The Bikeshare Planning Guide

Contracting Structure

Decisions about the operating environment and asset ownership will ultimately shape the
bikeshare system’s contracting structure. For publicly procured systems, there may be
separate contracts with the suppliers of each of the various components of the system,
including bikes (and stations), software, operations, advertising, and marketing. For privately-
operated systems, each operator (in a multi-operator system) is expected to provide all of
these components to the level required by the city through permitting requirements.

Systems Operated Through Public-Private Partnership (PPP)
Bundling of contracts can bring simplicity, with the government having to manage only one
contract, thus focusing accountability on a single entity. For Mexico City’s publicly-funded
system, contracting is essentially a complete concession of the entire system to a single
contractor. For station-based systems, the initial provision of infrastructure can either be
packaged with the operations contract or carried out separately. Combining infrastructure and
operations provides an incentive for the contractor to supply high quality infrastructure so as
to minimize maintenance costs over the life of the contract. This can also help to minimize
challenges that may arise in transitioning the system from the designer/infrastructure
implementer to the operator (as was the case in Bandung, Indonesia where the implementer,
Banopolis, does not operate the system).

However, in some situations, signing separate contracts can be a better choice. Given the large
variation in the depreciation time of hardware—stations, terminals, and the control center—it
often makes sense for the city to procure these systems and issue a separate contract for
operations. Creating separate contracts for infrastructure and operations also can reduce
implementation time and enable smaller budget packages that may be financed separately.
The latter was the case in Bandung, which leveraged full city funding for procurement and a
revenue-sharing agreement for operations. Furthermore, separate contracts help mitigate the
risk that may come with relying on a single entity and enable the government to contract with
an entity that specializes in the requested service. For instance, if a smart-card system and
payment mechanism are integrated into the city’s larger public transport system, that
operator could be contracted to expand into bikeshare and be responsible for payment and
customer tracking, while another entity would be contracted for operations.

The duration of the contracts that require investment into infrastructure are usually tied to
the life-span of that infrastructure to allow for depreciation of the asset and a chance to
obtain a return on the investment before having to invest in recapitalization. In London, the
contract for the Santander Cycles bikeshare system runs for five years, with the potential for
an additional five-year extension. Paris’ contract with Smovengo to operate the new Vélib’
Metropole system began in 2018 and runs through 2032.[45] While long contracts like these tend
to be attractive to operators because they reduce risk, they can also stifle innovation. Shorter
contracts, such as those that coincide with the three to five year lifespan of a high-quality
bikeshare bicycle, give more flexibility to the implementing agency and offer greater
opportunities to adapt the system to emerging technologies and operating models.

Since the station and IT infrastructure are expected to last beyond the initial operations
contract, the implementing agency should ensure that all the pieces of the bikeshare system
work together, especially the software, bikes and stations. In the case of software, usage rights
and the data should be retained by the city after the operating contract is over.
It is worth nothing that, while PPP arrangements have been widely used to implement stationbased
systems, cities may enter into an exclusive agreement with a dockless operator. This is the
case in Manchester, which established an MOU with Mobike to provide dockless bikeshare
service in the city. The regional transportation agency, Transport for Greater Manchester, chairs
an operations group that consists of members from Mobike and the city councils of Manchester
and nearby Salford to discuss topics related to rebalancing, parking, and data sharing.

Privately-Operated (Non-PPP) Systems
Because private bikeshare companies operate within the public realm, they should be required
to apply for a municipal permit to operate, similar to businesses or restaurants that place
merchandise or outdoor seating on the sidewalk. In addition to the permit itself, several cities,
including Seattle, San Francisco, Charlotte, Oxford, and Dublin, require private bikeshare
operators to agree to abide by additional rules to be approved to operate. See section 4.2:
Planning & Regulating Dockless Systems for more.

Regardless of the structure, the city government should maintain oversight of the system and
responsibility for managing the contracts and monitoring the level of service (see subsection
6.1.2: Operator(s) for more on single versus multi-operator systems). There are three main
types of contracting structures, defined by the ownership of assets and provision of service:

  • Publicly Owned And Operated (6.3.1)
    The government owns the assets and provides the services.
  • Publicly Owned And Privately Operated (6.3.2)
    The government owns the assets but contracts with a private entity to run the service.
  • Privately Owned And Operated (6.3.3)
    One or more private entities own the assets and provide the services, guided to some
    degree by government regulation.


