Appendix 3: Sensitivity Analysis for Smart and Integrated Ticketing Options55

Appendix 3: Sensitivity Analysis for Smart and Integrated Ticketing Options55

Introduction

As the base case relies upon certain assumptions for which the evidence is not fully conclusive, a sensitivity analysis is particularly important for this business case. This focuses on the key drivers that affect the benefit-cost-ratios (BCRs). Mostly these BCRs were found to be high. This means that the aim of the sensitivity analysis has been to investigate under what conditions the various ticketing options would no longer represent value for money, to allow a better understanding of the potential risks involved with smart and integrated ticketing.

Sensitivity analysis

The BCRs in the base case are as follows:

  • Smart ticketing – 14.6;
  • Integrated ticketing – 14.7; and
  • Smart Integrated ticketing – 19.7.

The table below shows the key base case assumptions for the three ticketing options which have been included in the sensitivity analysis:

Table A3.1 - Base Case Assumptions

 

Smart

Integrated

Smart Integrated

Time savings per passenger (bus)

2 Seconds

3 Seconds

2 Seconds

Percentage of passengers using the new ticketing product

100%

100%

100%

Increase in patronage following introduction of new ticketing product

4%

4%

6%

Average number of people on a bus

10

10

10

Benefit Sensitivity Analysis

The following sensitivities were assessed for each ticketing option:

  • Lowering boarding time savings per bus passenger (to zero and -2 seconds). Some in the industry are sceptical about the likelihood of there being any boarding time savings; some go further to argue that smart cards will lead to slightly longer boarding times. This is significant because any time saving per boarder will also apply to those already on the bus;
  • Lowering the percentage of passenger take up (to 75%, 50%, 25% and 10%). The model assumes 100% take-up, in line with the DfT business case, though actual take up would undoubtedly be lower. Note that this also lowers costs;
  • Lowering the percentage increase in patronage (to 2%, 1% and 0% for smart ticketing and integrated ticketing, and 3%, 2% and 0% for smart integrated ticketing) ; and
  • Reducing the average number of people on a bus from 10 to 5. This affects the overall time saving for the reason set out in the first bullet.

N.B. the international evidence, set out in the PTEG report56, does not link evidence of overall patronage increase with take up. This means that it cannot be said, for example, that a 6% increase in patronage would be associated with 50% take up. This has presented a problem for the sensitivity analysis: because these two factors are not connected in the evidence there is no robust way to connect them in the model. This initially had the effect that, when take up was varied, the benefits associated with patronage increase were independent and thus unchanged, while the variable costs fell, and so the BCRs for lower rates of take up were actually higher than the BCRs for higher rates of take up (though the NPVs were lower).

Because it seemed anomalous that patronage and take up would not be in some way correlated, it was decided for the sensitivity analysis, to vary the assumed patronage increase for each ticket type by the take up rate. Thus, in the sensitivity assessment of a 10% take up, the patronage increase is actually 0.6% for smart, integrated ticketing, as opposed to 6% in the base case (and 0.4% compared with 4% for the other ticket types). This is probably too restrictive an assumption, but the adoption of this highly conservative approach gives further confidence in the figures produced under the sensitivity analysis.

Cost Sensitivity Analysis

The following variations were also assessed for each ticketing option, in conjunction with the benefit sensitivities:

  • Capital costs increase by 50%;
  • Capital costs increase by 100%;
  • Operating costs increase by 50%; and
  • Operating costs increase by 100%.

Results

The results of the sensitivity analysis can be seen overleaf. Each of the individual variations was still associated with healthy BCRs and even applying different combinations did not yield a BCR below 1. This provides comfort, given the uncertainties around some of the key assumptions, that the business case for smart and integrated ticketing in Scotland stands up even under significantly more restrictive assumptions.

Results Tables

Table A3.2 – Sensitivity Analysis

 

SMART TICKETING SENSITIVITY ANALYSIS

Core

Capital Costs + 50%

Capital Costs + 100%

Operating Costs + 50%

Operating Costs + 100%

 

 

NPV

BCR

NPV

BCR

NPV

BCR

NPV

BCR

NPV

BCR

0

Base case

414

14.6

410

13.0

406

11.7

402

10.6

391

8.3

1

Bus boarding time: no time saving

269

9.8

265

8.7

261

7.9

257

7.1

246

5.6

2

Bus boarding time: two seconds slower

124

5.1

120

4.5

116

4.1

113

3.7

101

2.9

3

Passenger take up of smartcards is 75%

308

13.4

304

11.8

301

10.5

299

9.9

290

7.8

4

Passenger take up of smartcards is 50%

202

11.7

199

10.0

196

8.7

196

8.7

189

7.0

5

Passenger take up of smartcards is 25%

97

8.3

94

6.9

91

5.8

93

6.5

89

5.3

6

Passenger take up of smartcards is 10%

34

4.5

32

3.5

29

2.9

32

3.7

30

3.1

7

Patronage increases by 2% (base case = 4%)

