Abstract

In a future in which autonomous vehicle ridesharing services are widely available and grow to become the
primary means of transportation for large segments of the population, the current private ownership of
these services creates unnatural threats to the mobility of a population. Disruptions in service due to
management changes or issues, the opportunity for monopolistic practices, the lack of incentive to prevent
potential social inequalities in provided services and the shifting away of traditional public revenue streams,
among others, all provide real challenges for local governments. However, through public private
partnerships (P3s), a model already being employed in the United States to design, build, finance, operate
and maintain certain public transit systems , these governments can retain the innovation and efficiency of
private sector operations while harvesting the added value of optimized risk sharing. This paper suggests
a high level risk sharing model of autonomous vehicle ridesharing under a P3 framework and recommends
for a set payment schedule (availability structure) over an at-risk framework.

Introduction
Among the envisioned futures of the oncoming age of connected and autonomous vehicles (CAVs), there is
a model heavily dependent on ridesharing. This model, widely considered among many to be optimal, is
one in which a population relies on a fleet of vehicles owned, not by themselves, but by another entity, as
their main source of transportation. (1, 2, 3,4) In an autonomous future, these vehicles are driverless, and
move from location to location without a human touching the wheel. Adding together all the benefits of
driverless ridesharing, the theory postulates that, as an optimal transportation system requiring less
resources and expenditures, end-costs to the user will fall well below that of personal vehicle ownership.
Driven by these savings, the vast majority of the population, at least among the urban core, will come to
rely on ridesharing services on a day to day basis. In todays world, we see the forerunner of this system
currently being offered by private sector ridesharing entities such as Uber and Lyft, albeit with private
ridesharing entities employ citizen drivers to ferry other citizens from place to place. And after just over
seven years of exposure to these services in the United States, there is general widespread acceptance for
ridesharing as an innovative and valuable augmentation to transportation systems.(5)
However, under a future autonomous vehicle ridesharing scenario as described above, there will be a
significant shift in the balance between the overall population use of, and reliance on, these services versus
traditional transportation options such as personal car ownership or transit use. This shift will lead to a
realignment of the bulk of the responsibility for mobility to private entities and away from individual citizens
and public entities. Today, as supplemental to the multitude of transportation options that are available, the
availability, or lack of availability, of these ridesharing services produces low to minimal risk to the traveling
public. However, in a future in which ridesharing is optimally (widely) employed, the current independent
nature of these ridesharing services could produce serious threats to the mobility of a city. As such, there
will need to be a level of government oversight. Much like many other infrastructure services that have
been privatized through public private partnership (P3) contracting structures, this paper will explore the
benefits of employing a similar relationship with a private sector ridesharing operator. The paper will also
explore the risks that might be associated with a ridesharing services and how they may be optimally

divided between the public and private sector entities and recommends compensatory regime of a set
payment schedule (availability structure) over an at-risk framework.

The Ridesharing Model

Generally seen as the optimal mobility system for urban areas, the concept of ridesharing is simple
enough. At a most basic level, users call for or schedule a ride, generally through a mobile device, and,
after a short wait, are ferried to their desired location by a third party vehicle. Notably, there are some
potential slight variations of this, such as users hailing a ride meeting up at preset locations before being
ferried about, as suggested by Gorton(6), but the core concepts remain. Under todays technology, these
third party vehicles are driven by humans, however in a future in which fully autonomous vehicles are safe
and readily available, large ridesharing entities will likely eliminate the human driver to optimize costs.
Branching out from this underlying basis, there are many optional augmentations: perhaps users will have
the option to opt to pick up other passengers going their same direction, presumably being rewarded by a
reduced cost of trip; and/or perhaps the vehicles will communicate with a centralized system that, much like
an air traffic control tower, will inform the vehicles of the optimal path they should take to arrive at their
destination, and serve as a dispatcher to send them to their next route. All of these augmentations would
optimize the basic system and create corresponding savings that would result in a host of benefits, such as
reduced vehicle miles traveled, fewer emissions and potentially faster service with collectively lower wait
times. Features and benefits of a fully mature developed ridesharing service are as included in Figure 1
below:

Mobile application
Access to rides without a smartphone
Centralized control tower to dispatch vehicles
Centralized traffic management control to route vehicles
Ability to carpool
Coordination with transit routes
Reduced vehicle production
Reduced emissions
Low wait times
Selection of vehicle type
Affordable for all mobility

Current Private Ridesharing Models and Modern Issues

While there are many ridesharing entities in the market today, the largest two in the United States are Uber
and Lyft. These entities work within loose local government frameworks, recruiting citizens to serve as adhoc drivers for users of their services, primarily through a mobile application. They usually are able to
avoid direct city taxation on their services and are generally viewed as enhancing to city mobility.(7) While
currently very popular, specifically among the millennial generation, these services have not entered

markets without some turbulence. In some instances, the local laws simply do not allow for their services
and must be changed before they are allowed to operate. For instance, in Toronto, the law was recently
changed in July of 2016 to allow Uber to enter the market. In other instances, sometimes after getting laws
changed in their favor, private ridesharing companies meet with resistance from local representatives,
usually encouraged by already established Taxi lobbies eager to protect their domain. In Austin, Texas, the
city council demanded that Uber and Lyft drivers undergo the same background checks as taxi drivers.
Unwilling to comply, both Uber and Lyft pulled out of the city in early 2016. In other jurisdictions, Uber and
Lyft are seen as skirting local taxes, for instance, in San Francisco, the city council is mandating that Uber
and Lyft drivers register as small businesses and pay city taxes.(8) Likewise Australias Taxation Office is in
a legal battle with Uber over the definition of Taxi and if Uber drivers should pay a corresponding tax.(9) In
Rio de Janeiro the local government tried to ban the service and lost in court, and the Uber offices in
Amsterdam have been raided twice in 2015 for using a version of their app that skirted driver licensing
requirements(10, 11). The lightly or unregulated environment encouraged by Uber and Lyft and it's conflicts
with local jurisdictions is, potentially, just a small preview to the myriad of problems that could arise under a
mature system of unchecked private entity ridesharing services.

Potential Issues Under an System Dominated by Private Ridesharing Entities

While ridesharing might be an optimal mobility model, with corresponding benefits, it also opens a door that
could leave the mobility of a large portion of a city's population reliant on a private entity or private entities
to provide continual service. This would leave the transportation system of a city, the lifeblood of economic
and social activities, exposed to unnatural disruptions. Assuming the scenario described above, in which
the majority of a population rely on a ridesharing model driven by autonomous vehicles, below is the
beginning of a list of potential issues that could arise from this model.

Disruption in Service
Just as under any transportation model, a disruption in service could create a critical mobility situation.
What is particularly worrisome about a private sector model is that disruptions could come from very
unnaturally connected occurrences. For instance, a disruption in management of the private entity could
jeopardize the ability of millions to get to work. This sort of disruption could result from a laundry list of
common occurrences: from something as commonplace as a falling out between managers/owners to a
mismanagement of funds that leads to the company insolvency to the purchase of the entity by another,
larger entity that changes how it operates or shuts it down. Under a monopolistic structure, in which there
is only one ridesharing entity in a region, a failure in service would hamstring the entire system. Under
another possibly structure, in which there are multiple ridesharing entities in a market, this scenario may be
somewhat negated. However, even this is a dubious proposition as, very likely in a segmented market,
private entities will commit resources to the market comparable to their market share and would be unable
to make up for the deficit of a competitor suddenly unable to provide service.

Monopolistic Tendencies

In a market with just one, or with limited ridesharing providers, the opportunity for monopolistic practices
would be unchecked. This could lead to artificial price inflation, among a host of other possible
monopolistic practices, as users would be held effectively hostage due to their reliance on the in-place
ridesharing system.

Revenue Changes
In contrast to the great monetary benefit that would be realized by a private sector service provider, there
would be a corresponding drop in revenue for traditional city funding sources such as parking tickets and
traffic violations. This would leave local governments without funding to maintain the very infrastructure
needed to enable the ridesharing services (such as roads, traffic lights, etc).

