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54 4 IMPLEMENTATION PLANNING FOR CV INFRASTRUCTURE PROJECTS 4.1 INTRODUCTION Any CV investment option that receives a âgoâ decision from the decision-makers becomes a project or program of projects that DOTs must then plan and deliver as part of their standard business operations. As part of their planning process, DOTs devise means and methods to deliver the project at the lowest possible cost and manage any risks effectively. The financial and deployment components of the business case of the selected investment option present the reasoning for how the project will be delivered within the delivery structure of the DOT; describe the capital, human (competencies and knowledge), and technological resources required; and identify the associated risks. The business model builds on these business case components to deliver the project and create value to customers in alignment with the organizational objectives. 4.2 BUSINESS MODEL FOCUS AREAS SPECIFIC TO CV INVESTMENTS A business model is a specification that defines how a proposed investment and its value can be delivered to the customer at an appropriate cost. At the heart of the business is the âgame planâ to acquire the capital, technological and human resources necessary to deliver the investment and manage the risks. Due to the emerging nature of the technology and supply chain surrounding it, the business model for CV investments should address four phases of project delivery: â¢ Procurement planning, including all activities leading up to procurement, such as technology selection, drafting requirements, network and IT collaboration, systems configuration planning, and managing the procurement process. â¢ Installation and integration, including acquisition and installation of hardware (e.g., RSUs, OBUs, traffic signals) and communications infrastructure, device testing to demonstrate compatibility and interoperability, and integration with DOT systems. â¢ Implementation of applications, including functioning within a CV deployment environment (see Figure 2-2) to enable bidirectional transmission of data between vehicle and infrastructure and a virtual platform for further analytics using software applications. â¢ Long-term maintenance and upgrading of hardware infrastructure and software systems over their life cycles. 4.3 CV INVESTMENT RESOURCE NEEDS AND RISKS DOTs should carefully consider the following questions when structuring an appropriate business model for a given CV investment option: â¢ What are the resource needs of a DOT? What is the DOTâs plan to acquire those resources? â¢ What are the DOTâs risks associated with the delivery? What is the DOTâs plan to structure those risks optimally? What risks can be accepted, eliminated, or allocated to other parties through the delivery process?
55 â¢ What role does the private sector play (e.g., key support versus central role) in providing resources and sharing risks? â¢ What value does the DOT offer in return for the resources and risk sharing? Key resource needs based on findings from real-world deployments of CV V2I projects and the associated risks are: â¢ Human resource needs. Competence and know-how needed to deliver the investment. For example, for CV infrastructure deployment projects, DOTs may not have the internal expertise, experience, or availability specific to CV infrastructure deployment projects to perform the functions of a systems manager or systems integrator, or to engage in technology selection and maintenance of hardware infrastructure and software assets. In such situations, the resource need may be satisfied through an in-house training program, hiring, the use of consultants, or outsourcing activities through procurement (e.g., turnkey contracts). â¢ Technology resources refer to CV hardware infrastructure and the data environment. o Hardware Infrastructure: DOTs can procure hardware for the CV environment (e.g., RSUs or signal controller) from vendors, either individually or through a bundled turnkey contract that includes other services (e.g., construction, testing). DOTs have experience with providing procurement oversight with in-house staff or consultant support. The typical DOT risks that are unique to CV infrastructure projects are related to assessing technology maturity and the general upkeep/upgrades of hardware. DOTs may opt to acquire a dedicated consultant or in-house staff to assist with drafting requirements, train in-house personnel, or secure warranties or service agreements, either standalone or as a part of a turnkey contract. o Data Environment: Creating a data environment is a more complex endeavor that entails capturing and streaming data from a network of devices, aggregation, storage and analytics on a platform, and analytics using software applications that create usable information for broadcasting. DOTs typically are not well versed with technology selection in a rapidly evolving landscape, developing complex technology applications, contracting with technology companies, or keeping up with changing technology through periodic upgrades and enhancements. Similarly, large technology companies also do not have experience contracting with DOTs and often lack the patience necessary to work through the procurement process. Particularly for large-scale data environments, DOTs may inherit significant financial consequences from their exposure to potential technology risks. It may be prudent for DOTs to consider allocating technology-related risks to the private sector through the procurement process, which is generally deemed better at managing such risks. Some DOTs have been partnering with various entities, such as private application developers, technology companies, and universities for development of both small-scale applications and large-scale data environments. However, DOTs may need long-term partnerships, contracts, or subscription-based services with the private sector to handle technology needs.
