NJ appeals court to weigh challenge to $1.7 billion E-ZPass contract

Conduent disputes bidding process and TransCore’s ownership disclosures, while Turnpike Authority lawyers defend award

A New Jersey appellate court will decide whether the Turnpike Authority gave its longtime E-ZPass contractor a fair hearing before rejecting its challenge to a $1.7 billion contract that was awarded to a competitor.

Conduent, the current E-ZPass contractor, wants the court to overturn the authority’s decision to award a new contract to TransCore, arguing that the bidding process was unfair, TransCore’s ownership disclosures were incomplete, and the authority failed to justify choosing a proposal that cost $251 million more than Conduent’s bid. Lawyers for the authority and TransCore argue that the award followed a thorough review and complied with state contracting rules.

During oral arguments, the judges questioned how the authority evaluated the competing proposals, what information authority commissioners received, and whether Conduent had enough opportunities to challenge the Turnpike Authority’s decision. They also considered whether Conduent’s proposed sale of its tolling business affects its right to pursue the appeal.

Conduent challenged the award in October 2024. The Turnpike Authority accepted written arguments and held a hearing in January 2025 before rejecting the protest in April of that year. Thomas Holl, the authority’s director of law who oversaw the hearing, concluded that the award was justified and Conduent’s objections lacked merit.

The 11-year contract, awarded in September 2024 and set to begin in October of 2027, covers the technology and customer service operations for New Jersey’s E-ZPass system, including billing and toll violations. Conduent’s bid was $251 million lower than TransCore’s bid.

TransCore’s ownership structure drew scrutiny from elected officials in both parties because its ultimate majority owner, Singapore’s government-owned Temasek Holdings, had a board member with ties to the Chinese Communist Party. The Turnpike Authority rejected claims that those ties posed a security threat.

Motorists have complained about E-ZPass billing errors, mistaken fines and difficulty getting problems resolved. Conduent attorney Paul Josephson of Duane Morris LLP acknowledged problems with the system but argued that they were not necessarily Conduent’s fault. He said the authority could consider the company’s past performance when evaluating its proposal, but should have documented those concerns and allowed Conduent to respond.

Josephson asked the Appellate Division to cancel the award and require new bids. Alternatively, he asked for another hearing to examine how the authority evaluated the proposals.

He argued that Conduent could not adequately challenge the authority’s rationale for awarding the contract to TransCore. The company had an hour to present its objections at the protest hearing but could not question the evaluators about their scores or recommendation, he said.

New Jersey Turnpike Authority lawyer Thomas Abbate of DeCotiis, FitzPatrick, Cole & Giblin LLP argued that the hour-long appearance was only one part of the process. Conduent received about 14,000 pages of documents and had months to submit written arguments, he said. The authority was only required to provide an informal opportunity to present objections, he argued.

One issue in the appeal concerns Holl’s discussion with Jose Dios after closing the protest hearing record. Dios, the authority’s chief information officer, helped evaluate the proposals and Conduent’s live software demonstration.

“The live presentation was the subject of the discussion between the hearing officer and the member of the evaluation committee. And it’s disputed what happened at that live presentation?” one judge asked.

Josephson said Conduent disputes Dios’s account of what happened, did not receive notice of the discussion, and should have been allowed to respond before the hearing officer issued his decision.

Abbate argued that the hearing officer’s conversation with Dios clarified why the evaluators scored Conduent’s proposal as they did. It did not introduce new evidence, he said.

“They were given notice in the form of the decision, and they were given an opportunity for further briefing before the agency through their motion for reconsideration,” Abbate said.

A judge asked whether Conduent should have been allowed to challenge Dios’s account before the hearing officer rejected the company’s protest.

“Isn’t that the possibility of the denial of due process here?” the judge asked.

Josephson said Conduent requested an opportunity to respond, but the authority declined to reopen the record. He said the company wanted a process that allowed it to challenge the explanations for the award.

