Guaranteed Tolls – Viable Solution or Risky Endeavor?

Toll agencies have been offered a “guaranteed” toll in some form or another for years. But, recent offerings associated with all electronic tolling and innovative contracting approaches related to the collection of tolls not associated with an established account (e.g. EZ-Pass, SunPass, TxTag, etc.) has developed newfound interest in guaranteed toll contracts – but with potential risks that you need to know.

Fundamentally, the guaranteed toll contract model involves establishing two toll rates. The first is a base toll rate for customers with transponders to pay, and the second is a higher toll rate for customers with license plate-based tolling or image tolls. The contract is generally structured to guarantee payment of the base rate to the agency while a third party is granted the right to pursue collection of the higher rate.

On the surface, the concept sounds like a slam dunk, especially from a financial perspective. It can be likened to achieving the mythical 100% revenue collection efficiency target. However, there are risks associated with involving a third party in pursuit of image-based tolls, especially when customers do not respond to the first notice or prove difficult to locate. The contracting agency can even be exposed to negative customer sentiment and publicity absent tight controls on the third party contractor’s business practices.

Many agencies currently operating under an electronic toll model already have tolling schemes that establish a rate differential between transponder-based tolls and image-based tolls. The delta between the two rates will play heavily into any contract negotiations associated with a guaranteed toll payment. Other factors that come into play include the makeup of the customer base (commuter, infrequent traveler, etc.), current business rules, and the volume of image-based tolls subject to collection.

Aside from reaching an agreement regarding the delta between the two rates, critical factors that should be addressed in any contract associated with guaranteed tolls include enforcement of agency defined business rules, escalation procedures, a well-defined approach to handling existing customers, and more. A very real concern associated with this type of contract model is relinquishing direct control of the relationship with some customers. Agencies considering a guaranteed toll contract must carefully balance customer service needs with the financial responsibility to collect tolls. A properly constructed contract along with ongoing oversight can establish this needed balance and provide a high level of financial security associated with image-based tolling.

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About the author

Kevin Palmer, PE, PMP
Kevin Palmer, PE, PMP
Kevin serves as RS&H’s Tolls Technology Leader and has a range of progressive experience in program management, consulting, and system planning. RS&H provides specialized solutions for the planning, scheduling, and testing of toll and managed lanes systems.

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