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BALANCING RESPONSIBILITY AND PROFITABILITY
UNDERSTANDING THE DYNAMICS OF PUBLIC AND PRIVATE PARTICIPANTS IN INTELLIGENT
TRANSPORTATION SYSTEMS (ITS) INFRASTRUCTURE DEVELOPMENT
________________________________________________
13TH
WORLD CONGRESS ON INTELLIGENT TRANSPORT SYSTEMS
LONDON, UK
OCTOBER 2006
David Pickeral, JD
Booz Allen Hamilton, USA
Washington DC
Derval Cummins
Booz Allen Hamilton, Ireland
Dublin, IE
ABSTRACT
Where ITS infrastructure projects are being considered, there is a need for both public and
private entities to be actively engaged with each other and with the affected stakeholders
during all phases of the process to understand the costs, risks and benefits on all sides. Private
participation should be planned to combine immediate potential and the realistic possibility of
further work later on. The aim of this co-ordination should be a symbiotic relationship that
maximized both the public good and the long-term business potential of building effective,
sustainable and scaleable ITS infrastructures.
KEYWORDS ITS infrastructure, business opportunity, responsibilities, decisionmakers, risk,
Vehicle-to-Infrastructure Integration (VII), public-private engagement, open standards
architecture, privacy
BACKGROUND
As with any major public works project undertaken throughout history, making the decision to
develop ITS infrastructure involves the commitment of substantial resources with implications
that will reach years, if not decades, into the future. In reaching this commitment, a limitless
combination of options is available to stakeholders—and an equal number of potential pitfalls.
The overarching goal and obligation is for public officials to provide an end result of
improved safety, convenience, and overall quality of life to a broad segment of the population.
Fulfillment of this responsibility was reflected in the building of the Roman road system
throughout Europe and North Africa two thousand years ago, in developing the British mail
coach network a few hundred years ago, and in the creation of the “Chunnel” during the last
few decades.
Along the way, it became apparent to entrepreneurs worldwide that government creation of
massive public infrastructure presented a tremendous business opportunity—from the promise

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of steady wages for the rank-and-file workforce to the prospect of decent returns for investors
and substantial wealth for business leaders. Although these incentives are and will remain
essential to ensure a high degree of investment and drive further innovation, it is essential to
balance the private sector profit motives against public need. Having experienced both the
inequity of laissez-faire capitalism and inefficiency of state-run economies during the previous
two centuries, it is now an accepted principle among most of the world’s leaders that a policy
of balancing market forces against government oversight is optimal. This paper outlines, in
the briefest terms, some of the key metrics that should be considered when entering into
relationships designed to achieve that balance.
PUBLIC SECTOR CONSIDERATIONS
In principle at least, modern democratic governments worldwide are motivated by doing the
greatest good for the largest segment of the population, or for filling an important need that
could not be met by market forces alone. In recent years this equation has become
increasingly complex—directly meeting the needs of the citizen at large while also
encouraging industry participation—under the doctrine that doing so will create or enhance
economic growth affecting all income levels. Accordingly, regulatory bodies, such as the
Federal Communications Commission (FCC) in the United States and the Office of
Communication (OFCOM) in the United Kingdom, have increasingly expanded their
traditional role from detached oversight to serving as arbitrators and even advocates for
industry development to facilitate overall industry success and ensure national prosperity.
In such a climate of active engagement, ITS can present a particularly attractive option for
public officials, representing public convenience, increased public safety and protection of
life, and any number of broad-reaching new markets. These markets include those related to
the development, operation, maintenance, and enhancement of the ITS architecture itself, as
well as the tremendous number of services that could be developed as a result of it.
In U.S. federal and state governments and in many other countries around the world, the key
decisionmakers are a blend of elected or politically appointed officials and career public
service executives. Although it is risky to over-generalize, it is worthwhile to understand the
prevailing motivations of both groups. The “politicals” will tend to focus on advancing
immediate objectives of their administration’s agenda—often based on campaign platforms—
that affect a majority of the public or particular interest/industry groups that are key
supporters. Therefore, they will want to drive change quickly and may be less risk averse.
