Presto technology sold to Washington, D.C. raises questions

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Accenture, the $28 billion private contractor building the Presto electronic fare network, last week won a contract to construct a similar system for Washington D.C.’s Metro, but at a fraction of the price paid by the Ontario government and using some of the software and network technology the company has developed for Metrolinx, Spacing has learned.

The development is likely to raise more tough questions about Accenture’s long-running, and oft-delayed, Presto project, which came in for harsh criticism from Ontario’s auditor-general in December, 2012, due to roll-out glitches, cost escalations and untendered contract extensions.

“By the time it is fully developed, Presto will be among the more expensive fare-card systems in the world, and more than $700 million may have been paid to the contractor for developing it,” former Auditor General Jim McCarter said at the time. The original ten-year contract with Accenture, signed in 2006, was worth $250 million.

Washington Metro last week announced that it had selected Accenture to build a next generation fare system to replace its current fare card, which was developed by Cubic. The six-year contract is worth just US$184 million, and will include 1,000 faregates, 450 fare vending machines, approximately 1,500 bus payment targets, and approximately 160 new payment targets at parking exit lanes. Riders will be able to pay with chip-enabled bank or credit cards, federal government ID cards, smart phones and so-called “SmarTrip” cards. The agency says it wants to eliminate tickets, and is in the midst of a $6 billion network upgrade.

The Metrorail system is the second busiest transit operator in the U.S., with 218 million annual trips and a $1.6 billion operating budget. Metrobus provides 132 million annual trips on 318 routes, according to an agency spokesperson. Over 90% of payments are made with reloadable SmarTrip cards; there are 3.1 million in use.

Metrolinx officials say they were aware that Accenture was bidding for the Washington contract, but insist that they didn’t know the final price of the contract.

The issue with the Washington deal is whether Accenture has used any of the intellectual property developed for the lucrative the Metrolinx project to cross-subsidize its winning bid for the Metro contract.

According to Accenture’s press release, the company touts the project as one of the first of its kind in the U.S., but notes that it is being “built using the Accenture Fare Management Solution, based on commercially off-the- shelf software products.” The company also claimed it has “successfully implemented” similar technology in Canada and the Netherlands.

However, Kate Shenk, an Accenture U.S. spokesperson, confirmed that “Accenture will leverage Accenture Fare Management Solution IP in its work with Washington Metro. To date, PRESTO has been developed in part based on the Accenture Fare Management Solution and Metrolinx owns the Canadian rights to the PRESTO intellectual property.”

She declined to describe what elements of the Presto system would be used in the Washington project, saying it was “commercially sensitive information.” Accenture, Shenk added, has extensive ticketing experience with the rail, airline and bus industries, and implemented one of the first mobile ticketing systems for the Spanish national rail operator.

Metrolinx and Accenture negotiated an “intellectual property agreement” in November, 2012, shortly before McCarter released his scathing report.

That contract, according to a Metrolinx backgrounder on Presto, will allow Metrolinx to “reap future financial benefits should the system be successfully marketed elsewhere.” The backgrounder also notes that “this agreement is important as it provides clarity for the ownership of the intellectual property of the PRESTO system, and protects Metrolinx’ rights in the PRESTO system.” But the IP agreement specifies that Metrolinx only owns Canadian rights, whereas the contractor – Accenture – controls global rights.

According to a Metrolinx FAQ, there are currently 8,000 Presto devices on transit routes in Greater Toronto, Hamilton and Ottawa. The chip-enabled cards can be purchased in 70 locations, and there are almost 1 million users. Metrolinx and the TTC are still in the midst of a long-term project to make the card widely available on the region’s largest transit network. The agency says there will be 10,000 Presto devices on TTC bus, streetcar and subway routes by 2016.

As for the next generation “open fare” system that will allow fares to be paid by smart phones, bank cards and other media, Metrolinx says it is making a $236 million capital investment in this expansion. “PRESTO has technological releases planned over the next three years to continue to modernize the hosting and operating systems, incorporate feedback from customers and service providers, and based on ongoing research and evaluations.”

A Washington Metro spokesperson says it plans to launch a pilot project to test Accenture’s $184 million open fare system later this year, with full implementation beginning in 2015.

14 comments

  1. John, I think Accenture has just been selected by USA Dept of Health to fix the roll out of Obama’s helth care enrolment fiasco. source PBS

  2. “The issue with the Washington deal is whether Accenture has used any of the intellectual property developed for the lucrative the Metrolinx project to cross-subsidize its winning bid for the Metro contract.”

    Unusually for a Lorinc article I find myself frustrated reading it. Metrolinx signed an deal which meant it would have a say/return on deployments of solutions based on Presto in Canada. Washington is not in Canada. What am I missing here? What are the questions, who’s asking them and who are they directed to?

    I know Presto is generally viewed as crap but if someone else bought the crap it can’t be THAT crap? Right?

  3. “bus payment targets” — the readers, I guess? Odd terminology.

    Anyway, consultants reuse work produced for previous clients; film at eleven. I believe they call it “leveraging experience and expertise.”

  4. Mark, the question is whether Accenture has used the value of the IP asset created through the lucrative Presto deal as a way of helping it win the Washington deal, which the company says it will complete for considerably less money. The two systems are not identical, certainly, and it’s not clear whether Washington’s is much smaller in scale. Still, the salient point is the proposed speed of implementation for Washington, given the exceptionally sluggish pace here, and the differential in price ($700m plus, cf $184m).