Social Inequity
Without extensive government direction, the private ridesharing companies will have the ability to pick and
choose which areas they service. This may lead to private ridesharing companies choosing to ignore
certain poor or underserved areas in which users might not be able to afford rides or in which crime might
deter service. Another group that could be underserved is the handicapped, or those that otherwise might
provide special mobility challenges that negatively affect revenue. Under a profit maximizing model, many
people could be left without transportation options that are as effective as the the rest of the region that
might enjoy access to rideshare. This would be an unallowable social inequity.

Privacy
Another potential risk issue lies in privacy and data. As private ridesharing services collect data on their
user base, the information can be sold or otherwise used for unauthorized purposes. Everything from the
highly probably targeted advertising to the unlikely use for malicious behavior, the data that is collected by
Uber and Lyft could serve as a real threat to the traveling publics well being. Additionally, privacy is still a
significant concern for many Americans, and the knowledge that this data is not correctly handled may
actually discourage full adoption of the ridesharing model by the traveling public.

Elimination of Transit
Ridesharing with low enough pricing serves as a true threat to transit use. With a mature, widespread
ridesharing model, transit systems may lose a large segment of their customer base, endangering their
solvency. Combining this with the potential denial of service in certain underserved areas, the inability for a
local transit agency to function could, at an extreme, completely eliminate transportation options to certain
groups and/or areas.
Inability to Reach Optimum
As contemplated above, an optimum ridesharing system will utilize a control tower to dispatch and
coordinate vehicle routes. However, unless there is a monopoly in place, there is a low likelihood that the
optimal scenario can be realized. The nature of a capitalist system is founded on competition, and

individual ridesharing companies may be jealous of their data and means and methods. Constructive
cooperation to establish a control tower would be unlikely without government intervention, leaving a
system that does not reach its fullest potential.
Potential Solutions
Admittedly, many of the issues identified above could be solved through increased taxes on the ridesharing
companies, strict enforcement of antitrust laws, and further implementation of new regulation. However,
many of these solutions would lower the efficiency of the overall system, allow the private industry to direct
costs to the benefit of their bottom line and require a patchwork framework of great sophistication and
complexity. Instead, the implementation of a Private Public Partnership (P3) would wrap all of this into
one, albeit long and complex, contract and provide the appropriate government oversight mechanisms to
ensure social equity and consistent availability of mobility.

Public Private Partnerships

Public private partnerships are a way for the government (or any other public entity) to harness the
effectiveness and innovation and expertise of a private sector partner while retaining top level
administrative control. To the fullest extent of P3 contracting, a public partner entity signs a multi year
agreement with a private entity to design, build, finance, operate and maintain (DBFOM) public
infrastructure. However, a P3 are a very flexible concept, and can reserve any subset of these
responsibilities to the government. The private entity agrees to, and is expected to perform within a set
schedule and provide an agreed level of service, defined through key performance indicators. Normally
the government will contract with a single partner entity or a consortium of entities, which will provide or
otherwise contract all services under their general responsibility. For instance, the government would not
sign an agreement with a mobile application company and a car wash company. Instead, they would sign
one agreement with a consortium that would parcel out this work to their members. Payments to the
private entity for their services can come in a myriad of ways, as described in Figure 2. However, if we take
the models most common to transportation infrastructure, payments to the private partner depend on the
risk that is shifted to the private sector. If the private sector takes the risk of use of the facility, they may be
reimbursed through a collection of fees or tolls placed on the citizen end users in what is known as an Atrisk P3. Alternatively, the government could accept this risk and reimburse the private developer via a set
payment schedule from the government entity, known as an Availability structure. As is appropriate to
their risk profile, usually in an at-risk P3, the private developer will seek a higher rate of return due to the
increased risk of public use as compared to an availability structure. P3 have been found to be extremely
effective and.. insert studies here.
A Select History of P3s
Across the world, P3s have been employed in everything from civil infrastructure such as water and
wastewater treatment plants and pipelines, electric plants and toll roadways to vertical infrastructure such
as court houses, jails, schools and dormitories. In the United States, P3 contracting is less mature than in
Europe or Canada, in which they are very well developed, however, they have become more common in

the last few decades. On a federal level, the Department of Transportation (DOT) is very familiar with P3
contracting structures, as are many state and local governments. The Federal Highway Association
(FHWA), in particular, provides detailed guidance for P3s for roadway construction and transit (available
online at

