On Demand Transit and Microtransit: Where and Why How to Successfully Launch a Microtransit Service?

  • Date: November 2, 2023


For any agency considering launching a microtransit service, it is important to determine exactly how it will be implemented. Developing an implementation plan is essential to ensure that a new service or changes to an existing service are successful and understood by the public, resulting in a service that attracts and retains riders. Before developing an implementation plan, agencies should reflect on their goals to understand how they will inform performance measures and standards, as discussed in 5. When to choose Microtransit? With those defined, this chapter outlines a step-by-step process to developing an implementation plan for microtransit service, including how to:

  1. Select a service model
  2. Determine the desired app capabilities
  3. Develop a financial plan
  4. Contract with a vendor
  5. Market the microtransit service
  6. Pilot, adjust, and refine it.

Each section below includes checklists with considerations to guide the agency’s decision-making process.

Select Service Model

Service models are selected based on agency goals and what the agency already has on hand. As introduced in Chapter 1 Service Delivery Models, two overarching models describe how existing transit providers may choose to operate microtransit services. They are:

  • Software as a Service (SaaS) – In this model, the agency acquires ride-matching technology and operates the service with vehicles and staff from the agency or a mobility provider.
  • Turnkey Model – In this model, also known as transportation as a service (TaaS), a contracted vendor provides microtransit technology, drivers, vehicles, and operations management.

Software as a Service Model

An agency only contracts microtransit technology in the SaaS model but does not contract drivers, vehicles, or operations management. The agency either provides the vehicle fleet, drivers, and operations staff on their own or partners with a third-party operator. SaaS models make the most sense in regions where transit operators have experience running the local transit service or demand-response service exist, such as paratransit. Operators may need specialized training if microtransit is operating as a paratransit service.

Vehicle Selection

The SaaS model requires that the agency acquire a microtransit fleet if not repurposing existing vehicles. Generally, a vehicle with a seating capacity between six and 14 works. If more than 14 people are riding in one vehicle, the resulting increase in the number of stops may decrease the quality of service for riders. Compared to larger vehicles, smaller vehicles are easier to maneuver and generally more likely to be accepted in local neighborhoods. Smaller vehicles also tend to be more fuel-efficient and less costly to operate than larger vehicles. Additionally, depending on state laws, vehicles designed to transport fewer than 16 passengers may not require drivers to have a commercial driver’s license (CDL). An agency also has to consider their riders’ accessibility needs, especially if microtransit replaces paratransit. If the agency is using microtransit to provide paratransit service, the agency must have or acquire at least one wheelchair-accessible vehicle (WAV). Examples of microtransit vehicle types are shown in Figure 16.

Figure 16: Microtransit Vehicle Type Examples

Turnkey Model

A contracted vendor provides microtransit technology, drivers, vehicles, and operations management in the turnkey model. The turnkey model has better scalability because a contracted vendor provides all of the capital equipment, operations, and staff. As a result, a service can be launched and scaled relatively quickly, should the agency see higher or lower demand than expected. If the agency is choosing to operate the turnkey model, they should ensure the contracted vendor provides competitive salaries and benefits that are realistic in the regional labor market. Turnkey models can sometimes have clear cost savings, primarily due to lower labor costs.

Guiding Questions

  • SaaS
    • Does my organization have a vehicle fleet and operations staff on hand or prefer to partner with a third-party operator?
    • If not, is my organization prepared to acquire a new microtransit fleet?
    • Does my organization have transit operators with experience running local transit services, such as paratransit?
  • Turnkey
    • Does my organization lack a vehicle fleet, drivers, and an operations team for microtransit service?
    • Does my organization desire a service that can be scaled relatively quickly, in the case of higher or lower demand than expected?
    • Are there clear cost savings?
    • Do potential contractors have substantial experience providing microtransit service?


Develop a Financial Plan

Each selected service model has different installation and ongoing costs. The following sections discuss those costs in addition to funding programs, such as federal funding and grants, available to transit agencies who wish to implement microtransit services.

