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EXECUTIVE SUMMARY

Background.  Seven public transportation agencies operate bus, rail, and ferry services in four counties in the central basin surrounding Puget Sound in western Washington State.  Using public and private funding, these agencies are partnering to offer their public transportation customers a single electronic fare medium – a fare card – that will enable seamless travel across the region using multiple transportation service providers.  This is a large region, covering over six thousand square miles and a population of 3.5 million persons residing in both rural areas and densely populated urban areas centered on Seattle.  The Central Puget Sound Regional Fare Coordination (RFC) Project partners currently include: King County Metro Transit (the largest agency), Community Transit, Everett Transit, Kitsap Transit, Pierce Transit, Sound Transit and the Washington State Ferries.

Travel by highway and rail is substantially constrained by the geography of Central Puget Sound to take place in a north-south direction.  One consequence of this geography and the large population residing and commuting in the Central Puget Sound region is a high level of traffic congestion.  Early in the decade of the 1990s the Washington State Legislature, recognizing the worsening transportation problems in the region, encouraged the formation of the Regional Transit Authority and focused attention on the need for greater coordination among transportation agencies throughout the region.  Several limited fare integration projects were implemented that have laid a strong foundation for the current RFC Project.  These include the U-PASS and Puget Pass projects.  The RFC Project seeks to replace over 200 separate fare media with a single fare card and cash payment options for travelers.

Evaluation Objectives.  The Intelligent Transportation System (ITS) Joint Program Office (JPO) of the U.S. Department of Transportation (USDOT) contracted with Battelle to evaluate the RFC Project.  The Federal Highway Administration (FHWA) and the Federal Transit Administration (FTA) see great value for other locations and agencies in documenting the processes that have been followed by the partners and the strategies that they have applied to address institutional, technical, organizational, governance, financial, contractual, and other challenges.  Battelle has teamed with CRA International (CRA) to carry out the evaluation, and the findings and lessons learned, based on the early organizational and project design elements of the project are documented in this report.  Specific objectives of this evaluation have evolved based on project schedule changes and discussions with the ITS JPO and the local partners.  They now include the following:

In order to meet these objectives, the evaluation team reviewed a comprehensive set of project documentation and prior relevant research studies.  The team interviewed numerous staff and management in each of the seven partner agencies, the vendor representative, regional FHWA staff, and members of the Regional Team who are responsible for the administration of the project and the contract with the vendor.  In addition, the team has reviewed reports and evaluations of several other national fare card projects, such as TransLinkâ in the San Francisco Bay Area and the ORANGES Field Operational Test (FOT) program in Orlando, Florida.

RFC Project Timeline.  Transit agencies and elected officials in the Seattle area began planning for the RFC Project over a decade ago, and the project is currently (early 2006) testing and installing a subset of the equipment prior to a limited “beta” test of revenue service operations.  The milestone events that launched the development phase of this project were the official signing on April 29, 2003 of the agreement among these partners (the Interlocal Agreement) and a contract with the vendor selected to provide the hardware and software for the electronic fare card systems (ERG Corp.)  The revenue service operational test of the system is anticipated to occur in the third quarter of 2006, with full installation taking place in the first, second and third quarters of 2007, and commencement of regular system operations in the fourth quarter of 2007.  The RFC partners are faced with implementing a fundamentally new way of doing business among agencies that have their own long-established systems and procedures, as well as a desire and willingness to arrive at a common, operable regional fare card system.

The Battelle team began working on a “lessons learned” evaluation of the project in February 2003.  Since then, the Battelle team has conducted interviews with many representatives of each partner agency, as well as with the staff of the Regional Team that is responsible for administering the vendor contract and overseeing the complex day-to-day system development process.  This report provides a timeline that outlines the history of this project and the events that have shaped it into its current form.  This history is still being created, and the project continues to evolve as it is developed and tested.

Evaluation Findings: Lessons Learned.  The RFC system is one of the few current national examples of large-scale regional fare card implementation projects.  It holds great promise not only to improve the transit travel experience of residents of the Central Puget Sound region but also to serve as a template for the implementation and operation of a large, complex fare card system for transit agencies across the nation.  The evaluation seeks to convey a clear understanding of the range of institutional, organizational and governance issues addressed throughout the development of the project and how they were resolved.  The report offers an objective outside perspective on those institutional and process elements, including a set of “lessons learned,” that will be of most value to a general audience, including in particular other transit agencies that are considering developing or participating in similar regional fare card initiatives.  Building on the experience of the Central Puget Sound RFC Project, and the lessons of this and other fare card systems around the country, this evaluation offers transit agencies in other regions perhaps the best opportunity to identify a path to successful project implementation.

This evaluation has captured its main findings in a series of lessons learned.  There are of course many lessons that could be derived from the partners’ experiences to date, and many more will undoubtedly emerge in the future.  The lessons highlighted here seek to address the broad areas of project governance, the importance of understanding the context in which the project is being implemented, the factors that appear to motivate participation in a regional project like this one, and a number of key issues associated with project management, technology risk, project finance, and legal issues.  These are the issues that can be expected to be faced in a regional fare card project anywhere in the country.  The important point is to view these lessons as a form of awareness-building or sensitizing to institutional aspects of these programs that require careful consideration from the early stages of such a project.  None of these lessons should be accepted uncritically; rather, their potential relevance to an evolving program should be carefully assessed in the course of program design and decision-making.  With this approach in mind, it is hoped that the findings and lessons derived to date from the Central Puget Sound RFC Project will prove useful and suggestive to others who seek to implement a regional fare card project of their own.  Principal lessons include:

Allowing each partner an equal say in decision making in the regional partnership helps build trust, understanding and buy-in by ensuring that no one agency will dominate the process.  The consensus approach emphasizes the values associated with a philosophy of regionalism over individual agency self-interest.  A likely consequence of the consensus approach, however, is that it will require more staff time and cost than a structure with one lead agency.  Either approach should be guided by a formal agreement, endorsed by the highest levels of management in each participating agency, which specifies roles, responsibilities and organizational structure.  The Interlocal Agreement served that purpose for the Central Puget Sound RFC Project.