). This guidance, in addition to the established contracts of the few transit P3s that already

exist in the United States, and elsewhere in the world, is extremely informative in consideration of a future
ridesharing P3. In particular, the transit P3s in which rolling stock is maintained and operated for years
after installation of the supporting infrastructure may provide a substantive reference. Looking at the two
such projects that exist in the united States, the hudson-bergen light rail in New Jersey, completed in 2000
and the eagle rail, to be completed in 2016. The Hudson-Bergen line was a lump sum payment with a 15
year operating period (later extended 5 years) and the Eagle, to be opened next year is being operated
under service payments.

Starting a Proposed Contracting P3 Structure

To begin with creating a framework for a P3 for ridesharing entities, a local government would generally
look to existing established P3 contracting documents. For instance, the Eagle line in Denver provides an
opportunity to create a template from a very recent partnership agreement with many of the same factors
that would be implicated in a ridesharing P3. These contract documents are available at www..com.
Notably, in this transaction, the local government, the Denver Transit Authority, chose an availability
payment structure. Under this structure in a ridesharing P3 each trip or period of service would warrant a
preset payment. This seems like the best payment structure for a ridesharing P3 as in an at risk model we
can very easily contemplate the private industry partner providing exceeding service to more lucrative
routes while only meeting minimal requirements, or even accepting minor penalties if they are not too
significant, to the detriment of less lucrative routes. The Google bus in San Francisco, which provides
exceeding transit services to only Google employees might provide some modern day vision of this.
Another important part of the Eagle contract is that the entire asset is owned by the local government which
is leased back to the private contractor. This would also be important to a ridesharing P3 as contractually
this would ease the way for government to take over the operation if the contract is breached. Continuing
to borrow from the Eagle contract, and utilizing the authors own extensive experience with highway
transportaiton P3s, below is a general outline of some of the many risks that would be considered in a
ridesharing P3 and a proposed allocation of those risks. Please note that this is merely a proposed starting
point, before a final agreement between the public and private sectors can be established, there would be
many rounds of meetings and communication, all attempting to optimize the contract.

A proposed framework for a ridesharing P3.

Benefits of a P3 Model of Ridesharing

While there are many potential issues with private ridesharing entities going forward, many, if not all, of

these issues would be resolved through the use of P3 contracting. This is due to the ability of the public
sector to dictate key contract terms to bar any improper practices. In a competitively bid contract, the
private sector partner would account for the parameters of these contract terms in their proposed price,
theoretically asking enough to warrant the projects risk profile. Below are potential resolutions to the
issues previously stated in this paper in addition to several other benefits that could be realized by P3
contracting of ride sharing services.
No Disruption in Service
Under a P3 contracting model, there would be severe contractual consequences to the private sector
partner if they failed to perform their services as agreed. Beginning with heavy liquidated damages and
turning rapidly to step-in rights of the local government to take over provision of the service, and ending
with a complete termination and turn over of everything to the government, failure to provide services
would be highly damaging to a private entity. Any extended failure would lead to the government taking
over the service, under given legal, contractual rights, which would presumably lead to a rapid reactivation
of services.

No Monopolistic Tendencies
Under an availability structure, prices to the user would be set by the local government or otherwise within
contractual boundaries.

