Measuring Cost Savings and Benefits of Coordination

As part of local, state, and federal budget processes, agencies and departments are called upon to justify their budgets and estimate the value of the services they provide. In some cases, the value of a given service has a market value and can be estimated. In other instances, a price may exist but it may or may not represent the value of the service. Public transit agencies are a good example where the price of the service, the fare, often does not accurately reflect the value or the cost of the service. This is especially true when we consider a coordinated paratransit system. The ADA sets the limit of a paratransit fare not to exceed twice the fare charged for a similar fixed-route trip. The paratransit fare typically does not come close to covering the cost of providing the ride.

Assigning a value to coordinated paratransit services is primarily a measure of the cost savings achieved and the benefits realized from coordination. With performance measures in place, supported by available cost, revenue, and service data, paratransit providers can attempt to gauge the impact of coordinated services. Estimating the cost savings achieved through coordination is more straightforward than estimating the benefits. While some health and human service agencies might not have extensive historical operational data, most agencies can develop a rough estimate of what they were spending prior to coordination. That data are readily comparable to the cost of providing transportation to their clientele under a coordinated system. Cost savings are typically calculated on lower per passenger costs to the agencies and, in some cases, the elimination of the costs of operating, maintaining, and insuring vehicles on their own.

Calculating the benefits of coordination is a bit more difficult, but can ultimately be done. The first step in many areas is to define the broad parameters of benefits. This requires a process for analyzing the number and types of rides provided including work, medical, shopping, educational, and other types, and then assessing the impact on those riders of not providing that service. The impact could include such costs as the loss of jobs for lack of other affordable transportation alternatives and the loss of the ability to live independently for developmentally disabled clients or those clients with medical needs. The benefits of an affordable and accessible coordinated system could also include more non-quantifiable measures such as quality of life enhancements.

Measuring the cost savings and benefits attributable to coordination plays a clear role in developing support for further collaboration. Realistic cost savings and benefits estimates provide an opportunity for joint agency advocacy for better transportation services. These estimates also provide valuable information for agencies to share with other agencies still resisting coordination. Many health and human service and transit agency personnel reported that once they were able to provide actual cost savings achieved through coordination, other agencies became increasingly interested. In many areas, cost savings achieved have been substantial, but perhaps more importantly, coordination has led to simplification of customer access to the transportation system. On the cautionary side, claims about the benefits of coordination must be realistic and should continue to focus on real savings to individual agencies and enhanced services to their clientele if coordinated systems hope to encourage other agencies to participate.

The following two examples illustrate how agencies developed means to measure the cost savings and benefits of coordination, the data involved and the methodology applied, and the resulting use of the information For additional information about measuring cost savings and benefits of coordination, please see "Planning Guidelines for Coordinated State and Local Specialized Transportation Services," Checklist of Transportation Planning Steps, Step 10.¹²

A. State of Florida - Illustrating the Power of Coordination

In Florida, the Commission on the Transportation-Disadvantaged has been a vocal advocate of the benefits of developing a coordinated transportation system since its creation as the former Coordinating Council on the Transportation Disadvantaged under a Florida state law in 1979. Under the law, all agencies and operators receiving Federal, state and/or local funds for transportation services are required to coordinate their transportation services. The 27-member commission includes all major state level transportation and health and human service agencies, in addition to transportation providers and representatives of the transportation-disadvantaged (TD) eligible groups including children, poor, elderly and persons with disabilities. Through its systems of local coordinating boards covering all of Florida’s 67 counties, the Commission has designated 50 community transportation coordinators (CTC) who coordinate all local transportation-disadvantaged services under their umbrella that provide operating and expenditure reports to the commission. From this and other information, the Commission was able to estimate cost savings and benefits of coordination in the amount of $154 million over a three-year period in its report to the state senate in late 1998.

