Bike Sharing System in Canberra - Case Study Example

Author’s Name Instructor’s Name Course Number Date of Submission Title QUESTION 1 Bike sharing system in Canberra Cost Benefit Analysis Executive Summary This cost Benefit analysis looks into the values of the financial and economic impacts of the Bike sharing system in Canberra. This evaluation covers 12 months and has a discount rate of 5%. It also examines the Net Present Value which shows to what measure the benefits of the project will surpass its cost. Being a project that directly affects the society, this valuation shades light on the problem and states why it is a reliable and convenient solution. Abbreviations ACT Australian Capital Territory CBA Cost Benefit Analysis NCP National Capital Planning Contents Executive Summary 1 Abbreviations 1 What is the problem? 4 What are the proposal’s objectives? 4 What are the alternatives? 4 Table 1 5 Impacts (costs and benefits) 8 Project Financial and Economic Impact 9 Financial and Economic Costs 9 Table 2 10 Table 3 11 Table 4 11 Table 5 12 Value the impacts (costs and benefits) 13 Costs 13 Constructing and operating costs 13 Implementation costs and app development 14 Labour 15 Transport benefits 15 Table 7 18 Cost benefits analysis summary 18 Sensitivity analysis 18 Table 8 18 Table 9 19 Distribution 19 Conclusion 19 Works cited 20 Background Mobility is one of the prolific advantages of using a bicycle. In the city of Canberra, mobility and accessibility by a car or train have numerous obstacles such as traffic congestion and high costs. However, this project offers a simple yet reliable and convenient way to access any point in Canberra. In an era where time-saving almost equals money savings, bikes provide avenues through which Canberra residents can save time. The project idea seeks to eradicate the hustle of trying to manoeuvre traffic and also aims at reducing pollution since bicycles do not consume gasoline. The Canberra transportation network guided by National Capital Planning seeks to ensure quick mobility in and about the city using cars as the primary methodology of movement. The current population of Canberra is over 430,000 people, and it has an average 7% growth rate. Thus, the ownership of vehicles has risen drastically in the past five years thus piling pressure on the available infrastructure such as parking. It has also increased congestions, especially in the peak hours. Ideally, over 50% of households had two or more vehicles by 2013 in Canberra. Further research shows that 85.1% of Canberra residents have motor vehicles. This ownership is based on the ability of the population to access services and employment. This statistic is a worrying statistics given that the infrastructure development is has slowed down as a result of slackened economic growth. It also increases the rate of pollution due to significant fuel use. Bike sharing offers an alternative that not only reduces greenhouse emissions but also reduces the spending on health care and transportation. It introduces a formulation in that aims at the apartment staying population that works and operate within Canberra frequently. In the technological age, it introduces the Bike Share App and website that keeps track of all information on the location of the bicycles, bicycle stations, bike utility centres, cost per distance and available bikes. The app operates in a user-friendly interface that enables the user to understand all the information it offers. The flexibility of using a bike will allow it to meet the consumer needs extensively. What is the problem? The growing population of Canberra needs a transport formula that meets their demands. The current transport network does not ensure maximum mobility of a resident especially during peak hour due to congestion. Canberra is facing a congestion problem on the roads and in parking facilities. The NCA has failed to ensure that the transport network adapts to the increase in car ownership and population in Canberra. What are the proposal’s objectives? The Bike-sharing project will serve as a low-cost alternative that offers mobility alongside convenience. Through the online platform, one can secure access a bike and move around without necessarily paying parking fees or fuel costs. It also ensures time-saving and reduces air pollution. What are the alternatives? The ACT increases their infrastructure spending and enlarges the roads and parking spaces to suit the growing population. The public transport sector can also attain high capacity buses to sort out the increasing population. The Bike Sharing project was selected because it will reduce congestion, limit pollution and ensure maximum mobility within the city. It is also the low-cost option that fits all classes in the economy. Bike Sharing in Canberra The Bike-sharing proposal is the construction of bike stations and utility centres within Canberra. It also includes the acquisition of standard bikes to serve the entire Canberra. The stations will be strategically situated to link up entire Canberra city. The land to be used will be acquired from the ACT government. The project will also need a utility vehicle to coordinate and ensure reliability. The ACT government through the ministry of transport will be in charge of the Table 1 Logframe: Framework for Bike Sharing Project Design Narrative Summary Measurable Indicators Means of Verification Important Assumptions Goal: 1. Increase mobility in the inner city 2. Improve the convenience of transportation in Canberra 3. Make citizen or visitors travel easily 4. Reduce carbon emissions 5. Increase health benefits 1. Record the frequency of use, range and number of riding. 