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Multimillion dollar contract to upgrade Clipper biased toward incumbent, say vendors

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“If [MTC] actually implemented streamlined fares, it should get a more competitive bid”

Photo by Brock Keeling

This is the second in a series about Clipper 2.0. Monday’s story covered the many tech features that will not be included in the system. Tomorrow, the region’s failure to streamline transit fares will be discussed.

On Wednesday, officials will likely approve a $461 million contract to upgrade and maintain the region’s Clipper card transit pass. But Cubic, the the company that operates the system today, was the only outfit to submit a bid for the project. Eight other vendors quit the bidding process, many after asking the Metropolitan Transportation Commission [MTC] to remove crushing requirements they claim favor Cubic.

The MTC rejected calls to break the contract into smaller pieces, which would allow a broader range of vendors to bid and drive down costs. For years, transit advocates also have looked to the new Clipper system as an opportunity for the MTC to streamline transit fares across the region, which would help simplify the project. But many firms dropped out because MTC required old Clipper cards to work with the new system.

“That was one of the objectives,” said Randy Rentschler, a spokesperson for the MTC. “You can keep your card.”

But this isn’t a standard practice. When Chicago implemented a new payment system in 2017, the city’s transit authority started replacing old tap-to-pay cards or people switched to paying with their mobile phones.

The requirement to include existing Clipper cards is a problem because any new vendor would need to carry over much of the old software into the new system, which would force an exchange of information between Cubic and the new vendor. Both vendors would need to reveal trade secrets and software code to one of their biggest competitors, something both firms would resist—understandably so.

“What form of assurance will MTC get from the current contractor stating their commitment to work with a new contractor?” asked NEC, the Japanese electronics conglomerate. The question was typical of concerns raised in more than 200 comments from vendors Curbed found in documents obtained through a public records request.

Powell Street Muni station in San Francisco.
Photo by Sheila Fitzgerald/Shutterstock

Timothy M. O’Leary, a senior sales executive at Conduent put it more bluntly.

“The RFP is not competitive and creates an insurmountable bias in favor of the incumbent,” he wrote in a March 5 letter that MTC provided to Curbed SF.

Andrew Fremier, deputy executive director for operations at MTC, disagrees. The agency conducted its procurement process over two-years. It sought feedback from the industry, some of which was incorporated into the final request for proposal.

“I think we get exactly what [the public] would have hoped we had done,” said Fremier.

Another layer of complexity stems from a hoard of more than 19,000 fare rules from the 22 different transit agencies that accept Clipper cards. Each rule determines the amount charged when you tap your Clipper card. For years, transit advocates have called on the MTC to simplify the region’s fares before upgrading Clipper.

“If [MTC] actually implemented streamlined fares, it should get a more competitive bid,” said Kevin Burke, a software consultant and member of the Caltrain Citizen Advisory Committee. “You should be able to get a better bid and lower the cost.” (Tomorrow’s story will cover harmonizing fare rules.)

Moving the old system to the new one, along with transporting the region’s complicated bundle of fare rules, are elements Adina Levin of Seamless Bay Area, a grassroots advocacy group, likens to moving into a house without first getting rid of stuff you no longer need.

“Think about what it’s going to take to keep your kitchen clean if you still have all of the kitchen gadgets from the last 30 years,” she said.

The MTC also required a single vendor to handle this massive project, which is another factor that limited the number of potential bidders.

A Clipper card.
Photo by Brock Keeling

“The contract is a monolith,” wrote Ratna Amin, transportation policy director at SPUR, a regional planning think tank, in a 2016 letter to MTC. “Separating key functions such as hardware and software development would widen the pool of companies eligible to bid thereby increasing competition and lowering costs.”

Fremier, however, goes on to disagree.

“I would argue that if you piecemeal it out too much from the technology standpoint, you get a higher risk of things not communicating correctly through that chain of events that have taken place,” he said. “You run the risk of having a problem in some part or piece of the environment that affects the entire system.”

Wednesday morning Fremier will likely win that argument. The MTC board is expected to award the contract to Cubic.

Cubic declined to comment for this story.

“It wasn’t like it was a competition,” said a representative from a potential bidder on the condition of anonymity to protect their job. “It was more like a slam dunk.”