14.6Vehicle Operating Company Input Parameters

14.6.1Operational Expenditures (Opex)

Operational expenditures refer to expenses incurred in the course of ordinary business, such as sales, general, and administrative expenses. For the vehicle operating company, these expenses are directly dependent on the operation itself, as denominated in kilometer-dependent parameters. The expenses are also indirectly dependent on the size of the fleet/bus operation, which will be referred to as vehicle-dependent parameters.

Kilometer-Dependent Parameters

Kilometer-dependent parameters, as implied by the name, refer to sizing parameters that are directly and linearly dependent on the operational service.

Fuel

Out of these parameters, the biggest cost component is the fuel cost (US$), which can be calculated by multiplying the consumption rate (l/km) by the number of kilometers (km) and then by the fuel price (US$/l). Typically, the consumption rate is expressed as l/km, such that multiplying the consumption rate by the total number of kilometers gives the total number of liters used. This may be counterintuitive at first, since one usually thinks about consumption efficiency in terms of distance travelled per unit of fuel.

The consumption rate is different depending on vehicle specification:

• Vehicle size (eight meters, twelve meters, and eighteen meters);
• Front/rear engine specification;
• Air conditioning (AC), or not;
• Vehicle technology standard (Euro IV or Euro V);
• City conditions (altitude, humid/dry).

As a rule of thumb, a vehicle with AC will, aside from having a larger cost, also consume around 10 percent more fuel. That being said, as reference values, the consumption per vehicle should have values around those in Table 14.2.

Source: Logit. Currency conversions from R$ to US$ with 2013 exchange rate: https://www.irs.gov/individuals/international-taxpayers/yearly-average-currency-exchange-rates

For the fuel price, one must consider the “bulk” price, because fuel will be purchased in great quantities. Usually, a fuel tank and pump will be installed at the garage depot and be supplied weekly by a tank truck.

Lubricants

Lubricants are also a relevant cost item and, for simplification purposes, may be considered as a percentage of the total fuel cost. As a rule of thumb, this amount ranges from 3 to 5 percent of the total fuel cost, but may be calculated from the bottom up though specific lubricant cost and engine lubrication rates.

Tires

Tires are another relevant cost parameter and depend on a couple of other parameters, which vary per vehicle:

• Number of tires per bus:

  • Smaller vehicles—four to six;
  • 12- to 15-meter vehicles—six;
  • 18-meter articulated vehicles—ten.

• Tire type:

  • Smaller vehicles—175/75 R17.5;
  • 12- to 13-meter buses—275/80 R22.5;
  • 18-meter articulated buses—295/80 R 22.5.
• Tire unit cost per tire type;
• Useful life per vehicle type;
• Number of tire retreading allowed per vehicle type;
• Tire retreading unit cost (approximately 25 percent of new tire cost);
• Consumption;
• Price—new/recap.

Tire retreading/regrooving are processes intended to prolong the useful life of the tire and thus reduce the cost per kilometer. The regrooving process is the initial step, and consists of cutting into the tread of a tire and tread a pattern deeper than the original, so as to prolong its useful life. Once the regrooving reaches its limit, the tire is subjected to a retreading process, which consists of reconditioning the tire by replacing the worn tread with new material.

The total useful life of a tire should be expressed considering the maximum number of retreading processes possible. As a result, one may calculate the tire cost per kilometer as follows:

Source: Logit. Currency conversions from R$ to US$ with 2013 exchange rate: https://www.irs.gov/individuals/international-taxpayers/yearly-average-currency-exchange-rates

Parts and Replacements

Parts and replacements costs are strongly dependent on the quality and efficiency of the maintenance program. In other words, depending on the maintenance program, costs may vary considerably.

In order to size this item correctly, there are two parameters to consider:

• Vehicle acquisition value:

  • The parts and replacement costs must be correspondent to the makeup of a new vehicle;
  • The total vehicle acquisition value is superior to just the parts and replacements makeup of the vehicle, and must be considered without tires and without specific acquisition cost values.

