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The Mechanics
« Guzzardi Victory Gives Chicago Progressives Hope The Parking Hits Just Keep On Coming »

Transportation Thu Apr 10 2014

How Lawsuits, Lobbyists and Parking Meter Deals Led to Ventra

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After a glitch-filled rollout and several delays, the Chicago Transit Authority will fully switch over to the controversial Ventra open fare system by July 1, 2014, and end the previous payment methods for its bus and train lines.

But city officials might be the only ones currently satisfied with "the new way to pay."

Who is Cubic?

The San Diego-based company began in 1951, and steadily grew to encompass combat simulators, logistics, and defense technologies, among others.

Cubic expanded into mass transit fare collection technology 1971 when it purchased LA-based Western Data Products. Over the following decade, Cubic Western Data (later Cubic Transportation Systems), won contracts to build automatic fare collection (AFC) systems around Chicago, Hong Kong, Sydney, San Francisco and Washington D.C.

Today the publicly-traded company operates transit fare collection systems across 30 cities worldwide at a time when fare collection is set to overtake military contracts in long-term profitability.

But the company's official timeline, brochures [PDF], and financial reports gloss over several dubious milestones.

1977 - Atlanta

The Metropolitan Atlanta Rapid Transit Authority (MARTA) calls for bids to install an AFC system on its Rapid Rail Transit System.

Cubic offers the second lowest bid at $3,749,614, losing to Duncan Industries' $3,726,150 offer. MARTA officials believe Duncan's bid is incomplete for failing to provide complete test data on the ticket handling requirements. However, 80 percent of the project depends on a grant from the Urban Mass Transportation Administration (changed to Federal Transit Administration in 1991) who have final say over the decision.

On June 23, MARTA recommends Cubic's bid, but UMTA officials decline, believing Duncan's bid to be sufficient.

Cubic files a complaint with the U.S. Government Accountability Office on July 12 to prevent Duncan from winning the bid.

Two weeks later, MARTA formally rejects all the bids, citing a technicality in how the bids were advertised and to avoid the costs and delays of legal proceedings. The next day, Duncan files an action in the U.S. District Court for the Northern District of Georgia to demand that MARTA award them the contract.

The GAO dismisses Cubic's complaint on Aug. 3, but are soon requested to officially determine if Duncan's bid should be rejected based on the language of the bid's requirements. On Oct. 7, the Comptroller General rules in favor of the UMTA and Duncan.

Eight years later, another Duncan rival, POM Inc., would accuse the City of Chicago of designing the specifications of a $1.5 million parking meter bid to favor Duncan, causing the city to temporarily halt the decision.

Cubic, on the other hand, would soon apply the lessons they learned from Duncan.

1978 - New Jersey Turnpike

Alleging that their rival failed to meet the bid's specifications, Cubic files a complaint and temporary restraining order application to prohibit the New Jersey Turnpike Authority from awarding a toll revenue system contract to the lowest bidder, S.C.I. Systems. The restraining order is issued that day.

To avoid a repeat of their Atlanta troubles, Cubic further amends their complaint on Oct. 17 to prevent the Authority from rejecting any current bids (including their own) and advertising a rebid for the contract.

Months later, the court rules against Cubic, noting the $1,264,000 difference between the Cubic and S.C.I. Bids, and pointing out that "statutes requiring competitive bidding are for the benefit of taxpayers, not for the benefit or enrichment of the bidders."

1985 - Los Angeles

The Southern California Rapid Transit District (reorganized in 1993 under the Los Angeles County Transportation Commission) awards a $10.7 million contract for 2,600 new bus fare collection boxes to Cubic.

Archived minutes from RTD Board meetings in 1986 [PDF] and 1987 [PDF, shown above] make reference to unspecified litigation between Cubic and the agency, and tentative negotiations with a Cubic rival, Elk Grove Village, Illinois-based General Farebox, Inc.

1988 - D.C.

Cubic Defense settles with the U.S. Army for $7.25 million over claims that it falsified tests on a contract for handheld mine detectors.

Another allegation made in 1988 — that a Cubic executive bribed an Air Force official in an attempt to win contracts for its Top Gun program — results in a federal investigation as part of a broader Pentagon contract fraud crackdown, Operation Ill Wind.