333

11.9

329

10.6

325

9.6

321

8.7

310

6.8

8

Patronage increases by 1% (base case = 4%)

292

10.6

289

9.4

285

8.5

281

7.7

270

6.1

9

Patronage increases by 0% (base case = 4%)

252

9.3

248

8.2

244

7.4

241

6.7

229

5.3

10

Reduce number of people on a bus to 5

340

12.2

336

10.8

333

9.7

329

8.8

317

6.9

11

Combination of sensitivities: no time saving and 10% take up

20

3.0

17

2.4

15

2.0

18

2.5

15

2.1

12

Combination of sensitivities: 2 seconds slower to board and 10% take up

6

1.6

3

1.2

0.4

1.0

3

1.3

1

1.1

NPVs are expressed in £millions.

Table A3.2 – Sensitivity Analysis Continued

 

INTEGRATED TICKETING SENSITIVITY ANALYSIS

Core

Capital Costs + 50%

Capital Costs + 100%

Operating Costs + 50%

Operating Costs + 100%

 

 

NPV

BCR

NPV

BCR

NPV

BCR

NPV

BCR

NPV

BCR

0

Base case

403

14.7

402

14.2

401

13.8

390

10.0

376

7.6

1

Bus boarding time: no time saving

186

7.3

185

7.1

184

6.8

172

5.0

159

3.8

2

Passenger take up of smartcards is 75%

299

13.5

299

13.0

298

12.7

288

9.2

277

7.0

3

Passenger take up of smartcards is 50%

196

11.5

196

11.2

195

10.9

187

7.8

179

5.9

4

Passenger take up of smartcards is 25%

94

8.1

94

7.9

93

7.8

87

5.5

81

4.1

5

Passenger take up of smartcards is 10%

33

4.3

33

4.2

32

4.2

28

2.9

23

2.2

6

Patronage increases by 2% (base case = 4%)

322

11.9

321

11.5

320

11.2

308

8.2

294

6.2

7

Patronage increases by 1% (base case = 4%)

281

10.6

280

10.2

279

9.9

267

7.2

254

5.5

8

Patronage increases by 0% (base case = 4%)

240

9.2

239

8.9

238

8.6

227

6.3

213

4.8

9

Reduce number of people on a bus from 10 to 5

293

11.0

292

10.6

291

10.2

279

7.5

265

5.7

10

Combination of sensitivities: no time saving and 10% take up

11

2.1

11

2.1

11

2.1

6

1.4

1

1.1

NPVs are expressed in £millions.

The potential negative time saving applied to the other ticket types as sensitivity is associated with the time taken for electronic readers to read smart cards so is not applied to (non-smart) integrated ticketing.

Table A3.2 – Sensitivity Analysis Continued

 

SMART INTEGRATED TICKETING SENSITIVITY ANALYSIS

Core Case

Capital Costs + 50% Capital Costs + 100% Operating Costs + 50% Operating Costs + 100%

 

 

NPV

BCR

NPV

BCR

NPV

BCR

NPV

BCR

NPV

BCR

0

Base case

543

19.7

539

17.6

540

17.9

532

14.3

521

11.2

1

Bus boarding time: no time saving

397

14.7

393

13.1

390

11.8

386

10.7

375

8.4

2

Bus boarding time: two seconds slower

251

9.7

247

8.6

244

7.8

240

7.0

229

5.5

3

Passenger take up of smartcards is 75%

404

18.1

400

15.9

397

14.2

395

13.3

387

10.5

4

Passenger take up of smartcards is 50%

265

15.6

262

13.4

259

11.7

259

11.7

253

9.3

5

Passenger take up of smartcards is 25%

128

11.0

126

9.1

123

7.7

125

8.6

121

7.0

6

Passenger take up of smartcards is 10%

47

5.9

44

4.6

42

3.8

45

4.8

42

4.0

7

Patronage increases by 3% (base case = 6%)

421

15.5

417

13.8

414

12.5

410

11.3

399

8.8

8

Patronage increases by 2% (base case = 6%)

380

14.1

376

12.6

373

11.3

369

10.2

358

8.0

9

Patronage increases by 0% (base case = 6%)

298

11.3

295

10.1

291

9.1

287

8.2

276

6.4

10

Reduce number of people on a bus to 5

469

17.2

465

15.3

462

13.8

458

12.5

447

9.8

11

Combination of sensitivities: no time saving and 10% take up

32

4.4

30

3.4

27

2.8

30

3.6

28

3.0

12

Combination of sensitivities: 2 seconds slower to board and 10% take up

18

2.9

16

2.3

13

1.9

16

2.4

14

2.0

NPVs are expressed in £millions.