• Kilometers travelled:

  • The cost driver for “wear” is usage, and thus, the more kilometers a vehicle travels in a year, the greater need of parts and replacements it should have.

That being said, the sizing of this item must then relate a percentage of vehicle acquisition value correspondent to an average of kilometers travelled per year. In case the vehicle travels more kilometers or, in case the vehicle acquisition cost is smaller or larger, the cost of parts and replacements per kilometer must vary.

Because of a couple of tariff readjustment studies in Brazil, it was identified that the parts and replacements costs vary from 3 to 5 percent of the vehicle acquisition value. In addition to that, for the cities considered, 78,000 kilometers per year (6.5 kilometers/month) is approximately the average kilometers travelled per year. Consequently, one may derive a cost per kilometer to be utilized per vehicle type.

Source: Logit. Currency conversions from R$ to US$ with 2013 exchange rate: https://www.irs.gov/individuals/international-taxpayers/yearly-average-currency-exchange-rates

Vehicle Dependent

Vehicle-dependent cost refers to items that are indirectly dependent on the fleet size. The rationale behind this is that the larger the fleet, the larger the number of mechanics, traffic supervisors, back office, and overhead that is necessary. As a result, the sizing parameter for these costs will be a personnel/vehicle or cost/vehicle, that must then be multiplied by the corresponding fleet.

The main cost item relating to the entire vehicle operation is personnel-related costs. One may say that a vehicle operating company is personnel intensive, usually having this cost account for 30 to 40 percent of the operator’s total payment.

The employees may be divided into two different categories, which must be treated separately:

• Vehicle drivers and possible onboard fare personnel;
• Garage depot/back office personnel.

These employee/vehicle ratios must then be multiplied by the average salary per category, to company salary tax, 13th check, benefits, and other costs amount to the total cost of employment.

Vehicle Drivers

Vehicle drivers sizing ratio depends more on the system schedule than on predetermined sizing ranges. For starters, the operational personnel must be sized utilizing the operational fleet size, not the total fleet. The reason for this is that it is the operational fleet that is related to the vehicle timetables and schedule.

In order to properly size the number of drivers required for the system, a detailed analysis, bus route per bus route, must be conducted. However, in case the majority of the bus routes have a cycle time of around one hour, a simplified sizing method may be utilized. First, one needs the number of trips per hour for a working day, Saturday, and Sunday:

Having the total trips per hour, one may assume that in the peak hour, 100 percent of the operational fleet is utilized. Consequently, one may calculate the percentage of the fleet utilization over the course of the entire day:

Given that the driver utilization is directly dependent on the bus utilization, one may say that the “total” of total vehicle utilization hours equals the amount of driver working hours necessary.

Having calculated that, one must then verify the work regimen of the drivers in terms of daily working hours, weekly working hours, and also how these working hours may be spread out. In Brazil, for instance, many union agreements allow for a seven-hour working day (seven hours of work and one hour for lunch), a total of forty-four-hour working week and a 6 to 1 working regimen (work six days, rest one). That being the case, we can see that 11.55 hours (total weekday vehicle utilization hours) divided by 7 hours (workday hours) results in a ratio of 1.65. In other words, given the working scale alone, one could say that 1.65 drivers are necessary per bus in order to man the fleet in a working day. Given that this number is under 2, no overtime additional pay is necessary. If this number were over 2, then it would be necessary to calculate the daily overtime factor (total daily hours divided by 14 hours) and multiply that by the overtime pay.

