This is the accessible text file for GAO report number GAO-02-810T 
entitled 'Research and Development: Lessons Learned from Previous 
Research Could Benefit FreedomCAR Initiative' which was released on 
June 6, 2002. 

This text file was formatted by the U.S. General Accounting Office 
(GAO) to be accessible to users with visual impairments, as part of a 
longer term project to improve GAO products' accessibility. Every 
attempt has been made to maintain the structural and data integrity of 
the original printed product. Accessibility features, such as text 
descriptions of tables, consecutively numbered footnotes placed at the 
end of the file, and the text of agency comment letters, are provided 
but may not exactly duplicate the presentation or format of the 
printed version. The portable document format (PDF) file is an exact 
electronic replica of the printed version. We welcome your feedback. 
Please E-mail your comments regarding the contents or accessibility 
features of this document to Webmaster@gao.gov. 

This is a work of the U.S. government and is not subject to copyright 
protection in the United States. It may be reproduced and distributed 
in its entirety without further permission from GAO. Because this work 
may contain copyrighted images or other material, permission from the 
copyright holder may be necessary if you wish to reproduce this 
material separately. 

United States General Accounting Office: GAO: 

Testimony: 

Before the Subcommittee on Oversight and Investigations, Committee on 
Energy and Commerce, House of Representatives: 

For Release on Delivery: 
Expected at 9:30 a.m., EDT: 
Thursday, June 6, 2002: 

Research and Development: 

Lessons Learned from Previous Research Could Benefit FreedomCAR 
Initiative: 

Statement of Jim Wells, Director: 
Natural Resources and the Environment: 

GAO-02-810T: 

Mr. Chairman and Members of the Subcommittee We are pleased to be here 
to discuss our previous work on federal research and development (R&D) 
initiatives that provide some useful insight as Congress considers the 
FreedomCAR initiative.[Footnote 1] As you know, one of the major 
challenges facing the nation is to reduce the consumption of petroleum 
in the transportation sector. Transportation represented about two-
thirds of total U.S. petroleum consumption and roughly one-quarter of 
total national energy consumption. Furthermore, the United States 
consumes about 45 percent of the gasoline consumed in the world. The 
nation's continued reliance on petroleum makes the sector highly 
vulnerable to the uncertainties of the world oil market and greatly 
increases the difficulty of achieving clean air objectives. Over the 
past 25 years, the federal government has spent billions of dollars 
attempting to reduce the consumption of petroleum in the 
transportation sector. Throughout the period, we have tried a variety 
of means, such as tax incentives, mandates to use vehicles that run on 
alternative fuels, and laws designed to enhance fuel efficiency. More 
recently, the federal government conducted a $1.2 billion partnership 
between industry and government, the Partnership for a New Generation 
of Vehicle (PNGV), which focused on developing a highly fuel-efficient 
car. Clearly, some of these efforts, along with industry advances, 
have made many vehicles more fuel-efficient and less polluting than 
vehicles were a generation ago. However, any gains in fuel efficiency 
have been outpaced by increases in the total miles driven and the 
growing popularity of less fuel-efficient sport utility vehicles and 
light trucks. As a result, as shown in figure 1, the total amount of 
petroleum our vehicles consume continues to rise. 

Figure 1: Trends in Motor Vehicle Consumption of Petroleum and 
Alternative Fuels, 1992 through 2001: 

[Refer to PDF for image: stacked line graph] 

The graph depicts Gasoline-equivalent gallons in billions for: 
Alternative fuels; and; 
Petroleum; 
For the years 1992 through 2001. 

Note 1: Alternative fuels include ethanol and MTBE used as oxygenates 
in gasoline. 

Note 2: Year 2002 data are forecasts. 

Source: Energy Information Administration. 

