Navigating the Pitfalls of Illusionary Investment in AFC Systems
April 11, 2021
In the realm of Automated Fare Collection Systems (AFCS), the advent of investment projects, typically characterized as BOO (Build-Own-Operate) or BOOT (Build-Own-Operate-Transfer) models, often promenade as promising pathways towards seamless implementation and operational efficiency. However, a deeper delve into the practices often unveils a myriad of issues that taint the purported investment strategy with layers of complexity and hidden challenges.
When exploring the concept of investment projects, especially in the context of BOOT, the notion of ‘transfer’ often remains unfulfilled, a scenario that necessitates exploration in itself, exploring aspects of vendor lock-in, the struggles with system maintenance sans supplier involvement due to inadequate or absent documentation, and a palpable reluctance to relinquish business operations from a private entity.
The crux of the matter lies in the underlying philosophy of an investment project: the principle that it should be offset or financially justified through subsequent economic impacts such as production augmentation, sales increase, or cost reduction, much akin to how energy-saving projects validate their financial expenditure through future energy cost curtailment.
Yet, with AFC “investment” projects, a discernible guarantee or risk absorption by the investor concerning economic impacts remains conspicuously absent. Commonly, technical specifications or accountable deliverables embedded within project documents magnify aspects like “achieving a specified share of cashless payments within a determined timeframe” or quantifying installed validators, not necessarily parameters harmoniously tied to economic effects. The extrapolation that cashless payments amplify ridership or fare collection lacks tangible evidence, especially when juxtaposed with undeniable forthcoming costs entailing equipment installation and processing fees, among others.
There’s a noticeable trend where stakeholders, such as transit authorities, may overlook these realities, whether intentionally or inadvertently. Indeed, the costs intensified by these investment projects invariably percolate through the financial structures of public transport, ultimating in an impact on city budgets or indirectly levying passengers through augmented fare rates. Investments inherently harbor heightened risks, which invariably permeate the cost framework of every project.
In a scenario where transit authorities grapple with uncertainties regarding their returns in exchange for their investment, especially in cases where neither cashless payments nor AFC system implementation necessarily resolve inherent problems, the indispensability of clarity in implementing AFC systems becomes evident. Identifying clear, objective-aligned strategies, securing tangible, accountable deliverables, and ensuring rigorously calculated economic impacts are pivotal, always conscious of the axiom that advantages or benefits do not materialize without associated costs.
At AFCSOA, our commitment extends towards crafting diverse business models, meticulously tailored to the unique needs of our customers, ensuring that AFC system implementation is not only cost-effective but strategically and economically sound, fostering a symbiotic relationship between innovation, investment, and tangible, beneficial output. Our resolve is steadfast in mitigating the allure of illusionary investments and ensuring that every step towards AFC implementation is firmly rooted in practicality, sustainability, and economic rationale.