SERVICE PLANNING AND DESIGN

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SERVICE PLANNING AND DESIGN BUDGET CUT
PREPARATION

• Presented by Robbie L. Sarles
• RLS Associates, Inc.
• 3131 South Dixie Highway, Suite 545
• Dayton, OH 45439
• Ph [phone]

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The Challenge

• Tough Times
• Pressure on All Funding Sources
• Less Available Local Match
• Rising Costs
• Greater Demand for Services
• Higher Expectations
• Increasing Benefits/Demands of Technology
• Aging Work Force

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A Perfect Storm?

• For Some It May BeWe Have Already Begun to See
  the Impact

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What Is Different?

• Uncertainty is Part of a Transit Managers Life
• There Never Has Been Enough Funding
• Crisis Come and Go
• Political Pendulum Is Always Swinging

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What Is Different?

• Downturn of Nations Economy
• All Funding Sources are Impacted
• Matching Sources Are Evaporating
• Competition for Funding is Unparalleled
• Infrastructure Deteriorating

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What Is Different?

• Stop Gap Measures Will Not Be Enough
• Long-term Solutions Are Needed
• We Cant Do More With Less

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Our Response?

• The Transit Industry Cant Be Part of the
  Solution If It Is Part of the Problem
• Must Practice Sound Financial Management
• Must Avoid Common Pitfalls
• Must Be Proactive

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Top Ten Truths of Transit Financial Management

• Just Because You Have Checks In the Checkbook
  Doesnt Mean You Have Money
• You Cant Spend Next Years Money on This Years
  Expenses
• Dont Borrow Unless You Have A Way to Pay It Back

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Top Ten TruthsContinued

• Just Because They Need It, Doesnt Mean You Have
  To Provide It . . . Every Service Has A Cost
• You Cant Use the Same Money to Match Multiple
  Grants
• Dont Assume That There Is No Theft . . .
  Borrowing

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Top Ten TruthsContinued

• If There Is No Documentation, it Doesnt Exist
• Strings Are Always Attached to Federal Dollars .
  . . It Is Not Yours to Do With As You PleaseEven
  if it is a Good Idea
• Shell Games Will Catch Up With You

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Top Ten TruthsContinued

• Deferring Maintenance and Training will Prove to
  Be More Costly In the Long Run
• Regulatory Compliance Is Not An Option

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Be Proactive

• Know Your Agencies Finances and Understand Its
  Short- and Long-term Financial Health
• Solicit Support and Input
• Board Members
• Management Team
• Employees
• OthersState and Local Partners

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Do More With Less

• ?

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Seek Out New Revenue Sources

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Service and Fares

• Be Prepared to Make Tough Decisions

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Tough Decisions

• Realize You Cant Do Everything for
  EverybodyLearn How to Say No
• Objectively Evaluate Service Design
• Minimize Emotional Connection
• Utilize Updated, Accurate Data As Basis For
  Decisions
• Plan for FutureEven if Informal

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Service Planning

• Where Do You Start?

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Mission

• What Are You Doing That is Consistent With Your
  Mission Statement?
• What Are You Doing That IS NOT Consistent With
  Your Mission Statement?

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MISSION STATEMENT

• Who Are You?
• What Do You Want to Do?

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SAMPLE MISSION STATEMENTS

• to provide customer-focused mobility solutions
  for our local communities through strategic
  partnerships, innovative planning, and
  implementation options.
• to provide all citizens and visitors with safe,
  reliable, and efficient transportation, which
  continues to grow to meet their needs through the
  efforts of dedicated and well-trained employees.

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GOALS AND OBJECTIVES

• Reflect systems mission
• Means to achieve broader community goals
• Provides framework for designing and evaluating
  existing and proposed service

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POTENTIAL GOAL AREAS

• Service quality and quantity
• Effectiveness and efficiency
• Responsiveness
• Financial
• Community participation

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? ? ?

• Are Resources Being Used Most Efficiently to
  Deliver Service?
• Are the Services Being Delivered in the Most
  Effective Manner?
• Are the Resources Being Used Most Efficiently to
  Deliver the Most Effective Services?