From the total weekly hours, we can see that the Saturday and Sunday requirement totals a value over 14 hours (8.37 + 6.67 = 15.04). In other words, the total weekly work hours would be determined by the following equation:

Eq. 14.1 Total weekly work hours:

\[ (5 \text{days} * { 7\text{hours} \over \text{day}} ) + {15.04 \text{hours} \over 2 \text{hours}} = 42.52 { \text{hours} \over \text{week}} \]

Since 42.52 hours per week is under the weekly regimen of 44 hours, no additional weekly hours are required. In case this number were over 44 hours, then one should calculate the “factor” of exceeding hours total hours per 44 hours and multiply that by the overtime pay.

Based on this number, one must also consider additional pay that may be required for the nighttime shift (10:00 pm to 5:00 am). For the above examples, one may calculate that 7.88 percent of the total weekly hours occur during the nighttime shift. To that amount, one may apply the nighttime shift additional pay and thus reach a nighttime shift factor. In Brazil, this overtime pay factor is 1.3714, which gives a global nighttime factor of 1.0293.

In addition to all of this, one must calculate the provision for vacation period, national holidays (if applicable), and yearly absentee days.

Eq. 14.2 Provision for national holidays or absentees:

\[ 365 \text{days} \over [(\text{total days} \in \text{year}) – (\text{missed work days})] \]

For a 30-day vacation period, the ratio would be 365/335. All these provisions, calculated separately, must then be multiplied so one reaches a total coverage factor.

As a result, the sizing factor is calculated using the following variables:

• Daily work scale ratio;
• Daily overtime factor;
• Weekly overtime factor;
• Weekly nighttime factor;
• Coverage/absentee provision factor.

Having calculated the sizing factor, this number should then be multiplied by the union driver pay and benefits. As an orientation, for 44 hours/week working hours, the driver ratio could vary from 1.80, for an extremely peak-concentrated operation, up until 2.80, for a very distributed daily service (e.g., Rio de Janeiro City). In case the system is designed with onboard fare personnel, their sizing is similar to the driver sizing.

Operational Control

Operational control staff are responsible for the scheduling, inspecting, and release of the vehicles from the garage depot. The smaller the operation, the fewer inspectors are necessary; however, the following positions are nearly mandatory:

• Head of operational control;
• Controllers;
• Traffic inspectors/supervisors;
• Bus schedulers/programmers;
• Assistants.

Given that these are different positions, with different numbers of professionals per position, earning different wage amounts, there are two ways to address this sizing dilemma:

• Individually size each position, in terms of the number of employees and base salary;
• Adopt average ratios and average salaries, which are representative of the operation control as a whole.

In terms of convenience, it is always preferable to adopt average values; however, one must be careful in case the size of the companies varies greatly. The reason for this is that certain positions—such as the head of operational control, controllers, and bus schedulers—will have around the same number of professionals regardless of the fact if the vehicle operating company has one hundred vehicles or six hundred vehicles. Other positions such as traffic inspectors/supervisors are more directly dependent on the size of the company and fleet.

As an example, for the sizing of a vehicle operating company with an operating fleet of four hundred vehicles, one could expect the following sizing parameters:

Source: Logit. Currency conversions from R$ to US$ with 2013 exchange rate: https://www.irs.gov/individuals/international-taxpayers/yearly-average-currency-exchange-rates

For this situation, one can derive a sizing ratio of approximately 0.12 in relation to the operating fleet, and an average salary of approximately US$900 (R$2,020). Given that the average salary is superior to the salary of the traffic inspectors/supervisors, which are the positions more directly dependent on the fleet size, one should expect that a different operating fleet size should produce a different sizing ratio different average salary.

As an example, the table below shows the sizing for a vehicle operating company with an operating fleet of two hundred vehicles:

Source: Logit. Currency conversions from R$ to US$ with 2013 exchange rate: https://www.irs.gov/individuals/international-taxpayers/yearly-average-currency-exchange-rates

For this smaller company size, one can see that the average salary had a 10 percent increase and the sizing ratio increased from 0.1175 to 0.1550. Of course, in cases where the vehicle operating company is smaller, the salary levels would most likely be lower and the number of controllers, for instance, might be lower as well, having other positions take on part of the work. For the financial model, what matters is the total cost of the operational control, so in case the ratio increase is offset by an average salary decrease, the result is the same.