Under this type of contracting structure, the government plans, designs, implements, and operates
the bikeshare system. The government also owns all the assets of the system and the financial risk
lies entirely with the city. The implementing agency would then most likely become the operator, or
operations could be contracted out to a parastatal or another government agency. The greatest
advantage to this structure is that one entity is responsible for the planning, procurement,
implementation, operations, and future expansion of the system. Additionally, the public authority
is able to prioritize the desired goals of the system—ideally, that it supports the larger public
transportation system—over other incentives, such as profitability. The downsides to this type of
business model include the need for, and risks associated with, public funding, as well as
disincentives to improve service because of a lack of competition and innovation typically
generated by the private sector. In Germany, Deutsche Bahn Connect (a subsidiary of the national
train system, Deutsche Bahn) operates the Call-a-Bike system in cooperation with each city, and
the system operates in more than 50 cities across the country. In this model, the public authority
usually creates an internal entity to manage the entire project, including station siting and details
of network development, operational planning, fee structuring, and collection and marketing.



This type of contracting structure means that the government owns the assets and a private entity
provides the services. This can be a simple fee-for-service model, like in Barcelona or in Shanghai’s
station-based system, where the fee is based on the number of bikes in the system. The
procurement of bicycles for the system can be done by the government or it may be the
responsibility of the operator. All other assets—software, control center, stations—are owned by
the government.

Portland’s BIKETOWN is a good example of this model: It is owned by the city, which allocated US$2
million in federal funding to cover the system’s startup costs. Public funding, however, ends there,
since the system is operated by a private bikeshare company. The city’s contract with the operator
includes few specific requirements for rebalancing or maintaining certain capacities at each
station. This flexibility is designed to encourage the operator to run bikeshare like a business—as
efficiently and cost-effectively as possible—and this notion is further incentivized through a
requirement that the operator cover any financial losses the system generates in its first three
years of operation. However, the company will receive 60% of any program surplus (with the rest
going back to the city).

The advantage of this model is that the private operator manages all logistics, and the city has
some control during key phases of the project, while not assuming financial responsibility for dayto-
day operating details or system risk. In some cases, shorter contracts can be negotiated if the
operator has no investment in the infrastructure. This offers more flexibility for the city, but also
requires more staff time for planning (issuing tenders, negotiating, signing a contract every year).



Under this type of contracting structure, one or more private entities own the assets and provide
the service, while the government grants access to public space and the rights-of-way. In privately
owned and operated system arrangements, the city should be sure to set clear standards for the
system that are communicated through a tender, permit, or code of conduct. Ultimately, the
government grants the rights, in the form of legislation and street space, to operate, but the
capital assets are owned and the operational costs are borne by the private operator(s). This
approach avoids the need for cities to budget public funds to bikeshare and, in some cases, cities
can actually generate revenue by requiring operators to pay a fee to apply for a permit.

Privately owned and operated systems do have some risks associated with them, particularly
regarding conflicts of interest and balancing the city’s goals for widespread distribution against
the private operator’s desire to optimize revenue. Normally, the private operator is interested in
the most dense, high-revenue-producing areas or neighborhoods, while the city may have a
greater interest in making sure the system is equitable across the city, covering areas that may
produce relatively low revenue. In the operational agreement, the city should be sure to include
safeguards to ensure assets are maintained by operators in low-density, low-income communities
of concern, either through establishing geofenced hubs or fleet minimums in these areas or
through in-lieu fees. These approaches are explained in detail in subsection 4.2.1.

Privately owned and operated systems are very attractive to cities that have struggled—or
completely failed—to raise enough funds to support bikeshare. This was the case in St. Louis,
Missouri, which has been trying to fund a station-based bikeshare system estimated to cost as
much as US$3.3 million to implement since 2014. Following another failed funding attempt in 2016,
city officials pivoted, drafting and—in early 2018—passing detailed permit regulations that will
allow private dockless bikeshare operators that comply to provide service to the city.[46]

Interested in learning more about optimizing dockless bikeshare for cities? Check out ITDP's dockless bikeshare policy brief.

View Policy Brief