[End of figure] 

Further, about 97 percent of the total motor vehicle fuel consumption 
comes from petroleum. This is because consumers have not widely 
embraced vehicles that run on alternative fuels, such as natural gas, 
ethanol, or liquefied petroleum gas. As we have reported, these 
vehicles are often more expensive than traditional vehicles, few 
refueling stations are available, and the price of gasoline is lower 
today in real terms than the 30-cents-per-gallon gasoline sold in 
1960.[Footnote 2] 

In this context, the Administration has proposed a new initiative, 
known as FreedomCAR. Although the initiative is still in its early 
stages, it appears to be focused on developing hydrogen fuel cells 
that will provide the technology necessary to create cars and trucks 
that are free from petroleum and have no polluting emissions—without 
sacrificing safety or convenience. FreedomCAR will operate as a 
cooperative research effort between the Department of Energy and the 
automakers General Motors, Daimler-Chrysler, and the Ford Motor 
Company. The department has requested $150 million for FreedomCAR in 
fiscal year 2003 and will require additional funding for the 
initiative over the next 10 to 15 years. 

As Congress considers the FreedomCAR initiative or any comparable 
federally sponsored research program, we would like to suggest four 
themes for congressional oversight, based on the lessons learned from 
20 years of our work on R&D in many areas. Specifically, as you 
oversee the initiative, you may want to make sure that it: 

1. performs research that private industry would not do on its own, 

2. specifies a clear and measurable goal, 

3. devises a strategy to directly address that goal, and, 

4. considers whether consumers will buy the products resulting from 
the R&D. 

While these lessons seem like common sense, let me elaborate a bit on 
each, using examples from previous GAO work to show how each is 
crucial to an R&D project's success. 

Perform Research That Private Industry Would Not Do on Its Own: 

To ensure federal funds are being spent wisely, it is important to 
ask, "Would the private sector do the research without government 
funding?" Federal R&D programs have not always considered whether the 
federal funding is merely displacing private research rather than 
spawning new work. For example, when we spoke a few years ago to 
participants in the Department of Commerce's Advanced Technology 
Program (ATP), about 40 percent of program participants told us they 
would have performed the research done as part of the program even 
without federal funding.[Footnote 3] Before funding particular ATP 
projects, the Department of Commerce now considers whether industry 
would perform the R&D even without federal funding. 

Specify a Clear, Measurable Goal: 

To be effective, any R&D program must be directed towards a clear goal 
and be reassessed periodically to see if the goal is still worth 
pursuing. For example, we noted that SEMATECH, the federal and 
industry consortium formed in 1987, succeeded in part because it 
clearly articulated both a goal—-improve the competitiveness of U.S. 
manufacturing in semiconductors-—and a method to achieve this goal—-by 
building a state-of-the-art semiconductor using only equipment built 
in the United States.[Footnote 4] In contrast, in 2000, we said a 
significant problem with the Department of Energy's performance plans 
for its "Science and Technology" business line was that the department 
did not clearly articulate its goals.[Footnote 5] For example, the 
department sought as a goal to "pursue technology research 
partnerships with industry, academia, and other government agencies" 
without stating why it wanted to do so or how the goal helped to 
achieve the department's overall missions. We also reported that, 
although the PNGV began with a clear goal of developing a highly fuel 
efficient family sedan, the partnership did not later reassess the 
goal as consumer tastes shifted away from family sedans and towards 
light trucks and sport utility vehicles.[Footnote 6] 

Devise a Strategy That Directly Addresses the Goal: 

Although it may sound surprising, government-sponsored R&D programs 
have sometimes articulated a goal but then devised a strategy that did 
not directly address the goal. For example, in 2000, we noted that the 
Department of Energy sought to achieve one of its performance goals, 
"diversify the international supply of oil and gas," in part by 
continuing "leadership in international energy initiatives"—-a 
strategy that seems somewhat vague and only tangentially related to 
the goal.[Footnote 7] Similarly, the Energy Policy Act of 1992 
established goals that alternative fuels replace at least 10 percent 
of petroleum fuels used in transportation by 2000 and at least 30 
percent of petroleum fuels projected to be consumed in 2010. However, 
as we discussed in a 2000 report, the act's strategy mandated 
purchasing of alternative fuel vehicles rather than targeting the use 
of alternative fuels.[Footnote 8] We noted that since some of these 
vehicles also run on gasoline, drivers often used gasoline in these 
vehicles, either because they were unaware the car could run on an 
alternative fuel, or because not many refueling stations are available 
for alternative fuels. As you consider the FreedomCAR initiative, it 
is important to recognize, as was the case with the alternative fuel 
efforts, that there is a lack of infrastructure for fuels other than 
gasoline, as shown in figure 2. This lack of infrastructure could pose 
a significant challenge to the implementation of FreedomCAR if the 
vehicles it develops run on fuels other than gasoline. 