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PERFORMANCE EVALUATON AS A TOOL

• To Measure and Assess Performance
• To Evaluate the Progress Towards Transportation
  Goals and Objectives
• To Serve as a Basis for Decision-Making
• Diagnostic Tool to Identify Performance Problems
• To Assess Policy, Procedures, and Service
  Implications

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TARGET AUDIENCE of PERFORMANCE MEASURES

• System Management
• Governing Boards
• General Public
• Passengers

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TYPES OF PERFORMANCE MEASURES

• Cost Efficiency
• Service Effectiveness
• Cost Effectiveness

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COST EFFICIENCY

• The Amount of Service Provided for the Amount of
  Money Spent

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PRIMARY COST EFFICIENCY MEASURES

• Total Operating Cost Per Vehicle Service Hours
• Total Operating Cost Per Vehicle Service Miles

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SECONDARY COST EFFICIENCY MEASURES

• Examples Include
• Driver Operating Cost Per Vehicle Service Hour
• Vehicle Service Hours as a Percent of Driver Pay
  Hours
• Maintenance Cost Per Vehicle Mile
• Administrative Cost Per Vehicle Service Hour

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SERVICE EFFECTIVENESS

• The Consumption of Service in Relation to the
  Amount of Service Available

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PRIMARY SERVICE EFFECTIVENESS MEASURES

• Passengers Per Vehicle Service Hour
• Passenger Revenue Per Vehicle Service Hour
• Passengers Per Vehicle Service Mile
• Passenger Revenue Per Vehicle Service Mile

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COST EFFECTIVENESS

• Consumption of Service in Relation to Resources
  Expended

Cost Effectiveness
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PRIMARY COST EFFECTIVENESS MEASURES

• Passenger Revenue Plus Local Contributions as a
  Percent of Total Operating Cost
• Passenger Revenue as a Percent of Total Operating
  Cost
• Total Operating Cost Per Passenger

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Formulate Performance Measures
Service Outputs
Transit System
Public Consumptions
Inputs
Cost Efficiency
Service Effectiveness
Cost Effectiveness
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SERVICE QUALITY

• The Relationship of Service Delivery and Customer
  Expectations
• ACCESSIBILITY - Ability to Accommodate the
  Disabled
• Percent of Service Hours With Lift-Equipped
  Vehicles
• AVAILABILITY - Span of Service, Frequency of
  Service and/or Percent of Population Within
  Walking Distance

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SERVICE QUALITY (CONTD)

• COMFORT - Seat Availability, Climate Control, and
  Smooth Ride Operations
• RELIABILITY - On-Time Performance
• SAFETY - Vehicle Miles Per Accident Passenger
  Injuries Per 100,000 Passenger Boardings

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PERFORMANCE MEASUREMENTS

• Controllable Factors
• Decisions, Policies, and Actions of Governing
  Board, Managers and Employees
• Non-Controllable Factors
• Physical, Economic, and Social Factors not under
  the Control of the Transportation System

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SERVICE AREA CHARACTERISTICS

• Service area size
• Socioeconomic characteristics
• Land use characteristics
• Travel characteristics
• Geographic and topographical characteristics

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SERVICE AREA CHARACTERISTICS (CONTD)

• Weather
• Availability of other services - Public sector
  - Non-profit - Private sector
• History

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SOCIOECONOMIC CHARACTERISTICS

• Auto availability
• Income level
• Age
• Gender
• Employment status
• Minority
• Education level
• Disability mobility status
• Expectations

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TYPICAL TRANSIT USER

• No car available
• Lower income
• Minority
• Female
• Work trip

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LAND USE CHARACTERISTICS

• Density of origins - Residential development -
  Elderly housing - Subsidized housing
• Density of destinations - Employment sites -
  Job training sites - Day care facilities -
  Schools - Universities/colleges -
  Shopping/retail centers - Social service agencies

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LAND USE CHARACTERISTICS (CONTD)

• Service area size
• Proximity to regional medical and retail centers

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TRAVEL CHARACTERISTICS

• Peak periods AM, PM, midday - Varies by type
  of trip
• Off-peak periods evening, weekends - Trip
  purpose - Work - School - Social service
  agencies - Shopping - Personal business -
  Medical - Recreational