Estimating the impact of coordination is part of the Commission’s preparation of its Annual Performance Report (APR). Commission staff gathers annual operating information from the local CTCs, as well as actual expenditure reports from each purchasing or planning agency that provides funds for TD transportation services. When the program first began, state and local agencies reported their total transportation expenditures of approximately $8 million. Today, with reporting requirements in place for all agencies providing TD services, actual expenditures total $224.9 million statewide. This information has enabled health and human service agencies to assess how much they are spending and has encouraged some agencies to be more interested in coordination as they realize the potential for cost savings. The tracking of performance data including the number of trips provided, trip purpose, vehicle miles, vehicle and driver hours, and accidents, all of which are reported in the APR, allow the Commission and local CTCs to continue to focus on improving the cost-effectiveness of the coordinated system.

On a statewide basis in 1998, the Commission surveyed the local CTCs to estimate the cost savings. Savings were calculated as a measure of the number of trips diverted from the more expensive paratransit system to a less expensive alternative. The cost saving is then a calculation of what it would have cost to provide those trips by paratransit. In Florida, most of the cost savings estimated have been in urban areas, where trips are diverted from paratransit to fixed-route transit systems through the use of a bus pass.

The most notable of these examples is from Dade County, where the CTC worked with the local Agency for Health Care Administration (AHCA) to implement its Metro Pass program. The program encourages those Medicaid recipients who can use the public transit system to use the monthly Metro Pass, which gives them unlimited transportation on the fixed-route system at a cost of only $30 -$50 per month (including administrative fees) to AHCA. The local CTC estimates that the program is saving AHCA approximately $600,000 per month and $24.6 million since its implementation in 1993. A sample calculation from October 1998 is provided in the table below. The Dade County CTC runs other similar programs to divert passengers from paratransit to fixed-route services, which provide further cost savings.

In 1998, the Commission compiled data from the 50 CTCs to provide an overall cost savings estimate resulting from the coordinated system. On a statewide basis in FY 97-98, the Commission reported 36.6 million trips through the statewide coordinated system, a 14% increase over the previous year, while total system trip costs decreased by 5% over the previous year. The significant Medicaid cost savings illustrated in Dade County with AHCA is spurring health and human service agencies throughout the state to explore similar cost saving opportunities. As a result of the Metro Pass success in Dade County, the Commission is urging ADA-eligible Medicaid trips to be provided through similar bus pass programs where fixed-route services are available. These and other programs have resulted in a 23% increase in the utilization of mass transit in 19 Florida counties where fixed-route systems are in place as reported in the Commission’s 1998 APR. The state is continuing to examine issues of establishing statewide standards for setting a reasonable rate for a coordinated trip and accounting for the benefits of coordination. These and other measures will continue to reinforce the potential benefits of coordination.

B. Greene County, Ohio - Comparing Costs of Coordination: Before and After

The Ohio Department of Transportation (ODOT) administers the Ohio Coordination Program (OCP), a grant program that supports community efforts to coordinate transportation. In Greene County, Ohio, the County Board of Mental Retardation and Developmental Disabilities (MRDD) is the host agency in administering an OCP grant. The MRDD originally joined other county human service agencies to form Greene CATS. Since its formation, Greene CATS has grown to 44 member agencies operating 90 vehicles and now includes the Ohio Bureau of Employment Services, the Ohio Rehabilitation Services Commission, hospitals, senior centers, and nursing homes as well as other state, local, and private and public non-profit organizations such as the American Red Cross and the United Way. Greene CATS serves four major client groups including low income, elderly, mental health, and persons with disabilities.

According to staff, coordination was never meant to supplant individual agency efforts, but rather to expand agencies’ abilities to provide transportation for their clients by stretching their limited transportation dollars. Unlike many coordinated systems, Greene CATS is not a centralized system. Greene CATS functions as a transportation broker between various agencies that either provide their own transportation or purchase transportation services from other agencies. Under the Greene CATS model, each human service agency and operator continue to provide their usual transportation services while Greene CATS staff work to develop transportation arrangements between member agencies. Greene CATS staff serve as brokers between member agencies, providing details on the services available from the other agencies (driver qualifications, cost per trip, etc.) and matching trip requests with available service as well as available funding.

