Bike Sharing System in Canberra - Case Study Example

Bike sharing system in Canberra Introduction This report focuses on cost benefit analysis for bike sharing system in Canberra. A bicycle sharing system consists of a network of bicycles that are located at different stations around a town. Bike sharing system in Canberra therefore refers to a store of bicycles that can be picked up and dropped off at various points across Canberra. The bicycles will be available to the public for short-term use. According to Nadal (2007) bike sharing offers a cost effective and graceful mobility alternative for trips that can take a longer time to walk and not very long for transit or driving. A bike sharing system is comparatively low-priced and a fast implementation extension a town’s public transportation offerings. A bike sharing system is therefore reasonably priced and systems can be planned to operate like an automated bicycle rental services, or to promote shorter and spontaneous trips via membership and usage fees where individuals pick bikes from one station and returns the bike to any other station (Larsen, 2013). Accordingly, this report will present the scope of the project and perform a cost benefit analysis for the bike sharing system in Canberra. In cost benefit analysis, economic value of the project is analyzed. In addition, alternatives to the project are also analyzed in order to compare the costs of alternatives with the benefits. Therefore, the cost benefit analysis will be used to provide the value of the bike sharing system project in Canberra. Project scope The bike sharing system in Canberra consists of an automated station that has many bikes for hire. The automated bike system does not need excavation because it uses wireless communication where people swipe credit cards and the system releases the bike from the rack. Because of the system’s automation, it is possible to move, relocate or expand the stations to meet the demand of the bikes. The bike sharing system in Canberra contains bikes that are normally upright and this offers the advantage of being “one-size-fits all” and also promotes movement at a slower speed. The bicycles have safety features, for instance puncture-resistant tires, bells, in addition to a light that is motorized through bicycle pedaling. There is also a software back-end whose purpose is to track transactions and ridership information. The transactions and ridership information can be connected to real-time website and mobile device applications and user profiles; these are able to record the number of trips that a rider makes, the distance a rider travels as well as the burnt calories (Beck, et al, 1994). In addition, there is also a fleet of bikes that are particularly designed for short trips and have customized features that prevent vandalism or being stolen. The bike sharing system consists of a network of stations that are distributed across a wide region in Canberra and this provides a convenient access to bicycles. Every station consists of a terminal where transactions are carried out. There are also docking points for securing the bikes when they are not in use. There are staff members and programs responsible for rebalancing bicycles among the stations and also for maintaining the system infrastructure (Nadal, 2007). Logframe: Framework for Bike Sharing Project Design Narrative Summary Measurable Indicators Means of Verification Important Assumptions Goal: 1. Make citizen or visitors travel easily 2. Reduce carbon emissions 3. Increase health benefits 1. Record the frequency of use, range and number of riding. 2. NPV 1. CBA 2. Data analysis goal achieved Purpose: 1. Change people's travel habits,reduce car dependence. 2. Improve traffic. 1. number of users Increased 2. Reduce traffic congestion 1. Registration statistics 2. Income statistics Purpose to Goal Large area coverage makes cycling easier More people join the healthy ride More rental income Outputs: 1. Standard bike. 2. Bike sharing system. 3. Bike stations and utility vehicle. 4. Occupation of public space. 1. A large number of standard bike. 2.Bike station 3. Utility vehicle for recovery and maintenance 4. Bike sharing App& website 1. Output to Purpose Bike stations and vehicle transport can cover the city, to expand the scope of use App attracts more people to register and pay a deposit Activities: 1. Bike & utility vehicle purchase. 2.Bike station construction 3. Bike sharing app design Inputs: E.g. system designers, maintenance personnel, Labour, Bicycle supplier, utility vehicle supplier ISO certification Construction report ACT EPA report Activities to Output The government allows the use of public space EIA passed Bike quality standards System Safety standards Station quality standards Conditions Precedent Get business license Logframe: Framework for Bike Sharing Project Design The Logframe table above summarizes the relationship between the project’s inputs and outputs. This indicates that the project has a logical relationship between: Inputs (labor, construction materials etc) which are utilized in: Project activities (Bike & utility vehicle purchase, bike station construction, designing bike sharing app design) to produce a set of: Outputs (Occupation of public space, Standard bike, Bike sharing system, Bike stations and utility vehicle) to accomplish the project’s: Purpose (Improve traffic, Change people's travel habits, reduce car dependence) which achieves society’s: Goal (More rental income, large area coverage makes cycling easier, more people join the healthy ride in Canberra) Identify the Impacts (Costs and Benefits) Impact of the project activities are presented by impact chart below Value of the Costs and Benefits Costs Capital costs Capital expenditures for buying the initial fleet of bicycles and stations were approximately $500, 000, 000. This costs also includes the cost of resources for the implementation of the project, for example the cost of the fleet of vehicles for redistributing bikes between stations, station maintenance as well warehouse for storing spare parts