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Cubic Wins $179-Million NYC Contract : Business: Victory caps a 13-year campaign to build automated fare-collection system for New York's subway and bus system.

July 27, 1991|CHRIS KRAUL | SAN DIEGO COUNTY BUSINESS EDITOR

Capping a 13-year campaign marked by delays, frustration and intrigue, Cubic Corp. of San Diego on Friday was officially awarded a contract to provide the New York City subway and bus system with an automated fare-collection system.

To win the contract that it first targeted in 1978, Cubic triumphed over a team of Nynex, the New York telecommunications giant, and Alta, a French transportation electronics firm that has competed head-to-head with Cubic on other fare-collection contracts in the United States and abroad.

On July 17, a New York Metropolitan Transportation Authority selection committee recommended that Cubic be given the contract, which will generate 300 jobs in San Diego. The recommendation was based on Cubic's bid being $32 million under the Nynex-Alta offer. Despite the recommendation, company officials held their breath until the MTA board's formal vote Friday.

"It's tremendous," Ray de Kozan, chairman of Cubic's automatic revenue collection subsidiary, said in a telephone interview from New York. "It's been a long time, hard, hard road, tough competition. New York is tough, and we are just elated after all this time, investment and effort that we've put into it that it's all paid off."

On Friday, the MTA board formally approved a $96-million first phase, authorizing Cubic to provide card-activated fare-collection systems at 69 of the city's 469 subway stations and all 3,780 MTA buses by 1994.

If the first phase of Cubic's system performs well, Cubic will probably be paid an additional $83 million to outfit the 400 other New York subway stations with fare-collection systems by 1997, giving the contract a $179-million value.

Delivery of the first machines will begin in May or June, 1992, de Kozan said. The system, which will be partly operational in 1994, uses cards whose value is electronically reduced at the turnstiles with each ride taken. The system also includes security bars designed to thwart fare evaders, who are said to cost the New York transit system at least $60 million in lost fares each year.

With potential ancillary business, De Kozan and other Cubic officials have hopes that, over the next decade, the contract's value will be several times larger, perhaps more than $500 million.

Cubic expects to be a strong contender in a competition to supply the MTA with 2,000 to 3,000 fare card dispensing machines, De Kozan said. He also expects contracts to be let for fare-collection systems at non-MTA train stations in outlying areas of metropolitan New York--including Connecticut, Long Island and New Jersey--that feed commuters into MTA.

Victory in the high-stakes competition with the Nynex-Alta team did not come easy. Cubic had been endorsed by the selection committee in March after underbidding the Nynex-Alta team, only to have the MTA board reopen the contract bidding last month after Cubic's competitor promised to "substantially improve" on its previous bid.

Cubic challenged the rebidding in U.S. District Court in Manhattan but failed to get a restraining order. So both companies submitted new bids. Cubic's new, $179-million bid for the first two phases--$9 million under the first bid--turned out to be $32 million less than the Nynex-Alta figure.

"We are happy that the process is over," MTA spokesman Tito Davila said. "It's been a long process with an unusual wrinkle in it, but we believe we have got the best system for the best price."

In 1978, Cubic was first invited by the MTA to consider designing a fare-collection system for its subways. In 1985, Cubic and Alta each installed pilot fare-collection systems in 44 New York subway stations with the understanding that "whoever had the best performance on the pilot would get the whole thing," De Kozan said.

The process dragged on, and the MTA did not issue a formal request for proposals until July, 1990. In the meantime, Cubic was accused of trying to influence the outcome after a Cubic employee left several $20 bills in a set of MTA bid specifications. Cubic, which said the money was left inadvertently, was cleared of bribery allegations.

The New York system will be Cubic's 23rd fare-collection system. The largest to date is a system for 300 subway stations in the London Underground. Cubic also installed a system for the Washington subway.

Carol Fessler, spokeswoman for Nynex Computer Services Co., said the loss to Cubic will not deter her company from bidding on future fare-collection contracts.

"Naturally, we're disappointed that we didn't get it," she said. "We certainly thought and continue to think we offered the superior technological solution at an excellent price, and we're eager to seek out other opportunities."

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