The careerists will, by contrast, often tend toward a more conservative approach that
encourages stability. They will look for projects that advance long-term strategies that they
may have developed over lifelong careers within a particular agency. In this regard,
reconciliation between the two groups on ITS projects may often be easier because these
projects have the potential to effect rapid, significant change, affect both the public and
business interests within the technology community, and involve long-range development.
Perhaps the most universal factor relating to all government stakeholders involves the "two-
way" educational process. Private technology industry executives, as a function of their
primary responsibilities, are provided with the latest in market research to identify and
leverage emerging opportunities. Public sector decisionmakers, on the other hand, may have
more limited access to information on current trends and less time and resources to engage in

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analysis of them. Even those government leaders who are regularly and actively engaged in
ITS issues and committed to their development must promote their objectives in the absence
of advertising budgets, and very often with legal restrictions on their ability to lobby. In such
instances, the participation of the business, scientific, and academic communities is critical.
They can provide the latest information to support critical government decisions regarding
ITS development, affording intellectual credibility to bolster these decisions in the eyes of the
public and forums (Internet, publications) to conduct broad outreach and education.
PRIVATE ENTITY CONSIDERATIONS
The cynical view would hold that the private sector focus is limited to driving the highest
profit margin against the smallest outlay. This truism has certainly been demonstrated on any
number of historical occasions when civil engineering contractors were motivated simply to
complete a particular bridge, highway, airport, seaport facility, etc., and follow the profits to
the next big public works job. Even when more enlightened government contracting
procedures began to offer incentives for “on time and under budget” or “best value” in order
to increase the public’s return on investment, the philosophy remained that the newly
completed project would operate as a standalone resource for decades and that further
development, if any, was too far into the future to predict and track as a follow-on
opportunity.
However, the dynamics that have evolved to drive the business of ITS infrastructure
development in the 21st century—and the metrics used to define return on investment—have
generally moved far beyond immediate cash compensation toward a more diversified portfolio
of short- and long-term risks and benefits. The optimal objective for those in the ITS business
is geared far more toward sustainable, scalable growth. Such growth allows not only for the
deployment of a discrete asset, but for the maintenance and support of that asset, as well as the
opportunity for upgrades to that asset and other systems. Examples include intermodal
facilities that link marine, aviation, rail, or motor carrier operations, or that link any of these
assets with IT and communications infrastructure. Another more specific example, Vehicle-
to-Infrastructure Integration (VII), promises an increasing array of options—from traveler
information systems to emergency response capability to remote payment of tolls—to any
number of goods or services.
Beyond the direct monetary returns from the award of development contracts and/or return on
sales of equipment, industry will also be concerned with other less tangible but equally
important factors, chiefly the protection of intellectual capital and the limitation of liability.
In the case of intellectual capital, private firms that create it will want to protect it from
unauthorized appropriation–either directly or through "reverse engineering"— and promote it
for system development, to the exclusion of other technologies. In an era of rampant class
action lawsuits in the United States and a growing number in some other countries, private
firms, with the support of the insurance industry, will also view it as essential to define and, in
as many instances, restrict their liability. Lastly, as with virtually all developers of
technology, there will be a tendency, if not a necessity, for private firms to promote and then
retain the rights to proprietary technologies or other intellectual capital after devoting
substantial resources and undertaking substantial risk in the development process.

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BALANCING THE INTERESTS:
With an understanding the dynamics of both parties, it is now appropriate to attempt to
balance the relative strengths and limitations of each, optimizing the former and mitigating the
latter.
