The Victorian government has been accused of running a "flawed" tender process to award a $1.7 billion contract to overhaul the myki ticketing system, with concerns the successful bidder was given the inside running by government officials.
In a detailed letter of complaint to Premier Daniel Andrews, one of the losing bidders, Cubic, warned errors during procurement would cost Victorian taxpayers for years.
Last month, US-based Conduent was awarded a 15-year deal to operate and modernise Victoria's public transport ticketing system, including upgrading the system to allow all commuters to pay by credit card or phone.
But as reported by the ABC, Conduent is yet to roll out technology that allows all commuters to use their phones in lieu of tickets in major cities, including Paris, despite claims to the contrary made by the Andrews government.
The awarding of the contract has caused private concern in the sector.
Conduent was also part of the original consortium that set up myki, which was plagued by problems when it was established during the Brumby Labor government more than a decade ago.
Cubic's letter to Premier Andrews said its bid was $100 million cheaper than Conduent's and highlighted Cubic's track record of using mobile phones and credit cards for public transport fares — often called open payments — around the world and in Sydney.
The letter from two senior US-based executives, chief executive Stevan Slijepcevic and corporate senior vice-president Jeffrey Lowinger, stated it set out to draw Mr Andrews's attention to "serious concerns about possible errors in the tender process".
"Cubic asks you review the flawed procurement process for the PTT (Public Transport Ticketing) and suggest the result be re-evaluated to ensure that Victoria receives the innovative technology solution its residents desire and deserve,'' the letter said.
Opal operator Cubic claims tender bids were not properly assessed
Cubic, which runs open payment ticketing systems in London and New York, has raised concerns that government officials held discussions with Conduent after Cubic made its final submission.
"This gave that bidder a significant opportunity to explain and improve its offer, an opportunity that was not given to Cubic despite having a lower priced, technically superior offering,'' the letter, obtained by the ABC, said.
"These actions by the procurement team did a disservice to the State by reducing the competitive tension during the tender process, and it prevented the State from potentially receiving an improved offer from Cubic had it had similar discussions and interactions with Cubic."
The company denied the letter was a case of it being a sore loser.
Cubic accused the government's procurement team of not conducting thorough reference checks and claimed the team did not use overseas site visits to properly assess bids.
It is not the first time Cubic has made accusations of a flawed tender process, launching legal action against the NSW government in 2001 after rival ERG Group was awarded a contract for the state's ticketing system.
The NSW Supreme Court ruled against Cubic, but the NSW government cancelled ERG's contract in 2008, before awarding a new contract to a consortium including Cubic in 2010.
The Opal card system designed by Cubic is still in use in New South Wales, and permits open payments.
Government defends choice of Conduent for myki revamp
At his morning press conference, Premier Daniel Andrews said questions about the awarding of the contract were best directed to the Public Transport Minister Ben Carroll.
He said the contract was awarded on the advice of public servants through a tender process.
"Politicians don't sit down and evaluate the bids, independent experts and those who provide advice to government [do], so independent public servants [are] oversighted by a probity auditor," Mr Andrews said.
"I've got no advice to suggest there is any issue with this process, indeed quite the contrary."
The letter from Cubic stated "the successful respondent overstated its experience and progress in many jurisdictions".
Mr Carroll had spruiked Conduent's track record in Paris, Dubai and Montreal but the company is yet to deliver mobile phone and credit card payments without a ticket.
"Not only would this information have been accessible through the customer reference check process, but it is also available through a search on the internet,'' the letter said.
Cubic said it was also left frustrated by the Victorian officials' failure to answer questions about its bid during a de-brief.
Cubic's submitted price was $1.6 billion.
"When asked what price was used to evaluate Cubic's proposed solution during its evaluation, the procurement team declined to provide an answer,'' the letter said.
In response to the claims, the government defended both its tender process and its chosen firm Conduent.
The government cited Flanders in Belgium as a region where Conduent had delivered open payments on a scale similar to Victoria.
"The procurement process for the new ticketing contract was a rigorous process undertaken by experts that concluded Conduent to be the best option for Victoria's public transport network," a government spokesperson said.
"Conduent has a reputation for delivering successful projects in Australia and across major global cities — we have every confidence in this new ticketing contract and the track record of the technology."
The government said it did engage with other jurisdictions to understand the working experience of bidders.
Mr Carroll fronted a parliamentary inquiry into the 2023 budget on Tuesday, where he rebuffed Cubic's criticisms of the government's tender process.
"It’s a bit like the person on Brownlow medal night that can't win the Brownlow because they've been suspended. You can't then ask the tribunal to redo the process," he said.
"Rules are in place. procurements are in place, we've had a very thorough, very diligent procurement process."
Opposition calls for contract to be torn up
In light of Cubic's claims, the opposition on Tuesday called for the Andrews government to suspend its contract with Conduent.
"This contract must not proceed while such serious probity and transparency concerns remain unanswered," Opposition Leader John Pesutto said.
"Victorians cannot afford another Myki debacle and simply want a proven and affordable public transport ticketing system that delivers what we need."
Shadow Public Transport Minister Richard Riordan said his party had "grave concerns" around the tender process that awarded the contract to Conduent.
"There are serious probity issues surrounding the awarding of this contract and Victorians must not be left to pay the price of the Andrews government's incompetence," Mr Riordan said.
"Why are Victorians being asked to pay hundreds of millions more for a system that hasn't worked anywhere else in the world?"
