Victoria ignored risks before $137m blow-out, delayed myki overhaul

Victoria’s transport department failed to resolve early contract disputes and accepted an unrealistic timeline for the rollout of the new myki system before the program suffered a $136.8 million blow-out and an 18-month delay, an audit has found.

A report by the Victorian Auditor-General’s Office released Wednesday also highlights the high cost of running the new public transport ticketing scheme, which it estimates will absorb 26¢ of every $1 it collects in fare revenue.

In contrast, the Department of Transport and Planning (DTP) received advice in 2021 that “based on other global ticketing implementations, the cost of fare collection for a modern account-based system could be less than 10¢ per dollar collected,” the audit says.

The report comes two days after Transport Victoria launched a trial of the new ticket technology on a handful of V/Line and Metro train lines, allowing passengers to touch on with bank cards and iPhones for the first time.

Victoria signed a contract, now valued at $1.96 billion, with US outfit Conduent in 2023 to install and run the new ticket system across the state for 15 years.

But, as revealed by this masthead, the transport department and Conduent were at loggerheads by June 2024 over the contract and rollout schedule, with a “standstill” agreement in place for six months. They eventually agreed to reset the project, with a $136.8 million budget increase and 18-month delay.

“Before awarding the project contract, DTP received advice that [Conduent’s] delivery schedule was overly optimistic and did not contain enough detail. Ultimately, the schedule was proven to be unrealistic,” the VAGO report says.

“DTP did not address these known issues before signing the contract. It instead deferred this work… which contributed to disputes.”

VAGO found that the DTP was slow to hand over source code from the existing myki software that Conduent needed so it could continue to run the old and new systems side-by-side during the rollout, which contributed to delays.

The audit reveals that the program’s current timeline sets a target for tap-and-go payments to be enabled across the state by mid-2027 and for the entire system to be rolled out by mid-2028.

That will include the installation of 23,000 reader devices and introduction of “account-based ticketing”, which will link customers’ cards and devices to accounts, apply concessions and automatically calculate the lowest possible fare based on their travel patterns.

The audit says the program is on track with this revised timeline but warns there are upcoming challenges that could cause more delays.

The contractor responsible for developing a system so passengers can use concession fares with tap-and-go payments, HCLTech, told the auditor the DTP had recently paused its work, “directly impacting” the rollout timeline.

Transport department secretary Jeroen Weimar told the auditor that it had paused HCLTech’s work in response to policy changes, including the introduction of free travel for under-18s through the new youth myki.

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