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The Government demanded ERG divert resources into School Tcard. But with the project already in disarray, the Government's team was aghast. It warned the move posed an unacceptable risk to an already fragile enterprise. Nevertheless, Michael Costa, then transport minister, added School Tcard to ERG's already dizzying list of requirements, at an additional cost to taxpayers of $18 million.

The Transport Ministry would not allow its drivers to leave children behind if they had left their pass at home. Today, students still have to show drivers their old paper pass as well as their smart card.

Despite hiring a specialist data warehousing consultancy, the ministry has not managed to transform the raw figures about student travel, gained from individual buses, into meaningful school subsidy numbers. The ministry still cannot say if it is paying accurate subsidies to the private bus industry.

Within months of the School Tcard decision, the Government's long-standing manager of the project, John Armstrong, pulled the plug. In mid-2004 ERG was rocked by the resignations of its general manager, Rob Noble, and its NSW manager, Richard Fleming.

Meanwhile, a decision to save money on the main contract by not installing all-new ERG ticket vending machines was causing serious headaches. Technicians were instead trying to "reverse engineer" existing CityRail ticket machines, still maintained by ERG's bitter rival, Cubic, with ERG software.

The installation has been so problematic that only one ticket machine - at Ashfield - has been retro-fitted successfully. An expansion to Macdonaldtown and the City Circle stations is months behind schedule.

And the result of the bus fit-out, which progressed far more quickly, remains under a cloud.

On March 19, 2004, the company's second milestone was due. ERG had to demonstrate it had a working design for all parts of the smart card system. Commuters were to swipe a card as they boarded a bus or entered a train station, and then "tag off" at the end of the trip.