One area where the strengths of public-private engagement can achieve the most symbiotic
effect is in encouraging "best of breed" solutions. This can be accomplished by developing a
“portfolio” of multiple private entity providers rather than issuing an “all or none” award to a
single provider. This approach combines the reach and resources of large established
companies with the perspective and specialized expertise often offered only by smaller firms
or even individual entrepreneurs. On the public sector side, large national or even
international government agencies could partner with regional or local authorities to provide
the right mix of broad-based authority and deep community understanding that only those
directly appointed or elected within them have.
Those undertaking ITS infrastructure projects of almost any size will need to address the
liability issues discussed previously. This can be accomplished by direct statutory/regulatory
action such as formal design immunity. It might also be effectively mitigated through
government project leadership that involves regulatory oversight as well as arbitration of
claims. Although this approach should not discourage legitimate claims or grievances, it
would help to ensure that any claims or grievances are more likely the results of actual loss
rather than profiteering.
Recalling the tendency of private entities to both promote and protect their proprietary
intellectual capital, requiring an open standards architecture may be yet another option for
governments to increase competition and ensure parity between private sector participants of
differing sizes and resources. It should be recognized that the overall trade-off is between
market domination by a single or smaller subset of potential entrants using proprietary
standards, balanced against the likelihood that an open standards development process could
be much more time consuming and might be slower to react to latest technology trends. In
this regard, ITS can borrow from public safety community experience in the development of
the Project 25 radio communications standard in the United States and the TETRA radio
communications standard in the European Union, where end users worked directly with
standards bodies to develop a standard that could be deployed competitively by multiple
vendors.
Perhaps the most critical issue that public and private ITS partners must come together to
address involves privacy, which, from a public perspective is something of a double-edged
sword. On one hand, there is strong concern regarding the potential for governments to use
information such as vehicle identification, speed, and location garnered through the operation
of transportation systems such as VII for law enforcement or regulatory purposes.
Conversely, there is also a lot of public unease about trusting the collection, use, and
dissemination of this and other information to the discretion private concerns. Regulators
such as the FCC are currently engaged in rulemakings to resolve the implications of privacy
for ITS systems under such legislation as the Communications Assistance for Law
Enforcement Act (CALEA) related to the ability of authorities to monitor transmissions on
publicly switched communications networks. However, in this and other areas, there is, as

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yet, no clearly defined path to resolution. These issues are daunting even within individual
countries, and become even more pronounced when proposed projects cross borders.
CASE STUDIES
Although there are numerous examples of highway (an other infrastructure) public-private
partnerships which incorporate ITS, there are few examples, as yet of ITS public-private
partnerships.
One interesting case study to observe over the coming years is the UK Highways Agency’s
National Roads Telecommunications Services (NRTS) project. This was launched in 1999 to
procure a telecommunications services for the HA, using private finance, which would
support current and future requirements, including ITS initiatives. In September 2005, the
HA appointed the GeneSYS consortium to deliver this project in the form of a concession to
take over, upgrade, and operate the HA's telecommunications network over the next ten years.
A currently operational case study which appears to have struck the right balance is the
Austrian electronic toll collection system. Here ASFINAG was appointed by the Federal
Ministry of Transport, Innovation and Technology to operate the system for a period of 10
years, with the potential to extend for a further 5 years. The private sector entity’s
responsibilities included planning, financing, providing and installing the road side equipment
and on-board units as well as providing the operations, sales network and enforcement.
CONCLUSION
In closing, it is important to note that the issues described above are merely illustrative and
intended neither to be inclusive nor comprehensive. Rather, this paper illustrates the need for
both public and private entities in the nation or nations contemplating ITS projects to be
actively engaged with each other and with the affected stakeholders during all phases of the
process to understand the costs, risks, and benefits on all sides. Private participation in the
creation of public infrastructure should be planned to combine defined, immediate potential
and the realistic possibility (subject to continued competition) of further work later on.
Hopefully, the end result of this coordination will be a symbiotic relationship that maximizes
both the public good and the long-term business potential of building effective, sustainable,
and scalable ITS infrastructure.