Revenue Changes
Theoretically, in a ridesharing model, parking is reduced or eliminated, thereby eliminating parking ticket
revenue. Additionally autonomous vehicles will follow most, or all, roadway regulations, which will eliminate
traffic citations and the corresponding city revenue. Through the use of a P3, the return to the private entity
would be preset, or otherwise controlled, and ridesharing revenue above this compensation would go to the
city, thus paying for maintenance and operations of the existing roadways and traffic systems.
No Social Inequity
Assuming an availability structure, the private entity would be compensated on a per ride or per time period
basis and they would be contractually obligated to provide equitable service across the area. In fairness,
the payment from the government could be adjusted to compensate for trips that might require
extraordinary mobility solutions, such as handicapped service vehicles. Additionally, the government could
assume the responsibility for certain damage or loss or threat to service due to citizen behavior and
insulate the private sector from liability for these issues.

Privacy
Under a P3 model, the ownership and authority over data could be reserved to the government. This
would allow the government to contractually obligate certain scrubbing procedures to protect citizen

privacy. In addition, this would give full authority and access to the local government to use this data for
real time traffic control and/or future planning.
Promotion of Transit
Under a ridesharing P3, transit could be supplemented instead of threatened. As mentioned earlier,
Gibbons recommended a ridesharing configuration that utilized meeting places for riders to meet at before
embarking all together on their ride to their destination. In a future of autonomous vehicles, the total effect
of these vehicles to the mobility and traffic congestion of a region is unknown and an advanced mix of
transit and ridesharing could produce an optimal mobility solution.
Ability to Reach Optimum
In addition to a potential augmentation to transit, under a P3 contract, there is opportunity to create and
utilize a control tower to dispatch and coordinate vehicle routes across the region. This service could work
with government controlled infrastructure, such as traffic signals in a corridor to route vehicles and
consistently produce optimal travel times for the region.
Surge Pricing
Another benefit that could be realized under a P3 contracting structure, is a set regime for dynamic pricing
that could discourage trips in certain peak period. This would be tied into the control center contemplated
above and could shift user trips to off peak times.
Containment of Liability
Another benefit to having a top layer is the potential containment of liability. Through sovereign immunity,
local governments could theoretically establish protections against certain lawsuits. While negligence on
the part of the developer could leave open a wide window for these actions, in an extreme circumstance of
the government taking over the ridesharing service, there is protection that the government would not be
sued out of existence and have to terminate mobility services.
Encouragement of Ridesharing
As regions begin to transition to new types of mobility, they have the ability to exert some influence over
what systems are ultimately established. An early ridesharing P3 could open the door to help push towards
a society that does actually rely on ridesharing and autonomous vehicles. This encouragement would
come from the piecemeal implementation of autonomous vehicle zones across a region. Through the
implementation of a rideshare program that could begin with both autonomous and human driver options,
the traveling public would be incentivized to use a service that would operate in each of the zones. This
would seem to be a more efficient option than purchasing either an autonomous or a non-autonomous
vehicle and losing access to certain parts of the region.
Safety

There are a host of ways to increase safety through a ridesharing P3. Perhaps most obviously, through the
use of a P3, the private sector system could be integrated with emergency services to facilitate rapid
response. Perhaps less obvious, the data collected by the system could be used to identify trouble areas
on the roadway and direct renovation and construction. And perhaps even less obvious, the transport of
hazardous materials through a region could be tracked and passenger vehicle behavior could be adjusted
to provide wide berth. This list is just a beginning as there are many safety applications that could be
contemplated through this system.
Conclusion
At some point, the reliance on ridesharing will rise to the point where it will need to be controlled by the
public sector. Very possibly, this point has already been reached, or perhaps it has yet to come, and only
will be here when autonomous vehicles are widely available. Regardless, P3 contracting provides a known
opportunity to provide the mix of private and public sector involvement to optimize a regions mobility
systems. Due to the uncertain timeline of the development and growth of these ridesharing enterprises,
local, state and federal officials should begin to contemplate the use of P3 ridesharing contracts and start
taking steps towards exploring their implementation.

Endnotes
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http://fortune.com/2015/10/22/uber-tax-shell/.

8. SF to Require Lyft, Uber Drivers to Obtain Business Licenses - SFGate. Accessed July 23, 2016.
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