56 â¢ Financial resources refer to access to private sector capital, when needed, to address potential funding shortfalls or uncertainties. Possible strategies may include private sector equity in infrastructure development, cost sharing through partnerships, or resource sharing agreements. Depending on the partnership, the private sector can realize monetary returns through annuity- based fixed payments from the DOT and/or revenue generation. Examples include preference- based fees, such as mobility-as-a-service, or service-based fees such as subscriptions and advertising. Both communication infrastructure and application/platform providers may establish business-to-business transactions with OEMs and direct transportation-service providers, such as roadside service providers, over-the-air commercial services, and fleet operators for revenue generation. Examining this set of technological, capital, and human resource needs reveals that the private sector can play an important role in the delivery of CV investments. The private sector plays a predominant role in technology, equipment, and expertise to build the necessary technical capacity of CV infrastructure. The private sector assumes the risks related to technological maturity, uncertainty, and related financial risks, which in turn, helps public agencies âhedgeâ the risk of technology and systems obsolescence. Business models may differ in how the private sector will be engaged and how their responsibilities, costs, and risks will be allocated. 4.4 CV INVESTMENT DELIVERY The business caseâs deployment component considered procurement options to deliver the CV investment. A business model formalizes this selection by considering the four parts of project delivery, as detailed in the definition: 1. Installation of conventional ITS equipment and CV related hardware, which includes procurement planning, field installation of devices, integration to an existing TMC, and maintenance of hardware. 2. Installation of backhaul communications using DSRC, fiber optic, or cellular. 3. Enabling the data environment for CV deployment. DOTs have significant experience installing ITS equipment and using a variety of delivery methods for either a standalone project or a part of a major construction project (Tarnoff et al., 2005): â¢ Qualifications-based selection for system manager and system integrator functions using on-call consultants to perform or oversee system planning, design, software development, systems integration, inspection and testing. â¢ Low-bid procurement for well-defined projects involving field construction and installation of vendor-supplied commercial off-the-shelf solutions. â¢ Design-build procurement for major construction projects. The DOT may opt for other variants, including design-build-operate-maintain and design-build-finance-operate-maintain, based on the construction project needs. â¢ Separate contracts for a program of projects requiring complex software development.
57 â¢ Low-bid job-order contracting for preventive maintenance of ITS equipment, such as software updates and cleaning/tuning of ITS devices and components. But even with all this experience DOTs are still evolving in their knowledge of more standard ITS deployments. Stronger collaboration with statewide IT departments, for example, have led to a much more robust long-term outlook on cybersecurity, network architecture, and telecommunications. CV deployments will benefit from this increased collaboration. For backhaul communications, DOTs have used low-bid procurement methods or have added installation or upgrade as a part of their construction projects. Because the installation of fiber optic cable is capital-intensive, some DOTs, including Georgia, Pennsylvania, Kentucky, and Virginia, have partnered with telecommunication providers through resource sharing agreements to install fiber optic cables in the highway right-of-way so both parties benefit. Depending on the size of CV deployment and agency capabilities, DOTs may use multiple delivery mechanisms for systems planning and hardware installation until the point of integration with the DOTâs traffic management center. CV deployments require significant back office systems, data hubs, and software application capabilities. As observed in pilot deployments, a DOTâs existing delivery mechanisms, used for ITS applications, will be adequate for small-scale CV deployments to bring these components into service. However, the current back office infrastructure will not be adequate for large-scale deployments that require massive amounts of data flowing bidirectionally. Therefore, large-scale deployments might need alternative business models for procurement. 4.5 BUSINESS MODEL OPTIONS The previous sections reviewed the key considerations for business model structuring and selection. This section presents three business model options for consideration, each of which engages private sector partners to some degree. Such consideration requires DOTs to examine technological and human resource needs and risks alongside delivery options for each phase over the CV investmentâs life cycle. Business model considerations may also be influenced by the possibility that alternative technologies might emerge in the future that significantly affect partner roles and requirements. In addition, business model selection is expected to be highly localized to respond to different deployment contexts and political environments; therefore, it will vary across the nation. Three business models are proposed for private sector engagement in CV infrastructure deployment in the 5- to 10-year time horizon. These arrangements are distinguished principally by the allocation of responsibilities, risks, and commercial opportunities between the public and private sectors. The DOT can follow a modular approach to CV deployment where the agency can adopt one or more delivery approaches to meet its needs. For example, the DOT can use one approach for installing roadside ITS cabinets and another for data management. 