What will be the total cost?

Themes: ITS application; Support technology; Other resources; Operating costs

Approach to cost estimation

The cost of the ITS system needs to be estimated at various stages in the specification and design process. The initial estimate is usually an order of magnitude costing, based on typical costs in the industry. As the design becomes more specific to the host environment, a more accurate estimate of costs can be made. The costs should be considered from three perspectives:

  • Initial investment, including both equipment costs and the cost of installation/deployment
  • Ongoing operating costs
  • “Whole of life” costs, including upgrades and added functionality

It is important to make an accurate assessment of these costs. Failure to do so could lead to serious problems at the procurement stage if the price of the most suitable bids turn out to be well in excess of the available budget. This could lead to cancellation of the project, a major downgrading of the functionality, or a reduced number of locations where ITS devices are deployed.

The three most common causes of cost escalation are:

  • Software development turns out to be far more complex (and hence costly) than originally expected
  • “Mission creep” as more and more functions and devices get added to the ITS project
  • Fascination with technology, so that more advanced equipment is specified than needed to do the job

It is not necessarily a problem if the actual project becomes more expensive than the original estimate, provided this is known to the decision-takers, can be justified, and the extra cost is provided for.

The role of cost estimates

An initial costing would normally have been developed at the Technology Concept stage. This gives order of magnitude cost estimates and provides a reference framework to know whether what was desired could be afforded, and if not, what could be achieved with the available financing.

These initial estimates should be reviewed from time to time as the design develops, and as the technical solutions are firmed up. This is necessary to avoid a situation where the actual costs of delivering the ITS design are escalating without the decision-takers being sufficiently aware of it, and either exceeding the financing capacity or reducing the benefit-cost ratio below acceptable levels. It is not unusual for technologists to become enamoured with advanced solutions and to lose sight of prudent business discipline; or for ‘mission creep’ to lead to ever-expanding functional and technical specification, such that the cost of delivery becomes a multiple of the original estimate.

Periodic cost reassessment allows the implementation team to take stock, and for program managers to have sufficient oversight and rein in the design team if necessary. Occasionally, the increase can be justified (e.g. agreed expansion of functions/scope; clearly incorrect initial estimate) but this should go through a proper review of requirements, alternatives, revised benefit-cost, etc. and should gain approval in principle for the additional expenditure.

Whole-of-life costing

At this stage, a detailed Whole of life costing of the ITS System(s) should be performed. The same broad categories can be used as at the Technology Concept stage. This should identify, by system/sub-system:

  • In-vehicle device capital costs
  • Terminal, bus-stop and operational location device capital costs
  • Control centre, depot and other central capital costs
  • Communications infrastructure capital costs (wireless, landline, fipe optic)
  • Data and IT platform capital costs
  • Procurement costs
  • Installation and deployment costs, including training
  • Operational and maintenance (hardware, software) costs of the ITS system
  • Ongoing communication costs
  • Device spare parts and maintenance costs
  • Data, ITS applications and IT applications operation, support and maintenance, including licence costs

Operational costs of the ITS, including management of AVL Control Centre, Dispatching, traveller information, can be done either by:

  • Total costing, based on detailed estimation of all cost items, and of associated unit costs
  • Marginal costing, comparing the new operational scenario to the existing one

Why is accurate cost estimation needed at this stage?

In contrast to the Technology Concept phase, the costings should be as accurate as possible, since the primary purposes are to:

  • Identify the specific funding required, prior to entering procurement phase
  • Gain the required level of approval to launch procurement
  • Revise the design if required to achieve the same or reduced objectives and/or functions within the available finance
  • Finalise where the costs arise, and who must bear them
  • Identify and detail areas where the detailed design should seek opportunities to reduce cost, either in the individual system/subsystem design, or through synergies
  • Finalise items which will be deferred to a later stage, unless suppliers can deliver creative solutions within available financing limits
  • Set the upper parameters for procurement lots and for the negotiation with potential suppliers

Information sources for ITS costs

It may require some effort to get cost data that is relevant to the specific proposed technology and implementation context. For example, there are not published price lists for ITS systems, and the costs will reflect the amount of software development and customisation required for the site. Some suppliers may be willing to give an indication of typical costs, but as they are likely to have to participate in a formal tendering process to get the work, this source of information is not assured. 

It is recommended to seek cost data from operators / cities which have recently deployed ITS. Within the public transport industry, authorities and operators are usually willing to share knowledge with authorities and operators in other regions and countries. This is on a goodwill basis, where they are willing to give to their counterparts confidential information that would not be published or shared with consultants. This has the added advantage of being able to discuss sensitive matters such as whether their original cost estimates had been reasonably accurate, how well they felt they had done in the negotiations, and whether they felt they had been able to keep reasonable control of the post-deployment costs and charges. 

Cost information from North America

A useful source of published information on costs for ITS is published by the RITA (Research and Innovative Technology Administration) unit at the US Department of Transportation. This provides cost data for the full ITS domain. Information on public transport is mostly contained in the Transit Management section, at web address: 


The website contains both full examples and unit costs, as well as relevant contextual information for the detailed cases. In some instances, information is also given for implementation and lifecycle costs. 

While this is a valuable resource, there are two important caveats: 

1) The costs are for North American deployments. Some aspects will not change greatly in other regions, others might. The data should be interpreted with caution. Nonetheless, the cost headings and lifecycle costs aspects are likely to be quite relevant everywhere, even if the unit costs differ from one location to another. 

2) Costs are mostly for 'traditional' configurations. In most cases (but not all), these are based on expensive equipment, suited to large bus fleets and traditional modes of IT and data management. Alternative configurations at significantly lower costs may be possible without losing too much functionality. Potential implementers should not be ‘frightened off’ by high costs in a North American or European context, and should at least test whether there are solutions that could meet their needs within the available funding.