1988 - Los Angeles

A Dec. 2 article in the Los Angeles Times notes that replacing the old bus fare collection systems with the Cubic machines "has come in about 25% over the original price and a year and a half late."

By March, the installed Cubic fareboxes jam at a rate of nearly 250 times a day — six times the allowable rate in the RTD contract.

The city threatens to halt payment to Cubic until the problem is fixed — and later clarified the threat to avoid a lawsuit.

A year later, Cubic produces this training video for the fareboxes.

1991 - New York City

After years of deliberation (including technological trial runs), New York City's Tranist Authority nominates Cubic's bid to replace the decades-old turnstiles and token-based fareboxes used across the subway's 469 stations.

1991 - D.C.

As a result of the "Ill Wind" investigation, Cubic is fined $4.65 million after it "pleaded guilty to three separate felony counts of conspiracy, theft of government property and filing false statements."

Former Cubic Defense president Colvin Clay "Sam" Wellborn is given 18 months in prison — one month after the TA nomination in NYC.

1991 - New York City

Concerns over Cubic's scandalous behavior cause the MTA to review the bids. Furthermore, MTA employees allege that a Cubic employee left $100 in a stack of technical documents given during a Nov. 1990 meeting.

Though Cubic had offered the lowest bid at $181 million, rival bidder Nynex and its partners offer to lower their $218.5 million bid by another $40 million.

After deeming both proposed bids as technologically equal, the MTA announces by June that it will reopen the bidding process.

In retaliation, Cubic threatens to sue the MTA for violating federal rules of civil procedure.

The third bidding vendor, General Farebox, calls the MTA's procedure "illegal and unethical" for not being allowed to submit a new bid alongside Cubic and Nynex.

On July 9, U.S. District Court Judge Michael B. Mukasey rules against issuing a temporary restraining order to prevent the MTA from reopening the bidding.

Cubic initially responds by threatening further legal action and declaring their refusal to submit another bid.

Instead, they submit a rebid. On July 18, Cubic wins the recommendation of the selection committee for the second time with a $179 million bid for an extendable, three-year contract worth up to $400 million.

Cubic spokesperson Jerry Ringer tells the LA Times that the company opted to rebid at the lower amount because the difference lost would have cost as least as much as a lawsuit against the MTA.

The MTA board awards the contract to Cubic, and the New York City MetroCard is born.

1995 - Boston

The Massachusetts Bay Transportation Authority requests bids for an Automated Fare Collection (AFC) system. Cubic loses to the winning bid made by German firm Scheidt and Bachmann.

In retaliation, Cubic and a third bidding vendor, Thorn Transit Systems, sue Scheidt and Bachmann and the MBTA over claims that the winning bid failed to meet certain aspects of a public bidding statute regarding "public works."

A year later, the judge rules in favor of Cubic and Thorn, and the MBTA is forced to call for a rebid.

1999 - Sydney

With the 2000 Sydney Olympics only a year away, the Australian state of New South Wales puts out a call for bids for a transit fare smart card to replace the older systems across the city.

Integrated Trasnport — a partnership between Perth-based ERG and Motorola — wins with a system called the "Tcard" over a bid made by Smartpos, a Cubic/Commonwealth Bank of Australia partnership.

Refusing to give up, Cubic launchs a lawsuit against the NSW Department of Public Transportation, ERG, and its former bidding partner, the Commonwealth Bank. The suit alleges that ERG unfairly won due to improper contact between ERG officials and evaluation committee members, violations of bidding protocols, and committee members who were prejudiced against Cubic from previous business dealings. Cubic also claims the government's auditor and legal advisors have conflicts of interests and the ERG's proposed operating system wouldn't work.

The defendants deny the charges, but Cubic wins an injunction against the ERG contract in the preliminary hearing to prevent work on the Tcard.

1999 - Bay Area

An ERG/Motorola partnership wins a bid to build a fare collection system to unify payment between several San Francisco Bay Area transit agencies.

1999 - Boston

Six years after the first bid, Scheidt and Bachmann wins the MBTA contract over Cubic. For the second time, Cubic files a legal complaint.