and spare bicycles. Additionally, the costs include the costs of the IT equipment used to monitor the status of the stations and location of the bicycle. Labor costs The bike sharing system in Canberra has many bikes throughout the stations. There are also docking stations that are situated around the city. Obviously, there are employees responsible for supervising the operations of the bike sharing system. The labor costs also include the services of the management and customer care/assistance personnel. The about costs per year is estimated to be about $10, 000, 000. Operating costs In addition, there are operation costs as well as maintenance costs. The operations and maintenance costs include redistributing the bikes, customer service, station maintenance, and repair of the bikes and other equipment of the system. The operations costs are average prices that significantly depend on the form of the power supply used. The bike sharing system uses two kinds of power that include the alternating current (AC) and the solar power. Even though installation of alternating current is less costly, the power system has higher operation costs when compared to solar power system. Estimations show that it takes about ten to twenty years before solar power covers the additional installation costs and this mostly depends on the location. Apart from the discussed operation costs, the bike sharing system also needs security installation to prevent theft and vandalism. The estimated operations cost is $50 million annually. Implementation costs The implementation costs for a bike sharing system includes cost of buying the equipment and installation and maintenance of the system. Equipment, installation as well as maintenance of one docking station ranges from $100 million. The project equipment costs include the cost for redistribution trucks, bikes, kiosks, docking pads, and card readers. There are also costs for installing the RFID system, the card-swipe system, as well as the lock-and-maintenance system. Benefits Benefits from the bike sharing system come in different forms. For instance, members of bikes sharing system have reported decreased household expenses on transportation and healthcare. In addition, in comparison to the cost of owning and operating a car, bike membership is comparatively less costly. Evidence also shows that users of bike sharing system save money on public transport because they can access different parts of the city that previously could not be reached through transit. At a community level, bike sharing programs has been shows as being effective in attracting and retaining residents and workforce talent. A number of community members have used bike sharing system as a companion to other strategies to assist in revitalizing and redeveloping some of the depressed areas. Bike sharing system has also been used in promoting the image of the community (Midgley, 2009). Generally, bike sharing program is always transformative and relative to the costs of the system, bike sharing program has many benefits. This section provides several benefits that support bike sharing system in Canberra. Financial benefits Bike sharing system is a comparatively less costly and fast to implement urban transportation alternative when compared to other means of transport. As aforementioned, the cost of implementing a bike sharing programs is much less when compared to other transport systems such as rail or bus transportation. More importantly, no local funding is used to fund the bike sharing system because it is normally funded using state grants, corporate sponsorships and user revenues (DeMaio, 2009). Additionally, the bike sharing system is also an attraction for visitors and has generated positive media exposure. The bike system has also created “green” as manifested by the on-going positions for management and operations of the bike system. The size of the bike system in Canberra is big and has many stations that generate more than 10 full-time jobs. Another way that the bike system brings in financial benefits is through the small fees charged for ridership. Generally, bike sharing system brings financial benefits of approximately $2 million annually. Household savings The bike sharing system can save finances for the users due to reduced spending on health care and transportation. This is because the bike sharing system provides existing businesses another means of getting customers to their front door or provides employees with a less costly means of transport to commute to work and also to run errands during the day. Therefore, households are likely to reduce their transportation costs and hence save money that would have otherwise been spent on transport. Bike sharing project can also do away with the need of a family having an additional vehicle. The wireless nature of bike systems has many benefits when compared to other modes of transport (Shaheen et al, 2012). This is because installation of the bike sharing system is fast and less costly and it is possible to expand stations or reduce and move stations for demands’ optimization. Specifically, bike sharing is a reasonably priced form of transport. This is because the cost of utilizing a bike share is extremely cheap and can be as low as a membership fee of $100 annually in comparison$10, 000 for operating a car for a whole year. Normally, transportation is among the major household expenditures and in most cases is a top expense for several households (Larsen, 2013). The estimated savings for a whole year by the entire bike sharing program is about $200 million annually. The bike system is also likely to save funds because of the health benefits that come with cycling. Evidence shows that there are many benefits of cycling and they include; increased life expectancy and reduced rate of lifestyle diseases such as obesity and heart disease (Midgley, 2011). This is because riding bikes is a physical activity. Increased physical activities results to improved health outcomes as well as reduced mortality. Due to improved health outcomes, bike sharing