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Myki budget could rise again, as Victoria enters second round of contract renegotiations

by Paris Cowan •
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Victoria’s Auditor General warns that a second tranche of contract negotiations between the Victorian Government and the company contracted to roll out the Myki electronic ticketing system, Kamco, could result in yet another increase in the cost of the project.

Negotiations are being led by the Department of Treasury and Finance (DTF) and a spokesperson for Treasurer Kim Wells has confirmed that the talks are ongoing.

"The Victorian Coalition Government has combed over the contract we inherited from Labor to choose the cheapest method of delivering myki.

"We renegotiated the contract for the build phase of myki but negotiations are ongoing for the operating phase of the contract,” she said.

Enhancements to performance measurement arrangements and possible changes to call and cash handling processes are on the agenda for the latest round of negotiations.

The initial reconfiguration of the Kamco contract came shortly after a newly elected Baillieu Government conducted a review into the Myki project to help it decide whether to keep the troubled initiative or scrap it and start again from scratch. The review found that it would have cost the Government $1 billion to dump Myki so implementation continued albeit along a revised plan.

The Auditor-General’s annual survey of the State’s finances, tabled on 14 November, shows that a $166 million ‘top up’ of funding for Myki included in the May budget represented a 12.3 per cent increase in the overall funding laid out for the project.

The extra funding has been provided “to address problems including additional card vending machines and validators,” said the Treasurer’s spokesperson. An additional 300 fare payment devices, 80 card vending machines and associated software modifications will add $17 million to the bill.

According to the Auditor General’s report, the extra funding will also go towards:

  • $60 million to extend the contract for provision of the legacy Metcard system;
  • $46 million for civil works and revisions to the Yarra Trams service agreement;
  • $40 million to add additional milestones and increased system functionality to the implementation;
  • $13 million to increase the contingency allowance;
  • Minus $10 million in savings owing to the scrapping of plans to introduce disposable short-term Myki cards.

The report calculates that the full Myki budget currently stands at $1.518 billion, nearly $520 million more than was originally earmarked when the project was launched back in 2003.

The original contract with Kamco was signed in 2005 for $494 million out to 2017. It is not clear what the current value of the arrangement is.

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