Instead of suing right away, Cubic petitions the Federal Transit Administration to investigate whether Scheidt and Bachmann violated a Buy America law requiring federally-funded systems to use American manufacturers. Cubic alleges that they would use foreign made "end product items" such fare boxes and fare gates.

Other complaints [PDF] include allegations of Scheidt and Bachmann's inability to build a functional system, its unrealistically low bid, and that other requirements of the bidding specifications were changed by MBTA in Scheidt and Bachmann's favor.

2000 - Chicago

Chicago Transit Board Chairman Valerie B. Jarrett announces a smart card pilot program by Cubic.

The resulting ChicagoCard is based on the D.C. SmarTrip technology introduced by Cubic a year prior.

2000 - New York City

An Oct. 10 article in the Village Voice, "The $390 Million MetroCard," details the aforementioned issues Cubic faced in New York and D.C.

Additional revelations include:

  • Reports of insider trading of Cubic stock among selection committee members during the initial bid
  • MetroCard's numerous software problems (and expensive fixes)
  • Cubic's donations to Mayor Rudolph Giuliani and other politicians
  • Cubic's hiring of an MTA official overseeing the MetroCard, Richard Trenery, to be their vice president of business development, and potentially work on contracts in London, Washington D.C., or Sydney.

2002 - Sydney

Testimony at a hearing reveals that the Cubic had not only conspired to discredit ERG during the bidding process and sabotage the entire Tcard project in the event of a lost bid, but that Cubic had been supplied confidential information about ERG's bid by a consultant, in addition to using a member of the evaluation committee as a mole.

Even after ERG won the bid, evidence reveals that representatives of Cubic and the Smartpos project wrote letters to various NSW officials to cast doubt on ERG and the integrity of entire bidding process.

After two months of deliberation, Justice Michael Adams rules in favor of ERG and the NSW and lifted the injunction, noting that Cubic had been "guilty of reprehensible conduct" and "demonstrated that it was prepared to take advantage of highly confidential information that was passed to it quite improperly and, it appears, did not have any qualms in so doing."

Though Cubic lost the court case, it effectively won. The costly legal proceedings and injunction delayed legwork on the Tcard, setting the stage for perpetual failed tests and multimillion dollar losses for ERG.

2002 - Houston

The Houston Metropolitan Transit Authority awards $8 million to Cubic to build a smart card system for its bus and light rail systems.

2002 - Boston

The FTA investigation reveals Scheidt and Bachmann's bid to be in compliance with Buy America regulations. Cubic's request for reconsideration is also denied when the FTA finds that Cubic was previously aware of evidence they claimed they didn't know during the initial investigation of Scheidt and Bachmann.

Cubic, in turn, files a suit against two FTA agents involved in the decision, only to be dismissed two years later.

2003 - Atlanta

Cubic competes with French tech conglomerate Thales-eTransactions for a $100 million contract to upgrade MARTA to a smart card fare collection system.

In February, Thales files a lawsuit against Cubic and MARTA for $105 million, alleging that Cubic's bid received favorable treatment by MARTA, and that the agency violated its own procurement rules.

By April, MARTA announces that it began negotiations with Cubic over the terms of the contract, eventually awarding Cubic $72.5 million by October — despite Thales' attempts to delay the process.

2003 - ERG Calls Foul, Alleges "Guerrilla War"

Speaking to The Age, ERG managing director Peter Fogarty blames the company's lost $100 million potential profit on what he describes as a "guerrilla" campaign by Cubic to discredit them and delay implementing contracts they won in Sydney, as well as other cities where they had competed with Cubic for fare collection contracts, such as...

2003 - Seattle

ERG wins a $43 million contract over Cubic to build a transit card usable across seven regional systems. Six years later, this becomes the ORCA ("One Regional Card for All") card.

2003 - Bay Area

Despite losing the bid, Cubic files a lawsuit against ERG and the overseeing Metropolitan Transportation Commission, alleging that the MTC violated its procurement rules and prematurely awarded $8.1 million to ERG for equipment — an issue not resolved until Cubic purchased ERG's U.S. transit assets.