Installation and Ongoing Costs

Installation Costs

SaaS Model

SaaS installation costs depend on what the agency already has available. For example, if an agency is using microtransit to replace a service that uses minibusses, the agency may save the cost of vehicle acquisition, as well as driver hire if using the same vehicle and operators.

Table 9: SaaS Installation Costs

Cost Estimated Range (One-Time Expenses) Description
Vehicle acquisition $35,000-$200,000
  • Cost of acquiring vehicles, assuming they are not already available.
  • Cost includes vehicle registration costs, branding, retrofitting for accessibility, and more.
Driver hire Depends on the agency’s recruiting process and requirements
  •  Cost to hire and train drivers.
    • If drivers are providing ADA service, they may need additional training.
Hardware and data plans $200-$500 per tablet or smartphone plus ongoing data plan subscription
  • Cost to purchase tablets or smartphones, mounts, chargers, dispatcher hardware, and an active data plan.
Software installation fees $20,000-$50,000
  • Software installation fees vary depending on the provider and software capabilities.
Marketing $10,000-$40,000
  • Cost to market the service before the launch.
Turnkey Model

Turnkey installation costs depend on the provider. For example, some providers may charge an upfront fee while others incorporate installation costs into the ongoing monthly costs.

Operating Costs

SaaS Model

SaaS ongoing costs depend on how the agency currently operates and whether they are partnering with a third-party operator.

Table 10: SaaS Operating Costs

Cost Description
Vehicle Maintenance
  • Maintenance can be managed by an agency or by partnering with a third party.
Driver Pay
  • Depends on the employment model but will typically be salaried drivers.
Operations management and customer service
  • The organization would need to ensure they have at least one person at all times to act as a dispatcher and manage driver issues.
Software licensing fees
  • Software licensing fees depend on the provider.
Turnkey Model

The ongoing costs for a turnkey model will depend on the provider and the regional labor market. The ongoing hourly cost will decrease as fleet size increases because fixed costs can be spread across a larger number of vehicle hours.

Table 11: Turnkey Ongoing Costs

Type of Cost Cost
Fixed Costs
  • Administration and dispatch costs
  • Software
  • Marketing
  • Overhead
Variable Costs per Hour
  • Vehicle costs
  • Driver pay
  • Incremental WAV driver pay
  • Customer service cost

Setting the Fare

Fares should be designed with the agency goals in mind. For example, if the goal is to increase ridership, the fares should be low enough to attract riders. Fare prices can be impacted by zone size or design. For example, fares can be fixed per trip or based on distance. If a microtransit service operates in two zones, an agency can charge more for travel between zones. Some agencies that operate fixed-route transit charge up to two times the fixed-route bus fare for microtransit in order to incentivize fixed routes. If the agency operates fixed-route services, fare policies governing microtransit should be the same as those that govern their fixed-route services, including free transfer policies.

Funding Programs

Funding for public transit is usually a combination of fare revenue and federal, state, and local funding. However, demand-response services typically see low recovery ratios due to lower average passengers per hour. For example, in 2018, FTA-funded demand-response services had a seven percent farebox recovery ratio on average in the U.S.

Federal Funding

Formula Grant Programs

Federal formula funds are typically distributed through states and trickle down to small urban, rural, and tribal transit agencies based on area population, existing transit service, and other factors. FTA considers licensing software a capital cost and covers it at up to an 80 percent match with formula funds. Therefore, agencies operating a turnkey model would receive up to an 80 percent match for half of a turnkey contract’s cost, and the remaining half of the contract would fall under operating costs and receive up to 50 percent in federal match. Overall, federal funds can cover up to 65 percent of a turnkey microtransit contract. In response to the impact of COVID-19, due to the FTA’s Emergency Relief provision, the Coronavirus Aid, Relief, and Economic Security Act (CARES) Act passed by Congress, and the Health and Economic Recovery Omnibus Emergency Solutions Act (HEROES) Act passed by Congress, there was no local match required, and agencies could use funds for operating expenses.