One of the keys to the underlying success of the system has been an effort to put a process in place to measure the cost-effectiveness and service levels of transportation provided by individual agencies. Using cost allocation guidance provided by ODOT, Greene CATS staff have worked with member agencies to implement a transportation cost model that enables agencies to determine both an agency’s total cost of providing transportation service and the cost of individual routes or services. The model includes definitions of standard account codes for identifying and classifying passenger transportation costs.

One of the first steps taken by Greene CATS was to encourage member agencies to develop a data collection and analysis plan that would put a process in place to collect transportation operations and cost data at the agency level. In order to benefit from the OCP grant, each of the member agencies is required to provide data in quarterly operating reports which are, in turn, submitted to ODOT as part of the OCP grant requirement. This has been a challenging task, as many health and human services agencies are not accustomed to collecting or tracking transportation data. The process called for agencies to collect five basic types of data about the transportation services they operate or purchase including:

• amount of service - a measure of vehicle miles and hours that can be gathered from the vehicle odometers and payroll records.
• use of service - a measure of the number of trips provided (one-way) that can be pulled from the driver logs.
• quality of service - a measure of the number of accidents, time on-board vehicles and on-time performance that can be gathered from driver logs, customer complaints, and discussions with drivers.
• cost of service - a measure of both the operating and capital cost including vehicle cost, vehicle maintenance, fuel, and driver costs.
• payments for service - a record of the various revenue sources used to fund services including fares, contract fees, and Federal, state, and local grants.

According to information from Greene County, agencies use the transportation cost model to assign costs as either fixed costs, which should not vary significantly based on the amount of services provided, and variable costs, which are expected to change directly based on the amount of service provided. The cost data are then combined with operational data to develop overall agency cost ratios and productivity numbers for passenger service including:

• cost per trip - a measure of the cost-effectiveness of transportation.
• cost per vehicle mile and vehicle hour - a measure of how efficiently service can be produced.
• passengers per vehicle-mile and vehicle hour - a measure of how effectively the service matches service with ridership.
• passenger revenue per cost - a measure of how much of cost is covered by the user and other sources.
• accidents per passenger - a measure of the safety of operations.

These measures are captured in the quarterly reports to track performance of the coordinated system and will provide data on the system’s performance over time. The cost model also provides guidance for using agency-wide variable and fixed costs to develop variable unit costs due to vehicle miles, variable unit costs due to vehicle hours, and fixed unit costs for the purposes of determining the cost of individual agency routes. Individual route costs can then be determined by applying unit costs to data on miles and hours of operation for each route. Greene CATS staff hope to ultimately encourage the collection of individual route data by the agencies in order to evaluate costs and service levels at the route level. This information could provide valuable information to Greene CATS and agency coordinators as they evaluate service changes or alternative service delivery methods.

Originally, many of the data submitted by various agencies were incomplete and of questionable validity based on agencies’ lack of experience in collecting the data. Over time, the data have improved and are beginning to provide useful measures for comparing services. Trying to gather the data has also helped some agencies to estimate accurately the full cost of providing transportation for the first time. In a number of cases, agencies were surprised to see what their transportation costs were in comparison to other providers. This information has enabled agencies and consumers to assess the efficiency of transportation services provided by the coordinated system as a whole and on an individual agency basis over time, and has led some agencies to utilize less expensive services provided by another entity. While these costs may be surprising to some, executive directors of various agencies have acknowledged that going through the process has allowed them to evaluate how best to provide transportation services - directly operating services, purchasing services from another member agency, or contracting with a private provider - and the savings they could achieve through coordination.

In the near future, Greene CATS will be using other grant funding from ODOT to install an automated scheduling and dispatch system that will further improve inter-agency coordination. Greene CATS staff is also hoping to leverage their coordination success to generate additional funding from public and private funding sources by showing that the coordinated system is providing higher levels of service and greater operating efficiencies. In the meantime, coordination has opened up discussion between agencies and provided opportunities to adopt one another’s best practices. Understanding costs and taking a coordinated systems approach is also beginning to lower barriers to commingling of clients to improve operational productivity and better utilize each agency’s existing transportation capacity.