As MTC planner Randy Rentschler told the Contra Costa Times, "It is not uncommon for public agencies to find themselves caught in the middle of a corporate competitive fight."

An Oct. 30 article in the San Diego Reader details how Cubic hired Richard T. Silberman, ex-husband of former San Diego Mayor Susan Golding and ex-aide to California Governor Jerry Brown (himself a recipient of Cubic political donations), to lobby on their behalf.

Silberman, previously arrested in 1989 for heading a drug money laundering scheme involving the Chicago mob (namely Chris Petti), reportedly sent "scathing e-mails" to Bay Area Rapid Transit (BART) officials as well as reports attacking the financial stability and capabilities of ERG.

A Cubic spokesperson tells the Reader they hired him because "he's an excellent businessman and former head of the California Business and Transportation Administration."

Four years later, an obituary of jailed Swiss banker-turned-financial writer Paul Erdman notes his relationship with Silberman and quotes him claiming that the lobbyist and Brown presidential campaign supporter "thought he was going to wind up being Secretary of the Treasury."

2004 - Houston

After two years, and no signs of a functional smart card system, the MTA hires a consultant to monitor Cubic and "assess the work activity" of the project.

2004 - Atlanta

A judge denies Thales' request to force the MARTA to rebid the contract, allowing Cubic to proceed.

The resulting Breeze smart card launches two years later.

2004 - London

Cubic settles unspecified litigation against a subcontractor involved in its PRESTIGE contract awarded in 1998 — which includes the Oyster card system Cubic co-launched in 2002.

2005 - Houston

After missing several extensions on a November 2003 deadline, and failing security and reliability tests, MTA officials give Cubic 30 days to get their system up and running. Otherwise, MTA threatens to terminate the contract and seek damages for a replacement system.

In March, the agency sends Cubic a letter of termination, saying "the company had defaulted on its contract obligations to produce a workable smart card fare system."

Cubic responds by filing a lawsuit to keep the contract. In turn, the MTA countersues.

2005 - Miami

Cubic loses a trade secrets claim lawsuit against Miami-Dade County and Scheidt and Bachmann in an attempt to reseal documents made public that the company failed to mark as "confidential" under the state's Sunshine laws.

The ruling notes "as a practical — and therefore as a legal — matter, a conversation with a state employee is not enough to prevent the information being made available to anybody who makes a public records request."

2006 - Boston

Cubic petitions the FTA again in 2006, alleging that Scheidt and Bachmann went ahead and used parts manufactured in Germany, due to evidence that the company had prototyped the fare gate technology used on the MBTA there.

Though Scheidt and Bachmann ultimately builds the MBTA's resulting CharlieCard system, ERG is subcontracted to manufacture CharlieCards.

2007 - Philadelphia

After awarding Cubic a $13 million contract to build a smart card system for the New Jersey-Philadelphia speedline train and its parking lots, the Port Authority Transit Corporation (PATCO) complains about the company's progress.

The already-delayed system fails tests to the point where officials discuss the possibility of invoking penalty clauses.

Cubic doesn't finish implementing the Freedom card system until 2008.

2007 - Houston

After contracting Dallas-based ACS to build a $14 million replacement smart card system in Aug. 2005, the MTA installs the new card readers and begins the rollout of the Metro Q smart card.

2007 - Sydney

After spending $95 million of its own money with no results in sight, the NSW terminates the Tcard project and seeks reimbursement from ERG.

A year later, the NSW will decide to revive the Tcard project and put out a request for new bids.

2007 - Vancouver

Cubic hires Ken Dobell, a former CEO of Vancouver's TransLink transit agency and former deputy minister to British Columbia Premier Gordon Campbell, to lobby the province for a metro-area smart card and transit gate system.

He is charged with violating the province's Lobbyists Registration Act for not properly registering as a lobbyist for Cubic while still being paid as a special adviser by Campbell.

Months later, TransLink corporate and public affairs vice-president Bob Paddon acknowledges that they are aware of Cubic's legal battle with Houston.

Meanwhile, a judge rules Dobell's violation of the Lobbyists Registration Act to be a "trivial breach of a regulatory act" and discharges him.

