MANAGEMENT’S DISCUSSION AND ANALYSIS

PERFORMANCE HIGHLIGHTS

Secretary Mary E. Peters is committed to ensuring that our transportation system remains safe, secure, and efficient and that it serves as the engine that drives our Nation’s economy. Because economic activity and global trade are increasing, our roads, railways, pipelines, public transit systems, airways, and waterways are experiencing increasing growth in demand.

This Administration is working to ensure that our transportation system has the capacity to accommodate the needs of a growing and prosperous America. Below, we present the highlights of our fiscal year (FY) 2008 results in our five strategic areas: safety, reduced congestion, global connectivity, environmental stewardship and security, preparedness and response. We also present our internal organizational achievements that enhance DOT’s performance as a results-driven Federal agency.

SAFETY

Transportation makes possible the movement of people and goods, fueling our economy and enabling the American way of life. Development of transportation systems has become a major determinant of a nation’s economic success. At the same time, transportation exposes us to the risk of harm. While we have made progress in making all modes of transportation safer, the Department’s top priority and central focus remains improving safety. All modes of transportation have a share in achieving our strategic safety goal: Enhance public health and safety by working toward the elimination of transportation-related deaths and injuries.

In the last eleven years, the Department has set two very challenging safety goals for itself. In 1997, the White House Commission on Aviation Safety and Security issued a challenge to FAA and the aviation industry to reduce the air carrier fatal accident rate by 80 percent in 10 years. In response, FAA initiated a joint Government-industry analysis of causal factors most frequently involved in aviation accidents. By 2007, aviation fatalities had declined by 57 percent.

In 1998 we announced our intention to reduce highway fatalities to 1 per 100 million vehicle-miles traveled. In the ten years that followed we made significant progress, reducing the number of highway fatalities by 1.1 percent from 41,501 in 1998 to 41,059 in 2007. Taking into account the extent of highway travel (VMT), this seemingly small reduction in the number of highway fatalities corresponds to a 13.3 percent reduction in the fatality rate, from 1.58 fatalities per 100 million (100M) VMT in 1998 to 1.37 in 2007.

Over the years we have made significant progress toward the two targets, but we have yet to meet them. We reexamined our programs and goals and decided to make some significant changes in the FY 2006 – 2011 Strategic Plan.

Rather than focus exclusively on the 1.0 goal in highway transportation, we have begun tracking four new measures, which reflect the spectrum of road users: passenger vehicles, motorcyclists, large trucks and buses, and non-occupants (pedestrians, cyclists, etc.). This approach will allow us to pinpoint which populations are most at risk and develop programs to address those risks. For FY 2008, we project DOT will meet the targets for three of the four measures: occupants of passenger vehicles, non-occupants, and occupants of large trucks and buses. Fatalities continue to rise, however, among motorcycle operators and passengers. We have suspected for several years that this was a point of vulnerability in highway safety and the data for the new measures are bearing this out. The Department is addressing motorcyclists and the road conditions that are hazardous for them specifically. We have begun this process with the Transportation Action Plan to Reduce Motorcycle Fatalities. (See the report at: http://www.nhtsa.gov/staticfiles/DOT/NHTSA/Communication & Consumer Information/Articles/Associated%20Files/4640-report2.pdf.)

The Federal Aviation Administration has adopted a new goal: reducing the number of commercial air carrier fatalities per 100 million persons onboard by half by 2025. The new metric is more relevant because it measures the individual risk to the flying public. All fatalities, including passengers, crewmembers, ramp workers, and ground fatalities, are counted equally. FAA stayed below the target for this new metric in FY 2008. The Agency also had a successful year in general aviation; the end of April, 2008, marked a 3-year period that was the safest ever recorded in the history of General Aviation.

In September 2008, a commuter train in Los Angeles collided with a freight train, killing 25 passengers. Although this was the most serious passenger rail accident in several years, FRA still met its target for the number of rail-related accidents and incidents per million train miles. NTSB has begun an investigation to identify the cause of the accident; FRA will act on any recommendations that result.

Transit continued its long history of excellent safety, easily keeping the number of transit fatalities below .468 per 100 million passenger-miles traveled. This success is particularly notable when you realize that an increasing number of people across the country are turning to mass transit for their commute to work. In fact, passenger-miles traveled between January and June 2008 was 3.7 percent higher than the same period in 2007.

