Public-private partnering - ITS in highway investment

This chapter argues that Intelligent Transportation Systems (ITS) offer benefits to private industry that public agencies need to recognize in order to leverage material private financial participation in highway investment. Technology investments that prompt more reliable and predictable highway travel times are disproportionately more valuable to movers of freight (shippers and carriers) than to auto users. This is because more reliable and predictable highway performance improves the business case for investing in just-in-time logistical systems of production, distribution, inventory management, and customer service. When the expected rate of return on private investment in advanced logistics is sufficiently high, firms will be willing to share in the investment costs of realizing such returns, including the costs of ITS. Yet signalling mechanisms are not in place through which highway agencies can identify the impact of prospective ITS investments on the private business case for advanced logistics; neither are the communications mechanisms in place through which agencies can convey such information to firms within reach of such benefits. If such mechanisms were in place, agencies could seek to negotiate ITS cost-sharing partnerships with private firms, including multi-national companies whose logistics-oriented investment decisions are made at the network level. The effect would be greater overall investment in ITS than justified by savings in auto user costs. A collateral effect would be a reduction in the free-rider effect of ITS when it fosters profitable investment opportunities for private firms.