2008 - D.C.

Over the previous decade, Cubic and ERG are awarded contracts by the Washington Metropolitan Area Transit Authority (WMATA) to upgrade their automated fare collection system and expand compatibility with other systems in Virginia, Maryland, and the greater Baltimore region.

ERG is tasked to open and operate a Regional Customer Service Center by 2004, while Cubic is tasked to upgrade bus fare boxes and the smart card operating software. Essentially, the two rival companies are assigned to integrate with each other's technologies.

A WMATA audit report of the ERG contract [PDF] dated Apr. 29 concludes that both companies were unable to fulfill their contract due to delays from Cubic failing to provide necessary components for ERG on time.

Meanwhile, the Feb. 19 audit report of Cubic's software contract [PDF, shown above] notes that their delays forced WMATA to pay $1.4 million to ERG in contractually-stipulated delay costs.

2008 - Miami

Cubic wins a $45 million contract to upgrade Miami-Dade County from a fare payment system they originally built in 1983 to a smart card.

Over the previous year, losing bidder Scheidt and Bachmann filed complaints alleging that the county violated its request for proposal terms in favor of Cubic.

Despite their protests, a judge rules that Scheidt and Bachmann's own bid can't meet the same standards they claimed Cubic's bid should be disqualified under, and recommends that the county award the bid to Cubic as planned [PDF].

2009 - Boston

The second FTA investigation concludes that Scheidt and Bachmann had actually manufactured the parts in New York, Vermont, and Massachusetts, contrary to Cubic's claims otherwise.

2009 - D.C.

Because of the additional costs incurred by Cubic's delays, ERG submits a request to the WMATA for an equitable adjustment to the contract.

ERG sues WMATA to prevent them from releasing "confidential and proprietary commercial and financial information and trade secrets to a direct competitor," after Cubic files a request for access under a law similar to the Freedom of Information Act. The District judge rules in favor of ERG.

2009 - Melbourne

Cubic buys ERG's U.S. assets, including systems in places they lost bids for, such as the Bay Area [PDF] and Seattle.

The rest of ERG's assets are purchased by Melbourne-based Vix Technology.

2009 - Chicago

On Aug. 12, a Chicago Transit Authority Board meeting provides an overview of the "Next Generation Fare Collection Project."

The presentation [PDF] lays out the goal of partnering with banks and other private companies to create an open fare payment system that can "shift implementation costs" and "develop revenue opportunities" for the agency.

The report cites a successful 2007 pilot program in NYC city using Citi and MasterCard, as well as the active bids in Philadelphia and Washington D.C.

The CTA's proposed 2-step Request for Proposals process calls for a complete transition to open fare by Summer 2012.

On Aug. 28, The CTA puts out a Request for Proposals [PDF] for an Open Fare Payment Collection System.

Among other details, the proposal notes the city's desire to divest from producing fare cards through partial privatization, and outlines a two-step RFP process for prospective bidders.

Another section notes that "The RTA [Regional Transportation Authority] recently adopted a resolution calling for the implementation of a regional Open Fare System that would promote universal access among the CTA, Pace and Metra. The successful Prospective Partner may have the opportunity to market the Open Fare System to CTA's regional partners."

Furthermore, the RFP listed the bid's financial advisers as Peralta + Garcia Solutions and...

William Blair and Co.

In 2006, Chicago-based investment bank William Blair and Co. made about $2.2 million off its consulting work on a $563 million deal to lease the city's downtown parking garages to a Morgan Stanley-led consortium for 99 years. William Blair reportedly first proposed the idea to the city to do so.

On Dec. 4, 2008, City Council approved a similar deal leasing the entire city's parking meter system for $1.16 billion. William Blair and Co. made about $4.3 million for their financial advisory services.

The parking meter deal proved controversial, not only because of the increased rates, but also because city officials refused to disclose any information about the bidding process, and the fact that many City Council members hadn't read the deal before voting to approve it.

In Jun. 2009, the Inspector General's report [PDF] deemed William Blair's valuation of the meters as around $975 million too low, and the subsequent leasing as "a dubious deal" overall.

According to the Chicago Reader, William Blair had been working with Morgan Stanley on other multibillion dollar deals at the same time in violation of the city's contracting rules.

