London Oyster contract in limbo

Cubic, a member of the Transys consortium that runsLondon's Oyster smartcard public transport system, has beenlegally restrained by its partner EDS.
Written by Tom Espiner, Contributor

Cubic, a member of the Transys consortium that runs London's Oyster smartcard public transport system, has been legally restrained by EDS, the other major member of the consortium, from taking over the running of the entire Oyster system.

This follows complex contract negotiations by Transport for London (TfL), first with the consortium, then with its individual members.

Cubic has, however, brokered a deal with TfL that should the restraining order be lifted, Cubic will run the system, according to a Cubic Securities and Exchange Commission (SEC) filing.

TfL announced last week that it had terminated its contract with the Transys consortium, which consists of Cubic and EDS, citing "value for money" issues as a factor. It said today that it has appealed the court order as part of an energetic defence of its position.

"EDS, one of the partners of the Transys consortium, has sought to challenge the procurement arrangements for the new contract. Transport for London are vigorously defending this challenge and have appealed against the interim court order. We remain committed to delivering better value for money and to ensuring a seamless transition to any new contract from 2010," a Transport for London spokesperson said in a statement.

Although TfL had been in negotiation with Transys, those negotiations broke down. Transys's contract was terminated, but the consortium will continue to run the ticketing system until 2010.

Last week, TfL declined to give details of negotiations with Transys. However, an SEC report, filed on Friday in the US, revealed that TfL has brokered a deal with Cubic to be the sole provider of the system, but EDS has obtained a temporary restraining order against the deal going ahead.

TfL subsidiary Transport Trading Limited (TTL) in early 2007 expressed a desire to get better terms from Transys. TTL entered into discussions with Cubic and EDS under the Transys umbrella up until February 2008, said the SEC filing.

Negotiations with EDS failed, but were successful with Cubic. Negotiations with Cubic and EDS then continued as separate entities. Negotiations with EDS failed again, and were again successful with Cubic, according to the filing. TTL then negotiated with Cubic to perform the entire project, "both maintaining assets and providing operation services," said the SEC filing.

"These negotiations were successful and a new contract called the Future Ticketing Agreement (FTA) has been prepared under which Cubic would provide TTL with all services from 2010 to 2013," the filing continued. "It was TTL's intention to sign this contract simultaneously with terminating the existing Transys contract."

However, EDS went to court and obtained a temporary restraining order preventing TTL from signing a contract solely with Cubic. Cubic said this restraining order will be lifted by the end of 2008.

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