Conduent will challenge $1.7B NJ E-ZPass deal in court (updated)

A Newark company plans to take the New Jersey Turnpike Authority to court after losing a $1.7 billion contract to manage the state’s E-ZPass tolling system.

Conduent Inc. says the Turnpike Authority’s decision to award the contract to a Tennesee-based competitor with an Asian corporate parent is not only arbitrary and capricious but also exposes New Jersey motorists to security threats from Communist China.

“We’re preparing our case for Appellate Court,” said Conduent lawyer Paul Josephson in an interview Tuesday.

Earlier this month, the Turnpike Authority rejected an official bid protest by Conduent, which has provided back-office operations to the E-ZPass system for the past 22 years. TransCore LP won the contract even though its initial bid was $500 million more than Conduent’s. The New Jersey Turnpike Authority then negotiated privately with the company, resulting in a final winning bid that was $250 million higher than Conduent’s.

TransCore takes great pride in providing the best products and services to our customers,” said Whitt Hall, TransCore’s President and CEO. “We are pleased the NJTA recognized TransCore’s proposed solution as providing the best value to the state of New Jersey and has now rejected Conduent’s protest, affirming their decision after due consideration.”

In a protest filed last October, Conduent argued that TransCore representatives received special treatment from the Turnpike Authority in the form of private meetings that other bidders were not granted. During those meetings, the Turnpike Authority improperly changed crucial bid requirements that allowed TransCore to lower its initial offer by hundreds of millions of dollars, Conduent charged.

Conduent representatives also said the Turnpike Authority never detailed its reasons for favoring TransCore and claimed that the agency’s staff never informed its board of directors that Conduent was the low bidder.

In addition, Conduent representatives argued that TransCore’s bid application was fatally flawed because it never fully identified the chain of corporate ownership, as required by state law. TransCore has never named the foreign parties that own 27% of TransCore’s parent company, Science Technologies Engineering of Singapore, Conduent said.

The largest shareholder of the Singapore firm is Temasek Holdings, an investment company owned by the government of Singapore, records show. Fu Chengyu, a Chinese national linked to the nation’s ruling Communist Party, was a member of Temasek’s board. He stepped down last November.

The Turnpike Authority, in a decision issued last week, rejected Conduent’s protest and gave no ground on the issues raised by the company, concluding that the contract award was “well-reasoned and well-supported.”

“Conduent’s challenges to the contract award are without merit,” said Thomas Holl, director of law for the New Jersey Turnpike Authority, who presided over the protest hearing in January.

Holl found that Conduent’s claims about potential security risks from TransCore’s parent firm in Singapore were unfounded and said there was no evidence of Chinese Communist influence over the company. He accused Conduent of hypocrisy in its attack on TransCore’s foreign links, pointing out that Conduent proposed to outsource some work to sites in India and Guatemala.

“Conduent’s arguments on this topic are nothing more than an exercise in speculation and hyperbole — rife with baseless accusations, designed to sow fear and elicit negative public sentiment,” Holl found.

Holl also addressed the $1.7 billion price tag of the new 11-year contract, which is believed to be the largest ever awarded by the Turnpike Authority. The agency is not obliged to choose the lowest bid, he wrote, noting that competence and confidence in a vendor are also key.

Under Conduent’s management of electronic toll systems and billing over the past two decades, motorists have lodged a series of complaints about unresponsive service, billing errors and mistaken fines. But Conduent has argued that the Turnpike Authority routinely mismanaged underfunded service operations.

Josephson said Conduent has officially requested a stay on the ruling, which would continue to freeze action on the contract while the state Appellate Division decides the matter. Without a stay, work would begin to transition the toll system to TransCore, which would take over management of E-ZPass operations in 2027.

In a letter to the Turnpike Authority requesting the stay, Josephson wrote that Conduent’s appeal would rest partly on what he said was TransCore’s failure to fully reveal its ownership, an issue he said would disqualify the contract. He also pointed out that, only last year, the court questioned the Turnpike Authority’s procurement practices in overturning a $10 million highway project award.

Holl’s ruling, Josephson wrote, “grossly mischaracterized” the record on a string of issues, including Conduent’s proposed use of employees in India and Guatemala for clerical work and software development. He also pointed out that New Jersey public officials from both parties continue to oppose the new contract on security grounds.

“Could it perhaps be that TransCore wanted to hide the fact that it was ultimately owned by a foreign government, who put a prominent member of the Communist Chinese Party on the board of TransCore’s parent company? Is it aware of other shareholders who may pose security or integrity risks?” Josephson wrote.

Among the officials questioning the contract are U.S. Reps. Jeff Van Drew and Josh Gottheimer, and state Sens. Joseph Pennacchio, Michael Testa and Douglas Steinhardt.