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GEOGRAPHIC AND TOPOGRAPHIC FEATURES

• Water bodies and bridge weight restrictions
• Street widths and direction
• Pavement quality
• Parking
• Grades/hills - topography
• Railroad tracks and overpasses
• Traffic restrictions and signals

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GEOGRAPHIC AND TOPOGRAPHIC FEATURES
(CONTD)

• Congestion roadway capacity, peak pattern
  changes
• Community boundaries
• Speed limits
• Inhospitable walking environment
• Greater building setbacks
• Long distance between generators

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DATA COLLECTION PROCEDURES

• Service area characteristics - U.S. Census -
  Chamber of Commerce - Department of Development
  - Metropolitan planning organizations - Local
  planning agencies - Department of Transportation

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EXISTING SERVICE CHARACTERISTICS SERVICE
TYPE

• Demand response - Advanced reservations (1 48
  hours) - Door to door, curb to curb, or door
  through door - Pickup window (/- minutes
  from scheduled pickup time - Standing
  orders - Contract services - Paratransit
  vehicles - Area coverage - Productivity

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EXISTING SERVICE CHARACTERISTICS SERVICE
TYPE (CONTD)

• Demand response (Contd) - Eligibility
  requirements - Funding sources and levels
• - Personal involvement - Technology
  applications
• Fixed route, fixed schedule - Types of
  routes - Express - Local - Crosstown -
  Circulator - Radial, Grid, Hub

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EXISTING SERVICE CHARACTERISTICS
SERVICE TYPE (CONTD)

• Fixed route, fixed schedule (Contd) - Fixed
  guideway, rail, or surface - Complementary
  paratransit service (see demand response) -
  Headway average and maximum - Transfer rate
• Directness of travel - Circuitousness -
  Interlining - Transfers - Through-routing -
  Shared ride

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EXISTING SERVICE CHARACTERISTICS SERVICE
TYPE (CONTD)

• Service availability area coverage -
  Percentage of population with access to
  service
• Service level/volume - Vehicle revenue hours -
  Vehicle revenue miles
• Policy headway fixed route
• Pickup window demand response
• Advanced reservation period demand response

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EXISTING SERVICE CHARACTERISTICS
SERVICE TYPE (CONTD)

• Span of service - Days of service - Hours of
  service
• Usage patterns
• Ridership

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SERVICE QUALITY

• Response time demand response - On-time
  performance - Pickup window - Advance
  reservation requirements - general public
• Response time fixed route - On-time
  performance - Average headway - Maximum
  headway - of transfers - Service mix

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SERVICE QUALITY (CONTD)

• Service reliability
• Loading standard
• Safety
• Infrastructure
• Accessibility

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EXISTING SERVICE POLICIES

• Fleet accessibility
• Group trip potential
• Door-to-door vs. curb-to-curb
• Labor contract
• Personnel policies
• Experience and competence of scheduling and
  dispatch staff
• Experience and competence of vehicle operators
• Vehicle condition and maintenance

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EXISTING SERVICE POLICIES (CONTD)

• Mobility training
• History/community perception
• Use of volunteers
• Policy headway (fixed route)
• Pickup window (demand response)
• Advanced reservation period (demand response)
• Bus stop spacing (fixed route)
• Scheduling pickup increments (demand response)

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DATA COLLECTION PROCEDURES FOR EXISTING
SERVICES - FIXED ROUTE SERVICES

• Route maps and timetables
• Point checks - Maximum load count - Arrival
  time
• Ride checks - On/off counts by stop - Average
  trip length - Running speed - Load profile
  diagrams - Passenger miles
• Boarding counts - Fare category by trip

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DATA COLLECTION PROCEDURES FOR EXISTING
SERVICES - FIXED ROUTE SERVICES (CONTD)

• Farebox readings - Total cask - Ridership -
  Average fare
• Revenue counts
• Transfer counts - Transfer activity - O/D Pairs
• Passenger surveys - Passenger travel patterns,
  characteristics, and opinions

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SELECTION OF TECHNIQUES

• Availability of technology
• Availability of personnel
• Union rules
• Ridership levels
• Number of vehicles
• Route structure (degree of interlining)
• Transfer tickets
• Availability of smart fare cards

