6.5 International lessons for defining technology components

market assessment and on the provider’s experience. It is common practice to use the same technology provider to provide fare collection systems as well as fleet management and control systems. however, many projects are facing challenges stemming from a provider’s lack of capacity, especially when it comes to fleet management and control systems. risk management strategies include the definition of mechanisms that allow for the updating of technology (instead of making it compulsory) in case of obsolescence. Such mechanisms include defining both the technologies and delivery methods that can be updated as well as the mechanisms that permit changing the definition of certain components. Finally, the length of a concession affects how easily a technology can change. It is recommended that planners try to use the following elements:

• Technologies that can be updated. In general, the higher fixed cost of implementing a technology, the costlier it is to update. Similarly, fostering open-source, scalable solutions increases the ease of updating technology. • Flexible delivery methods and short-term obligations. Certain delivery methods provide more room for updating technologies. For instance, when a leasing company provides the fleet, the flexibility to introduce a new technology in the fleet is greater than when an operator acquires the fleet as part of the project under a 10–15-year contract for operation. Similarly, all else remaining equal, shorter concessions allow for easier technological upgrades.

In general, the risk of technological obsolescence should be borne by the party that has an incentive to implement changes in technology. This risk depends on the final structure of the project. rather than forcing a party to update a technology after a certain period of time, which generates costly uncertainties, the project should be structured so that the party that is responsible for a component has incentives to update the technology in an efficient manner and the parties that would benefit from this update have mechanisms to compensate partially for it. Especially significant is the remuneration mechanism. If a concessionaire benefits from lowering operational costs (while maintaining predefined levels of operational performance), the concessionaire will have an incentive to incorporate technology to lower operational costs. If the incorporation of technology includes external benefits, those benefiting from it may want to include compensation mechanisms to incentivize their adoption. box 6.5 presents lessons learned for defining technology components. For more guidance, see GIZ (2004); and World bank, PPIAF (2016).

In many cases, technology generates data, whose ownership and access must be clearly defined in the project structure and clarified properly in subsequent contracts. Fare collection systems generate data on levels of demand. Data from fleet control systems are useful for operations and planning, while data from fleet management systems allow for a better estimation of maintenance costs. All parties should have access to information that helps them carry out their functions and manage their risks efficiently. In this sense, project structures should not only regulate the ownership of data but also ensure that data are available and usable by all interested parties. For example, an operation concession may recognize that data on demand and vehicle

BOX 6.5

International lessons for defining technology components • The government should use payment mechanisms to incentivize operators to use better and cleaner technologies (SyTrAl, Transantiago). • Performance-based payments can incentivize good performance (Acabús, Metrobús,

Metropolitano, Transantiago, TransMilenio). • Fuel provision should be addressed in the contract, including penalties for failing to supply fuel (Ecovía).