the U.S. Senate as a staff member for Senator Mark Hatfield, both when he was chairman of the Appropriations Committee, and on his personal staff as well. In between those times, I was an executive at one of the nation's largest not-for-profits, the American Red Cross. So I feel like I've been lucky to have some really interesting and diverse experiences.

Mr. Abel: How does this diversity help you in performing your job today? It is a very eclectic background. It's very broad across the roles that you've played in government. How does that play in with what you do as the administrator on a daily basis?

Ms. Dorn: One of my professors in college used to say, "Where one stands depends upon where one sits." What I have found in my job is that one of the most important things to be able to understand and relate is the perspective of another individual, whether it would be another Executive Branch agency, member of Congress, or a stakeholder. That helps you understand how to problem solve. So a big part of any executive's responsibilities, I think, is mediating, moderating, consensus building, focusing on the big picture.

I have learned in each and all of my jobs the very important value of outreach to stakeholders is listening. And I think one of most important skills that I learned that was valuable in any of these jobs, in government or not-for-profit, was the skill of writing. My journalism background helped me develop that skill, and I didn't realize quite then how useful that would be, because if you can't write it down or talk about it, then it's very hard to be able to solve the problem and deal with the issue.

Mr. Lawrence: Let me ask a little bit more about your background. In terms of working in government and also the nonprofits, could you give us a sense of the comparison about the management approaches in both of those sectors?

Ms. Dorn: I think particularly under this secretary and under this President, there is more of a focus in government towards outcomes and results, and that is a very I think important sort of initiative through the President's Management Agenda that this President with the support of Secretary Mineta has really moved forward.

It isn't always as accepted in a not-for-profit, or, in fact, even in the Legislative Branch where process tends to be product. So I really appreciate that this administration is focused more on results and outcomes. In public transportation, what that means is more riders, getting more people out of their cars so we can have fewer congested roads and riding public transportation. So it's not about, for example, how many buses you have, how many miles of light rail, but how many people are on the buses or on the light rails. So that's a real important focus. I think it's not always as accepted in a more not-for-profit environment.

Mr. Lawrence: How about in terms of the Legislative and Executive Branches? You talked a little bit about process is the outcome, but how about some comparisons in terms of the management styles in those two sectors or those two parts of our government?

Ms. Dorn: By the very nature of our charges, the Executive and the Legislative have a different responsibility. There is such an emphasis on management, or should be, management for results, and it's a very different sort of thing than looking at the 30,000-foot level which is what you do on a congressional committee. When you really get down into the issue and figure out what are the pros and cons of doing any particular policy or whatever, you have to have depth and expertise on your staff to be able to weigh those pros and cons, and that isn't always necessary in another environment like a congressional environment. So management is the most important thing, frankly, to getting the policies accomplished in the Executive Branch, and it doesn't have to be in the Legislative Branch.

Mr. Lawrence: You've talked a lot about your experiences in your career about the importance of involving stakeholders. Could you give us a sense of who the stakeholders are for the FTA?

Ms. Dorn: That's one of the most fun things about the job, actually, Paul, because it's such a diverse set. We have mayors, city councilmen and governors, all of whom care about public transportation. We had rider groups, people who don't have the choice; they don't have a car. We have the providers. Every organization from a small not-for-profit like the United Cerebral Palsy that provides opportunities to get to work or other places, to large transit agencies like the New York's transit agency that offers 7 million rides a day. There is a very diverse set of stakeholders.

Sometimes that makes it very complicated, but it always is rewarding because the community comes together and makes that kind of decision about what kind of investments they want to make in public transportation.

Mr. Lawrence: Come back after the break as we continue talking with Jenna Dorn of the Federal Transit Administration. This is The Business of Government Hour.

(Intermission)

Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence. This morning's conversation is with Jenna Dorn. Jenna is the administrator of the Federal Transit Administration in the U.S. Department of Transportation. Joining us in our conversation is Dave Able.

Mr. Abel: Jenna, let's talk a little bit more about FTA. How does FTA fit in with the mission and activities of the Department of Transportation?

Ms. Dorn: Good question. FTA is one of about 10 what we call modal administrations within the Department of Transportation, and, of course, we're focused on the public part of transportation, as a grant-making agency to transit systems.

One of the most important things that is important to note is that public transportation is really a lifeline to jobs, to community, and to friends and family for those who rely on transit. It also supports economic growth and vitality; it reduces congestion, and improves the quality of life. Certainly it conserves energy, and there is no more important time to do that.