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DATA COLLECTION PROCESS

• Develop baseline - On/off counts - Farebox
  readings, average fare - Onboard survey
• Monitor changes - Point checks - Arrival times
  - Total boardings or revenue

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DEMAND RESPONSE SERVICES

• Dispatch logs
• Driver manifest analysis - O/D pairs - Travel
  time analysis - Trip denial logs
• Vehicle utilization chart
• Passenger surveys

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PUBLIC INVOLVEMENT NEEDS AND EXPECATIONS

• Public meeting
• Rider surveys
• Stakeholder interviews
• Household surveys
• Employer survey
• Elected official interviews
• Focus groups
• Driver input

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STAKEHOLDERS

• Human service agencies
• Higher education institutions
• Employers/business community
• Retailers
• Governmental entities
• Seniors

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STAKEHOLDERS

• Medical community
• Children of older adults
• Youth
• Developers
• Minority populations
• Non-English speaking populations
• General public

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Excellent and Good Ratings
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DEMAND ESTIMATION METHODOLOGIES

• Survey response
• Similar routes method
• Elasticity models
• Regression models transit propensity

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SURVEY METHOD

• Request travel itineraries
• Assess perceptions and attitudes of new service
• Identify sensitivities
• Extrapolate the response to potential user group
• Adjust patronage estimates for noncommittal bias
  x 20

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SIMILAR ROUTES METHOD

• Identify similar routes
• Utilize same trip rates
• Elasticity models - Wide variation by market
  segment, mode, time period, and trip purpose
• Fare changes elastic
• Services change inelastic

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REGRESSION MODELS

• Associates independent factors to ridership
• Requires calibration to specific site
• Based on socioeconomic variables, land use
  variables, or transit service variables

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TRANSIT PROPENSITY

• Model derived from 1986 study Financing and
  Sustaining Rural Mobility in Rural Areas A
  Manual by Theodore A. Wallin and Alice Kidder
• Transit Propensity ((12 X) (19
  Y))/0.8where X population aged 65and Y
  Number of zero vehicle households

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REGULATORY REQUIREMENTS

• Americans with Disabilities Act - Complementary
  paratransit service - Service area - Days
  and hours - Fare - Trip priorities -
  Response time - Advance reservation -
  Capacity constraint - Trip denial -
  Trip negotiated /- 1 hour - Excessively
  long wait time

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REGULATORY REQUIREMENTS (CONTD)

• Americans with Disabilities Act (contd) -
  Complementary paratransit service (contd) -
  Capacity constraint (contd) - Excessively
  long transit time - Equivalency of service

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REGULATORY REQUIREMENTS (CONTD)

• Charter Regulations (49 CFR Part 604) - Charter
  definition - Group of persons - Common
  purpose - Single contract (written or oral)
  - Fixed charge - Exclusive use of service
  or vehicle

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CHARTER REGULATION EXEMPTIONS

• FTA excludes from charter regulations coverage of
  recipients under the Section 5310, Section 5311,
• Section 5316, and Section 5317 if the
  service to provided is for program
  purposes.
• Transportation that serves the needs of either
  human service agencies or targeted
  populations(elderly, individuals with
  disabilities and/or low income individuals)

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REGULATORY REQUIREMENTS (CONTD)

• Charter Regulations (49 CFR Part 604) (contd) -
  Charter definition (contd) - Specialized
  itinerary - Uses FTA-funded vehicle - Must
  identify willing and able private charter
  operations - If exists, charter is prohibited
  unless exception applies - No
  willing and able operator - Service and
  accessibility requirements exceed
  private operators capacity - Special
  events or national significance

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REGULATORY REQUIREMENTS (CONTD)

• Charter Regulations (49 CFR Part 604) (contd) -
  Must identify willing and able private charter
  operations and publish annual notice (contd)
  - If exists, charter is prohibited unless
  exception applies (contd) -
  Social service agency transporting disabled
  individuals, federally funded, consistent
  with program purpose - Agreement with
  willing and able private operator
  - Undue hardship

