Victoria's Myki retender at "significant risk" of repeating past mistakes

The Victorian agency charged with handling the Myki transport ticketing system needs to take immediate action if it is to avoid repeating past mistakes as it retenders for a new Myki operator, the state's auditor-general has found.

John Doyle today tabled his office's review [pdf] of the operational effectiveness of the $1.5 billion Myki ticketing system.

The state government committed $1 billion in 2005 to develop the system as a replacement for the paper-based Metcard.

But poor planning and bad governance and oversight resulted in significant delays and cost increases that pushed the system's cost past $1.5 billion and the timeframe for delivery from two years to more than nine years.

The initial contract for the Myki system - awarded to Kamco but now with NTT Data after the company bought out Kamco in 2010 - will expire next year. 

The state government will start accepting bids to take over the contract later this year.

But in his report today, Doyle found the same cost and delay issues that compromised the success of the original business case had also resulted in significant risks to the state's retender for a new operator.

While Public Transport Victoria - the agency in charge of Myki - had improved oversight of its contractor partner and related agreements, it was at risk of repeating past mistakes, Doyle found.

He said PTV still has no complete or reliable picture of Myki's operational performance - due to inadequate monitoring - and had not clearly defined the benefits and outcomes it was seeking in the retender.

It had also still not assessed whether Myki had achieved any of its expected benefits, he said.

But despite its insufficient monitoring of NTT Data's performance, PTV still paid out $1.4 million in performance incentives between April 2013 and December 2014, Doyle revealed.

He said while new performance measures implemented by PTV in 2013 had introduced incentives for the contractor to promptly address faults and ensure accurate financial information is recorded - overcharging to users has been the biggest complaint since Myki rolled out - "fundamental issues" remain.

"Current measures in the contract's new performance regime do not address all key aspects of performance[,] there is no framework for assessing myki's overall effectiveness, efficiency and benefits, [and] PTV does not adequately assure the reliability of results, reported by the contractor, that underpin incentive payments," Doyle wrote.

Doyle also warned the compressed timeframes for the retender risked exposing the state to "significant additional costs". 

Historical delays in the Myki project have forced PTV to use its option to extend the existing contract by six months to December 2016 to give it enough time to complete the retender evaluation and transition period, Doyle said.

But this decision has "virtually eliminated any contingency in the retender schedule".

"Consequently, there is a significant risk that the tender outcome will not be finalised before the current contractual term expires," he wrote.

"If this occurs, it may seriously worsen the state's negotiating position and expose it to significant additional costs."

PTV has no further options for extensions to the current contract, Doyle revealed. 

Should the retender activities extend beyond December 2016, the state government will likely need to fork over "substantial additional funds" for unanticipated costs, he said.

"PTV needs to urgently address these issues to avoid perpetuating previous mistakes, and to ensure that the state can maximise value from the future operation of Myki," he said.

The state government had issued more than 13.4 million Myki cards at the end of last year. At that time the system was processing around 7.8 million transactions per week.

Victoria collected $800 million in fares from Myki in 2013-14.