None of these benefits, however, can really occur unless we work at the community level and at the nationwide level to make sure that we have a seamless kind of transportation system. So the other modal administrations, whether it's the airports of highways, all of them have to be user friendly and have to be connected to each other so we make a transportation system that works well together.

This year is a terribly important time to be talking about that because the surface modes of transportation will be having their programs reauthorized for the next 6 years, under Congress's direction. So the administration is in the process of finalizing its proposal to move forward, and there will be some really good discussions over the next number of months on that.

Mr. Lawrence: Let's spend a few minutes talking about the programs of the FTA. Could you tell us more about the urbanized area formula program?

Ms. Dorn: That is probably the biggest part of our grant program in the Federal Transit Administration. We give about $4-1/2 billion to cities to buy buses, to make major capital investments. Most of that is distributed by formula, and flexibility is really the watchword for the urbanized area formula program.

The kinds of things that we want to change in the administration's reauthorization bill, we want to make sure that the local community which is the appropriate place for community decisions to be made about transportation has the option about where and how they want to invest in their transportation systems. So that's a very important piece of the urbanized area program.

We also want to start, and the administration has proposed, a passenger-based performance incentive, and that's a very important and growing piece that this President wants to emphasize, what we're all about is outcomes. For public transportation, the real outcome is number of riders, and we think that while ridership has moved upward dramatically over the last 6 years, 28 percent more people ride public transportation across America now than they did 6 years ago, we think we can do even better, and we need to do better, particularly in America's cities.

Mr. Abel: So how about the New Starts Program? What is that, and how does it facilitate cost-effective transit solutions?

Ms. Dorn: The New Starts Program, under this President's '04 budget, is a $1.5 billion investment, and it's what it says: it's new investments or extensions of existing transportation infrastructure. For example, we build light rail systems, heavy rail systems, and the whole component of the New Starts Program is really very performance based, because we have a very intensive way of evaluating literally hundreds of projects that are proposed to the federal government, to the FTA, to be built in communities across America.

We have a very comprehensive kind of plan to figure out are these projects really going to provide benefits for the costs that they will cost, and what other kinds of benefits in terms of the environment will they provide. Then we rate those projects, and we tell Congress that we think this project is highly recommended, recommended, or not recommended, and then the administration and Congress work through that kind of investment.

Typically, for a capital investment sort of new start, the federal government provides about 50 percent of the capital infrastructure. Right now we have probably 30 projects across the country from light rail, to trolleys, to buses, bus rapid-transit projects, heavy rail, from the east coast to the west coast. So it's a very important part of our program, one part of our program that we're very proud of, because we spend so much time and energy making sure that the taxpayer dollar will really be a value at the end of the day.

Mr. Lawrence: Could you tell us a about the state-administered programs? I've pulled out a couple, the Rural Formula Program, the Elderly and Persons with Disabilities Program, the Job Axis and Reverse Commute Program, and the New Freedom Initiative?

Ms. Dorn: We talk about major capital infrastructure in the new starts, and at the other end of the spectrum really are the smaller but equally important services that we provide, primarily for people who don't have choices about whether or not to ride transportation. We're talking about programs that we administer at FTA like for the elderly and disabled, which are formula grants that are distributed through the states, and then the states do a suballocation to about 1,300 local transit providers.

What the role of the government is, is to make sure that in communities across the country that there can be service provisions for the elderly, for the disabled, for the low-income that get to work, etcetera, so that we believe that that's a very important part of our program. What we're trying to do is to rationalize those programs and to make sure that we never have a situation in a community where you have a van that is taking the elderly at one end of the neighborhood and at another end of the neighborhood you might have the United Cerebral Palsy providing a disabled ride, when in fact if there were more combination and more local community planning, you could have a more efficient kind of service provision and you'd have more service to more riders.

So we want to ease the restrictions that have grown up over time, in terms of government kinds of requirements. We want to make it easier to get the service to people who need it. So there are a number of proposals in our reauthorization proposal that would do just that.

Mr. Abel: How does that differ from the Metropolitan and Statewide Planning Programs?

Ms. Dorn: One of the most important things, Dave, about putting together a good public transportation system is planning for it, whether it's planning with a number of providers across the stakeholder groups, or whether it's deciding just what kind of investment should be made that makes sense.