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REGULATORY REQUIREMENTS (CONTD)

• General Public Service Guidelines - Open to
  public - Controlled by transit - Multiple
  stops - Advertised - Part of network - Part of
  plan - Stops on route area reasonable
  generators - Charges fare (comparable to similar
  service)

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REGULATORY REQUIREMENTS (CONTD)

• General Public Service Guidelines (contd) - In
  service hours - No drinking - Designed to
  benefit public at large
• - Drivers have to let general public on board
  - Contributions to system - In service area

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• Service Planning Determines the Operations,
  Maintenance, Administrative, and Capital
  Requirements of the Public Transportation System
  Based on Adopted Goals and Objectives

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Service Planning

• Service Modes

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TRADITIONAL FIXED ROUTE, FIXED SCHEDULE

• Corridor linehaul
• Radial, grid, hub
• Express, limited stop
• Fixed route local
• Local, limited stops
• Fixed route commuter
• Crosstowns
• Connectors/Feeders
• Fixed route, reverse commute
• Fixed guideway service - Heavy rail - Light
  rail - Commuter rail

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NON-TRADITIONAL SERVICE TYPES

• Transit centers (multi-modal)
• Hubs
• Seamless regional mobility
• Brokerage
• Mobility managers
• Shuttles

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NON-TRADITIONAL SERVICE TYPES (CONTD)

• Neighborhood circulators
• Subscription bus
• Vanpools/Ridesharing
• Service routes
• Special niche services
• Revenue commuter

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TRANSIT CENTER/TIMED TRANSFER

• Connecting multiple suburban transit centers
• Centers located at key activity centers and park
  and ride lots
• Connects circulators with linehaul services
• Transfers are timed to reduce wait times timing
  is critical as headways increase
• Transfer location amenities and security
• Drivers communicate to facilitate transfers

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EXPRESS ROUTES

• Long-distance commuter trips
• Limited stops
• High travel speeds arterial or highway
• Comfort and reliability
• Stress-free commute
• Special equipment
• Primary central business district bound/major
  suburban employment centers
• Served by feeders and/or park and ride lots
• Heavily traveled corridors limited stops
• Guaranteed ride home and safety nets
• Best if bus receives priority treatment
• Peak and limited mid-day trips

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EXPRESS ROUTE KEY FACTORS

• Real employer support - Direct subsidy -
  Employee-subsidized passes - Guaranteed ride
  home - Flex-time
• Participatory planning and local support
• Congestion and parking fees that penalize
  automobiles
• High-density destinations
• Good residential marketshed
• Bus priority treatments
• Supportive regional planning
• Transit dependent populations
• Special equipment

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LIMITED STOP ROUTES

• Heavily traveled corridors
• Supplement locals
• Skip stops, closed door
• Requires residential density, multiple activity
  centers, concentrated stop locations
• Used to upgrade existing services

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CIRCULATORS

• Local travel internal trip-making
• Connect to bus services

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FIXED ROUTE CIRCULATOR

• Neighborhood employment site, shopping center
  penetration
• Local trip-making
• Secondary roadways
• Internal community general circulation and/or
  special purpose
• Short, non-linear
• Connect multiple origins and destinations

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FIXED ROUTE CIRCULATOR (CONTD)

• Potential to reduce congestion in high-density
  areas
• Target markets shoppers, elderly
• Smaller vehicles
• Complement linehaul services feeder
• Use in low density, difficult terrain, limiting
  roadway design

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CIRCULATOR KEY FACTORS

• Population and population density
• Transit dependent population
• Mixed use setting or special conditions
• Appropriate headway and travel times
• Low operating cost low productivity
• Attractive pricing
• Coordinated intermodal connections

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SHUTTLE SERVICE

• Tailored, high-quality connecting services
  between activity centers
• Niche markets specific trip purposes - Station
  to employment center - Residence to linehaul
  service - Midday employment/shopping shuttles -
  Special event shuttles
• Short, direct, quick (outside walking distance)
• Public-private partnership opportunities

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SHUTTLE SERVICE (CONTD)

• Careful planning avoid charter
• Open to public
• Multiple stops
• Advertised
• Stops on route are reasonable generators
• Charge fares
• Drivers have to let others board
• Contributors paid to support service, not
  specific route