This included a $2 billion bond deal with the CTA to finance underfunded pensions. According to Bloomberg, the Illinois Auditor General concluded the bond deal would end with "a loss of taxpayers' money [PDF]."

2009 - D.C.

On Oct 3, digitized White House Visitor Logs from the Sunlight Foundation note a 16-minute meeting between Chief of Staff Rahm Emanuel and Thomas Lanctot, the William Blair principal who oversaw Chicago's parking garage and meter deals.

According to the CTA Open Fare RFP, Lanctot is the sole point of contact for questions from prospective bidders.

2009 - Chicago

An Oct. 7 memo from the CTA extends the deadline for Open Fare bids to Nov. 23, 2009.

2010 - Miami

Despite previous problems with Easy Card, Cubic is awarded $15 million from the South Florida Regional Transportation Authority (SFRTA) to adopt the Easy Card technology to Southern Florida's Tri-Rail line.

Though smaller in scale, the Tri-Rail adoption of Easy Card for fare payment is similar to what Chicagoland's zone-based Metra will attempt with Ventra integration.

2010 - D.C.

On Mar. 8, White House meeting logs note a half-hour meeting between Emanuel, his former aide (now William Blair employee) John Borovicka, and Lanctot.

This is Lanctot's second White House meeting since the start of Phase One of the CTA Open Fare bid.

2010 - Boston

On Apr. 6, Cubic replaces ACA Computer Integrators, a Disadvantaged Business Enterprise subcontractor contractually-stipulated from the MBTA-ERG deal, with a new qualified company.

ACA sues Cubic, but the case is later dismissed.

2010 - Chicago

Cubic hires former CTA Chief Information Officer John Flynn to manage its Chicago operations.

2010 - Miami

Cubic's resulting EASY Card launches in what Bloomberg News calls a "record-setting" 15 months after winning the bid.

But after a wave of incidents involving EASY cards fraudulently purchased with credit cards then resold, an investigation shows that Cubic failed to install anti-fraud measures as stipulated in the original contract, such as an address verification process "commonly used throughout the credit card industry."

The calculated losses between Sep. 1, 2009 and Aug. 5, 2010 totaled to $261,204, or an aveage monthly loss of $23,729.

2010 - Chicago

Per the CTA's online contract database, the sum of all contracts awarded to Cubic by the CTA over the six year period between Apr. 17, 2004 and June 11, 2010 totals to $30,280,036.67.

The contract descriptions range from software upgrades and fare collection equipment maintenance to furnishing proprietary equipment for certain rail stops.

2010 - London

Cubic fully takes over the Prestige/Oyster contract from its consortium partners.

2010 - Chicago

On Sep. 28, the CTA issues the RFP for Step Two of the Open Fare Payment Collection System bid. Several addendums are issued, extending the bidding opening date to Jan. 14, 2011.

Instead of William Blair, prospective bidders are instructed to direct questions to CTA Procurement Administrator James Kozicki.

2010 - D.C.

On Sep. 30, Emanuel announces he will leave the White House to run for Mayor of Chicago.

2010 - Chicago

On Dec. 21, Cubic Transportation Systems donates $1,500 to Chicago for Rahm Emanuel, a political action committee for his mayoral election campaign.

2011 - Vancouver
Cubic and its partner, IBM Canada, win a $220 million contract to build a smart card and fare gate system for the metro region's bus, rail, and ferry systems.

Beating out eight total bidders, and two competing finalists, the Compass system will be Cubic's third-largest ever built, behind London and Sydney.

2011 - Chicago

On Feb, 22, Rahm Emanuel is elected mayor of Chicago.

He appoints former Daley chief of staff and Chicago Park District head Forrest Claypool to CTA president.

2011 - Boston

A Cubic supervisor is arrested for selling over 20,000 fraudulently-created CharlieCards on the side for nearly $4 million.

The MBTA terminates their contract with Cubic, and switches to in-house contracting for CharlieCards.

2011 - Springfield

On Jul. 7, Illinois Gov. Pat Quinn signs into law a bill requiring the Chicago metro region's CTA, Pace, and Metra transit systems to unite under a universal fare payment card by Jan. 1, 2015.