In some growing communities that are already large, for example, a light rail makes sense. In others, it may be a lower-cost technology like bus rapid transit that would allow us to make a more cost-effective investment. Or it may make sense to have one service provider, as I mentioned earlier, to provide services for elderly and the disabled, or you might want to mix it up.

The key to that is local community planning. So in this President's budget we've increased the amount of money for planning so that we can make sure that every dollar we spend really produces something.

Mr. Lawrence: You've described a wide range of programs, and I'm curious, how are you measuring the performance of these programs?

Ms. Dorn: I think we can do a better job, Paul, in terms of measuring the performance, and that's why the proposal that this secretary has supported has a component for performance-based funding that's in addition to the formulas. What we're saying is that those transit agencies that can establish that in fact their systems have increased ridership, then we want to give an extra bonus, because that's our goal. So we're working very closely with a number of agencies, including the National Academy of Public Administration to help us figure out how can we make an effective performance-based sort of system.

We've done that for our grantees, but we've also done that inside the FTA in terms of performance-based systems that we're implementing that we may be able to have a chance to talk about in a moment.

Mr. Lawrence: Are all the outcome measures clear, or is that part of what still needs to be developed in many cases?

Ms. Dorn: In some cases, it is difficult to establish how specifically an outcome relates to a particular investment. Let me give you an example. The value of an investment in a light rail, heavy rail system, or bus rapid transit, the value to the environment or to the creation of economic development around the stations, to be able to quantify that can sometimes be difficult. So many of the benefits are indirectly as a result of the investment.

So the most significant though not the only one, the most significant measure we believe is how many riders are using the facility. So that's pretty clear. We believe there are a number of incentives that we can provide so that the investment that is made is made on the right basis, on an outcome sort of orientation.

Mr. Lawrence: How when you measure the ridership or look at ridership do you compare? I think you pointed out that some people have options outside of public transportation; other people have fewer options, maybe none.

Ms. Dorn: We don't want to only count the number of riders overall, but because we believe that the federal government has a role to play in helping to ensure that those who don't have a choice about riding or not riding, because they don't have a car, that we want to measure the ridership of those groups as well. So we want to measure ridership at a lot of different levels.

You have to take into account the community size, because ridership in New York is quite a different matter than ridership in Wagontire, Oregon, even on a percentage basis. So we're very conscious of that, and we want to carefully plan how we do this best.

Mr. Lawrence: That's a good stopping point. We have to go to a break. Join us in a few minutes as we continue talking about management with Jenna Dorn of the FTA. How does the FTA link budget to performance? We'll ask Jenna for her perspective when The Business of Government Hour returns.

(Intermission)

Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence, and this morning's conversation is with Jenna Dorn. Jenna is the administrator of the Federal Transit Administration in the U.S. Department of Transportation. Joining us in our conversation is Dave Able.

Mr. Abel: Jenna, the 2004 budget was recently announced. Can you give us some general highlights of the budget and how it compares to your budget in previous years?

Ms. Dorn: I'm really pleased by the good news for public transit in the FY 2004 budget, as proposed by the President, especially in light of the many critical and costly challenges facing this country. This budget keeps our commitment to public transit by sustaining the record level of funding that was present in the '03 budget, and I think it's really useful to give a perspective.

Over the last 6 years, the federal investment in public transportation has grown by 25 percent, and that's terribly good news in my view because these investments have provided so many benefits to the community. In terms of other increases within the Federal Transit Administration, I'm pleased that the Rural Transit Program will grow by 20 percent. I think that's really important, because there are about 40 percent of our rural counties who have no public transportation. If you were to take all of the rural communities together and determine how many are choice riders versus those who have no choice, about one-third of the people in rural communities across America are transit dependent. So that 20 percent increase for rural transit is I think a really important and responsible step.

Mr. Abel: In your budget request, you have some very clear priorities. Can you talk about the four main goals of the FTA?

Ms. Dorn: I think the goals really reflect what the taxpayers need, want, and expect. There are just a couple of fundamental principles, first of all, common-sense transit solutions. We want to give states and communities the freedom and the flexibility to solve their own transit challenges in terms of determining where and how those investments should be made. That's always been the federal philosophy, really, in terms of transportation - particularly public transportation - that federal investments are appropriate, but local decisions need to be made because of the wide diversity in geography, in culture, in preference, in economic base, etcetera. So we want to make sure that we can simplify and streamline our programs to get the most transit service for the dollar.