2. NPV 1. CBA 2. Data analysis Goal to Super Goal 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 bikes. 2. Bike station 3. Utility vehicle for recovery and maintenance 4. Bike sharing App& website Officially project evaluation and assumption 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. Consultation 2. Bike station construction 3. Bike & utility vehicle purchase. 4. Bike sharing app design 5. Inputs: Projects costs ($3.25m) system designers maintenance personnel Labor Bicycle supplier utility vehicle supplier land (city space) 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 The project will rely on an online the Bike Share App and website to facilitate its activities. Through the online platform, consumers will get the relevant data such as prices and terms and conditions. The app and website will operate in a manner that reduces the human to human interactions thus lowering the operation costs. The App will be accessible on the Android and IOS platforms. The construction of bike stations will begin in September 2017 and end in September 2018. The project will have fifty stations distributed in the entire city of Canberra and its suburbs. Each site will have 5,000 bikes thus the resultant number bikes will be 25,000 in entire Canberra. These bikes will be able to serve over 5% of the residents of Canberra at the same time. These stations will have a utility centre which will ensure daily maintenance of the bikes. These stations will be located near apartment’s areas and in densely populated regions. The project will also have stations in the city centre. Each centre will have a utility vehicle for recovery and maintenance. The log frame above illustrates further. The log frame illustrates the correlation between the cordial segments of the report. It reports on the liaison of the cause and effect of the project. It illustrates the sequence of relation from inputs; labour, land and capita which are used in project activities; construction of bike stations and purchase of bikes to produce a set of outputs; bike stations and standard bikes mainly to achieve the project’s purpose; which in turn achieves society’s goal. The Logframe portrays the project's impacts in the Narrative Summary column. The arrangement is based on the causality of the project. In The Measurable Indicators column they are illustrations on how the impacts will be measured. The Means of Verification column shows where the measurement information will be sourced. This verification will be done through data analysis, income statistics and registration statistics. The last column is assigned to assumptions made in the correlation between input and input, cost and benefit, and activities to output. These assumptions are vital determining the potential of the project and the future of the variables of the project (Larsen, 2013). The assumption include Bike stations and vehicle transport can cover the city, to expand the scope of use, Bike Share App attracts more people to register and pay a deposit and the government allows the use of public space among others stipulated. For the Cost Benefit Analysis of Bike Sharing System, the framework categorizes construction, implementation, maintenance and environmental damage during construction as the costs. It isolates time savings, fuel savings, and convenience, reduced carbon emissions and improved mobility as the benefits. Impacts (costs and benefits) The project directly utilizes resources such as labor, building materials, implementation equipments and land which is then unavailable for other societal use. The indirect impacts will occur on the environment due to construction activities (Woodcock, Tainio, Cheshire, O’Brien and Goodman, 2014). Public transport will also be affected upon completion of the project. The impact chart below illustrates better, Besides, the project offers solutions that suit the local community. It suggests a pollution free environment as it cuts the usage of fuel. The below description of the financial vs. economic impacts table explains further. Figure 1 Project Financial and Economic Impact Financial and Economic Costs Financial costs are payments in form of cash made by the project owners. Economic costs are the actual resources needed or used to complete the project. The financial and economic costs of bike sharing include: Implementation costs. Money used up in setting up a bike sharing system and the stations; Operating costs; Labour; Financial and Economic Benefits Financial benefits are monies that are paid out by the individuals who make use of the project outcomes. Economic benefits are the resources created by the project and that are sought after by the people or the general public. The main financial and economic benefits of bike sharing are: Household savings through reduced spending on health care and transportation Environmental benefits. Bike sharing reduces the greenhouse gas emissions transmitted by automobiles. Time use. Bike sharing is a new form of transportation that enhances accessible and easy mobility. As a result, people are able to save some few hours that can be used up in other productive engagements. Productive uses benefits to the local industry