project hence saves finances that would have otherwise been used in treatment and medications. In addition, the project also saves on costs associated with reduced productivity due to ill health. The estimated cost of health benefits is at $100, 000, 000 million annually. The cost of the health benefits is high because the bike sharing systems are relatively safe when compared to other means of transport. This is evidenced by lower number of sustained injuries and fatalities when compared to other means of transport (Woodcock, et al, 2014). Environmental benefits As a means of transport, bike sharing system is virtually carbon neutral. The stations for the station are solar powered and environmental friendly and also the facilities are equally friendly and can be selected for operations like electric vehicles for re-distributing the bicycles. Bike sharing project practically does not have carbon emissions and does not use fuel. Basically, when compared to other forms of transport such as road and rail transportation, bike share ha many environmental benefits (Walravens, 2013). Additionally, bike sharing does not need hard space that is evidence in automobile parking. The approximate environmental benefits are at $500 million per year. Time use Bike share system is relatively fast when compared to other means of transport. This is because there is no need of waiting like in the case of vehicles and railway as means of transport. In addition, the bikes are available at convenient places and therefore people just walk and access them at their convenient locations. Besides, there are no possible delays with this form of transport when compared to other means of transport (Hampshire& Marla, 2012). It is projected that the benefit of time use when it comes to the bike sharing system is about $200 million per year. Productive uses As aforementioned, bike sharing system as a means of transport is likely to improve health outcomes of Canberra population because of increased physical activities. Increased physical activity is associated with improved health and reduced lifestyle diseases. This obviously results to health and active workforce. Healthy and active workforce is likely to contribute to increased and improved economy because people are more productive when they are healthy (Woodcock et al, 2014). The productivity benefit is can be estimated to be at $500 million annually. Alternatives Road Transport Road transport is the most common form of transportation. This mode of transport is associated with negative aspects such as lower safety, waiting times, increased carbon emissions etc when compared to bike share system as a means of transport. Road as an alternative means of transport has a negative value of approximately $-10 million. Railway transport Just like road transport, railway transport is associated with negative aspects such as lower safety, waiting times, increased carbon emissions etc when compared to bike share system as a means of transport. Road as an alternative means of transport has a value of approximately $200, 000. Cost benefit and NPV comparisons of the bike sharing system and other alternatives Cost benefits Bike sharing system Road Railway Costs Labor costs Capital costs Operating costs Implementation costs Total $ 10, 000, 000 $500, 000, 000 $50, 000, 000 $100, 000, 000 $660, 000, 000 - $100, 000, 000 $600, 000, 000 $250, 000, 000 $950, 000, 000 - $500, 000, 000 $250, 000, 000 $150, 000, 000 $900, 000, 000 Benefits Household savings Productive uses Time use Environmental benefits Total NPV (10-4) $ 300, 000, 000 $ 500, 000, 000 $200, 000, 000 $200, 000, 000 $1, 200, 000, 000 $ 1, 100, 000, 000 -10, 000, 000 $-9, 800, 000 $300,000, 000 $275, 000, 000 Decision criteria Therefore, the NPV is approximately $ 1, 100, 000, 000 and this indicates that the project has net gain in regard to the benefits and therefore it is a worthy investment. In addition, it has more benefits when compared to the other alternatives. Sensitivity Analysis The project is sensitive to changing conditions and thus the accuracy of cost benefit analysis is normally impacted by some unpredictable components. These could include errors in the assumption of transport values, construction costs, environmental costs, as well as population changes. Therefore, it will be necessary to ensure that a sensitivity analysis is performed to ensure stability and reliability of the cost benefit analysis (Lenfle, 2012). The estimation of NPV on each adjustment of the flow of people by 15% has been estimated in the range of -20% +15. This indicates that the NPV is likely to be positive until the flow of passengers decrease by 15%. The health benefits have also been adjusted. However, factors that have the likelihood of affecting the NPV of the bike sharing project are unpredictable and are not likely to have significant effect on the project. Conclusion The above report represents a cost benefit analysis for bike sharing system in Canberra. Form the analysis; it is evident that the bike sharing project is a viable and a worthy project. This is because the costs benefit analysis shows that the project has positive NPV. This is demonstrated by numerous benefits the project has as compared to the cost of the project. The benefits of the project include; Household savings; Productive uses; Time use and Environmental benefits which have a very higher value when compared to the costs of the project. Bibliography Beck, M. J. H. & Immers, L. H. (1994) Bicycling Ownership and Use in Amsterdam. Transportation Research Record, 1441, 141–146. Midgley, P. (2009). The role of smart bike-sharing systems in urban mobility. Journeys, 2(1), 23-31. DeMaio, P. (2009). Bike-sharing: History, impacts, models of provision, and future. Journal of Public Transportation, 12(4), 3. Hampshire, R. C., & Marla, L. (2012). 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Walravens, N. (2013). Case study validation of a business model framework for smart city services: Fixmystreet and london bike app. IT CoNvergence PRActice (INPRA), 1(3), 22-38. Read More