Innovation in the Transportation Marketplace
Through Effective Procurement:
Findings from an Experts' Workshop

Table of Contents | Appendices

APPENDIX B. - Remarks by Mort Downey
(Department of Transportation)

Remarks prepared for Delivery by
Deputy Secretary of Transportation Mortimer Downey
for the

National Science and Technology Council Committee
Workshop on Procurement Reform

Crystal Gateway Marriott
Arlington, VA
Tuesday, September 21, 1999.

Thank you, Harvey (Bernstein, President/CERF). And good morning everyone. It's great to be here and to be part of what I think is a very important endeavor and a key ingredient for moving innovation into the transportation marketplace.

Procurement Reform

We decided that my remarks ought to focus on WHY we need procurement reform. And on why we need our procurement processes to be more flexible so that we encourage the use of new technologies, concepts and processes.

As our population grows, so, too, do the demands on our aging infrastructure. For example, nearly 578,000 or 31% of America's bridges are structurally deficient or obsolete for today's freight or highway traffic.

And just to highlight an example, right here in the Washington area, the Woodrow Wilson Bridge is in dire need of replacement. We've got a little more work to do on financing and planning, but some day soon we will be underway with the work.

Some of the questions the Wilson Bridge and other projects like it elicit include: What will we replace it with and what will the procurement process be like?

Will the Virginia and Maryland Departments of Transportation decide to use High Performance Steel (HPS) that will make our bridges stronger and more corrosion-resistant? Or will they have even better ideas?

I hope they will use whatever material is the most cost effective and has the best long-term performance when they finalize the contracts. Or perhaps even better, allow the prospective contractors to make their proposals for achieving this goal.

High tech steel and other advanced materials might cost a bit more than conventional steel, but because of their durability and corrosion-resistance will likely save the taxpayer money. And after the trouble we?ve had getting a plan for rebuilding this bridge, the longer it lasts, the better I'll feel about it.

We could use even more innovations like high tech steel in our transportation infrastructure. And, we know that industry would be willing to invest in developing and producing such technologies if they thought they could win contracts and make a profit.

Another reason both the public and the private sector should considering updating their procurement regimes has to do with 2 key words: Global Competition. We live in a global economy and must compete with countries that have very inexpensive labor and other advantages, so we have to have something special to capture and hold onto markets.

That something special that America and its business sector has is the ability to create new technologies, particularly information technologies that are used in Intelligent Transportation Systems (ITS) and advanced materials. Thus, it makes sense that our own procurement systems should encourage, and even invite, new technologies.

Once proven successful, we can sell the new products or methods in world markets, increasing economic growth and creating jobs.

But, the procurement rules we have in place today, largely written for the traditional construction industry of a bygone era, often do not encourage new technologies and innovations. Just as the procuring agencies are somewhat intimidated by new technologies or processes being proposed, vendors can also be intimidated by our often over-complex procurement processes.

State Departments of Transportation, in their own interest, need to consider not just price, but new technologies and processes, which can provide benefits that conventional products or materials cannot. For example, new concretes and asphalt materials may cost more, but will last longer and be more durable than the ones we typically specify. Similarly, the way projects are managed and scheduled offers opportunity to do things faster, better and cheaper. Procurement decision makers need to take into account life cycle costs and safety.

Often, federal, state and local government each have their own procurement, environmental and other regulations as well as differences in organization. These differences, too, can inhibit innovation. We need to work better together to streamline the procurement process and to remove obstacles to innovation.

Government ought to be making life better for its citizens, and that includes the businesses that provide jobs for our economy. Stifling innovation with too many regulations and standards that aren't flexible enough for the marketplace is not the way to improve service to the public. Reliance on overly prescriptive material and method specifications limits competition, potential technology solutions and the harmonization of national standards.

Rigid and cumbersome procurement procedures and methods, which may have been designed to prevent favoritism toward particular contractors or suppliers (although they may now have the opposite effect), dramatically slow the procurement process and, hence, the deployment of existing as well as new technologies, concepts and processes into the market.

Lack of an independent venue to resolve issues based on technical merits without becoming embroiled in the legal or contractual process, costs the government, contractors and suppliers considerable time and money.

We need to consider using an Alternative Dispute Resolution process to resolve these issues that naturally will arise so we can explore the use of new technologies.

If we try to hold innovation to the same standard as manufacturing, then we won't see innovation in transportation infrastructure design and materials. If we think innovation and new technologies will improve our country's transportation system, and we at DOT certainly do, then we need to upgrade most of the current procurement systems to offer processes that have flexibility and encourage innovation and the introduction of new technologies.

One example of how an outdated procurement system can stifle flexibility and, hence, the deployment of the best technologies occurred in Houston several years ago. The Houston Metro was awarded a grant several years ago to implement a smart commuter program as a demonstration. Then, Metro put out a solicitation and awarded a contract based almost exclusively on price. But, because of changes in technology, many of the original design features and components of the system that won the bid were not current by the time of installation.

Houston Metro officials stated in retrospect that they should have used a Negotiated Procurement to provide for current standards at the time of installation as well as Best Value Procurement, which takes into account technical capability and factors other than price.

Some may argue that their rules and procedures prevent favoritism toward particular contractors or suppliers, but many procurement regimes only frustrate legitimate bidders and slow the deployment of existing as well as new technologies, concepts and processes into the market.

Unfortunately, risk averse environments in both the public and private sectors are inhibiting the adoption of new procurement methods, technologies, concepts and processes.

Now is the time for procurement reform at the federal, state and local level because time is running out on rebuilding and developing a transportation system that can meet America's needs in a new century.

We also need to consider other procurement procedures, practices and mechanisms. You will be hearing about some of the innovative procurement mechanisms being used in other Federal agancies, such as the "other transactions" agreement which was developed by the Defense Department.

"Other transactions" is a procurement tool which allows multiple parties in government, industry and academia to come together to share goals, expertise, resources, milestones, risks and benefits and do so quickly and affordably.

We in the transportation infrastructure business may want to learn from the successes in Defense as well as from successes in other Federal and State governments and companies who are using innovative tools to streamline the innovation process.

There are a lot of people in this room who, working together, can make a difference and influence change for the better in procurement.

The partnerships we have formed under PAIR-T could lead not only to change but revolutionary change. Such change is not always easy to live through, but the pain is usually worth the gain.

As Yogi Berra once said, "If you keep doing what you've always done, you'll keep getting what you always got." We can do better than that, if we're willing to take some risks. Thank you.

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