In any case, a reasonable sizing parameter to be used is something in the range of 0.10 to 0.16. The average salary depends on the local condition, but as a proxy, in this case, it would equal approximately 3.0 to 3.2 times the minimum wage.

Garage Depot/Maintenance

The garage depot/maintenance staff is responsible for maintaining the vehicles in operational conditions, as well as aiming to reduce maintenance costs and breakdown occurrences. The garage depot/maintenance personnel sizing issues are similar to the ones addressed in the operational control sizing. The denominator, for the ratio analysis, is the operational fleet.

Typically, the expected positions should be:

• Head of maintenance;
• Maintenance supervisors;
• Mechanics;
• Assistant mechanics;
• Electricians;
• Panel beaters;
• Spray painters;
• Tire repairmen;
• Others.

As an example, for the sizing of a vehicle operating company with an operating fleet of four hundred vehicles, one could expect the following sizing parameters:

Source: Logit. Currency conversions from R$ to US$ with 2013 exchange rate: https://www.irs.gov/individuals/international-taxpayers/yearly-average-currency-exchange-rates

For this situation, one can derive a sizing ratio of approximately 0.42 in relation to the operating fleet, and an average salary of approximately US$700 (R$1,575). The overhead of the garage depot/maintenance department, which differs from the operational control, is smaller and most positions have a larger dependency on the number of vehicles.

As an example, the table below shows the sizing for vehicle operating company with an operating fleet of two hundred vehicles:

Source: Logit. Currency conversions from R$ to US$ with 2013 exchange rate: https://www.irs.gov/individuals/international-taxpayers/yearly-average-currency-exchange-rates

As a result, one may see that the average salary is roughly the same and the ratio sizing parameter had a small increase from 0.4225 to 0.4600. Of course, in case the vehicle operating company were considerably smaller, or larger, probably the salary levels would change and the number of personnel would be altered as well. In any case, it is safe to size the garage depot/maintenance to something in the range of 0.420 to 0.480, with an average salary of approximately 2.3 to 2.4 times the minimum wage.

Back Office Personnel

The back office personnel are assigned the responsibility of managing the company and performing the roles of recruiting and procurement, among others. Since the back office size relates to the overall size of the company, one could argue using as a denominator for the ratio parameter the total number of buses, considering the operational and reserve fleet. However, in order to keep coherence with the other personnel sizing above and considering that the back office is usually more dependent on people than assets, it is recommended the use of the same driver index: personnel/operational fleet.

The back office, similar to the operational control department, is less scalable than other operational positions. Independent of the size of the company, a minimum structure is required, which is usually sufficient for a larger “leap” in overall employee numbers. In other words, the back office increases in steps.

Typically, the expected positions for the back office personnel are:

• Back office manager;
• Secretary;
• Head of employee relations;
• Accountant;
• Nurse;
• Work safety engineer;
• Work safety technician;

• Assistants:

  • Accounting;
  • Financial;
  • Employee relations;
  • Data processing;
  • Procurement;
  • Administrative;
  • Other assistants.

As an example, for the sizing of a vehicle operating company with an operating fleet of four hundred vehicles, one could expect the following sizing parameters:

Source: Logit. Currency conversions from R$ to US$ with 2013 exchange rate: https://www.irs.gov/individuals/international-taxpayers/yearly-average-currency-exchange-rates

For this situation, one can derive a sizing ratio of 0.10, in relation to the operating fleet, and an average salary of approximately US$820.00 (R$1,840.00). As mentioned before, there is less room for scalability due to size and most positions still require at least two employees.