Abbate said Conduent received the documents used in the evaluation and had an “unlimited and unfettered right to provide written submissions.” He argued that evaluators’ working notes and internal deliberations were protected from disclosure.

The judges also examined what information was available to the Turnpike Authority’s commissioners when they selected TransCore.

Josephson said the agenda item did not list the competing bid prices. Although the evaluation report included pricing and scores, he argued that it did not adequately explain why TransCore’s proposal justified the additional $251 million. He also questioned whether commissioners received that report.

“The evaluation report simply reported on the scores and did not provide any sort of real narrative explanation as to why one vendor was better than the other,” Josephson said.

He acknowledged that the authority did not have to choose the cheapest proposal. But he argued that commissioners needed to know they were selecting a higher-priced option and understand the reasons.

One judge asked whether commissioners could reasonably adopt the evaluation committee’s recommendation without examining the background materials themselves.

“Is it arbitrary and capricious for a board to say we trust our professionals and the evaluation committee and adopt what they say?” one judge asked.

Abbate said James Carone, then the Turnpike Authority’s executive director, briefed commissioners individually before the vote to provide background on the proposed award. Abbate also described a review by authority staff, the Office of the State Comptroller, and the Governor’s Authorities Unit, which oversees independent state authorities. He also said the governor could have vetoed the award.

The price of the contract accounted for 20% of the overall evaluation score, Abbate said. The final cost also depends partly on transaction volumes over the contract period, making the projected price difference “to an extent, illusory,” he argued.

Conduent’s lawyers challenged the scoring. In their brief, they noted that Conduent’s score fell from 72.3 to 67.7 after further evaluation, while TransCore’s rose from 77 to 82.7. They argued that the authority had not adequately explained the changes.

Abbate defended the evaluation, saying authority staff members exercised their expertise.

“All that’s required here is a demonstration that we rationally relied on the record, and exercised our judgment in a non-arbitrary way,” he said.

Abbate said the authority spent 18 months on the selection process, including three days of in-person presentations. He argued that its written decisions and later court submissions explained the reasons for the award.

Josephson also challenged whether TransCore fully disclosed its ownership, as required by state law.

TransCore is based in Tennessee and owned by Singapore Technologies Engineering, known as ST Engineering. Temasek Holdings, owned by the Singapore government, is ST Engineering’s majority shareholder.

Josephson argued that TransCore’s ownership disclosure form omitted those layers of ownership and that the omissions should have disqualified the company from receiving the contract.

Abbate countered that the information appeared elsewhere in the proposal, including in financial statements and a link to ST Engineering’s annual report. A 2016 change in state law allows publicly traded companies to disclose ownership through securities filings, he said.

TransCore attorney Brian P. O’Neill argued that the company met both the traditional disclosure rules and the alternative for publicly traded companies.

“There was no hiding anything in TransCore’s proposal here,” O’Neill said.

Josephson said the ownership disclosure requirements were mandatory and that information elsewhere in the proposal did not cure an incomplete form. He also argued that the authority’s explanation for accepting TransCore’s disclosures had changed during the proceedings.

“The Turnpike Authority’s position on the ownership disclosure form has changed three times in the course of these proceedings,” Josephson said.

Abbate said the contract required data to remain in the United States and cited federal approval of ST Engineering’s acquisition of TransCore.

The judges also considered whether Conduent could continue its challenge while preparing to sell its tolling business to Canadian company Quarterhill, a publicly traded company that operates in the United States. Conduent will own 7% of Quarterhill’s shares after the deal is closed.

Abbate argued that Conduent was giving up the employees and assets needed to perform the contract, undermining its right to pursue the appeal. Quarterhill had not joined the case, he said.

One judge asked whether the authority’s argument was premature while the sale remained incomplete. Abbate maintained that the signed sale agreement already affected Conduent’s position.

Josephson said the sale has not closed yet. He also noted that the same Conduent employees would continue working for Quarterhill, and Conduent would retain a financial interest in the company through its Quarterhill shares. He also argued that its status as a New Jersey taxpayer supported the challenge.