On-demand transportation continues to grow in interest, awareness, and real-world applications across Canada. Many communities, transit agencies, and other entities are evaluating on-demand as a viable transportation option and service delivery framework to extract maximum possible value. For many, it comes down to deciding to operate on-demand in-house or engaging a contracted operator. Here are five key reasons why Contracted On-Demand may be the best solution available:
Flexibility + Speed
Knowledgeable on-demand transportation providers can utilize their expertise and prior experience to make swift decisions related to fleet size and specs, technology and app providers, communications planning, staff training, and much more, depending on the specific project requirements and objectives. In addition, contractors are not subject to the same procurement rules as municipalities or other publicly-funded agencies, facilitating quick procurement of goods and services necessary to launch an on-demand service. PWT has implemented on-demand transportation services for customers in a matter of several weeks and has taken delivery of new vehicles built especially for an on-demand service or client in as fast as five months from the initial contract award.
In many cases, our clients and potential clients are unsure of the long-term viability of on-demand and wade into this model by using pilot programs or funding grants with fixed expiration terms. In these cases, the prospect of spending considerable capital on vehicles with unknown useful life is rather challenging in terms of council approval. Engaging with a qualified contractor to operate an on-demand service can eliminate the most significant start-up capital costs. Contractors like PWT are willing and better able to manage fleet utilization risk based on their ability to re-deploy equipment in other divisions at the expiry of pilot projects, contract terms, etc.
Service Support Capacity
Depending on the goals and objectives of an on-demand service, net additions to a municipal/transit agency fleet or general operations scope may occur. In these cases, there’s a decision regarding the available garage and parking space, parts inventory capacity, and management oversight capacity. PWT has found that, in most cases, municipalities and transit agencies tend to operate at close to maximum capacity in the areas listed above. The introduction of an on-demand service could push the limits of the organization’s available resources. Contracting out an on-demand service allows a municipality/transit agency to focus on its core services while handing off the responsibility for on-demand operations support to a third party. It is important to note that contracting out the service does not equal a total loss of control or direction. A well-written contract governing the service will still allow the municipality/agency to define the overarching goals and KPIs of the service and continuously monitor contractor performance toward these objectives.
Centralized Resources and Experience
One of the key downfalls of on-demand transit service is that the public cannot rely on a fixed schedule of pick-ups and drop-offs to inform their transportation decisions. In our experience, most customers quickly adapt and get used to an on-demand service offering. Despite the one downfall listed above, it provides significant benefits like direct service (no transfers), expanded service coverage area, flexibility, enhanced ride tracking capabilities, shorter trip duration walk distances, and more. However, customers who would previously rely on a fixed timetable or rider’s guide to navigate the system will need to port over to a smartphone app or dial-in options. As most of our clients insist on dial-in as a trip booking option, personnel may need to be introduced to handle additional call volumes. Contractors like PWT can centralize call-taking/reservation resources to dramatically reduce overall cost and increase customer satisfaction with the service (lower call wait times, for example). PWT has a central on-demand Customer Care Centre that looks after trip reservations, customer communications, and operational support for eight different on-demand systems. This allows PWT to staff the centre with agents who look after multiple systems, not one in specific, reducing overall staff numbers and expenses. PWT’s call centre provides an impressive span of call-taking coverage, and agents are experts in trip booking with multiple tech platforms, reducing average call time. The call centre can also work alongside or in addition to local call-taking resources, facilitating overload call-taking and after-hours communications with riders.
Another key benefit of contracting out on-demand operations is that contractors like PWT have extensive experience operating on-demand services in various communities and using various technology and app vendors. This allows us to see what’s different about the customer experience or service performance metrics depending on the community or tech platform so adjustments can be made in other locations that enhance our clients’ customer experience and overall satisfaction. The ability to scan the marketplace and advise clients on service impacts is extremely beneficial when making adjustments to a new service offering, making it as attractive as possible for users.
Cost and Overall Value
In most cases, when our municipal/transit agency clients or potential clients have studied the costs of operating on-demand transit service, the cost of operating in-house exceeds the cost of contracting out by about 30%. Much of this can be attributed to the information outlined above, including call-taking resources, fleet and facility expenses. Contractors can also save considerably in areas like technology expense (negotiating pricing for multi-system deals) and system oversight costs. Another critical factor when contracting out on-demand transit is whether it will optimize the labour force, given that on-demand services are most frequently delivered using much smaller transit vehicles. The capacity of these smaller shuttle-style vehicles will typically allow for the employment of vehicle operators with a lower driver’s license qualification (Class 4 vs. Class 2, Class F vs. Class C), which significantly expands the labour pool. Many municipalities/transit agencies struggle to incorporate these different wage classifications into their labour agreements, and contracting out provides the only mechanism to properly match operators’ required skills and qualifications with overall compensation. In our experience, demand for these jobs remains very high. It offers an excellent way for professional drivers with a lower license qualification to get exposure to public transit with the idea of perhaps upgrading to operate larger vehicles in the future.
The great news for municipalities and transit agencies is that the reduced operating cost does not degrade service quality. One of the key advantages of contracting out any service is managing the contractor through contractual performance metrics, which is not possible when delivering a service in-house. In a number of our current on-demand transit contracts, metrics like average wait times, in-vehicle travel times, on-time performance, customer satisfaction and more are written into the agreement as a way to govern the service and highlight where the contractor must direct its attention and resources. When performance metrics are trending in the wrong direction, it’s up to the contractor to fix (in conjunction with its technology vendor/partner) those issues to the client’s satisfaction. The side benefits this provides to the municipality/transit agency are monitoring and overseeing the on-demand service with one contract manager, or even adding to an existing transit professional’s duties.
The information outlined above highlights some key reasons why contracting out on-demand transit services may prove most effective, both in terms of cost and operational effectiveness – especially for municipalities and transit agencies who are still investigating the introduction of this delivery model to solve problems within their transit portfolio. Contractors like PWT continue to gather more and more experience providing on-demand services that operate in vastly different communities and environments. These services are designed to address different client needs, operated using various methods, including technology platforms and apps. This experience can be leveraged by other clients interested in approaching the implementation of on-demand transit by studying what’s currently happening in the industry and what has and has worked or not worked for cities and communities that have already “taken the plunge.”