On Sept. 29, Cubic donates $5,000 to Theis For Supreme Court.

Mary Jane Theis was appointed to the Illinois Supreme Court in 2010 to replace a retiring justice in the 1st District, which encompasses Chicago and the surrounding Cook County.

2011 - Sydney

The winners of the $1.2 billion smart card contract — the Pearl Consortium — include Cubic.

But an investigation reveals the company had the help of a former Labor minister during the lobbying process, and hired several former ERG employees involved with the Tcard.

2011 - Philadelphia

On Nov. 17, the Southeastern Pennsylvania Transportation Authority (SEPTA) awards a $129.5 million contract to ACS Transportation (now owned by Xerox) to build an open fare payment system for its fleet of buses and trains.

This comes after a three-year process including bids made by Cubic (roughly $135 million) and Scheidt and Bachmann (roughly $174 million).

2011 - Chicago

On Nov. 17, the CTA awards a 12-year, $454 million contract to Cubic to build an open fare payment system for its fleet of buses and trains.

The rival bidders' names, proposed specifications, and projected costs are never disclosed.

However, city records note that ACS paid $30,000 in 2010 to lobby the CTA and Mayor Daley's office about "Fare Cards."

2012 - Sydney

Sydney settles with Vidella (formerly ERG) out-of-court, despite cross-claims for compensation in the millions.

2012 - D.C.

A WMATA Request For Proposals [PDF] dated May 8 indicates that Accenture, Cubic, NTT Data, and Xerox are all Prequalified Firms for Step 3 of the New Electronic Payments Program contract bid.

Twenty months later, WMATA will award a $184 million contract to Accenture to build an open fare payment system.

Cubic claims that WMATA missed two payments into a contractually-established escrow account that total to $27,595.96 in interest owed by the agency.

The Armed Services Board of Contract Appeals rules on Jun. 1 that although WMATA breached the contract [PDF], clauses within it protect the agency from needing to pay Cubic.

2012 - Sacramento

Cubic Corporation founder Walter J. Zable passes away on Jun. 23. California Governor Jerry Brown proclaims Jul. 12 as Walter J. Zable Day in his honor.

On Oct. 18, Brown appoints Cubic president Steven Shewmaker to the San Diego County Fair Board.

2013 - Chicago

A Mar. 31 fund manager commentary [PDF] on the William Blair Small Cap Value Fund describes its holdings in Cubic Corporation (CUB) stock as one of the two "most significant detractors in the portfolio."

Regardless, "We continue to own the stock, citing its market leadership, recurring revenue base, strong backlog coverage and diversified business mix."

Cubic's first appears in William Blair's Securities and Exchange Commission filings on Nov. 19, with the Small Cap Value Fund listing 20,505 shares of Cubic Corporation totaling to $837,000.

The commentary does not disclose the firm's role in overseeing the Ventra deal.

2013 - Chicago

On May 27, the Chicago Tribune reports that the CTA will rehire John Flynn from Cubic, becoming the agency's vice president of technology.

According to spokesman Brian Steele, "CTA's ethics policy governing post-employment only applies to individuals leaving CTA to go to another position outside the agency, not coming to CTA."

A William Blair Summer 2013 newsletter [PDF] highlights the firm's role in overseeing the CTA's public-private partnership deal with Cubic Transportation Systems, in what it calls a "vigorous, transparent selection process."

The newsletter does not disclose William Blair Funds' holdings in Cubic Corporation stock.

The Ventra system's subsequent launch over the last-third of the year is filled with card reader glitches, payment problems, and long customer service waits.

2013 - Sydney

Cubic's Tcard-replacing Opal card system launches in a December trial period, and rolls out to most parts of the city's transit system.

Beyond costing four times as much as the initial $357 million Tcard bid, customers complain that the way the Opal card calculates fares between Sydney's complex, distance-based system will be more expensive for certain commuters in the long run.

Meanwhile, Cubic receives an additional $65 million contract to provide maintenance and other services on Sydney's RailCrop.