Competitive Grant Programs

The FTA and Federal Highway Administration (FHWA) have a number of grant programs focused on innovation and helping transit agencies experiment with new technology:

  • Enhancing Mobility Innovation – The Enhancing Mobility Innovation program advances a vision of safe, reliable, equitable, and accessible services that support complete trips for all travelers.
  • Integrated Mobility Innovation (IMI) – The IMI demonstration program, which includes the FTA Mobility on Demand (MOD) Sandbox Program, supports the integration of mobility innovations with existing services.
  • Accelerating Innovative Mobility (AIM) – The AIM initiative supports mobility and innovation by promoting forward-thinking approaches to improve transit financing, planning, system design, and service.
  • Mobility for All – The Mobility for All Pilot Program Grants support projects that improve mobility and access to public transportation for older adults, people with disabilities, and individuals of low income.
  • Congestion Mitigation and Air Quality Improvement Program (CMAQ) – The CMAQ program funds transportation projects and programs that reduce congestion and improve air quality.
State Funding

States raise funds for transit from a variety of sources such as motor vehicle taxes, gasoline taxes, and motor vehicle registration fees. In addition, several states offer grants for innovative transit services or other programs that focus on policy objectives, such as reducing greenhouse gas emissions.

Local Funding

Local communities can raise dedicated transportation funding through sales or property tax increases by creating a ballot measure. On Election Day in November 2020, voters approved 13 of 15 ballot measures supporting public transit, totaling $38 billion in funding. These ballot measures were passed in regions such as Sonoma County, California; Monroe, Michigan; Missoula, Montana; and Wheeling and Bethlehem, West Virginia. Local leaders can also create partnerships with corporations, foundations, or universities to launch transit services. For example, the city of Lone Tree, Colorado, partnered with several medical centers and local business districts to launch Link On Demand.

Cost-Sharing Models

If multiple jurisdictions are collaborating to provide microtransit service, they can split funding in various ways. A fixed funding split is the most straightforward option; however, a more likely approach is to split funding on the basis of service that takes place in each jurisdiction. This can be done in two different ways:

  • Vehicle miles traveled (VMT) basis: Funding is split according to the distance traveled by microtransit vehicles in each jurisdiction.
  • Trip count basis: Funding is split according to the number of trips that take place within each jurisdiction, based on origin and/or destination points.

Guiding Questions

  • Installation and Ongoing Costs
    • Does my organization have a cost estimate for both installation and ongoing costs?
  • Setting the Fare
    • Has my organization reflected on our goals before setting the fare?
    • If my organization operates fixed-route services, are fare policies for microtransit service aligned with the organization’s goals?
  • Funding Programs
    •  Will my organization receive federal formula funds for microtransit service?
    •  Has my organization researched other federal and state grant programs to apply?
    • Will my organization attempt to raise funding by creating a ballot measure?
    • Are there any corporations, foundations, or universities that might want to partner with my organization to provide microtransit service?
    • If multiple jurisdictions collaborate to provide microtransit service, have we decided how to split funding?

Contract with a Vendor

If the agency is a recipient of an FTA grant, it will need to follow FTA guidelines. The National Rural Transit Assistance Program’s (RTAP) ProcurementPRO is a free web-based application that guides rural and tribal grantees through FTA procedure and allows the agencies to download FTA clauses and certifications that must be included in the request for proposals (RFP). The FTA has also published a Best Practices Procurement and Lessons Learned Manual that gives examples of procurement practices and lessons learned throughout the procurement process by FTA recipients. The N-CATT Technology Procurement Playbook details strategies that agencies can follow to ensure their technology procurements maximize benefits to their system and passengers. Additionally, any granting agency may have data requirements that should be inserted into the RFP, so the agency knows the vendor can comply. Finally, transit agencies should ensure that their procurement policies follow state and local guidelines.