through a more healthy and active workforce. Table 2 Financial vs. economic impacts Impact Financial Economic Costs Labour Wages Time lost Implementation costs Market price Alternative transportation Operating costs Market prices Alternative transportation Benefits Household savings Earnings and savings Reduced spending on health care and transportation Environmental benefits Savings Reduced greenhouse gas emissions Time use Hours saved More output Productive uses Incomes Healthy and active workforce Table 3 Valuation Technique Impact Definition Valuation Costs Labour Human resources required Wage rates data from ABS Implementation costs Equipment and installations required Market prices Operating costs Resources required to maintain the bike sharing systems Market prices Benefits Environmental benefits Reduced environmental pollution through the use of kerosene, fire wood. Contingent valuation Time use Hours saved Contingent valuation Productive uses Incomes Increase in income Table 4 The stakeholder table accounts for the views of all major players in the project. Stakeholders Point of view Objective Government (ACT) state Increase the dividends acquired from the transportation sector Make movement around Canberra easy Passengers (bike users) Individuals, firm employees, Reduced transportation costs Convenience and efficiency in transportation Fuel savings Local community (Canberra residents ) Individuals Accessibility and quality of life NCA Government agency To achieve suitability thus curb the population pressure on the existing road network Construction firms Company Profits The table below shows the various stakeholders and the cost and benefits impact the project offers to them Table 5 Bike sharing system in Canberra : incidence of costs and benefits Participant group COSTS BENEFITS Bike users Transportation costs Easy mobility Reduced fare costs Fuel savings Time savings Local community (Canberra residents) Environmental degradation due to construction City space loss Quick accessibility to various Canberra regions Quick mobility Increased reliability in the transport system Construction firms Resources used Direct profits from the construction activities NCA Resources used in consultation and planning of the project Achieving their goal of having an efficient transportation system in Canberra Government (ACT) Resources and funds used in facilitating the project Dividends and revenue obtained upon operation Increased investment in the capital Vast growth and development of the region Value the impacts (costs and benefits) Costs Constructing and operating costs Reason: The resources used in the construction and implementation of bike stations and utility centres will not be available for other uses. This is an opportunity cost to the local community. Basis For construction, resources will be purchased from competitive markets where prices are a good reflection of economic value. Thus, market values are used in the purchase and acquisition of labour, materials and consultation services. The construction of the stations will cover the whole year. The construction will use Australian products such as Expanded Polystyrene (EPS) panels so as to minimise expenditure while boosting the domestic economy. Approximately 25 acres of land will be used to construct the 50 stations. The value of an acre within Canberra city centre is estimated to be $15,000per acre which adds up to $750,000 for all stations. The city land will be acquired from the ACT government Operations costs will be attained once the project is on use. The project needs 5,000 bikes each costing $300 with an annual maintenance cost of $50 on each bike (Clifton, Morrissey and Ritter, 2012). This sum up to an initial cost of purchase of $1.5m and maintenance costs of $25,000 per annum. Value Construction Bike stations $300,000 Land $750,000 Operation Purchase of standard bikes $1.5 million Maintenance cost $25,000 pa Implementation costs and app development Reason: This is a service that requires expert design, analysis, consultation and testing. Funds will be utilised in order to achieve the app and website. This capital will not be available for others uses in the society. Basis: The app will require the integration of all routes of Canberra. Apart from the standing charge, the cost is measured in hours with each hour of app developing being $50. Geo-location takes 32 hours, hours to load routes are 35 and the hours to track a bike are 74. Eventually this sum up to $7,050 and a standing charge of $30,000. However, the app also requires maintenance and continuous update. This is a cost included as a maintenance cost. The implementation of the project will require marketing so as to create awareness of the app and the service being offered. Value App design $37,050 App maintenance Marketing costs $10,000 pa $10,000 pa Labour Reason: The labour used in the construction, implementation and operation of the project is from the local community. This creates a shortage of labour available in Canberra. Basis The labour cost in Australia is high especially for a skilled labour force. This imposes labour costs, as the bikes need constant supervision and maintenance, the operating and management of the app and responsibility for the utility vehicles. The labour expenses thus add up to $600,000 given that each worker receives an average of $3,000 per annum and there are 200 workers. Value $600,000 Benefits Transport