4.5.1 Traditional Model of Public Sector Systems Ownership and Development Using Purchased Commercial Capabilities This traditional model option is a conventional âvendorâ arrangement where the public sector owns the physical assets, and the private sector supplies communication and information services for a fee. This model is suitable for publicly developed and owned DSRC communications networks, and hence, substantially dependent on public sector investment and development initiatives focusing on DSRC
59 processing, and storage system; and developing V2I software applications. Panasonic will employ its CIRRUS traffic management technology, an âopen development platform for data sharing and collaboration,â to develop data analytics using vehicle, infrastructure, and weather- related data collected from UDOT infrastructure. Through this partnership, Panasonic benefits from gaining access to real-world deployment experience to help develop its CIRRUS system, while UDOT benefits from perpetual royalty-free rights to the system. UDOT also benefits directly from the collaboration through faster scale up of its CV program, production grade deployment, expertise on vehicle installation, data platform for large- scale data, and potential partnerships with OEMs on basic safety messages. Data and other resource sharing agreements are another variant of this partnership model. The DOT can enter a negotiated agreement with the private sector to share data or resources in a way that mutually benefits each partyâs objectives. This variant may not involve direct equity contribution from the private sector. The information sharing agreement between FDOT and Waze is an example. Under this agreement, FDOT will have access to the data that Waze collects (e.g., congestion or crash data), and in return, FDOT will supply Waze with network information on work zones, speed limits, evacuation routes, and tolling As discussed earlier, the DOTs have resource sharing agreements with telecommunication companies to install a fiber optic network within its right-of-way. The DOT benefits from the availability of a communication medium for CV related purposes, which is a capital-intensive endeavor. In addition, the DOT facilitates the availability of broadband access to local, predominantly, rural and disadvantaged communities, for non-transportation purposes. In exchange, the private sector receives open and secure access to its infrastructure on highway right-of-way. 4.5.3 CV as a Service Procurement Model Under this partnership arrangement, the DOT purchases a service package from the private sector by subscription or contract. The private sector supplies âall-inâ services including physical assets, cloud data, and analytics for a fee, while the public sector owns the data feed and provides signal controller and network access. This model is suitable for potential V2I applications that are technology-agnostic and those not dependent on latency bandwidth requirements. Starting with private sector cellular communications (3G/4G), this model can build on the presumed evolutionary path to 5G. This approach may also use DSRC communications as an option. Panasonicâs CIRRUS platform is an example of such a service model. 4.6 FUTURE OUTLOOK FOR BUSINESS MODELS There is a current line of thought among the industry that many of the critical V2I applications, if not all, involving publicly owned infrastructure and data, can be substantially achieved by a combination of Automated Driver Assistance Systems, V2V systems, and publicly available information with no reliance on the public sector data or sector infrastructure. A combination of vehicle-based detailed mapping, UDOTâs partnership with Panasonic is unique and differs significantly with typical P3 models adopted by DOTs in that there is no revenue risk sharing involved typical of P3s. It may not provide a viable model for other DOTs to emulate because it centers on opportunistic early engagement benefits for both parties involved. Panasonicâs CIRRUS software platform and likes of it from potential future competitors who might emerge is essentially an operating system and data environment based on which V2I applications can be written. It may eventually evolve into a âCV as a serviceâ model.
60 Internet of Things (IoT), and advanced V2V systems would eliminate the need for any public sector involvement in operational management or dependency on public infrastructure. In such a situation, public regulation would merely establish inter-industry standardization of vehicle function, especially those involving safety and traffic management for freeways or arterials. A high degree of vehicle automation and ubiquitous private provision of V2X and networked telecommunications would be necessary to realize such a business model. These preconditions, by any current forecast (including the most optimistic ones made by telecommunications firms), are perhaps 15 to 20 years away. Until such time, the business model options presented in this chapter will perhaps be the ones DOTs will most likely use.