6.4.1 MANAGING CONTRACTS THROUGH SERVICE LEVELS
Once the city establishes the organizational and operating structure for its bikeshare system,
a mechanism for enforcement—namely, ensuring the operator(s) is running the system in line
with the city’s overall goals—must be established. Traditionally, service levels have been used
to enforce the quality and service standards agreed to in the contract. If the city is pursuing a
private, multi-operator system that grants permits to operate instead of a formal contract,
enforcement should be included in the permit language. It is recommended that, particularly
for privately-operated systems, at least one full-time staff person (either within the city
government structure or a consultant) is responsible for overseeing bikeshare enforcement.
Additional details on staffing are included in subsection 7.2.1.
Service levels ensure a baseline of quality in system operations (hardware and software),
customer service, maintenance, redistribution, marketing, and reporting. Each service level
normally identifies an optimal level, and then a variance within which performance is
acceptable. The operator is then penalized if varying from the service level negatively affects
the system, and rewarded if it positively affects the system. Offering rewards as well as
penalties enables flexibility in how an operator can make revenue from the system.
For example, an operator of a recently launched system is having a hard time keeping the
system online in accordance with the software service level agreement because of initial
glitches in the system. This causes the operator to fail to meet the service level in this
category. The operator does, however, far exceed the service level for membership. Between
the service level for software, which the operator does not meet, and for membership, which it
exceeds, the operator is able to secure a decent revenue while working on the service levels
where there are problems. Service levels should be designed to create incentives for an
operator to increase its revenue while doing an outstanding job. They should not bankrupt the
company.
While the government sets the quality and service standards when the contract is signed, it
should work with the private sector on the best way to achieve the desired service level. It is
important to look at the capabilities and limitations of the system and set the service levels
realistically. When planning a system, many service levels will be estimates or best guesses,
and will likely need to be re-evaluated using performance data from the initial year of
operation. Identifying what data to collect from the outset to assess performance will help to
inform and adjust service levels. Service levels that prove to be unreasonably high should be
lowered to be more realistic, while those that are being vastly exceeded should be adjusted, or
should include ceilings regarding compensation. Service levels should act as an evolving
matrix of give-and-take between the operator and the authority or governing body.
There are two basic principles regarding monitoring service levels:
Easy & Cost-Effective
Realistic service levels should be monitored at little expense to the city government. Setting
service levels that cannot be monitored easily leads to difficulty calculating the compensation
to the operator, and can result in non-enforcement. This ambiguity starts off small but will
over time create problems in the relationship between the operator and the city.
Transparent
The authority should have access to all data collected and transmitted by the system, and
should know how much revenue comes from the different sources. Audited financials should
be shared by the operator with the city so there is a clear picture of excessive profit or loss.
The contractual relationship between the operator and the governing body with the
associated service levels creates the performance-management system. The performance
management system is usually based on a weighted points system whereby service levels
that are very important, like the system’s being online, are weighted more heavily than those
that are desirable but not essential, such as marketing efforts. By weighting the service
levels, the governing body can create an incentive to the operator to put resources toward
meeting service levels that the governing body feels are most important to serve the user.
6.4.2 PERMIT ENFORCEMENT MECHANISMS
Similar to service levels, permits enable cities to establish system-wide standards that
operators must meet continue operating. Having mechanisms in place to enforce these
requirements is critical to achieving optimal service quality. This can be done in a variety of
ways:
Non-Compliance Fees
If an operator violates operational permit requirements, such as not removing broken bikes
from the street or rebalancing bikes that have not been ridden in the time frame expressed in
the permit, they may be required to pay a non-compliance fee. If possible, the city may want to
divert these fees into a fund used to support bike parking infrastructure or providing reduced
cost rides to low-income residents.
Assessing compliance falls to city staff, and it is unlikely they will have the capacity to monitor
every operator’s fleet at all hours of the day. However, city bikeshare staff should field-verify
operator data on real-time bike locations, and take test trips that can be identified in
submitted trip history data. Once staff has verified an operator’s data, they should begin
checking for operational compliance both on the ground (conducting “sweeps” of the city) and
using real time data from operators. Permit language should reflect that if a certain
percentage of any operator’s fleet is not meeting the requirements when city staff completes a
sweep, they may be subject to a non-compliance fee.
Relocating Bikes
Many permits give the city authority to relocate or remove bikes from the street that do not
comply with permit requirements, such as those that have been reported as broken but have
not been maintenanced within the permit time frame, or those that are blocking the public
right of way. Seattle’s permit requires operators to pay a fee equal to 115% of the city staff
member’s hourly rate for the city having to relocate or remove non-compliant bicycles.
Permit Freeze & Revocation
If an operator fails to meet major permit requirements like not providing safety information to
users or exceeding fleet maximums set by the city, a temporary freeze may be initiated on the
operator’s permit as an intermediate step while the operator makes adjustments necessary to
comply with the permit. Failure to do so within a certain time frame will lead to revocation of
the operator’s permit. In Indonesia, governments have undertaken this strategy in cases of
serious non-compliance. Permit freezes (and revocations) should only be initiated in extreme
circumstances, since reducing the availability of bikes would be counterproductive to most
citywide mobility goals.
