Case #1984.0

Cracking Oyster: Shashi Verma & Transport for London Confront a Tough Contract (A)

Publication Date: April 04, 2013
Current Stock:

Educator Access

A review copy of this case is available free of charge to educators and trainers. Please create an account or sign in to gain access to this material.

Permission to Reprint

Each purchase of this product entitles the buyer to one digital file and use. If you intend to distribute, teach, or share this item, you must purchase permission for each individual who will be given access. Learn more about purchasing permission to reprint.

Cracking Oyster (A) is the first part of a two-part case set, Cracking Oyster (A) and (B), intended for a two-class sequence, but the (A) case may also be taught on its own. It is accompanied by a brief, two-part video companion piece with a total length of six-and-a-half minutes. The (A) case introduces Shashi Verma (MPP 97) in 2006, soon after he has received a plum appointment: Director of Fares and Ticketing for London's super agency, Transport for London. The centerpiece of the agency's ticketing operation was the Oyster Card, developed and managed under the terms of a 1998-2015 PFI (Private Finance Initiative) contract called Prestige. Thus, in pursuing his goals for TfL ticketing -- a reduction of costs, expanded service, and adoption of convenient, lower cost technologies -- he knows he will have to negotiate with the contractor, a consortium called TranSys, governed by its two leading partners, Cubic Transportation Systems, a San Diego based company specializing in automated fare collection equipment and service, and EDS, one of the world's largest information technology service providers. Though the Oyster system -- reliable and popular -- was widely regarded a smash success, Verma soon learns that within TfL, the Prestige Contract is the source of much frustration. The case details the perceived shortcomings of the contract: a cumbersome process for negotiating variations, excessive costs, inadequate performance requirements, and poor incentives for the contractor to collaborate with TfL on new innovations. While the contract does, technically, allow TfL the opportunity to opt out early, TfL appears to have little practical ability to do so, as intellectual property for the complex system resides with the contractors. Cracking Oyster (A) ends with Verma facing a broadly-framed dilemma: what to do about Prestige?

Learning Objective:
The case is used to introduce the challenges confronting a public sector manager when part of his/her operation is contracted out to a nongovernment organization. In particular, the operating capacity provided under the eight-year-old contract was poorly aligned with the manager's present mission. Students are challenged to put themselves in Verma's shoes and apply tools from decision theory to define his problem, identify his constraints in solving it, and construct best alternatives. 

Please note: the video portion of this case is included in the teaching plan and is intended for instructors to use in class. Here is more information on how to access teaching plans

This case comes with a complementary audio version. 

Other Details

Teaching Plan:
Available with Educator Access
Case Author:
Pamela Varley
Video Producer:
Patricia Garcia-Rios
Faculty Lead:
Richard Zeckhauser and John D. Donahue
Pages (incl. exhibits):
Europe, England