Cubic Ensnared in Political Web : Subways: Cubic Corp.'s $105-million contract is in limbo as New York’s Metropolitan Transit Authority moves to reopen bidding for turnstiles.


With their tough metal exterior and high-strength security bars, the subway turnstiles that Cubic Corp. has designed for New York City’s least-savory subway stations don’t look very user-friendly.

The stark design of the state-of-the-art, computer-driven gates is in keeping with a mission: stopping wily “fare beaters” who limbo under, vault over or squeeze through the system’s existing turnstiles, cheating the Big Apple’s transit system out of an estimated $70 million each year.

San Diego-based Cubic was the acknowledged front-runner for an initial $105-million contract to replace an aging transit fare collection system that has been described as a museum piece. But, last week, the New York state-funded Metropolitan Transit Authority dealt the company a serious blow when it unexpectedly reopened the bidding. It now appears that Cubic has become entangled in New York politics--city and state. The state is in a budget crunch. Some consumers and politicians in the city are taking potshots at the MTA’s plans, and the MTA board has put its own staff recommendation on hold.


Meanwhile, Cubic officials, who estimate that the automatic fare collection contract could swell in value to an estimated $480 million during coming years, is planning to go to court to prevent the reopening of the bidding.

Cubic in March began manufacturing parts for the system, shortly after a transit staff report described the company’s bid as technically equivalent to--but $26-million cheaper than--a competing bid by an international consortium that includes Nynex, the New York-based telephone and computer giant.

Shortly afterward, the MTA board surprised Cubic officials by setting aside the staff recommendation and postponing a scheduled vote on the contract award. The MTA board instead ordered its staff to seek additional information about automatic fare collection systems.

Some observers have suggested that MTA board members were miffed by a March newspaper story that described the scheduled MTA board vote as a simple formality. “They didn’t like that,” said one observer. “It made them look like a rubber stamp.”

MTA spokesman John Cunningham said board members approved “further discussions” with Cubic and Nynex in order to get “the best product for the best price.”

An angry Raymond L. de Kozan, chairman of Cubic’s Automatic Revenue Collection Group, promptly alleged that the decision was a “corrupt (act) . . . that undermines the integrity of the selection process. . . . It’s not a competition, it’s an auction.”

The MTA has directed Cubic and the Nynex team to submit new bids by June 28, but Cubic said it would go to court instead.

The unexpected decision to reopen bidding was the latest in a string of events that have dogged Cubic, which has been chasing the elusive subway contract since the late 1970s.

Cubic also has been under investigation by New York state’s Office of the Inspector General.

The investigation was sparked by the discovery of five $20 bills that ended up in a report that a Cubic engineer delivered to a transit authority employee. Cubic maintains that a San Diego-based engineer misplaced the bills shortly after withdrawing them from an automatic teller machine for his personal use. During an unusual “show-and-tell” session, Cubic executives recently ordered the obviously embarrassed engineer to explain to reporters how he lost track of the bills in an effort to hide his cash from potential muggers in the Big Apple.

Some New Yorkers also have criticized Cubic’s planned turnstiles as ineffective against fare-beaters. Within minutes of arriving at a Manhattan subway station, a New York City councilwoman recently watched as several subway riders sneaked through a Cubic-designed gate without paying. Cubic officials subsequently said that a turnstile design change has made fare-beating impossible.

While Cubic has been busy with damage control, the MTA has been deflecting growing criticism from consumer groups and elected officials who have questioned the wisdom of spending close to $1 billion for a highly automated fare collection system.

“The MTA board now is questioning the whole project from top to bottom, and it’s hard to tell what will come out of it,” said J. Wesley Leas, a Philadelphia-based consultant who has studied fare collection systems for New York. “The only thing everyone knows is that they want to move quick because they lose more money (to theft) every day.”

New York State Assemblyman Jerrold Nadler, who chairs an assembly committee that controls MTA funding, isn’t opposing the acquisition of an advanced fare collection system. But Nadler has questioned why the board is “looking at what is the most expensive (system) ever proposed. . . . I want to know what they propose to use it for.”

Similarly, Joseph G. Rappaport, a coordinator with the Straphangers Campaign, a nonprofit group that represents New York subway and bus riders, strongly supports a new fare collection system. But Straphangers has conditioned its support on “a real commitment to a pass system,” Rappaport said. “If there isn’t, then we don’t buy the notion that AFC is necessary.”

Rappaport and others have criticized transit officials for failing to keep the public informed about the bidding. “This has been studied to death, but at this point the study has taken place inside the transit authority,” Rappaport said. “Never once has the transit authority asked riders groups, business groups or the public what they want.”

Cunningham said the MTA now intends to conduct a “customer acceptance test after the first seven turnstiles are installed.”

Although the MTA has been hit by criticism, even its most serious detractors acknowledged that the existing fare collection system must be upgraded.

A new, automated fare collection system would eventually allow transit officials to increase revenue by abandoning the existing flat fare of $1.15 and setting fares according to distance traveled. The automated system also would allow authorities to trim the number of token clerks in the system’s 469 stations.