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SHUTTLE SERVICE (CONTD)

• Incorporate into plan
• Incorporate as part of network

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SHUTTLE KEY FACTORS

• Market profile
• Service parameters
• Income and density
• Congestion and parking

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SUBSCRIPTION

• Service to a closed group of riders
• Associated with sponsor
• Fixed price regardless of ridership
• Service tailored to subscriber needs
• Guaranteed seats
• Assurance of success

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SUBSCRIPTION KEY FACTORS

• Define demand with common origin/destinations and
  travel times
• Comfort and convenience
• Guaranteed ride home
• Interest and sponsorship
• Low operating cost

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VANPOOL/RIDERSHARING

• Commuters
• Riders share cost/drivers ride free
• Similar origins/destinations and travel times
• Guaranteed ride home

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DEMAND RESPONSE/ PARATRANSIT

• Advanced reservations demand response
• Realtime advanced response
• Route deviation
• Point deviation
• Shared ride taxi
• Exclusive use taxi
• User-side subsidy
• Limousine service

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DEMAND RESPONSE/ PARATRANSIT (CONTD)

• Zones
• Transfers
• Subscription
• Social service agency coordination
• Volunteers
• Guaranteed ride home
• Brokerage
• Flex routes

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ROUTE DEVIATION

• Designated route and schedule with defined stops
  and time points
• Buses deviate off route to pick up riders in
  designated areas then return to route
• Point deviation returns to point of departure
• Schedule must account for time to deviate
  deviations need to be monitored and accounted for
• Door-to-door service
• Small vehicles
• Suitable when time sensitivity is low
• Limited capacity

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ROUTE DEVIATION ATTRIBUTES

• Door-to-door convenience
• Maintains fixed schedule framework
• Attracts choice rider
• Serves individuals with special needs reduces
  demand on specialized services
• Increase area coverage
• Increase utilization of small fleets

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ROUTE DEVIATION KEY FACTORS

• Moderate population density
• Continuous roadway
• Transit dependent profile (i.e., elderly)
• Mixed-use settings
• Connectivity balanced by reasonableness
• Low operating cost
• Coordinated intermodal connectivity
• Local support and public participation
• Marketing

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FLEX ROUTES FIXED SCHEDULE

• Stretches scarce resources
• Specific corridors on scheduled days or times of
  day
• Identify corridor of travel
• Used to group longer-distance trips
• Serves specific generators
• Group trips/less per-trip cost
• Door-to-door or curb-to-curb
• Allows pre-planning, but not required

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REAL-TIME ADVANCED RESERVATION

• Similar to taxi
• Group trips
• Appropriate for small, well-defined service area
• Increases ridership
• No advanced planning
• Door-to-door or curb-to-curb
• Requires more complicated dispatch techniques
• Area limited (no more than 4 square miles)

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ADVANCE RESERVATION DEMAND RESPONSE SERVICE

• Advanced reservations (1- 48 hours)
• Door-to-door within designated service area
• Standing orders accepted
• Suitable for low to moderate densities
• Provides greater area coverage
• Small vehicle

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ZONAL DEMAND RESPONSE

• Service area divided into zones
• Vehicles assigned/restricted to zones
• Transfers at zone boundary

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DEMAND RESPONSE KEY FACTORS

• Appropriate setting
• Focused, well-defined service area
• Limited trips concentrating in zones
• Internal opportunities
• Transit dependent population
• Applicability of new technologies for realtime
  scheduling
• Reasonable operating cost
• Modest expectations for mobility and
  cost-effectiveness

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FAMILY OF SERVICES
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SERVICE PLANNING

• Service availability (amount, days, hours,
  geographic distribution)
• organizational/institutional context
• Service pricing
• Labor requirements
• Rolling stock
• Other capital

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SERVICE AVAILABILITY

• Geographic coverage
• Span of service
• Frequency of service
• Days and hours of service
• Response time
• Seat availability
• On-time performance

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ORGANIZATIONAL/INSTITUTIONAL CONTEXT

• Local government
• Non-profit
• Human service agency
• Private for-profit

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SERVICE PRICING

• Ridership levels
• Fare equity
• Ability to pay
• Cost of service

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LABOR REQUIREMENTS

• Operation
• Administration
• Maintenance
• Contract Services

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ROLLING STOCK

• Vehicles
• Radios
• Fareboxes
• Lifts
• Other Special Equipment

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OTHER CAPITAL REQUIREMENTS

• Garages
• Offices
• Shelters
• Benches and stop signs

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ITERATIVE REVIEWS

• Iterative Planning Process

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THE ITERATIVE PLANNING PROCESS
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HOW CAN WE USE COST ALLOCATION MODELS?