Contextual factors include each agency’s customer base, regional geography, agency size and services, agency governance structure, technology applications and needs, and existing fare structure.  Each agency will experience a unique mix of these factors, and they need to be carefully understood with regard to their implications for regional decision making and devising good solutions in support of approaches that meet the needs of the entire region.

The state legislature is in a good position to recognize the region-wide value of a fare card program and can encourage broad participation.  The larger partner agencies can assume more of the risks and can set a good example as early adopters of the new technologies.  Central Puget Sound has benefited by having Sound Transit help underwrite some of the costs and liabilities for the smaller agencies to join the partnership, even though the project may not have appeared to “pencil out” for some of these agencies.

The Puget Sound region benefited from several precursor fare programs that helped “break the ice” by giving travelers and agencies some experience with smaller scale implementations that demonstrated the value and viability of such fare systems.  At this point in the evolution of regional fare card programs across the country, the lessons from Puget Sound and elsewhere may be just as useful as, and likely more cost-effective than, implementing limited deployments in a step-wise fashion.  Nevertheless, partial implementations may still be of great value, and the individuals who gain first-hand experience with such initial fare pass programs can be of assistance in guiding the development of a full region-wide system.

Regional fare card projects will likely face a variety of legal challenges, from the initial preparation of the RFP and negotiations with the candidate vendors to aspects of contract language, change amendments, specification of terms and conditions, intellectual property issues, warranty and maintenance, indemnification against lost revenue and claims, and contractor performance security[1].  It may be helpful to consult with partnerships that have already undertaken a regional program to better understand the likely legal issues and ways to address them.  The Central Puget Sound RFC Project established a legal advisory team to deal with these issues, and this has proven to be a very useful structure for them.

Assigning a full time site manager with the needed skills and experience in each partner agency seems to be a prerequisite for success.  The consensus model of governance is particularly time consuming, as discussed above.  It is critical to allow adequate time in the project schedule for document reviews, legal review, meeting attendance, technical integration, working with the vendor, and management oversight and coordination.  Also, more time and cost will be associated with a need to modify or customize hardware and software systems than with adopting an off-the-shelf solution.  Flexibility and willingness to change as the project evolves are critical organizational success factors.

The Regional Team on the RFC Project includes a Contract Administrator and a Technical Manager.  The Interlocal Agreement did not provide for a traditional project manager position.  The Regional Team plays a crucial role in supporting the extensive regional coordination and leadership workload of a project of this magnitude, but experience to date has shown that the Regional Team has been understaffed and lacked adequate focus on standard project management activities involving project planning, scope, schedule, direction, and guidance of key elements of the project.  In recognition of this need, additional resources have been provided, and a new position of Regional Implementation Manager has been created to help meet these pressing needs.

The risks of modifying an off-the-shelf system or selecting a customized fare card technology (hardware and software) are potentially much greater than the risks associated with accepting an off-the-shelf technology that is already proven.  One way to manage the risks is to establish a large performance security requirement at the outset of the vendor selection process to help assure that only financially secure firms are likely to respond.  It is preferable to select a vendor with established electronic fare card systems deployed elsewhere that also meet most of the requirements of the project.  This helps avoid the risks of adopting unproven technologies.  Customized software may need to be developed in order to accommodate the partners’ existing legacy systems with which a new fare card system must be integrated.  These risks usually cannot be avoided, though in the case of Puget Sound not all the partner agencies had legacy integration issues.  Other ways to control risk include (1) establishing an escrow account to protect source code and documentation against the risk of vendor default, and contractually require the vendor to deposit its proprietary source code, build documentation, and periodically update them, (2) requiring a conservative payment schedule that allows for major milestone payments at limited points in the contract, each associated with a significant and satisfactory completion of work, and (3) requiring extensive and comprehensive insurance coverage from the vendor.

The Central Puget Sound partner agencies selected a coordinated fare arrangement that enables passengers to use a single fare medium but allows partner agencies to retain autonomy in setting their fare policies.  The main alternative is an integrated fare structure that operates on a single standard when calculating fares.  The coordinated regional framework is likely to be perceived by the customer as more complicated and to entail greater programming costs for the agencies.

The Central Puget Sound RFC Project finance plan includes federal, local and private funding sources.  A unique aspect of this project is the provision of funding to selected partner agencies by Sound Transit to subsidize the first few years of capital and operating costs.  This early financial support has been a critical factor in encouraging several of the partner agencies to participate in the regional program.

Conclusion.  While these lessons address many of the larger issues associated with the implementation of a regional fare card program, they by no means cover them all.  Recognizing the nature of these issues and seeking to address them early in program development will, however, help agencies anticipate many of the governance and policy challenges inherent in such programs and avoid many of the major pitfalls.  The challenge will be to adapt these examples to successfully fit the needs and conditions of each region and their participant agencies.

 

[1] A deposit of funds to guarantee performance.

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