Minister's office not cowed by ERG threat

Although ERG Group has threatened a lawsuit to reclaim its AU$250 million losses on the Tcard project, the Transport Minister's office believes the government is in a solid legal position.

Although ERG Group has threatened a lawsuit to reclaim its AU$250 million losses on the Tcard project, the NSW Transport Minister's office believes the government is in a solid legal position.

A Tcard Reader (Credit: Tcard)

In a statement yesterday, ERG Group claimed that the NSW government's termination of the contract to develop a cashless electronic ticketing system for Sydney's transport was "unlawful" and that it believes the Public Transport Ticketing Corporation (PTTC) had no proper basis for terminating the 2003 agreement. It concluded that the PTTC's actions constituted a repudiation of the agreement.

According to ERG Group, it is considering legal action to reclaim the AU$250 million dollar loss the project has engendered, with the company having only received AU$13 million of the AU$350 million set out in the contract to date.

"Their legal position is a matter entirely for them," a spokesperson for the Minister's office told ZDNet.com.au today, but added that the government's contractual position was sound: "The government has followed the contract that it had with (ERG Group subsidiary) ITSL to the letter."

ERG Group, however, believes that the government did not adequately consider its remedial plan, which was presented to the government after NSW Minister for Transport John Watkins threatened to cancel the project. The plan was "extremely sound" according to the company, and backed by an "independent, reputable Sydney based project management consultant". Despite this, the plan was "ignored" by the PTTC, ERG Group claims.

"Except for some very brief and perfunctory questioning in relation to the company's plans the government chose not to engage with ERG at all in looking at how Tcard could be delivered in a co-operative manner," ERG Group chairman Colin Henson said in a statement.

ERG Group wouldn't have been in this position if it had delivered on the contract, the spokesperson for the Minister's office countered.

ERG Group blamed the government's and the PTTC's uncooperative behaviour for the unsuccessful nature of the project and said it had delivered on other similar projects: "It needs to be remembered that ERG has successfully delivered similar programs with cooperative government departments in cities all around the world (including San Francisco, Singapore, Hong Kong, and other cities much larger than Sydney), and many of ERG's current project customers have provided references supporting the company.

"The key thing that distinguishes the Tcard project from so many of ERG's successful projects around the world is the unwillingness of the government to work with ERG in developing and deploying a world class system," Henson said.

What the decision means to taxpayers, according to Henson, is that getting an alternate Tcard up and running will now take years, and the price will be doubled because of the complexity of the fare structure and because any supplier will factor in risks inherent in dealing with the "withdrawn and uncooperative" NSW government.

"Unless there is a really hard look at trying to reduce the complexity, then it could be horribly expensive," Richard Harris, VP of Research at analyst firm Gartner, told ZDNet.com.au.

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