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Economic development > 8. Surface Freight Transportation

Fragmented federal programs and funding structures are not maximizing the efficient movement of freight.

Why This Area Is Important


The movement of freight is critical to the economy and the livelihood of Americans who rely on freight transportation for food, clothing, and other essential commodities. Freight shipments move predominantly over vast networks of highways, railroads, and waterways and often are transported by more than one mode before reaching their final destination. System performance is essential for the timely transportation of freight from its sources and manufacturers to the customer. Congress authorized around $43 billion in fiscal year 2010 for Department of Transportation programs that can benefit surface freight transportation.[1] However, the Department of Transportation is just one of many stakeholders that are involved in freight movement—all with complex and varied roles, but none are responsible for the entire system. Federal funds in the form of grants, loans, and tax incentives are provided to state and local governments and the private sector, all of whom play major roles in ensuring freight mobility. Specifically, public sector transportation agencies at the federal, state, and local levels have a significant role in developing and managing some modes of the freight transportation system—such as highways and waterways—while private sector entities—such as railroads—finance and manage their own infrastructure. According to the Department of Transportation, in 2007, the surface freight transportation system, which crosses multiple surface modes, connected an estimated 8 million businesses and 116 million households moving $12 trillion in goods. Federal leadership can help assure that projects that facilitate movement of freight, which can be high-cost and cross jurisdictional lines, are undertaken.

While freight transportation has some issues that are similar to the surface transportation issues that GAO identified in its first annual report to Congress on federal programs with duplicative goals or activities,[2] inefficiencies affecting freight transportation such as poor roads and the lack of intermodal connections can impact the nation’s economy. Freight volumes are closely linked to the gross domestic product—increases in freight shipments closely coincide with economic growth. However, freight vehicles often compete with non-freight vehicles, such as on the U.S. highway system, which consists of mixed-use facilities where passenger and freight vehicles operate in the same stream of traffic on the same facilities. Systems that cannot adequately accommodate both freight and non-freight vehicles can become congested, leading to delays in freight movements, lost revenues, and increased carbon emissions—all of which can increase transportation costs and, consequently, the price of goods, hurting businesses that rely on freight transportation infrastructure.

[1]An unknown amount of the funding went to projects that benefit freight. These programs have broad eligibility and may be used for a variety of types of projects that benefit freight to greater or lesser degrees.

[2]GAO, Opportunities to Reduce Potential Duplication in Government Programs, Save Tax Dollars, and Enhance Revenue, GAO-11-318SP (Washington, D.C.: Mar. 1, 2011).

What GAO Found


As GAO previously reported, federal goals in surface transportation are numerous and roles are unclear, and the federal government does not maximize opportunities to promote the efficient movement of freight, despite a clear federal interest, the billions of dollars provided, and the importance of freight transportation to the national economy. There is currently no separate federal freight transportation program, only a loose collection of many freight-related programs that are embedded in a larger surface transportation program aimed at supporting both passenger and freight mobility. This fragmented structure makes it difficult to determine the types of freight projects that are funded and their impact on overall freight mobility. As GAO reported in January 2008, the need for the federal government to reassess its role and strategy in funding, selecting, and evaluating transportation investments, including those for freight transportation.

Department of Transportation administrations that have a role in freight transportation include the Federal Highway Administration, Federal Railroad Administration, Federal Motor Carrier Safety Administration, and the Maritime Administration (see table below). There also is an Office of Freight Management and Operations within the Federal Highway Administration that administers programs, develops policies, and undertakes research that promotes freight movement across the nation and its borders. However, the office does not coordinate federal actions related to freight mobility, specifically. In addition, the U.S. Army Corps of Engineers in the Department of Defense is responsible for planning, constructing, operating, and maintaining the nation’s waterways. Department of Transportation administrations also coordinate freight issues with other federal agencies including the Department of Commerce, Department of Homeland Security, and Environmental Protection Agency. The various federal agencies and modal administrations play key roles in planning, designing, constructing, maintaining, and regulating freight transportation. GAO could not determine the total amount spent on freight transportation projects because it is not separately tracked from other transportation investments. According to Federal Highway Administration officials, isolating freight transportation expenditures is not possible at this time because the vast majority of the nation’s highway system is used by both passenger and freight vehicles, and most highway projects benefit both.

Number of Department of Transportation Programs GAO Identified That Provide Funding for Freight Surface Transportation Infrastructure

Department of Transportation administration

Number of programs identified

Federal Highway Administration


Federal Motor Carrier Safety Administration


Federal Railroad Administration


Maritime Administration


Office of the Secretary of Transportation


Source: GAO analysis of Department of Transportation information.


These programs’ structures for funding freight transportation projects include

  • grants (such as the National Highway System program, which funds projects that benefit both freight and passenger travel and, since 2009, the Transportation Investment Generating Economic Recovery—TIGER—programs, which use a criteria-based, competitive process to fund projects serving national and regional priorities);
  • loans (such as the Railroad Rehabilitation and Improvement Financing program, which directs federal loans and loan guarantees to finance the development of railroads); and
  • tax credits (such as the exemption from federal taxes on interest earned from state and local government bonds for general transportation purposes and tax credits for certain expenditures on railroad track maintenance, which can create incentives for the investment of private sector funds on transportation improvements).

These programs are administered by different agencies and modal administrations with different missions, oversight, and funding requirements; do not necessarily coordinate with each other; and at times may overlap. As a result, funds have not always been allocated based on need or condition of the infrastructure carrying freight. For instance, highway funds are distributed to states through formulas that are not linked to performance or need. Examples of programs that may overlap include loan programs such as the Federal Railroad Administration’s Railroad Rehabilitation and Improvement Financing Program and the Federal Highway Administration’s Transportation Infrastructure Finance and Innovation Act Program. Both may be used for freight rail facilities and infrastructure. Additionally, certain state and local governments issue tax-exempt bonds for financing infrastructure projects.