benefits Reason The project introduces a new transport system that is lower in cost compared to the current modes of transport. The transport benefits range from reduction in vehicle operation costs, reduction in accident costs, health benefit and residual value to public transport operating savings. Basis Vehicle operating costs The bike program will cut the number of kilometres travelled by cars thus reduce vehicle operation costs. The components of Vehicle maintenance costs include the length of a journey, traffic volume, vehicle speed, and road conditions. Total vehicle operating expenses comprise basic running costs of the vehicle which consists of depreciation, fuel, repairs and maintenance in resource cost terms. Public transport operating savings This project provides an alternate mode of transport. Thus, instead of using busses individuals can use bikes which will take them up to thier final destinations. Therefore, there will be a reduction in expenses of the provision of alternative public transport services. This will be reflected by the change in public transport earning. Residual value This includes the cost of assets of the project. The remaining value of the benefits to be derived from the implementation of the project at the end of the evaluation period has been estimated as the discounted net economic benefits of extending the lifetime of the project beyond the 30-year horizon. This valuation is based on assumptions of a continuing stream of project benefits, renewal of the rolling stock and ongoing operating, maintenance and replacement cost. Value Transport benefits Present values ($) Time savings 500,000 Vehicle operation costs 300,000 Residual value 800,000 Total transport costs 1.8 million The total transport benefits obtained are $1.8m which is accrued by time savings, vehicle operation costs and its residual cost. Environmental benefits Reason: Recent rise in pollution has lead to high health constrains. The project reduces the use of gasoline thus limiting car pollution. This has great effect to the local community. Basis Valuation of this benefit cannot be done through market values. However approximation can be done based on health records. A reduction in pollution related case shows direct benefit. Value $400,000 Land use benefits Reason: The Bike Sharing has the potential of maximising the productivity of land areas that are not under construction (Walravens, 2013). The areas adjacent to the bike stations will experience growth because they are perceived as accessible. Basis: The Bike program restructures areas such that they are attractive to daily commuters and students. Therefore this program will lead to a better land use than the current. This will also lead to an increase in the value of land in the region. Value Land use benefits Present values ($m) Land value benefits 1.6 Infrastructure efficiency savings 0.4 Total land use 2.0 The largest gain is an anticipated $1.6m increase in the value of the use of land adjacent to the Bike sharing stations. Infrastructure efficiency savings will also contribute to land use benefits with $0.4m. Table 7 Cost benefits analysis summary Cost scenario $m present value Transport benefits 1.8 Environmental and health benefits 0.6 Land use benefits 2.0 Total project benefits 4.4 Total project cost 3.25 Indicators Net present value 1.15 BCR 1.35 Sensitivity analysis This is a project that is sensitive to changing economic conditions. The main assumptions are centred about the app uptake by clients. The assumptions also rely on availability of land in strategic places. An analysis of +-20% on all cost and benefit values is taken to establish that despite the assumptions, the BCR still above 1. This project maintains it’s the BCR at one or greater than one. This indicates that it is beneficial to the society in economic and financial terms. Table 8 Sensitivity analysis for -20 Total costs PV $3.25 million Total benefits PV $3.52m BCR 1.08 NPV 0.27 Table 9 Sensitivity analysis for +20 Total costs PV $3.25 million Total benefits PV $5.28m BCR 1.62 NPV 2.03 This shows that the project is viable and has a good turnover if implemented. Distribution The main harvesters of the fruits of the project are the residents of Canberra. They will be able to access and move about the inner city at ease. Reduction in transport operating cost will suit they lifestyle. Investors in the public sectors especially busses will face stiff competition from this new program. The worthy loss will be due to shift in consumer preference. Conclusion This analysis of the Bike Sharing System shows that it will benefit the society directly. The impact of the project will be positive as shown by the sensitivity analysis. The project will benefit the local and visitors in mobility in the city. However, other forms of public may take that hit for consumer shift. Policies should be put in place to enable a sustainable transport network that covers all. Works cited Clifton, K., Morrisey, S. and Ritter, C. (2012) Business Cycles, Catering to the Bicycling Market, Transportation Research News, 280, 26 – 32. Larsen, J. (2013) Bike-sharing programs hit the streets in over 500 cities worldwide. Earth Policy Institute, 25(1). 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. Woodcock, J., Tainio, M., Cheshire, J., O’Brien, O., & Goodman, A. (2014) Health effects of the London bicycle sharing system: health impact modeling study, 348-425. Read More