An inconvenient e-ticketing truth

I am certain that the settlement of the case over NSW's cancelled e-ticketing system was the best thing for both the NSW government and Videlli, given the current circumstances. But did it display justice at work? I'm not so sure.

I've been following the Tcard court case since it first started in 2008, when the then Labor government spat the dummy over delays for the roll-out. Basically, the government had been hoping to bring in a working electronic ticketing system for years (the contract with ITSL, an ERG (now Videlli) subsidiary was first signed in 2003). In 2008, when the project was cancelled, the completion date was expected to be February 2010.

Then Transport Minister John Watkins called out the company for the delays, failures and "appalling project management" when he cancelled it and stopped the trials that had been running on buses in Sydney's inner west. The government also announced its plans to litigate against the Tcard developers, looking to recoup $95 million of government funds that had been spent on the project.

This was broken down as being $18 million for the purchase of new equipment for buses and rail stations; $32 million for the development of new technology and implementation of the system; $16 million to launch the interim ticketing scheme used by 430,000 school students; and $29 million on interest and other payments, internal operations and insurance. The government had already seized a $10 million performance bond.

Watkins said that electronic ticketing still had to be implemented, and that the state would look into how it would do that.

When its contract was cancelled, ERG was not happy. It announced a counter-claim for $200 million, saying that not only had the Public Transport and Ticketing Corporation (PTTC) charged with overseeing the work been extremely unhelpful, but also that it believed that the termination of the contract was a political stunt.

"ERG strongly believes the Tcard project was terminated by the NSW Government for political purposes, and that PTTC's conduct lacked reasonableness and good faith," ERG chairman Colin Henson said in a statement at the time.

"The project was plagued by disinterest by the government, lack of leadership by the minister and PTTC executives and a complete breakdown in the PTTC's ability to manage the transport operators to effectively co-operate with ITSL in development, testing, installation and operation of the Tcard system," he said.

Later, in its statement of claim, the company reportedly echoed the politics statement, saying that the cancellation had been carried out to avoid bad PR.

The government had apparently been advised that a "possible public relations nightmare" was brewing, because of the need for passengers to tag off when disembarking from trains and buses. If the system didn't work, or a passenger forgot, they would pay the maximum fare, and wouldn't notice because the charge would come from a block sum of credit. This actually happened in Victoria with its myki system, and the push back from commuters would have been terrible with an election due the next year.

In a Supreme Court directions hearing, the company's lawyer Wayne Muddle said that the company had been told by an intermediary company that a "mea culpa" letter to the government would allow the project to go ahead; however, this was allegedly just used as fodder for the cancellation.

At the same directions hearing, Muddle alleged that RailCorp had failed to tell ERG when it upgraded its software, and that the rail organisation's descriptions of its legacy systems hadn't been very clear. He also alleged that ERG had been kept in the dark on how the tests of the Tcard system had run, failing to detail any errors found in testing.

That sounds like a difficult environment to operate in, doesn't it?

Then take into account the fact that Sydney's fare structure was so complex that experts said that electronic ticketing would be difficult to deliver.

Watkins asked the Independent Pricing and Regulatory Tribunal (IPART) to look into the matter after cancelling the contract. Lo and behold, in 2010, before announcing the new vendor that would tackle the ticketing system, the government announced a fare restructure.

If I were ERG/Videlli, at that point I would have been screaming with hysterical laughter, because if I didn't laugh, I'd cry. Does it sound like this ticketing system really had the chance to get off the ground to you?

That's why I was surprised that a settlement, which saw ERG/Videlli pay $5 million to the NSW government and lose out on $27 million that had been coming to it, was reached. Perhaps the company had not delivered, but the conditions just didn't seem conducive to delivery.

I felt a little more illuminated after I read Videlli's statement.

"Legal action by a company of Videlli's size against the much larger government is always difficult. In the end, the settlement was reached without admissions on either side, and with each party paying its own costs. Videlli has spent over $20 million over the last three years in defending the claim and pursuing a counter-claim in an attempt to obtain a fair and reasonable result for shareholders," it said.

That doesn't sound like a mea culpa statement. What it does sound like is sad reality.