Why the new Opal ticketing system is at risk of costing an extra $171m

The cost of a complex upgrade to NSW’s Opal ticketing system for public transport is at risk of increasing by as much as $171 million to $738 million amid delays of at least a year in completing the project.

The state government’s infrastructure adviser has put the project under greater scrutiny due to its complexity and scale, forcing Transport for NSW to provide greater contingencies in its funding.

Dubbed Opal Next Gen, the project is now budgeted for $738 million, up from $568 million. Infrastructure NSW has changed Opal Next Gen from a “tier two” to a “tier one” project, which means the transport agency must be 90 per cent sure the final cost will fall within budget.

The project involves replacing 25,000 electronic readers on buses, at train stations, light rail stops and ferry wharves. Planned features of the new system include allowing concertgoers to use event ticket QR codes to catch public transport, while concession fares will be easier to access for those eligible.

Transport for NSW secretary Josh Murray said the extra contingencies in funding for the project provided surety of having “enough budget headroom”.

“When they are at this scale, it means you’ve got to put aside more in the kitty to have a buffer before you start to get into contracting. This $170 million on-paper change to the project is a requirement of the accounting rules,” he said.

The government had planned to complete the rollout of the new Opal system next year, four years after it was announced. However, the Herald has previously reported that Transport for NSW is now targeting September 2027 as a “go-live” date for the ticketing system.

More than eight months after tenders closed, Transport for NSW is yet to reveal short-listed bidders for the main contract to overhaul the ticketing system, and another for new bus technology that will offer passengers extra real-time journey information via mobile devices.

Murray said nine companies were in the mix for both Opal contracts, including some that had put in bids for both tender packages, and the short-listed bidders would be announced shortly.

The agency plans to sign contracts early next year for the project, which Murray said was “incredibly complex” while its scale had increased due to different public transport modes and expectations.

In a sign of the challenges, the government has extended the contract with incumbent Opal operator Cubic by another two years, up to September 2028.

Murray said the extension would allow for a “gradual rollout” of the new system while the existing deal with Cubic remained in place as “back-up provider”.

“We do believe … we will have certain elements that will click into place pretty quickly, but they’ll be done under the cover of having Cubic providing the system,” he said.

Murray declined to give a definitive date for when he expected the project to be completed because discussions with bidders included their forecast timelines and costs. He would give only a wide-ranging period of sometime between September 2026 and September 2028.

“We’re not going to rush it, and we have to get the right bidder to put forward a credible timeline for the transition of 25,000 readers as well as back-end technology,” he said.

“We anticipate transitioning [to the new system] well before that time period [of September 2028 when Cubic’s extended contract expires]. This is about Sydney remaining leading edge, not bleeding edge, in terms of what we’re delivering.”

A confidential business case for the project put the cost of a one-year delay to the Opal system upgrade at $86 million, a two-year delay at $163 million and a three-year delay at $237 million.

Murray wouldn’t say the cost to the government of extending Cubic’s contract for two more years because “the ins and outs” of the final figure were still under negotiation with the technology company.

He emphasised that the scope for modernising the Opal system had grown since it was announced in 2022, requiring it to take into account new rail lines such Metro West between the Sydney CBD and Parramatta, as well as recommendations from a taskforce into bus services.

“The number of readers [and] the knowledge of the network the new Opal product will need to have [has grown] significantly in scope,” he said.

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