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20 Smartcard Interoperability Issues for the Transit Industry pass. The rollout of these agencies will need to occur simultaneously to avoid affecting patrons who use the common fare product. Although it is more "patron friendly," a full system rollout is more likely to disrupt operation for the agencies. Project resources must be spread over a wider range and are less able to focus on those areas that may experience issues such as high degrees of confusion and lack of patron education. Additionally, unlike a phased approach, a full rollout does not afford the benefit of "lessons learned" from the earlier implementations. Figure 8 identifies potential rollout strategies and the progression of each strategy. Other issues that will affect the scheduling of the interoperable project include Availability of staffing resources, Availability of financial resources, Agency operations, and Patron education and orientation 2.1.5 Developing a Contracting Strategy Participating agencies need to determine and agree on how the equipment and services will be procured. The main contracting challenge is deciding whether to procure the equipment and ser- vices under a single contract or through multiple contracts. Each approach has challenges that must Rollout S trategy and Progress ion Participant Pha se-In F ull "C apability First" (e.g., Tran s Link, "Big B ang" Octopus, EZ-Link) C a p a b i l it y P h a s e C a rd C ap abilities "Limited Limited" - In "P articip a nt First" (e.g., Oys ter, (e.g., Sm a rTrip) LACMTA) Limited Limited F ull C us tomer P articipation Limited Limited Project rollo ut occ urs with limited pa rticipa tion a nd le ss -tha n-fu ll-s ys tem functiona lity Capability First Project rollout c a ptures nearly a ll of the planned s ystem functionality but is limited to a subs et of planned participants Participant Firs t Project rollou t build s participant base on a s ys tem with only core functiona lity and capabilities Big Bang Project rollou t c apture s ne arly a ll of the pla nned s ys tem functionality a nd includes all planned participants Figure 8. Rollout dimensions.

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Findings of Institutional Requirements for Interoperable Smartcard Fare Payment Systems 21 be overcome, and the selection of the approach will depend on factors such as an agency's appetite for integration risk, the availability of technical and project management resources, and the level of equipment and services to be procured. The most common contracting strategies are single procurement and contract, multiple procurements and contracts, and contract type selection. Single Procurement and Contract Procuring all equipment and services under a single contract transfers most of the integration and interoperability risk (faregates, fareboxes, ticket vending machines (TVMs), card readers, and back-office systems) to the contractor. The contracting agencies have a single point of responsibility for lack of performance. The single procurement approach can accommodate a more aggressive rollout schedule because the schedules of multiple procurements and contrac- tors do not have to be coordinated. However, the single procurement approach may be less com- petitive because of the limited number of suppliers for highly specialized equipment (e.g., the farebox). Therefore, the procurement will result in fewer bids. Multiple Procurements and Contracts By choosing to procure the equipment and services separately, agencies are likely rewarded with more competitive procurements and lower costs for "best-in-class" elements of the system. How- ever, the risk of integrating the services and equipment supplied under separate contracts will be borne by the contracting agencies. Another variant of the multiple procurements approach is to contract with a systems integrator to take responsibility for pulling separate pieces together and ensuring interoperability. While a systems integrator may be better equipped to deal with techni- cal and programmatic issues than the contracting agencies, this approach may also result in a higher cost than self-selected teams because each supplier must factor in a fee for technical and management issues caused by the systems integrator during the contract's execution. In either case, the integration of multi-vendor equipment will result in higher overall system cost initially because of the increased software development and testing that result from the task of integration. Contract Type Selection The type of contract structure must also be decided. The contract structure is driven by the types of services that the participating agencies can support and their current way of doing busi- ness. For example, if the member agencies decide to outsource clearing and settlement, patron support, and card management, a design-build-operate-and-maintain (DBOM) contracting structure may be advantageous because the contractor will design the system so that operating costs are balanced against the selection and cost of equipment components. If, on the other hand, the member agencies decide that these services will be supported in house, design-build con- tracting may be a better alternative. The challenge is to choose a type of contracting that takes advantage of existing in-house resources with minimal overlap. Other Management Strategies To help address contracting issues related to interoperability, most U.S. and Canadian deploy- ments have retained the services of consultants specializing in transit and electronic payments. As an outside party with best practices developed over multiple projects, experts can assist the participating agencies with overall program strategy, document preparation, procurement assis- tance, and critical decision making throughout design and implementation. Using outside expertise can also serve to moderate the partisanship that can develop among the participating agencies and between suppliers. The outside expert provides an objective view based on best practices from other industries. Using the services and expertise of outside consultants will add initial cost to the project, but has proven to lower integration risk. Lowering integration risk pre- vents contractors from taking control of critical parts of an interoperable fare payment system and using this control to generate supernormal profits during the program's life cycle.