Figure 2: Density of Refueling Stations for Gasoline and Alternative 
Fuels, 1999: 

[Refer to PDF for image: 2 illustrated U.S. maps] 

Maps depict locations of: 
Gasoline Stations; and:    
Alternative Fuel Stations 
within the Continental United States. 

Note: Each dot represents 10 refueling stations in the state, rounded 
up to the next highest 10 (e.g., a geographic location of stations in 
the state. 

Source: Energy Information Administration.  

[End of figure] 

Even when an R&D program at the outset clearly defines where it wants 
to go and creates a logical strategy to get there, things often change 
along the way—new technologies develop, better approaches are found, 
and consumer tastes or needs change. As a result, those who manage R&D 
programs should consistently build in "reality checks" to ensure the 
strategy still helps to achieve the goals. Planners need to establish 
interim milestones that are meaningful, achievable, and can be 
reconsidered as the project progresses. For example, although the PNGV 
did not achieve its ultimate goal, the partnership did incorporate 
interim milestones that allowed it to reevaluate the progress of 
research efforts and reallocate spending towards the most promising 
technologies.[Footnote 9] 

Consider Whether Consumers Will Buy the Product: 

Research for its own sake can deliver basic scientific discovery and 
expand general human understanding, but to increase energy efficiency 
and reduce the reliance on oil, the FreedomCAR program must remain 
focused on developing technologies that are competitive in the 
marketplace. Unfortunately, in some of our work, we have seen that 
federal research sometimes produces compelling technical 
accomplishments, but few marketable products. In 1995, we reported 
that, although the U.S. Advanced Battery Consortium could potentially 
achieve its intermediate technical goals, the resulting batteries 
would be too expensive and would perform too poorly to enable electric 
cars equipped with them to be competitive with traditional 
automobiles.[Footnote 10] In our report on the PNGV, we noted that the 
partnership developed some products that car manufacturers adopted 
into their existing vehicles. However, industry officials told us that 
consumers would probably not buy the vehicle the Partnership sought to 
create because the costs would be too high.[Footnote 11] 
 
In conclusion, Mr. Chairman, the FreedomCAR initiative's plan to 
develop fuel cell technologies represents an exciting area of 
research. Yet, based on our reviews of previous federal R&D 
initiatives, it will be critical for the initiative to keep one eye on 
achieving technical goals and one eye on the marketplace. Moreover, 
the ultimate success of the new FreedomCAR initiative should be judged 
by its contribution towards reducing the nation's use of petroleum in 
transportation, rather than by reaching specific technical R&D goals. 

Mr. Chairman this concludes my prepared remarks. We would be pleased 
to answer any questions you or any Members of the Subcommittee may 
have. 

Contacts and Acknowledgments: 

For further information, please contact Jim Wells at (202) 512-3841. 
Key contributors to this testimony included Jim Wells, Dan Haas, 
Vondalee Hunt, Jon Ludwigson, Rene Pollack, and Daren Sweeney. 

[End of section] 

Related GAO Products: 

Cooperative Research: Results of U.S.--Industry Partnership to Develop 
a New Generation of Vehicles. [hyperlink, 
http://www.gao.gov/products/GAO/RCED-00-81]. Washington, D.C. March 
30, 2000. 

Energy Policy Act of 1992: Limited Progress in Acquiring Alternative 
Fuel Vehicles and Reaching Fuel Goals. [hyperlink, 
http://www.gao.gov/products/GAO/RCED-00-59]. Washington, D.C. February 
11, 2000. 

Government Performance and Results Act: Information on Science Issues 
in the Department of Energy's Accountability Report for Fiscal Year 
1999 and Performance Plans for Fiscal Years 2000 and 2001. [hyperlink, 
http://www.gao.gov/products/GAO/RCED-00-268R]. Washington, D.C. August 
25, 2000. 