As an example, the table below shows the sizing for vehicle operating company with an operating fleet of two hundred vehicles:

Source: Logit. Currency conversions from R$ to US$ with 2013 exchange rate: https://www.irs.gov/individuals/international-taxpayers/yearly-average-currency-exchange-rates

As a result, one may see that the average salary is slightly higher, which is consistent with the inability to shed the upper level positions. The ratio sizing parameter thus has a 30 percent increase, going from 0.10 to 0.13. In any case, it is safe to size the back office personnel in the range of 0.090 to 0.150, with an average salary of approximately 2.7 to 3.1 times the minimum wage.

Directors Pay

Lastly, there is the sizing of the cost related to the company’s directors. This sizing parameter could be considered within the back office personnel, but since this item is even less scalable and more dependent on the specific operation/country conditions, it is best to treat it separately.

As an example, for a vehicle operating company with approximately 400 vehicles in Brazil, it is possible to observe payments to directors totaling up to US$40,000 per month (about R$90,000 per month)—approximately 65 minimum wages. If the company were half that size, in terms of vehicles, and thus generating less revenue and profits, this total director payment amount could be reduced by 30 to 50 percent. Since for the financial model what matters is the total cost related to the directors, one could have more directors earning less each, or the opposite. In any case, this is a less sensible item in terms of total Opex and is strongly dependent on regional conditions.

In addition to the expenses mentioned above, there are other operating expenditures that are less significant but that should be considered.

Licensing/Insurance/City Taxes

Usually, each vehicle is subject to yearly licensing, obligatory insurance, and city taxes. Licensing and insurance tend to have a fixed value per vehicle. Hence, at a given time in the year, the vehicle operating company will be required to renew these licenses for the entire fleet (operational and reserve). City taxes may also be fixed, or possess descending yearly values per vehicle, based upon on vehicle age. These unit values are specific to each city and country. Moreover, there are additional insurances that may be contracted by the vehicle operating company that may be paid monthly.

Onboard Surveillance and Fare Maintenance

Depending on the system attributes, it may be the operating vehicle company’s responsibility to maintain the onboard fare system and surveillance equipment, as well as paying for the data communication fees.

This is not a substantial value, and in Brazil, these values may amount to about US$245 per month (approximately R$550 per month).

Other Costs

Finally, there are many other overhead costs, whose individual sizing is not recommended. Usually, these costs amount to 3 to 8 percent of total operational expenditures and, as such, it is recommended to treat them as a percent markup on total operating costs.

A list of items included in this estimation is presented below:

• Water and sewage;
• Electric energy;
• Communications costs (telephone and internet);
• Building upkeep;
• Security;
• Certifications;
• Land tax;
• Accounting and legal support;
• Other equipment/machinery maintenance;
• Banking expenses and money transport;
• Other support vehicle expenses;
• Food;
• Marketing and public relations;
• Office supplies;
• Data processing;
• Environmental protection/waste management;
• Publications;
• Travel;
• Other.

14.6.2Capital Expenditures (Capex)

Capex refers to expenditures whose aim it is to create future benefits. A capital expenditure is incurred when a business spends money either to buy fixed assets or to add to the value of an existing asset, with a useful life that extends beyond the tax year.

Vehicles

Acquisition

For the vehicle operating company, the initial vehicle acquisition is the single most important capital expenditure of the operation. Since the vehicles must be acquired before the operation commences, they happen before the “zero” date mark, occurring between the year before year zero and the moment year zero starts. As discussed previously, this implies that the vehicle acquisition cost be considered at year zero. For the financial analysis, this consideration is of paramount importance; otherwise, profitability indexes may be considerably overestimated.

Regarding the vehicle acquisition cost, it is important that the vehicle make, year, engine technology, emissions standard, seat capacity, and possession of an air conditioning system be clearly defined. Depending on the engine technology and emissions standard, vehicle cost may increase substantially. Also, if the vehicle is equipped for air conditioning, not only will there be an additional air conditioning equipment cost, but windows and doors may have to be fitted differently, further increasing assembly cost.