Although the current federal structure of loans, tax credits, and grants (including formula grants and congressionally directed funds) is beneficial, opportunities may exist to return greater national public and private benefits. Furthermore, intermodal considerations may not be evaluated in considering beneficial freight solutions for a given corridor, which may result in funding projects across multiple modes without regard for how each works toward meeting a common goal. Current law generally ties transportation funding to a single mode, limiting the ability of state and local transportation planning agencies to use federal funds for intermodal projects. Further, Department of Transportation administrations and state and local transportation agencies are organized by mode—reflecting the structure of funding programs—resulting in an organizational structure that the department’s own assessments acknowledge can impede intermodal coordination. In addition, collaboration between the public and private sectors can also be challenging; for example, private-sector interests in airport, rail, and freight (such as freight shippers and carriers) have historically not participated in the regional planning process.

The federal government’s fragmented approach also has resulted in a situation where the users of each freight mode are not equally bearing the costs those modes impose on society. When looking at the three categories of social costs borne by freight transportation services—private costs (labor, equipment, and fuel), public costs (paid out of government budgets and can be funded through taxes and fees), and “external” costs (congestion, accidents, health, and environmental impacts), GAO reported in January 2011 that freight trucking costs that were not passed on to consumers of that service were at least 6 times greater than rail costs, and at least 9 times greater than waterways costs. Therefore, public and private investment choices may be distorted, and there may be misallocation of scarce government resources to one mode over another.

Constrained freight mobility could have negative economic, environmental, and health implications. Because of the growth in freight and passenger demand, there has been an increase in truck and rail congestion that is particularly pronounced in major urban areas that contain important freight hubs such as ports, airports, border crossings, and rail yards. Congestion results in increased delays, carbon emissions, and fuel and labor costs, among other things.

Since the expiration of the last surface transportation authorization in 2009, Congress has funded transportation programs through a series of temporary extensions; the most recent will expire on March 31, 2012. Comprehensive legislative action has not been taken to fundamentally reexamine the nation’s surface transportation policies; however, several legislative committees have approved bills to reauthorize and reform surface transportation programs. For example, the Senate Environment and Public Works Committee approved a bill on November 9, 2011 reauthorizing the highway portion of the surface transportation program.[1] This bill contains measures to increase accountability for results by entities receiving federal funds and consolidate federal programs. In addition, the House Transportation and Infrastructure Committee approved a bill on February 2, 2012 that includes consolidating or eliminating a number of programs.[2] When we completed our work for this report, floor action was pending in the Senate. GAO is evaluating the extent to which ongoing legislative actions better define federal roles and goals, incorporate accountability for results, emphasize return on federal investment, and ensure fiscal sustainability.

[1]S. 1813, 112th Cong. (2011).

[2]H.R. 7, 112th Cong. (2012).

Actions Needed



Although there is a clear federal interest in freight transportation, there is no strategy or clearly defined federal role in freight transportation or mechanism to implement the strategy, complete with defined national and regional transportation priorities, to achieve the highest return on federal investments. As noted, federal funding for freight-related infrastructure is based on discrete programs’ objectives, not on a national freight policy, and it is currently not possible to identify program costs associated with only freight. Further, the Department of Transportation does not have a national freight strategy to guide its different operating administrations’ freight programs. In addition, oversight and funding requirements by the different modal administrations can make it difficult for planners to develop and implement intermodal freight projects which could result in more efficient freight movement.

In recent years, GAO has recommended or proposed for congressional consideration the following actions. The Department of Transportation has agreed to consider the following recommendations, but they have yet to be implemented, in large part because the authorization for surface transportation programs expired in 2009, and existing programs subsequently have been funded through temporary extensions.

GAO recommended in June 2007 that the Secretary of Transportation

  • direct one operating administration or office—such as the Federal Highway Administration’s Office of Freight Management and Operations—to take the lead in coordinating intermodal activities for freight at the federal level by improving collaboration among operating administrations and the availability of intermodal guidance and resources.

GAO recommended in January 2008 that the Secretary of Transportation

  • develop with Congress and public and private stakeholders a comprehensive national strategy to transform the federal government’s involvement in freight transportation projects, including defining federal and nonfederal stakeholder roles and using new or existing federal funding sources and mechanisms to support a targeted, efficient, and sustainable federal role.

GAO proposed in February 2009 that Congress, in considering the reauthorization of federal surface transportation programs,

  • consider defining the federal role in surface transportation in accordance with national and regional transportation priorities, implementing a criteria-based, competitive project selection process, and working with the Secretary of Transportation to develop enhancements to ensure the highest return on federal investments.

Congressional reauthorization of transportation programs presents an opportunity to address GAO recommendations and matters for congressional consideration that have not been implemented. By promoting and coordinating solutions across jurisdictional lines, the federal government could increase the effectiveness of localities, states, and regional governments and planning organizations in overcoming freight-related challenges.

How GAO Conducted Its Work


The information contained in this analysis is based on findings from the products listed in the related GAO products section. See pages 341-342 of the PDF version of this report (appendix III) for a list of the programs GAO identified that may have similar or overlapping objectives, provide similar services or be fragmented across government missions. Overlap and fragmentation may not necessarily lead to actual duplication, and some degree of overlap and duplication may be justified.

Agency Comments & GAO Contact


GAO provided a draft of this report section to the Department of Transportation for review and comment. The Department of Transportation provided technical comments, which were incorporated as appropriate. Department officials informed GAO that the department is working with Congress to address prior GAO recommendations as part of efforts to reauthorize the federal surface transportation programs.


For additional information about this area, contact Phillip Herr at (202) 512-2834 or

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