• Cost Evaluation and Billing (How Much Does It
  Cost to Operate an Existing Service?)
• Cost Estimation and Budgeting (How Much Will It
  Cost to Change Service?)

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FIXED AND VARIABLE COST

• Fixed Costs Do Not Vary with the Amount of
  Service Provided (e.g., Administrative Salaries)
• Variable Costs Change Relative to the Amount of
  Service Provided (e.g., Drivers Wages)

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KEY ASSUMPTIONS FULLY-ALLOCATED COSTING

• Total System Cost is Allocated to Services Based
  on Amount of Service Provided (e.g., Service A
  Operates 1,000 Service Hours)
• System Average Unit Costs are Used to Estimate
  Service-level Cost (e.g., System Average Unit
  Cost 30/Service Hour Service A Cost 1,000
  30 30,000)

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WHY CANT WE USE A SIMPLE MODEL?

• Sample System Statistics
• Total Operating Cost 612,827
• Total Hours
  28,811
• Total Miles
  473,512
• Average Unit Cost/Hour 21.27
• Average Unit Cost/Mile 1.29
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  Speed
• Service Hours Miles (MPH)
• A 3,000 27,000
  9
• B 3,000 48,000 16

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COST OF SERVICES USING AN HOUR-BASED MODEL

• Cost Hours 21.27/Hour
• Cost of Service A 3,000 21.27
• 63,810
• Cost of Service B 3,000 21.27
• 63,810
• Does This Make Sense?

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COST OF SERVICES USING A MILE-BASED MODEL

• Cost Miles 1.29/Mile
• Cost of Service A 27,000 1.29
• 34,830
• Cost of Service B 48,000 1.29
• 61,920
• Does This Make Sense?

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BASIC STEPS FOR DEVELOPING FULLY ALLOCATED
COST MODEL
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STEP 1 ASSEMBLE DATA

• Compile Expense Data (Costs)
• Compile Service Data (Hours, Miles)

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STEP 2 ASSIGN EXPENSE LINE ITEMS

• All Costs Are Assumed to be Either Variable or
  Fixed
• Expense Line Items Are Assigned to Variable
  (Hours or Miles) or Fixed Categories
• Knowledge is Required of How/Why Expense Items
  Vary
• Some DOT Cost Allocation Spreadsheets Use This
  Approach

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ALLOCATION TIPS

• Be Logical in Your Reasoning for Assignment
• Make Decisions That Are Defensible
• BE CONSISTENT

158
EXAMPLE OF EXPENSE ASSIGNMENT
159
STEP 3 CALCULATE AVERAGE UNIT COST

• Determine Each Variables Value (e.g., Number of
  Hours)
• Divide the Cost by the Value to Obtain Average
  Unit Cost

160
EXAMPLE OF UNIT COST ALLOCATION

• Total Total
• Basic of Expenses Operating Unit
• Assignment Assigned Statistics Cost
• Hours 277,037 28,811 9.62/Hour
• Miles 188,812
  473,512 0.40/Mile
• Subtotal (HM) 465,849
• Fixed Cost 146,978 465,849 32
• Annual Cost 1.32 (9.62 Hours) (0.40
  Miles)

161
EXAMPLE OF APPLYING COST MODEL

• Speed
• Service Hours Miles (MPH)
• A 3,000 27,000 9
• B 3,000 48,000 16

162
EXAMPLE OF APPLYING COST MODEL CONTD

• Annual Cost 1.32 (9.62 Hours) (0.40
  Miles)
• Cost Service A 1.32 (9.62 3,000)
  (0.40 27,000)
• 1.32 (28,860 10,800)
• 52,351
• Cost Service B 1.32 (9.62 3,000)
  (0.40 48,000)
• 1.32 (28,860 19,200)
• 63,439