  5. “Mark, the question is whether Accenture has used the value of the IP asset created through the lucrative Presto deal as a way of helping it win the Washington deal, which the company says it will complete for considerably less money”

    Sorry John but what you’re describing is simply commerce in semi-bespoke software development where developers must cover their incurred costs immediately without depending on future orders. Metrolinx did not negotiate a cut of worldwide or North American sales and it could be argued they should have but that is a question solely for Metrolinx, not for Accenture.

    Judging by the release, WMATA’s deployment will be comparatively simpler since it is an iteration on existing product (but Accenture will likely have locked in some ways it operates whether that is to WMATA’s taste or not) but also because unlike Presto it is not being deployed on several different systems (OC Transpo, GO Transit, TTC (a little) and the participating transit companies in the 905). Again, this will mean less people to okay the specification and changes as the purchasing authority fully controls the operations of the company it is deploying on.

    Yes, Metrolinx paid $700m but after an initial contract for $250m. WMATA may be have arrived in a more favourable part of the development cycle but history shows that the change orders do arrive and the $184m figure is likely to be substantially exceeded.

  6. John, with all due respect, the PRESTO system is a system that will be used across the entire Province with various different transit agencies that have different needs and requirements. Just look at GRT’s debacle with whether they will go along with PRESTO or not, because PRESTO doesn’t provide them what they need currently and it would have to be developed if they chose PRESTO.

    If Washington has purchased the same system for a single transit agency I imagine that this is why it may take less time and less money. Admittedly I don’t know all the facts and you bring up a good point, but I think we need a bit more information on this before we jump to conclusions. IMO

  7. To follow up on John’s comment, another big issue is the features and range of payment options that are cited for the DC contract. Toronto has been screaming for these for years, but an attempt to “go it alone” rather than implement Presto (which at the time was in its original, pitifully outdated mode), was quashed by Queen’s Park who said, “no Presto, no subsidy”. Are we being hosed by Accenture, or is Presto/Metrolinx the real culprit?

    The use of public subsidy to develop a product remarketed for private gain has a long history in Ontario. We paid a fortune for the Scarborough RT, and the technology was resold to BC for their Skytrain at a fraction of the cost of the Toronto system. The fact that Metrolinx negotiated a Canada-only deal for a share of the profits suggests that someone at Queen’s Park was either asleep at the switch, or participated in a deliberate arrangement to leave the real spoils of international sales available to Accenture.

    I wonder how many of the private sector brains trust (an oxymoron, no doubt) who sit on the Metrolinx Board were aware of or participated in this?

  8. Why does the first version of anything always costs more than later (updated) versions?

  9. Shaking my head at the notion that this was a partnership with spoils to be had. We only have to look up the road to Montreal and Bixi to see that municipalities and agencies delivering local functions should focus on delivery of service not be venture capitalists.

  10. The Liberal Government appears utterly incompetent in negotiating contracts. Especially when party supporters are involved, hmmm. Anyway, nice catch John. Thanks for bringing this to our attention.

  11. The first rule of contracting is don’t contract with Accenture.
    They used to be known as Arthur Anderson. Remember Enron? They were the auditors.
    My own dealings with them many years ago led me to believe they were a dishonest and deliberately incompetent (helps with the billing hours, don’t you know) organization.

  12. I’m not blaming Accenture here; the fault lies with the MTO/Metrolinx and their idiotic decision to make up their own new system with a green consultant rather than contract with the proven players who had ready-to-go products. Toronto was one of the last transit regions to select a smartcard system, how the @$!$%% did we not benefit from using everyone else’s experience as early adopters? We’re like the guy who said “never mind this Betamax and VHS stuff – that will never catch on. I’m going to invent the LaserDisc instead because that will totally be less expensive and provide better value.”

    Morons.

    What makes this even more perplexing is that when you get right down to it, the actual tech actually IS the same as everyone else’s. Only the operator/system-builder part – Accenture – was new. The technology in the Presto card itself is not new — it’s the same MiFare chip as used in many other cards (Oyster in London and similar cards in Boston, Atlanta, SF, etc.) There is absolutely nothing special about it.

    http://en.wikipedia.org/wiki/MIFARE#Places_that_use_MIFARE_technology

    So how did this get so screwed up? The tech is the same, the programming for different fare structures takes 5 minutes. Why did Metrolinx not simply call up Scheidt & Bachmann say — the guys who installed the MiFare based CharlieCard in Boston in 2005, and order up THE EXACT SAME THING? More card readers, whatever, but why weren’t we piggybacking off of them instead of bankrolling Accenture to break into this market?

    http://en.wikipedia.org/wiki/Cubic_Transportation_Systems

    Chicago wasn’t this stupid — in 2011, they awarded a $454 million monster implementation for commuter rail, bus and subway to Cubic, the huge systems implementer that had done LA and San Diego and NYC and countless other places. Same for Vancouver – $220 million in 2011 to Cubic. Same for Philadelphia in2011. And whoever didn’t use Scheidt or Cubic used ACS Xerox — (Denver, Houston…) Freaking Metrolinx hired a system builder WITH ONE EXISTING SYSTEM TO THEIR NAME, IN HOLLAND! They ignored the top three! And it wasn’t even a competitive bid process.

    The fault here is ENTIRELY Metrolinx. Wasteful idiots should be concentrating on why it costs $8 to go from Aurora to downtown Toronto on Viva bus and TTC subway compared to $2.50 in New York (Nice bus/MTA subway) or Chicago (Pace bus/CTA subway), not inventing resumes for goddamned payment system builders so that they could not compete for smartcards they never had a chance at before (like taking the SmarTrip card away from Cubic).

    Fire them all.

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