How Mark IV beat Amtech to win E-ZPass in 1994 - INSIDE STORY

Fourteen years ago on March 18 1994 on a snowy Friday afternoon there was a David vs Goliath battle at the Triborough Authority's head offices on Randall's Island in New York's East River. The chief executives of seven northeastern toll agencies comprising the Inter Agency Group (IAG) met to vote on whether to give Amtech or Mark IV the big E-ZPass electronic toll systems contract.

David - Mark IV - won. Quite why and how it won has always been something of a mystery to all but a small number of officials who participated in the closed meeting. Last weekend one of the officials present at the March 18, 1994 meeting and at other crucial meetings gave us the inside story.

It was quite simple. The three New York Agencies favored Amtech. The three New Jersey agencies favored Mark IV.

Mark IV won because the New Jersey agencies threatened to leave E-ZPass IAG if Amtech was selected. This threat got the swing vote of the Pennsylvania Turnpike.

Most vehement against Amtech was Dave Davis CEO of the New Jersey Highway Authority which operated the Garden State Parkway.

So in the first vote it was four votes for Mark IV and three votes for Amtech.

But the IAG rule is that all decisions must be unanimous.

So it was a long meeting. Officials of the New York agencies held out for Amtech for several hours.

IAG chairman Michael Ascher (TBTA CEO) allowed everyone to speak at length. The group gathered from noon on and talked casually. The formal meeting didn't start until well after lunch, probably not until nearly 3pm and it went until close to 9pm. They didn't break for a meal, though sandwiches were brought in.

Both Amtech and Mark IV were publicly traded companies and share prices were bound to be heavily affected by the decision. Under SEC rules the decision was not to be made until after close of share trading Friday afternoon.

Present were about 15 people the chief executives and another senior officer and of the then seven members of the IAG:

- Tribough Bridge and Tunnel Authority (TBTA)
- New York State Thruway Authority (NYSTA)
- Port Authority New York New Jersey (PANYNJ)
- New Jersey Turnpike Authority (NJTA)
- New Jersey Highway Authority (NJHA)
- South Jersey Transportation Authority (SJTA)
- Pennsylvania Turnpike Commission (PTC)

The New York agencies all favored Amtech. They said the Dallas-based company had the great advantage of experience. It had three working systems. And Amtech had promised a quicker installation than Mark IV.

Amtech was the Goliath of electronic tolling back then. It had major systems on the railroads tracking freight cars. It had pioneered road systems on the Dallas North Tollway and at the Crescent City Connection bridge in New Orleans five years earlier, and had a system operating on the Oklahoma Turnpike, and was discussing deals in Houston and elsewhere. One of the major members of the E-ZPass Inter Agency Group the New York State Thruway had already committed to Amtech and had many thousands of Amtech transponders (though read-only) in use.

Mark IV by contrast didn't have a single operating system. It had a contract to build one in Orlando and that didn't meet IAG specifications. It had pavement-based readers.

Amtech and Mark IV had been finalists from seven companies that had submitted proposals in April 1992. The IAG set new standards for an electronic toll system. It was to be the first electronic toll system with a serious write-back capability. All the operational systems were read-only.

Write-back enabled the transponder to have written to its memory information such as the time and place of entry, the new account balance, and so forth. This was helpful in trip toll systems that used tickets - the main stretches of the Thruway, the NJ Turnpike and the Pennsylvania Turnpike.

There would be no need to gather separate entry and exit data and try match them. Just like a printed and magstripe encoded 'ticket' the read-write transponder would carry the entry data with it and transmit that to the toll reader at exit, making computation of the toll simpler.

Feds hot on 'traffic management'

In addition the Feds were hot on the supposed "traffic management" aspects of what got called in deference to them Electronic Toll and Traffic Management (ETTM). They were doling out money especially to the 'poor' New Jersey toll agencies for ETTM systems, but their interest was strictly in the '-TM' part.

One memo recalls an encounter with a federal official who said dismissively that the FHWA had no interest in helping states collect tolls faster.

Write-back was supposed to provide a range of new capabilities for "traffic management" - a woolly ITS notion that doesn't seem to have been realized. Read-only tags can equally well be used as traffic probes to gather data on speed and congestion, about the only "TM" function implemented with transponders.

A memo from E-ZPass

A memo from "E-ZPass" dated June 9 1993 called "Technical Aspects of E-ZPass" says Mark IV and Amtech are "now trying meet in the second round of testing" requirements, the key points of which were:

- system accuracy in the toll lane of 99.95%

- ability to operate at up to 75mph (121km/hr) on an open highway

- minimum proprietary components

- meet FCC regulations

- read-write accuracy of one error in ten million

After both companies fell short in the first set of technical tests September to December 1992, they both passed the second set of tests a year later.

The two companies were ranked equally in the technical performance of their transponder-reader system in the final technical evaluation late 1993.