Over the years, a number of different requirements have grown up. They are not always valuable. So we want to streamline the programs. We know that funding categories and restrictions shouldn't get in the way of common-sense transit solutions. Ironically, and Secretary Maneta has often mentioned this to me, one of the worst things that can happen is that a community's decision about what kind of investments to make in public transportation are skewed by the pots of money. In other words, I really would like to do a bus rapid transit sort of investment, but there is only money for a light rail or fixed guide way, so, therefore, I'll modify my merit-based program and try to fit it into the confines of how we've built the funding pot. So that we think doesn't really make sense.

Another important principle is really A-plus performance. That's both within FTA, our responsibility, and also in all of our transit agencies and service providers across the country. We want to provide improvement where it matters the most, and that's in getting more riders to more locations with less overlap in service. So we have some performance-based incentives that we discussed earlier to encourage an emphasis on ridership, and we want to encourage cooperation and coordination with a number of transit-related programs that are occurring in the community. We want to make sure that all of those make sense and they perform well.

The third principle is really promoting independence and economic opportunity, and that's what public transit is all about. As I mentioned before, really transit can be a lifeline for many groups, including people with disabilities, the elderly, and low-income, and our programmatic changes are designed to make it easier to make communities serve those kinds of needs.

We also think it's pretty important that because there are so many needs out there in terms of public transportation and our investments are generally keeping up with those needs, that it's important that those funds be delivered by formula rather than, forgive me for saying it, but many of the programs delivered by earmarking. We think that the more flexibility we can provide to local communities by formula, the better that is.

In some cases, for example, we have only half the urbanized areas who get bus money, yet the whole country needs bus money because half the urbanized areas get earmarks. So we think it is really important to emphasize that piece.

The last piece is keeping our commitment which means staying on target to improve transit infrastructure and maintaining record levels of funding for public transportation, and making sure that we continue the long-held commitment that there is a significant role of the federal government in providing investments for these kinds of services.

Mr. Lawrence: How are you linking budget and performance?

Ms. Dorn: We have ways go in that in terms of our programmatic efforts, and I think we've made a significant first step in introducing people-based performance incentives for part of our formula program. I think that will have long-term, wide-ranging impacts to encourage all of our transit agencies that the number-one focus is increasing ridership. If we want to get all the benefits for public transportation, for decreasing congestion, helping the environment, reducing energy consumption, we have to get people out of their cars and onto public transportation. We recognize very fully that we need a partnership; we're not car-bashing, because we need that partnership with the highways and transit, but we need more ridership on public transportation.

I guess I would just saying linking the budget to performance, also, I'm very proud that the Federal Transit Administration has a very aggressive and value-added oversight program so that when we make a federal investment in transit, we are sure, or as sure as we can be, that that investment will pay off, that we'll be on time, on budget. We have many, many major infrastructure projects that we're building throughout the country from helping New York in terms of recovery after the terrorist attack in their $4.5 billion subway and transit reconstruction program, to helping communities in California and all in between who have light rail or bus rapid transit technology programs. So we keep a very right rein to make sure that these are value-added investments, and I believe in large very large part they are.

Mr. Abel: The President has made very clear through his management agenda the need to make management improvements across the federal government. How are you working to implement management improvements in the FTA in particular?

Ms. Dorn: The secretary and the President have taken this piece very seriously. And as you mentioned, Dave, the President's Management Agenda is very results-oriented, customer-focused, citizen-centered, and we've taken that to heart.

About a year ago, our senior management team at FTA developed a strategic business plan to guide our work. It identified a number of major goals and 16 specific action items. We've been very focused with regular meetings not about process, but about outcomes, and we want to be really focused on that, and I think that the taxpayer will be better for our focus on the outcomes.

As a management team, we've stepped up to the plate by agreeing to be held jointly accountable for four specific measurable accomplishments, and if we don't meet those, including one of them, meaning increasing ridership in areas across the country, if we don't meet them, then our performance bonus depends on that success. So I think that's a very important piece.

We have increased emphasis on cost-effectiveness in our projects. We want to do a better job of assessing the risks, whether we're tunneling in Seattle for a major light rail project, or we're building a bus rapid-transit guide way, we want to understand better going in what kind of risks there are, and then be able to hold ourselves accountable to the bottom line, the budget, the costs, and the benefits as well.

Mr. Abel: We've talked quite a bit this morning about reauthorization. Can you tell us more about the President's reauthorization proposal for FTA?

