Touch-on stand-off: State government in dispute with US firm over myki upgrade

The company building Victoria’s $1.7 billion new public transport ticket system is locked in an acrimonious legal stand-off with the state government, which has threatened to derail the rollout of a long-awaited myki replacement.

A legal “standstill agreement” is in place between Victoria and Conduent while they attempt to negotiate amendments the US-based firm has demanded to its contract after claiming additional costs and technical work is required to bring the new ticket system online.

Victoria and Conduent are at loggerheads about the cost of upgrading myki. Credit: Paul Rovere

Confirmation of the relationship breakdown comes as the two parties scramble to fix an outage affecting hundreds of myki readers on trams and buses after an apparent failure to prepare them for Telstra turning off its 3G network last Monday. The issue was still not resolved on Saturday.

Conduent commenced its 15-year contract to run and upgrade myki in December last year but quickly raised concerns that its upgrade of ticket readers and other infrastructure across Victoria could not be achieved within the agreed timeframe and budget. This masthead first revealed in June that Conduent was seeking variations in its contract.

Five months later the state government insists work on the project continues and that it is still on track, but the parties remain at loggerheads.

A source familiar with the situation but unauthorised to speak publicly on the matter said the implementation of a standstill agreement shows how badly the relationship has broken down.

The agreement, which is in place until the end of this month, prevents either side taking legal action while senior company and government figures try to negotiate a resolution.

Work continued on the project, the source said, but communication between the two sides was mostly via lawyers.

“They’ve arrived at an impasse. When you’re no longer discussing it in good faith, you’ve then got to go to a next level,” they said.

Myki readers have been glitching.

Five other well-placed transport industry sources familiar with the project, who spoke on condition of anonymity to discuss commercially and legally sensitive information, have shared details with this masthead about challenges it has faced.

One said that there had been “genuine fear” within government that Conduent would walk away from the contract during the middle of the year.

“There was a breakdown in communication within the department, they weren’t telling senior staff how much the situation had deteriorated,” they said.

One industry source said conversations between the state and the operator had initially broken down amid a disagreement over milestone payments set out in the contract.

They said there had been a dispute between both sides about whether the government’s timelines were achievable and that there was “no way” costs would be kept within their initial estimates.

Other disputes about the scope of the contract included whether Conduent or the state government should pay for telecommunications upgrades on trams needed to send information from the new readers back to head office, another of the sources said.

Advanced preparations were under way earlier this year to trial Conduent’s system on buses in several towns in Victoria’s north-east, but that came to an abrupt halt several months ago, one transport industry figure with knowledge of those plans said.

“They were about to start the trial and everything was put on hold,” they said.

Work on the trial had recently resumed, but the trial will only take place in one regional town, they added. The state government confirmed to this masthead that a trial would commence in the coming weeks but has not announced further details.

Illustration:Credit: Matt Golding

A key feature of the new system is that passengers can touch-on using a bank card, iPhone or other digital device rather than a physical myki card. (Digital myki passes have been available on Android devices since 2019.)

Such “contactless payments” have been available on London’s transport network since 2012 and in Sydney since 2019, rendering myki increasingly outdated.

“The overriding imperative is they [the Allan government] know they need it to go live before the next election [in 2026] and they’re anxious about getting there,” one of the sources said.

Two sources said Conduent and the government had not agreed on firm plans for introducing new ticket infrastructure, such as turnstiles at train stations and readers on trams, with one saying the state was concerned that some of Conduent’s proposals would be overly cumbersome.

For example, it could involve both the old and new infrastructure operating simultaneously across trains and trams. That would mean a passenger might touch-on with a bank card at a train station only to find contactless payments unavailable when they transferred to the tram network, or vice versa.

Authorised Officers would have to carry two sets of devices to check if passengers had valid tickets.

“It was supposed to be straight-forward and there shouldn’t be a difference across modes,” they said.

Then-public transport minister Ben Carroll flagged Conduent’s systems would be introduced broadly in 2025 when he announced the contract in May 2023. However, budget papers forecast the full $543.6 million rollout will not be completed until mid-2027.

A spokesperson for Public Transport Minister Gabrielle Williams said both parties were committed to delivering the new ticket system and the program was on track.

“A local trial of new payment options is set to begin before the end of the year, ensuring the technology is tried and tested before being progressively rolled out,” the spokesperson said.

Conduent referred questions to the state government.

Other improvements promised through the myki upgrade include paying with QR codes, short-life smart tickets, and bluetooth-based tokens. Myki will also become an “account based” system, meaning funds won’t be lost with physical cards and enabling more flexible fare options.

In June, Williams said the state expected the project to be delivered within the $1.7 billion budget.

“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,” she said at the time.

In 2019, the Victorian government committed $1 million to help allow mobile myki to become available on Apple devices. It is still only available on Android products.

More than $100 million of unclaimed money is sitting on unused or expired Myki cards.

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