In mid-December 1993 IAG officials had three days of meetings with Amtech and Mark IV to get their best and final offers (BAFO). The meetings were held at a hotel in West Point NY right next to the Military Academy.

Amtech's Texan swagger didn't help it

Amtech had a real cultural problem, our participant tells us.

"They were full of themselves, acting as if it was just a matter of going through the motions. They thought they had the contract all sown up, as if it wasn't a serious competition."

Many of the northeasterners just didn't like the Texans: "They behaved like cowboys. They handed out silly little gifts."

By contrast the IAG officals found the Canadians of Mark IV serious and unpretentious. Our reporter says the outstanding performance in the BAFO session was given by the Mark IV chief engineer at the time Kelly Gravelle, who talked conversationally and showed a deeper grasp of the subject than anyone else.

"He came across as knowledgeable and honest. He explained himself. When he didn't know he'd say so. The Amtech people - you just didn't know when to believe them. Big talking Texans!"

Perhaps out of that experience came the notion that Mark IV was more committed to product improvement and next generation technology than Amtech. Mark IV offered to produce a transponder with a smartcard interface whereas Amtech officials were less interested, or gave the impression they were going to be more expensive by emphasizing its costliness.

Mark IV's AT&T connection

Mark IV successfully used an "association" with AT&T to bolster its standing. AT&T was dabbling in electronic tolling. It had a transponder design with a slot for a card, that was actually deployed on the first of the Orange County tollroads in the early 1990s for a short time. More important AT&T with Bell Labs gave Mark IV corporate and technical heft it would otherwise have lacked.

AT&T was then a huge employer and corporate presence in northern New Jersey - this is Thomas Edison country - so that association gave the Mark IV attraction to New Jersey politicians.

Mark IV has indeed subsequently offered a transponder with a smartcard slot, but no toller has placed an order. Similarly not much seems to have come from the "association" with AT&T. But at the time it helped solidify the New Jersey tollers around Mark IV.

Multi-lane reader set Mark IV apart

Mark IV's real winner however was its multi-lane reader. Amtech only had single lane readers. This meant that except on ramps with a lane or two, Amtech was the more expensive installation.

Amtech transponders were slightly cheaper to buy than Mark IV but for any agency with large toll plazas the Mark IV installation was going to be substantially cheaper because of the multi-lane readers they offered.

For the 'rich' New York agencies capital cost was not a major concern. Highly profitable operations all, they had the money to buy the higher cost installation of Amtech. They were straining to get electronic tolling up and running so they were attracted by the quicker installation schedule and the experience of Amtech.

By contrast the New Jersey toll agencies were relatively 'poor.' Politicians had always pressed them to keep toll rates low and they didn't have the surpluses to finance expensive toll systems.

Two of the NJ tollers, the Parkway and the Expressway already relied heavily on automatic coin machines and didn't see great economies from electronic tolling - mostly improved customer service. And they were in much less hurry to get systems running, so Amtech's fast schedule meant nothing to them.

They thought the Mark IV transponder with the company's commitment to improvements and ITS would be more attractive to the Feds who were providing them with grant money for their "ETTM" system.

Conclusion: Davis of the Garden State Parkway sunk Amtech with his forceful advocacy for Mark IV and his threat that the Jersey agencies would "go it alone" if the meeting chose Amtech.

The IAG chairman Michael Ascher sealed the decision by drawing out of the New York engineers the position that "Yes they could make the Mark IV product work." They all said they expected a slower installation with Mark IV but conceded that in all other respects the two offerings were similar.

Ascher made a quiet speech about the importance of unity, how the whole purpose of the IAG was to keep the agencies together so a single toll system could be implemented. This required every agency to be prepared to subordinate its individual interest to the interests of the larger group. Compromise was essential. All the hard work of the past several years would be lost if agencies didn't give a little in order to make the cooperation work.

With that he and the other two New York CEOs switched and voted Mark IV, making the formal decision unanimous.

Within months all the NJ CEOs were purged

At exactly this time the governorship of New Jersey was changing party complexion. Democrat Jim Florio was replaced by Republican Christine Whitman. All three New Jersey toll CEOs were purged in the weeks and months following the E-ZPass decision. Briefed on Amtech's greater experience the incoming Republican toll officials thought there was something suspicious in the Democrat CEOs being so strongly for Mark IV.

They launched an inquiry. Staff were interviewed by state lawyers.

For a while the Mark IV contract looked to hang in the balance.

But the inquiry found no evidence of corruption and the Whitman administration accepted the selection as a done deal, and a clean one.

Could Dave Davis of the Parkway really have taken the three New Jersey agencies out of the E-ZPass IAG as he threatened? It seems unlikely, especially since he was a lameduck CEO.

But if it was a bluff, the New Yorkers were not going to call it. There was too much at stake.

Welcome any comments (indicate if they are attributable or not) email petersamuel@mac.com

See follow-up report with reaction

http://www.tollroadsnews.com/node/3472 

TOLLROADSnews 2008-03-24 revised 2008-03-25