New myki operator wants more money to run troubled system

The new operators of Victoria’s long-troubled myki system have sought more money from the state government to deal with technical roadblocks and cost pressures as the state budget strains under the weight of increasing debt.

Trials of an upgraded public transport ticketing system were expected this year, but sources said new operator Conduent was struggling with key deadlines and negotiating variations on its contract with the state government.

The new myki operator wants more money to run the system.Credit: Scott McNaughton

Another key public transport contract for Melbourne’s metropolitan rail network has been extended until 2027, pushing back the bidding process until 2026.

Victoria signed a 15-year $1.7 billion contract with Conduent in May last year. The US-headquartered firm took over running myki from its previous operator NTT Data in December.

But two industry sources, speaking anonymously to detail confidential discussions, said teething issues with the takeover had prompted new negotiations with the Department of Transport and Planning.

They said the project was tracking above its allocated budget and discussions were under way about contract variations.

One source said ongoing issues with the system – which is yet to handle mobile payments for iPhones five years after the government invested $1 million to develop the feature – continued to haunt the new operator. This included overly complex IT systems and difficulties with the hardware used to scan myki cards.

Another source said the company had been delayed on some deadlines during the transition from NTT Data.

A spokesman for Conduent declined to comment and referred questions to the Allan government.

Conduent will gradually install new ticket validators and other infrastructure across the state’s trains, trams and buses capable of taking contactless payments, meaning passengers can travel just using a credit or debit card rather than having to buy a physical myki smart card.

Currently only Android smartphones can be used to touch on, but the new operator has pledged to deliver this for Apple devices as part of its work.

State budget papers suggest the rollout of the next ticket system may have fallen behind schedule. The 2023-24 budget forecast $183.8 million would be spent this financial year for its public transport ticketing asset renewal project.

But this year’s budget, released last month, estimates it will have spent less than two-thirds of that budget – or $113.7 million – by June 30, which is $70 million less.

The state government did not respond to questions about Conduent on Wednesday, and at a media event on Thursday Public Transport Minister Gabrielle Williams would not say whether the company had sought further funding. But she said the plan to trial new myki technology in regional Victoria later this year was on track and the contract remained at $1.7 billion.

“That is our expectation, that this project will be delivered within that budgetary envelope,” Williams said.

“We are taking a very careful and considerate approach to make sure that we have full confidence in that technology, before we roll it out, across what is a very complex public transport system here in Victoria.”

Budget papers forecast an $83 million spend in 2024-25. The full rollout of new ticket readers, turnstiles and other infrastructure is estimated to cost $543.6 million and will be completed by mid-2027.

The budget papers also forecast Victoria’s net debt to rise to $187.8 billion by June 2028, as the state grapples with cutting spending and delaying projects.

Conduent will gradually install new ticket validators across the state’s trains, trams and buses capable of taking contactless payments.Credit: Darrian Traynor

Despite the $1.7 billion contract with Conduent, Victoria’s transport department has continued to spend millions on other third-party consultants to help get the new system off the ground.

That includes a $4.2 million, one-year contract awarded to Rhumb Consulting for “public transport ticketing – technical design services”.

Victoria awarded a separate $6 million contract to BPMA Australia in January this year for “public transport ticketing program delivery services”. The Sydney-headquartered firm advertises on its website that it assists clients to develop, test and operate transport ticket systems.

The department is also negotiating a new contract to operate Melbourne’s tram network and is expected to announce a successful bidder by the middle of 2024. It has pushed the end of the metropolitan train contract out until 2027.

A letter seen by The Age shows the department has attributed the delay to the opening of the Metro Tunnel and negotiations over the tram contract.

The letter to stakeholders says the government wants to allow bidders adequate time to assess the performance of the tunnel, opening by 2025, on the broader network. Expressions of interest will open late 2025.

Credit: Matt Golding

It also acknowledges that the result of the tram contract may impact which companies form consortiums to bid for metropolitan rail.

One source said this was an acknowledgment that the contract may soon change hands from Keolis Downer.

One of the bidders that has impressed the departments is Transdev, which has partnered with builder John Holland.

John Holland is part of the Metro Trains consortium, but is expected to separate from Hong Kong-based MTR Corporation when the train contract expires and bid with a different group.

Transdev previously ran a third of the state’s bus network until its contract was not renewed in 2018. It has been replaced by Kinetic.

Before the government decided not to renew its contract, The Age reported it pulled nearly 140 buses off the road after they were found to be defective in 2017.

Opposition public transport spokesman Matthew Guy said a renegotiated contract would be “yet another financial disaster”. “The level of financial incompetence by the state government, over so many different areas, is stunning,” he said.

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