Development of Requests for Proposal

RFPs should be as detailed as possible to receive high-quality, competitive bids. The RFP should be written with the agency’s goals for the microtransit service in mind, and ensure local agency access to the program’s data to manage, evaluate, and refine the service. The RFP should include a budget, including how they intend to address issues of additional service being required post-launch, which will allow for vendors to submit more specific and better thought-out responses. By this point, an agency should have already determined whether they would like to operate a turnkey microtransit service or a SaaS method, which will help an agency write the scope. Agencies can use the information in Chapter 1 Financial Plan to determine their budget.

The Procurement Process

Agencies can choose to hold a pre-bid conference if needed in order to reiterate the bidder instructions and to answer any questions proposed by attendees. If the RFP allows for question submissions, the agency should publish questions and answers in the addenda. It is best to give at least two weeks between the publication of a final addendum and the proposal deadline to give vendors time to consider answers to their questions. When it comes time to select a vendor, an agency should have a clearly defined approach for evaluating bids and proposals. There are many different methods of evaluating proposals to determine the best value for the agency. Some agencies develop numerical rubrics and assign proposals scores based on different categories, such as approach, qualifications, and key personnel. Agencies will also need to consider the technical merits of the bidders and the price differential to determine if a higher price proposal warrants the award based on the benefits it offers compared to a lower price proposal. This is where providing a budget in the RFP plays a role. Agencies should then decide whether to invite the top bidders to interview or submit a best and final offer (BAFO). Once agencies offer an award, they should debrief unsuccessful bidders, allowing the unsuccessful bidder to submit an improved competitive proposal in future procurement. The process will be complete once the agency has administered a contract to the winning bidder and issued a notice to proceed letter

Guiding Questions

  • Contract with a Vendor
    • If my organization has received federal funding for microtransit service, have we followed FTA guidelines in developing the RFP?
    • Has my organization ensured that the RFP follows state and local guidelines?
    • Has my organization determined a budget before publishing the RFP to ensure the responses are more specific?
    • Has my organization held a pre-bid conference and/or released addenda for questions received?
    • Has my organization developed an approach for evaluating proposals?
    • After offering an award, has my organization debriefed unsuccessful offerors?

Market the Service

Successfully launching a new microtransit service can be challenging if riders are unaware of the service or reluctant to adopt new technology. Marketing and public education should begin before the service launches. Agencies should use a mix of strategies to market every step of the customer journey and deploy strategic initiatives at each phase. Adjustments to marketing strategy are anticipated due to changing demand throughout the implementation process. Some providers of microtransit platforms can assist in marketing as part of their contract.

Marketing and public education strategies include:

  • Digital marketing
    • A website for the service
    • Social Media posts, including geotargeted ads
    • Radio and television ads
  • Print marketing
    • Direct mail to people who live in the zone
    • Brochures and flyers distributed at transit centers and affected bus stops
    • Ads at/on transit centers, bus shelters, and bus exteriors
    • A featured story in local papers
  • Direct outreach
    • Attend community events, such as neighborhood association meetings
    • Public meetings and stakeholder meetings
    • Pop-up events
    • Bilingual brand ambassadors at rail stations and on buses affected by the change.
    •  Biggest visible brand image – Wrap the Vehicle in the new microtransit program’s logo and colors


Before the launch of a service, the goal of marketing is to ensure that the community is aware of upcoming service changes and to create excitement. Agencies can partner with civic and neighborhood associations to hold public meetings and send emails to their listservs to reach potential riders. Because the zones are already defined by this stage, the agency can mail brochures and advertisements to all residents in the zones. Agencies can also ask businesses and organizations to display window clings advertising the service. Advertising should also be in other languages in addition to English for people with LEP in the region. If transit already exists in the region, microtransit service should be branded and integrated with the agency’s existing services. The microtransit vehicles can be branded to match the branding of the app to foster brand familiarity.

Launch of Microtransit Service

Agencies can create buzz for the service by planning a launch event that will draw attention, such as a ribbon-cutting ceremony. The agency can invite journalists to the launch event and invite them to trial the service. To encourage ridership, agencies can also use fare promotions. Examples include offering a fare-free period and offering the first two (or more) rides for free. The agency can also use existing riders to promote the service; for example, a rider who refers a friend and family member receives a free ride if that friend uses the service. Some services cite the referral program as their biggest rider acquisition channel.