We are still finding it challenging to meet the target for the number of serious incidents for natural gas and hazardous liquid pipelines. This year’s target was 40 and, based on preliminary data, we project there will be 41 serious incidents. We know that approximately three-fourths of serious incidents occur in natural gas distribution pipelines, the small diameter lines that move material from a collection point to homes and businesses. To address this issue, the Pipeline and Hazardous Materials Safety Administration (PHMSA) plans to extend the integrity management rules, which have been so effective in reducing incidents in hazardous liquid and natural gas transmission lines, to natural gas distribution systems. Implementation will begin in FY 2009, but it will be several years before we begin seeing the effects of the new risk-management approach.

The number of serious hazardous materials transportation incidents continues to decline. PHMSA works closely with other DOT agencies involved in transporting hazardous materials (FAA, FMCSA, and FRA) to address major risks.

REDUCED CONGESTION

Historically, the mobility that transportation provides has helped define us as a people and as a Nation. Our ability to travel from place to place allows us to connect with other people, work, school, and marketplaces throughout the United States and around the world. Congestion in all modes of transportation, however, has increased substantially in the last decade. Whether it takes the form of commuters and trucks stalled in traffic, cargo on the docks at overwhelmed seaports, or airplanes circling crowded airports, congestion is costing America around $200 billion a year. To address this situation, the Department adopted a new strategic goal: Reduce congestion and other impediments to using the Nation’s transportation system.

In 2006, the Secretary of Transportation announced the National Strategy to Reduce Congestion on America’s Transportation Network. The strategy, which focuses on roads and transit systems, contains a number of initiatives to encourage variable pricing, the use of new technologies, and private sector investment in transportation infrastructure. Our goal is to reduce the rate at which congestion is increasing across the country. At 27.3 percent of travel, congestion in urban areas was below the projected level of 32.3 percent.

Pavement and bridge conditions affect congestion; the better condition the infrastructure is in, the less need for repair and rehabilitation projects that slow down the flow of traffic. This year, preliminary results suggest that slightly less than the target of 57 percent of pavement met the standards for a good ride. The percent of bridge deck area rated as either structurally deficient or functionally obsolete, however, exceeded the target. More than 29 percent of bridge deck areas needs to be replaced or repaired. The FHWA is assisting States in developing programs to repair, rehabilitate, or replace structurally deficient bridges in their inventories in order to reduce the number of structurally deficient bridges at an accelerated pace.

Transit ridership increased by 4.3 percent this year, exceeding the target of 1.5 percent. While transit agencies have increased ridership over four years with improved service and fare subsidy programs, it is fairly clear that this year’s growth can be attributed to higher gas prices.

The Department seeks to increase transit ridership in general, and also to individuals with disabilities who often rely on public transportation. The Federal Transit Agency has worked with state and local transit agencies for 18 years to bring bus fleets and rail stations into compliance with the Americans with Disabilities Act. We have exceeded targets for both measurement areas once again, with 98 percent of bus fleets compliant and 95 percent of key rail stations compliant.

Aviation congestion remains a challenging issue for FAA and the Department. We missed the target for on-time arrivals for a second year; this year’s target was 87.29 percent and actual performance was 87.35 percent. To help increase arrival rates, FAA evaluates new tools and technologies, redesigns airspace where helpful, adjusts separation standards between aircraft flying at high altitudes, and collaborates with airlines to manage traffic flow at specific, high-volume airports

GLOBAL CONNECTIVITY

Transportation systems within and among nations are lifelines to economic growth, less restricted trade, and greater cultural exchange. The globalization of the American economy has put pressure on our ports, borders, and airports. When combined with increasing local traffic, greater volumes of international freight and passenger traffic will result in more congestion and delay and, as a result, higher shipping and travel costs. Our strategic goal: Facilitate an international transportation system that promotes economic growth and development rests on two strategies: open international transportation networks and improved intermodal transportation systems.

The Department has adopted two new measures connected with efficient cargo movement: the number of freight corridors where the average speed is 55 miles per hour and the number of U.S. border crossings with an increase in operational reliability. We also continue to track the movement of vessels through the St. Lawrence Seaway. In FY 2008, all twenty-five of the freight corridors under study kept their average travel speed at 55 miles an hour, and no corridor had a decline in average speed of more than 1 mile per hour. Any decline in the average speed means it takes motor carriers longer to reach their destinations, thus increasing the cost of transportation for the goods being carried. The target for more efficient border crossings was not met. The SLSDC narrowly missed its target of U.S. Seaway availability. We expected this gateway to the Great Lakes to be open for 99 percent of the shipping season, but the actual performance was 98.8 percent.