As an estimate of these values, one must not rely entirely on quotation values, since they are generally overestimated unless there is a firm intention of buying or request on the table. It is recommended that one try to obtain actual vehicle transaction values for similar specifications in similar regions, in order to obtain a better vehicle price estimation.

Replacements

Ideally, vehicles should be replaced when they reach their useful life. In some systems, which have been operating under the same concessionaire over a long period, the public agency may establish a maximum fleet average age, to gradually replace the older vehicles without having to impose a drastic fleet renovation. This practice is satisfactory for an evenly distributed or old fleet; however, if the fleet is new, it may cause a suboptimal fleet usage. The reason for this is that one would have to replace vehicles just slightly over the target average age to maintain the overall fleet age below the average target age. This situation should be avoided if possible.

The vehicle useful life may vary per the vehicle typology (18-meter articulated bus, 12-meter bus, etc.), if it runs in mixed traffic, and the quality of the pavement, among other variables. One usually establishes the useful life as the tipping point before major repairs are needed to the chassis and engine. For modern/latest series engines, this is said to be on average one million kilometers, which for articulated vehicles running in segregated lanes 65,000 kilometers per month on average, this translates roughly to twelve years. However, with proper maintenance and vehicle care, the useful life can be extended past this projected useful life.

Once the useful life is reached, the vehicles must be replaced with new vehicles, whose purchase order must be made at least six months before the actual moment these new vehicles are required for operation. Consequently, if the vehicle is to be replaced at the end of year eight, for instance, then the new vehicle acquisition must also be concluded in year eight.

At the moment of vehicle replacement, it is possible that the financing conditions available at year zero are no longer the same. The reason for this is twofold:

• Sometimes special conditions are given for new systems, where the government assumes part of the investment risk and hence the interest rates and conditions are better;
• Usually, for a diverse fleet, the replacement of all vehicles does not happen simultaneously, hence the total investing amount is different. That being said, for lesser amounts, perhaps certain credit lines may not be available.

In any case, these financing considerations are only pertinent in a leveraged/shareholder appraisal. In that case, it is important to treat the financing options accordingly.

Depot and Other Capex

In addition to the vehicle acquisition costs, there are other significant capital expenditures worth noting. Most of these other capital costs are incurred at the beginning of the operation or at the system’s startup.

Land/Depot Acquisition

The first other capital expenditure worth mentioning is the land/depot acquisition cost. For this item, it is important to determine if the land is to be leased/donated by the city, or if it will be the vehicle operating company’s responsibility to procure it.

The argument in favor of the city donating/leasing the land or, better yet, renting it, is that the city may make “one off” investments and clear well-positioned land in order to maximize system efficiency. In the case that the depot is well positioned, the system’s dead kilometers (the distance from the depot to the routes) may be reduced to a minimum, which in return minimizes the variable, nonproductive, operational cost. Since the total vehicle operating cost determines the technical fare and, consequently, the fare price or system subsidy, it is in the system’s best interest to minimize avoidable costs to the fullest.

Once the system is established, densely populated “prime” real estate locations close to the corridor have dramatically higher land acquisition costs. The vehicle operating company will be inclined to set up its depot facility at places “close enough” to the system that possess an accessible land acquisition price. As a result, these locations may be suboptimal. Also, leasing/renting the land is a way of reducing the start-up cost, and hence improve the operating company’s profitability, which in return allows for lower tariffs or subsidies. The argument in favor of the vehicle operating company procuring and setting up its own depot greatly simplifies the whole process, with much less city bureaucracy involved.

In any case, leaving the above issue aside, it is necessary to determine the size of the land needed for the depot. As a rule of thumb, one may use the following sizing correspondence:

• Small vehicle—about 30 square meters;
• 8-meter vehicle—about 80 square meters;
• 12- to 13-meter vehicle—100 square meters;
• 18-meter articulated vehicle—150 square meters;
• Double articulated 24- to 28- meter vehicle—200 square meters.