Observations on the Department of Energy's Fiscal Year 1999 
Accountability Report and Fiscal Year 2000/2001 Performance Plans 
[hyperlink, http://www.gao.gov/products/GAO/RCED-00-209R]. Washington, 
D.C. June 30, 2000. 

Department of Energy: Proposed Budget in Support of the President's 
Climate Change Technology Initiative. [hyperlink, 
http://www.gao.gov/products/GAO/RCED-98-147]. Washington, D.C. April 
10, 1998. 

Federal Research: Challenges to Implementing the Advanced Technology 
Program. [hyperlink, http://www.gao.gov/products/GAO/RCED/OCE-98-83R]. 
Washington, D.C. March 2, 1998. 

Measuring Performance: The Advanced Technology Program and Private-
Sector Funding. [hyperlink, 
http://www.gao.gov/products/GAO/RCED-96-47]. Washington, D.C. January 
11, 1996. 

Electric Vehicles: Efforts to Complete Advanced Battery Development 
Will Require More Time and Funding. [hyperlink, 
http://www.gao.gov/products/GAO/RCED-95-234]. Washington, D.C. August 
17, 1995. 

Federal Research: SEMATECH's Technological Progress and Proposed R&D 
Program. [hyperlink, http://www.gao.gov/products/GAO/RCED-92-223BR]. 
Washington, D.C. July 16, 1992. 

[End of section] 

Footnotes: 

[1] See Related GAO Products. 

[2] U.S. General Accounting Office, [hyperlink, 
http://www.gao.gov/products/GAO/RCED-00-59], Energy Policy Act of 
1992: Limited Progress in Acquiring Alternative Fuel Vehicles and 
Reaching Fuel Goals (Washington, D.C.: Feb. 11, 2000). 

[3] U.S. General Accounting Office, [hyperlink, 
http://www.gao.gov/products/GAO/RCED-96-47], Measuring Performance: 
The Advanced Technology Program and Private-Sector Funding 
(Washington, D.C.: Jan 11, 1996). 

[4] U.S. General Accounting Office, [hyperlink, 
http://www.gao.gov/products/GAO/RCED-92-223BR], Federal Research: 
SEMATECH's Technological Progress and Proposed R&D Program 
(Washington, D.C.: Jul. 16, 1992). 

[5] U.S. General Accounting Office, [hyperlink, 
http://www.gao.gov/products/GAO/RCED-00-268R], Government Performance 
and Results Act: Information on Science Issues in the Department of 
Energy's Accountability Report for Fiscal Year 1999 and Performance 
Plans for Fiscal Years 2000 and 2001 (Washington, D.C.: Aug. 25, 2000). 

[6] U.S. General Accounting Office, [hyperlink, 
http://www.gao.gov/products/GAO/RCED-00-81], Cooperative Research: 
Results of U.S.--Industry Partnership to Develop a New Generation of 
Vehicles (Washington, D.C.: Mar. 30, 2000). 

[7] U.S. General Accounting Office, [hyperlink, 
http://www.gao.gov/products/GAO/RCED-00-209R], Observations on the 
Department of Energy's Fiscal Year 1999 Accountability Report and 
Fiscal Year 2000/2001 Performance Plans (Washington, D.C.: Jun. 30, 
2000). 

[8] U.S. General Accounting Office, [hyperlink, 
http://www.gao.gov/products/GAO/RCED-00-59], Energy Policy Act of 
1992: Limited Progress in Acquiring Alternative Fuel Vehicles and 
Reaching Fuel Goals (Washington, D.C.: Feb. 11, 2000). 

[9] See [hyperlink, http://www.gao.gov/products/GAO/RCED-00-81]. 

[10] U.S. General Accounting Office, [hyperlink, 
http://www.gao.gov/products/GAO/RCED-95-234], Electric Vehicles: 
Efforts to Complete Advanced Battery Development Will Require More 
Time and Funding (Washington, D.C.: Aug. 17, 1995). 

[11] See [hyperlink, http://www.gao.gov/products/GAO/RCED-00-81]. 

[End of section]