The Department continues to work with other countries to negotiate bilateral agreements, removing the barriers to increased service and lower fares for airline passengers. As of 2008, the Department has negotiated 90 Open Skies agreements, covering 3.94 billion potential passengers.

ENVIRONRONMENTAL STEWARDSHIP

While transportation ties us together as a Nation, it can also produce unwanted side effects such as air and water pollution, the loss of ecosystems and disruption of communities. Americans want solutions to transportation problems that are consistent with sound environmental planning. DOT is committed to avoiding or mitigating the adverse environmental effects that can accompany transportation, as stated in our strategic goal: Promote transportation solutions that enhance communities and protect the natural and built environment.

For the third year in a row, the number of areas in a transportation emissions conformity lapse was well below the target. In fact, for the second year in a row there were no conformity lapses at all nationwide.

In FY 2008, we replaced the performance measure “Number of exemplary ecosystem initiatives initiated” with “Number of exemplary human environmental initiatives undertaken”. The previous measure tracked actions that helped sustain or restore natural systems and their functions and values using an ecosystem or landscape context. We had exceeded the target by significant margins since 2004, which indicated transportation planners were increasingly aware of the environmental impact of their projects and taking steps to mitigate it. We decided to drop the measure in favor of a new, more challenging one which focuses on enhancing the human environment. This year the target was to identify 10 exemplary initiatives; FHWA received proposals for 11 projects that met the criteria.

This year, for the first time, we are presenting performance measures that indicate our success in streamlining the environmental review process. Three Operating Administrations, Federal Highways, the Federal Aviation Administration, and the Federal Transit Administration, sponsor major infrastructure projects that must comply with the National Environmental Protection Act before the projects can be started. It can take years to complete an Environmental Impact Statement (EIS). The length of time required to complete the environmental review process, referred to as the NEPA process, is a source of frustration to State and local transportation agencies. We have set ourselves challenging targets and this year’s results prove how much of a challenge this effort will be. We know progress will be slow, but we are committed to streamlining the process because it will ultimately reduce the time it takes to complete major projects.

SECURITY, PREPAREDNESS AND RESPONSE

Our transportation system must remain a vital link for maintaining the country’s economy, supporting civilian emergency response and mobilizing our armed forces for military contingencies. The strategic goal has been refocused to include the need for preparedness and response to natural disasters: Balance transportation security requirements with the safety, mobility, and economic needs of the nation and be prepared to respond to emergencies that affect the viability of the transportation sector.

The Department of Defense (DOD) relies on the U.S. commercial transportation industry as well as government-owned ships to deliver equipment and supplies throughout the world in order to maximize defense logistics capabilities and minimize cost. In addition to the availability of commercial U.S.-flag vessels, MARAD has 44 government-owned Ready Reserve Force vessels available to satisfy DOD’s surge sealift requirements. MARAD, in conjunction with DOD, also negotiates an agreement with each DOD-designated commercial strategic port specifying which facilities will be needed to conduct a military deployment. These ports are expected to make their facilities available to the military within 48 hours of written notice. DOT met both the shipping capacity target of 94 percent availability within mobilization timelines, and achieved 100 percent readiness within established timelines for targeted commercial strategic ports.

ORGANIZATIONAL EXCELLENCE

Secretary Peters’ management strategy for achieving organizational improvement includes full implementation of the President’s Management Agenda (PMA). The PMA contains seven mutually reinforcing initiatives that the DOT team is integrating into its corporate culture in striving for continuous management improvement. The seven PMA initiatives are in the areas of strategic management of human capital; commercial services management; financial performance; electronic government; performance improvement; federal real property asset management; eliminating improper payments. For FY 2008, three of DOT’s initiatives had green ratings and four of the initiatives had yellow ratings. A green rating means the Agency has met all the OMB requirements, whereas a yellow rating indicates that the Agency has failed to meet one or two significant requirements. An Agency that receives a red rating has met none of the major PMA requirements for the initiative in question.