Cubic Loses Round in Fight for Subway Job


A U.S. District Court Judge in Manhattan on Monday declined to issue a temporary restraining order that would prohibit New York City transit officials from reopening the bidding for a lucrative contract to replace aging turnstiles and fare-collection machines in the city’s 469 subway stations.

Although officials of San Diego-based Cubic Corp., which submitted the low bid on the project, said they intend to pursue other legal options, Metropolitan Transit Authority Chairman Peter Stangl on Monday praised the ruling by U.S. District Judge Michael B. Mukasey.

“We are pleased that the court, in its preliminary ruling, has recognized our legal right to choose the best (system) for the best price,” Stangl said in a prepared statement. “I hope we can now proceed unimpeded with the selection of the best candidate to install the modern fare-collection system our customers have long awaited.”


Cubic officials Monday downplayed the significance of Mukasey’s ruling.

“All that the judge did today was refuse to grant the temporary restraining order,” Cubic general counsel William Stewart said. “The case is still pending before the court . . . (and) the judge did agree to allow us expedited discovery.”

Cubic’s Automatic Revenue Collection Group, which filed the lawsuit challenging the bid reopening, earlier submitted the low bid for the initial phase of the hotly contested contract that could grow in value to an estimated $480 million. Cubic said it could complete the first phase of the project for $181 million, while an international consortium that includes New York-based Nynex bid $218.5 million.

MTA spokesmen earlier had described the lawsuit as premature because the MTA board has yet to cast a final vote on the contract award. The MTA has maintained that it is lawful to reopen bidding in order to get “the best product for the best price,” a spokesman said.

In March, Cubic became the front-runner in the increasingly bitter competition for the contract when an MTA committee determined that Cubic’s offer was technically equal to the Nynex team’s, but cheaper.

Despite that finding, the MTA board reopened bidding in June after Nynex officials indicated they could lower their initial bid by as much as $40 million. The authority has asked Cubic and the Nynex group to submit new bids by today.

Cubic spokesman Jerry Ringer has said that the San Diego-based company will not submit a new bid, as requested by the MTA. Since March, Cubic officials have maintained that their initial bid was their “best and final offer.”

Cubic’s lawsuit alleges that the MTA violated federal rules of civil procedure by agreeing to review the Nynex team’s bid after an MTA committee recommended that Cubic be awarded the contract. Although the MTA is funded by the state of New York, Cubic officials believe that federal regulations prohibit the agency from reopening bidding.

Friday’s lawsuit is the latest chapter in the MTA’s 13-year-old plan to modernize a fare-collection system that has been described as a museum piece.

The existing system, which dates from the 1930s, is losing an estimated $70 million a year to “fare-beaters” who avoid paying by crawling under or climbing over turnstiles.