It is important to state that the correspondence above is based upon average values and includes necessary areas for bus parking, fueling, maintenance, and the administration building. Once a total amount of square meters is determined, it is necessary to obtain a market price per square meters at that location’s whereabouts in order to calculate the total land acquisition capital cost. In the case that the responsibility lies with the vehicle operating company, then the land acquisition would be a onetime acquisition to take place at year zero.

Depot Setup

Once the depot land is determined, the next capital expenditure is the depot setup. Depot setup may be divided into two components:

• Building/edification costs;
• Equipment and installation costs.

It may be a bit tricky to separate, at times, the edification costs from installation costs and, likewise, the equipment costs from installation costs. However, one should attempt to at least separate the building/edification costs, since they possess different depreciation and renewal rates.

Building/edification costs refer to the infrastructure setup of the garage depot. In order to size the total cost ideally, a block layout for the depot should be developed/made available. This would indicate how the depot is to be set up, the paving and covering, among other definitions. However, garage depots do not require special or complex setups, and based upon other garage depot reference investment values, it is possible to approximate the sizing of the investment for a new location. Since the driving parameter for garage depot investment amount is the required depot area, and that in return is dependent on the total fleet size, one may use the fleet size as the driving parameter for depot building/edification costs. As is the case of the land acquisition, the depot building/edification Capex are a onetime acquisition to take place at year zero.

The other component of the depot setup is the equipment and installation costs. For an initial setup, the installation costs are considerably more and may amount to as much as two-thirds of the equipment costs. However, it may be a bit tricky to separate the two, hence one can regard them jointly as equipment and installation costs. The equipment side of this equation will need replacing over time and, through observation, one may consider a periodic renewal rate of 20 percent of the total cost related to equipment and installation every five years. This means that in addition to the initial acquisition at year zero, there should be subsequent renewal rates at years five, ten, and so forth. Given that the equipment acquisition is also proportional to the fleet size it needs to service, the driving parameter for the equipment and installation Capex may also be the fleet size.

Based upon other systems’ information, in Brazil, the total expenditure for building/edification, equipment and installation costs may range between about US$9,000 to US$13,000 per vehicle (R$20,000 to 30,000 per vehicle—currency conversions from R$ to US$ with 2013 exchange rate). Of this amount, roughly 50 percent relates to depot building and edifications, 20 percent to installation costs, and approximately 30 percent to the equipment costs. In any case, a more detailed analysis should be conducted to validate these ballpark numbers.

Equipment—ITS per Vehicle

Together with the depot setup capital expenditures, the additional relevant “other” capital expenditure has to do with the intelligent transportation systems (ITS). With ITS, one encompasses the onboard fare system (necessary, especially for feeder buses), the monitoring system (CCTV, onboard computer), and the bus panels for variable messaging. This cost may vary according to system specifications. For instance, an onboard fare system may not be required or more sophisticated components with additional functionalities may be necessary. In any case, the three functionalities mentioned above serve as good references for what is generally needed.

Since this equipment is to be mounted on the vehicles, the driving parameter for its sizing is also total fleet size. Given that the equipment is prone to wear and tear, one may consider a periodic renewal rate of 20 percent every five years. In other words, in addition to the initial acquisition at year zero, there should be subsequent renewals rates at years five, ten, and so forth.

The total cost per bus for this equipment installation may vary depending on if it is to be installed on an existing fleet or on a new fleet. Ideally, the equipment should be installed during vehicle assembly, since the installation itself is of better quality, and this reduces the cost. In Brazil, the approximate ITS Capex is approximately US$6,600 to US$5,300 (R$12,000 to R$15,000 per vehicle—currency conversions from R$ to US$ with 2013 exchange rate). This value is roughly 50 percent related to the fare system, 35 percent related to the monitoring system, and 15 percent related to the variable messaging panels.