2013 - Springfield

In a Dec. 6 letter [PDF] to CTA President Claypool, an Illinois Department of Transportation Task Force asks him to clarify aspects of the CTA's Ethics Policies.

This includes a request to identify and provide copies of "the policies, procedures, and controls in place regarding your agency's (a) procurement process, including bidding and price tracking; and (b) communications between board members or employees and past, current, or potential vendors regarding agency business and procurement."

So What?

Throughout the past several decades, Cubic Transportation Systems has attempted to use the legal and political system to win and secure contracts for fare collection across the world, costing cities millions of dollars in the process, and not necessarily delivering functional systems in return.

On one hand, this previous history alone makes the circumstances surrounding the Ventra contract worth further scrutiny.

On the Other Hand...

Ventra is more or less the exact system the CTA's original RFP asked for, and certain complaints (such as the phase out of magnetic stripe and ChicagoCards) would be the same no matter what replacement the CTA picked. It's entirely possible that Cubic's bid was truly the best option (at least on paper).

Even still, questions remain about why the RFP was written the way it was, who bid on the contract besides Cubic and ACS/Xerox, and most importantly, why Cubic's bid was chosen above all.

In this case, it's worth noting that the CTA's Procurement Policies and Procedures [PDF] state that "Certain information about CTA procurements is normally considered public and should be released in accordance with these Regulations and applicable state laws and regulations concerning freedom of information."


Currently, William Blair, Peralta + Garcia Solutions, and its previously prospective bidder, Cubic Transportation Systems, are all listed as registered business members of the City Club of Chicago.

Quoting the New York Times, the About page describes the civic organization as "a who's who of business people and political leaders and a required stop for most anyone who wants to win office around here..."

What's Next?

With recent proposals to merge the three Chicago transit agencies into one, and to raise capital to expand the regional bus and light rail lines, it's easy to overlook what's happened in the past.

But as the recent revelations about Metra patronage hiring show, Chicagoland transit still has buried secrets that prevent it from becoming the world-class metropolitan public transit system that politicians keep claiming they want to see.

Given Cubic's history of using lawsuits and lobbyists to expand its transportation technology business, and the role that a company behind the Chicago parking meter privatization deal played in the vetting process, it's time for the CTA and Emanuel Administration to come clean about how exactly Cubic ended up with the Open Fare contract that gave the city Ventra.

After all, if Mayor Emanuel can call for an audit of private contractors patching up potholes, he can call for an audit of the private contractors behind Ventra, too.

Even if they are his friends.

GB store

jem / July 30, 2014 8:21 PM

This is amazing work!

Sue B / August 7, 2014 10:51 AM

Great journalism. I don't like the Ventra cards. Money mysteriously disappears off them and there is nothing you can do about it. I knew my card had over $10 on it and when I checked it, it had $1.70 on it. I was told by a CTA worker that the card sometimes takes more than one fare. The screen the users sees does not show any before/ after amount on the card, so the cards pilferage sneaks up. I also don't like that Ventra tracks a person's movements if they register the card. If you don't register, the card costs $5. Thanks, I will pay the $5 and avoid having Bib Brother track my every move.

Anon / May 10, 2015 11:34 PM

Interesting presentation. I used to work for Cubic. I'd love to tell you more stories about the place but I had to sign a NDA when I left.

However, at one point we had someone working with us from the head office in San Diego. Apparently the inside joke at Cubic HQ is that Cubic is an acronym for "C U Bastards In Court".

After reading this I know why.

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Parents Still Steaming, but About More Than Just Boilers

By Phil Huckelberry / 2 Comments

It's now been 11 days since the carbon monoxide leak which sent over 80 Prussing Elementary School students and staff to the hospital. While officials from Chicago Public Schools have partially answered some questions, and CPS CEO Forrest Claypool has informed that he will be visiting the school to field more questions on Nov. 16, many parents remain irate at the CPS response to date. More...


Substance, Not Style, the Source of Rahm's Woes

By Ramsin Canon / 2 Comments

It's not surprising that some of Mayor Emanuel's sympathizers and supporters are confusing people's substantive disputes with the mayor as the effect of poor marketing on his part. It's exactly this insular worldview that has gotten the mayor in hot... More...

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