Ms. Dorn: Sure. First of all, we have an underlying foundation of what's called T-21, which was the initial or the second phase of investment in public transportation. We think that foundation is very solid and we have learned a lot. What we want to do is kind of tweak that and make some fundamental improvements.

The second piece is the predictability of those funds. What we have found is that the more that the state and local governments understand that there will be a long-term commitment at dollar-level X for investments, the more they will investment. In fact, over the past 10 years, state and local investment has grown even more, because there is that certainty, that predictability, that 3 years from now they're going to have this dollar amount. That allows communities to make longer-term investments. And I'm sure as you would know, investments in transit and public transportation and transportation generally, many of them have to be longer-term.

Another price of local flexibility, so that we don't have to follow pots of money with particular requirements, but, in fact, the locals can determine what they need. Lastly, we think it's really important the more we can streamline the programs and remove burdensome requirements from the grantees, the better our dollar will perform locally.

Mr. Lawrence: That's a good stopping point. Rejoin us in a few minutes as we continue talking about management with Jenna Dorn of the FTA. What's the FTA's role in the post-9/11 year? We'll ask Jenna to give us her perspective when The Business of Government Hour continues.

(Intermission)

Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence, and this morning's conversation is with Jenna Dorn. Jenna is the administrator of the Federal Transit Administration in the U.S. Department of Transportation. Joining us in our conversation is Dave Able.

Mr. Abel: Jenna, security is critical to most organizations, in fact, all organizations in the government right now, but probably none more than the modals within the Department of Transportation. Can you tell us about the Post-9/11 Security Initiative and what FTA is doing in regards to that initiative?

Ms. Dorn: Sure. It's such an important question, Dave. Really, transit systems are safer and more secure now than they have ever been. However, it's important to note that just by the very design of our transit systems, they're designed to be open and accessible. That, in effect, makes them vulnerable, as well as the history around the world where transit systems have been the targets of terrorist attack. I'm really pleased to say and proud to say, however, that with the full and aggressive cooperation of our transit partners throughout the country, as well as with the FTA and the strong emphasis, as you know, under Secretary Maneta's leadership, we've made some really important progress.

Let me just give the highlight of what we've learned in terms of the most important investments that can be made at the federal government and at the state and local governments. What you've learned is that you get the most bang for the buck in the transit environment in terms of security by investing in three things: training of personnel; emergency response; and public awareness. In all of those things, we have been very active, and I'll get to that in just a moment, but I want to tell you about some of the things we did initially after 9/11.

We put together a team of experts, transit experts, terrorism experts, intelligence experts, that went out to 37 of our top transit agencies, the subway systems, the light rail systems, and those that had high consequence, high assets in the community. And we did a very thorough - not a cookie cutter - but a very thorough assessment about vulnerabilities and threats. We learned a great deal about that that we were able to transmit to transit agencies across the country, and each of those agencies learned a lot as well. We are now sending them in follow-up teams to perfect some of the plans and the emergency response things that need to be done in each of those areas.

In addition to the training piece that I mentioned, where we have increased the kind of training that is offered for first-level supervisors, what we want to make sure is that not only is the public aware that there is heightened sensitivity on the part of the operators and the bus drivers, but that they are trained well to know what to look for, what to do, and it's those first-line supervisors that really can play an important role, whether it's a bus system, a subway, or a light rail.

The emergency response plan, there is nothing more important than that, and as I noted very dutifully just a few short weeks after the terrorist attack, when I went to New York and had a briefing from the transit, the police, and the fire officials, they said literally tens of thousands of lives were saved as a result of that collaboration, collaboration across not just the transit folks, not just the emergency, the fire and the police, all working together. They had an emergency operations center, they talked to each other, they were aware of what was important to do. They trusted each other, and all of that is very important.

We have established, through 17 regional forums throughout the country, that kind of learning experience with 2-day seminars bringing all of these folks together to try to more finely tune those emergency response plans, and that's been a very important effort as well.

Mr. Abel: As the Transportation Security Administration increases their focus on surface transport where they've mainly focused in the past year or so on air transport, what will be the nature of the relationship between FTA and TSA?

Ms. Dorn: I am very committed and encouraged by the fact that we already have a very good and strong working relationship with our colleagues at TSA, and I am confident that that will continue. We have in effect an agreement, a memorandum of understanding, both in sprit and in kind, about who does what and how we do it together. The real benefit of TSA being a part of Homeland Security is not only the intelligence sharing, but also being able to prioritize resources not only across transportation sectors, but across all sectors.