163
COMPARISON OF COSTING APPROACHES

• Costing Approach Service A Service B
• One Variable Hours 68,810 63,810
• One Variable Miles 34,830 61,920
• Two Variables/Overhead
  52,351 63,439

164
EXAMPLE OF FULLY ALLOCATED COSTING

• Problem We want to know the operating cost of
  Service A that we provide under contract to a
  social service agency. What should we charge the
  social service agency for Service A if we are
  using a contract rate based on miles (/mile)?

165
EXAMPLE OF FULLY ALLOCATED COSTING (CONTD)

• Solution
• 1. Collect Annual Operating Data for Service A
• Hours 7,543 Miles 80,042
• 2. Develop Full Cost Allocation Model
• Cost 1.32 (9.62 Hours) (0.40
  Miles)
• 3. Determine the Annual Cost of Service A
• Unit Operating Total
• Cost Statistics Cost
• Hours 9.62 7,543 72,564
• Miles 0.40 80,042 32,017
• Overhead 32 104,581 33,466
• TOTAL 138,047

166
EXAMPLE OF FULLY ALLOCATED COSTING (CONTD)

• 4. Convert Annual Cost to a Mileage Rate
• Mileage Rate Operating Cost/Annual Miles
• 138,047/ 80,042 Miles
• 1.73/Mile

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SPECIAL SERVICE NEEDS

• Some services require special treatment (i.e.,
  added costs to the agency) such as - More
  operator assistance - More detailed reporting
• These situations require special analysis.
  However - Added operator costs can be covered
  by hours - Special vehicles may require
  different mile costs - More detailed reporting
  may add a new overhead
• factor.

168
INCREMENTAL COSTING

• Principal Use is to Estimate the Costs of Service
  Changes
• Costs of Service Changes are Estimated by
  Omitting the Fixed Cost Factor From the Cost
  Allocation Equation
• Example
• Total Cost 1.32 (9.62 Hours) (0.40
  Miles)
• Cost Change (9.62 Hours) (0.40 Miles)

169
EXAMPLE OF INCREMENTAL COSTING AND FORECASTING
A SMALL-SCALE SERVICE CHANGE

• Problem The transit system wishes to institute
• a new service between a small town
• and the county government center.
• 1) What will be the added operating cost to
  operate this new service?
• 2) What should be charged for this service?
• Solution
• 1. Estimate Annual Operating Data for the New
  Service.
• Hours 1,530 Miles 38,250

170
EXAMPLE OF INCREMENTAL COSTING AND FORECASTING
A SMALL-SCALE SERVICE CHANGE (CONTD)

• 2. Develop Incremental Cost Allocation Model
• Cost Change (9.62 Hours) (0.40 Miles)
• 3. Estimate the Annual Incremental Cost of the
  New Service
• Unit Operating Total
• Cost Statistics Cost
• Hours 9.62 1,530 14,719
• Miles 0.40 38,250 15,300
• TOTAL 30,019

171
EXAMPLE OF INCREMENTAL COSTING AND
FORECASTING A SMALL-SCALE SERVICE CHANGE (CONTD)

• 4. Revise (Recalibrate) Fixed Cost Factor in
  Cost Allocation Model
• Subtotal (HM) 465,849 Existing services
• New (HM) 30,019 New Service
• Revised Sub (HM) 495,868
• Fixed Costs 146,978 No Change
• Fixed Cost 30 146,868/495,868
• New Annual Cost 1.30 (9.62 Hours)
  (0.40 Miles)

172
EXAMPLE OF INCREMENTAL COSTING AND
FORCASTING A SMALL- SCALE SERVICE CHANGE(CONTD)

• 5. Determine the Fully Allocated Cost of
  New Service
• Unit Operating Total
• Cost Statistics Cost
• Hours 9.62 1,530 14,719
• Miles 0.40 38,250 15,300
• Overhead 30 30,019 9,005
• TOTAL 39,024

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