During service, agencies can adjust their marketing tactics depending on their needs. By using data automatically collected by the mobile app, agencies can understand real-time behavior trends to deploy messaging quickly and easily across products, such as emails and push notifications. According to their data, agencies can target their marketing to areas that generate or attract the most trips, such as apartment complexes, hospitals, office parks, entertainment venues, or the most popular origins and destinations.

Guiding questions

Pre-Launch Marketing

  • Did my organization partner with civic and neighborhood associations to reach potential riders?
  • Has my organization distributed print marketing directly to residents in the zone and/or at transit centers?
  • Is advertising in other languages in addition to English?
  • Is the microtransit service’s branding integrated with my organization’s existing services?

Launch of Microtransit Service

  • Has my organization planned a launch event for the new microtransit service?
  • Has my organization invited journalists to the launch event to create buzz?
  • Has my organization considered fare promotions for the weeks after launch?

Post-Implementation Marketing

  • Has my organization adjusted marketing tactics based on data from the app?
  • Is my organization continuing to update marketing materials with updated service information if anything changes?

Pilot, Adjust, and Refine It

Since most everything is processed through a smartphone app and microtransit software, microtransit is inherently data rich. Agencies should ensure they have local access to this information, by requiring it in the RFP. This data allows agencies, even the ones with limited staff or resources, to monitor the service’s success. The flexibility of microtransit also allows agencies to adjust services based on performance metrics. Evaluating metrics discussed in Chapter 5: Establishing Performance Measures, such as rider feedback (by conducting surveys), demand patterns (by analyzing OD data), or budget after launch, assists agencies in refining their services.

Guiding Questions

Pilot, Adjust, and Refine

  • Does my organization continue to monitor performance metrics, demand patterns, and OD data?
  • Does my organization ask riders for feedback and analyze the responses?
  • Does my organization adjust microtransit service based on performance?

Key Takeaways

A growing number of transit agencies are looking into launching microtransit services. As discussed in the previous chapters, microtransit can take many forms in how services are designed and operated and works best in areas where people are more likely to use transit and fixed-route service is less likely to be productive (low density, poor street connectivity, or other factors). Microtransit services should be designed with respect to the agency’s goals and the customer’s preferences and needs. The implementation plan is key to successfully launching a microtransit service, and this chapter outlined the main steps in developing an implementation plan, including how to:

  • Select the service model
    • Decide whether to use the SaaS model or the turnkey model based on agency goals and what the agency already has on hand.
  • Determine the technology to be used
    • Decide which features to include in the mobile app.
    • Ensure the technology is deployed equitably, with booking and payment alternatives available.
  • Develop a financial plan
    • Estimate installation and operating costs based on the service model.
    • Set the fare based on agency goals and existing fare policies.
    • Research funding programs and apply to applicable competitive grant programs.
  • Contract with a vendor
    • Develop an RFP by following FTA guidelines, if applicable.
    • Ensure the RFP clearly outlines the goals and objectives of the microtransit service for offerors to respond to.
  • Market the service
    • Create a marketing plan for the pre-launch, launch of the service, and post-implementation.
    • Post-implementation, adjust marketing tactics based on data collected by the microtransit app.
  • Pilot, adjust, and refine
    • Continuously monitor performance metrics.
  •  Adjust microtransit service based on performance.

Finally, as microtransit services across the country mature, our understanding of their role in the transit landscape also grows. For example, while agencies have been implementing microtransit to achieve goals commonly related to cost, productivity, and rider satisfaction, research conducted for the development of this Guidebook revealed that microtransit could enable a more efficient allocation of resources in areas with under-performing fixed routes, low population density, or logistically challenging to serve areas, but may not propel ridership growth in every case. However, with vehicle routing and mobile apps technological advancements, microtransit excels at improving the responsiveness and reliability of demand-response services, including paratransit, benefiting agencies and riders alike.


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