For me in the FTA, I may say we need capital equipment to make sure that we protect against this or that, but I don't have the 30- or 50-000-foot level about what are the threats in this environment versus the port security or versus the banking industry, so that piece will just be very important. But I remain very confident that that working relationship will continue and be better, in fact, because of the affiliation of a TSA in a broader Homeland Security department.

Mr. Lawrence: How is technology changing the way FTA does business?

Ms. Dorn: In terms of FTA, Paul, I think that a very substantive kind of contribution that technology has made is in the arena of electronic government, or e-gov, I guess as it's called. Our grantees use a web-based grant application and approval system that's really one of the best in government. In fact, in the last two weeks we've gotten an award from outside not-for-profits who say we have a very good system.

That lets us transfer the funds as quickly as possible once a completed grant application has been received. As you can imagine, with more than $7 billion every year in grant funds going out to communities, that kind of more responsive timeframe in grant application review allows us to make sure that the money goes to the right place in a timely fashion.

In terms of technology being used by real people, in terms of the riders, that technology has been so important in terms of encouraging ridership. Many of you may seen the next bus technology or the next train coming technology that allows you, as someone who is riding or me as someone who's riding, to note when that bus actually will be there. It makes you feel better, it makes you feel more confident, it allows you to schedule things, and that encourages ridership. So there are many areas of technology that over the past even 5 or 6 years have made a big difference in our ability to provide public transportation in a seamless way and in a way that really matters to local communities.

Mr. Abel: What are some of the next challenges on the horizon for your agency?

Ms. Dorn: Certainly, reauthorization of the Surface Transportation Bill is absolutely top on our list. That's a very important sort of effort we want to continue, the very good foundation that has been established through T-21.

Mr. Abel: What about transit issues in general? What are the next big things that are going to arise as far as issues in transit?

Ms. Dorn: I think the whole competition for funds. Transit has become trendy in a very good way, I think. People are recognizing, in many places: we can't build more roads; we can't extend more; we have to maintain the system. And in some places where the roads are - expansions are obviously very important.

But because of that, there is more and more demand on public transportation infrastructure. Fortunately, the investments that the federal government has provided to date have virtually been keeping up with the maintenance and the demand, but we see down the road that there are more and more communities that want to make major capital investments. So that's a very important piece of what we see in the future.

In addition, I think the whole issue of focusing attention directly on our customers, the riding public, that's a terribly important issue not yet talked enough about, but we're trying to remedy that.

Mr. Abel: Can you give us your highlights of your vision for the agency over the next 5 to 10 years, taking into account some of the factors that we've talked about during the conversation this morning?

Ms. Dorn: Perhaps to summarize it, I would hope that public transportation in America's future would be the mode of choice. I don't mean by that that every person would choose transit, but every person would have an opportunity to choose transit, in their community, if that's what worked for them. So that would be one piece of it.

I guess from a more parochial perspective as the administrator of FTA, I would hope that FTA would be recognized as the best resource and the source of expertise to help ensure that America continues to make very sound investments in public transportation.

Mr. Lawrence: You've had a long career in public service so I'm curious, what advice would you give to a person interested in starting a career in the public sector?

Ms. Dorn: First, I would tell them that there's no better career than in public service. It's just a wonderful opportunity. I feel privileged to serve in this department, under this secretary and this President, and it's a career you can't beat. So I would tell people, young people that, or even mid-career people I would tell that.

I also think it's important to be open to opportunities and to learn as much as you can by every experience because every experience will be valuable to the next one. I guess the third thing I would say is that the more you can hone your skills in listening, writing, communication, analysis, it will stand you in good stead no matter what sector, or no matter what agency, you serve in.

Mr. Lawrence: Jenna, we're out of time. Dave and I want to thank you for joining us this morning.

Ms. Dorn: Thank you. I've really enjoyed it, Dave and Paul. And I would call attention to your listeners that we have a website, www.fta.dot.gov. Thanks so much.

Mr. Lawrence: Thank you. This has been The Business of Government Hour, featuring a conversation with Jenna Dorn, administrator for the Federal Transit Administration in the U.S. Department of Transportation. Be sure and visit us on the web at businessofgovernment.org. There you can learn more about our programs and research and get a transcript of today's very interesting conversation. Again, that's businessofgovernment.org. This is Paul Lawrence. Thank you for listening.