A DELAY IN the implementation of a new payroll system could cost the City of Portland an extra $3 million, in a year when budgets are being slashed across the board and the city is struggling to pay for even basic services.

The city first contracted with information technology company Ariston to install a Systems, Applications, and Products (SAP) finance and payroll system in 2006, following a 2004 council decision to update the city's computers—which have been running the same system since the late 1980s. In 2006, the projected budget for the SAP installation was $27.9 million—but in May 2008, it ballooned to $49 million, after the city terminated its relationship with Ariston and employed a new contractor.

The city switched some of its finance operations to SAP last November, and had planned to switch its payroll operations over on April 1. But on March 12, a decision was made by the project's steering committee to wait until at least mid-June.

On March 17, a committee of outside experts on SAP, including Kumud Srinivasan, general manager for IT core systems engineering at Intel, and Cormac Burke, director of SAP for PacifiCorp, recommended that the city wait until July 1 to implement the new payroll system. That committee met just once, with representatives from the Office of Management and Finance (OMF) in the room, and a representative from Mayor Sam Adams' office, according to former TriMet Director of Finance and Administration Bruce Harder, who was also in the room.

"These were new people to me," says Harder, who says the meeting lasted 75 minutes. "Our mandate was to decide whether we should roll out this new system in April, or do we buy a little more time?"

Harder says the cost of delayed implementation was not discussed at the meeting—but that the city has learned not to rush these things from the early implementation of a flawed new water bureau billing system in 2001, which cost Portland up to $30 million in lost revenue.

"Where payroll is concerned, you are talking about people's lives," says Harder.

Meanwhile, in projected budget documents released on March 6, OMF estimated the cost of the SAP overrun at $60,000 for each working day.

"It's more like $1 million a month," says Laurel Butman, principal management analyst for OMF. "This is a huge project. It takes up half to two-thirds of the 14th floor of the Portland Building, with each bureau devoting staff to the changeover."

The extra costs cover city staff, rent for leased space, internal services like phones and copying, travel, the salaries of an SAP consultant and a sub-consultant, and a quality assurance consultant, says Butman. Some of the $3 million in overrun costs will come from a contingency fund established for the SAP system—which has about $1.5 million in it right now, says Butman.

Butman thinks that the city will "probably" issue bonds to pay for the extra $1.5 million contingency shortfall, but admits that the timing could be better: Currently, the city is facing an $8.8 million decrease in its general fund budget from 2008, and a 90 percent cut in one-time funding for special projects, from $24.9 million to $2.5 million ["Turned Out onto the Streets," News, March 19].

While $1.5 million may be a drop in the ocean compared to the massive cost of implementing SAP citywide, the latest overrun could pay for several important services currently on the city's one-time funding chopping block. For example, $1.5 million could cover a canine officer at the police bureau ($117,087), homeless reduction work ($110,826), homeless men's and women's shelter services and severe weather services ($704,222), a homeless employment program ($300,000), and two fire and arson investigators at the fire bureau ($236,713).

Mayor Sam Adams' office is responsible for overseeing OMF, but Adams declined comment on the overrun personally. Nevertheless, the timing of the news is likely to be embarrassing for Adams, who last week approved a deal to use up to $80 million in public money for a Major League Soccer franchise, and last month led Portland City Council in a vote to build a $4.2 billion, 12-lane commuter bridge across the Columbia River.

Was the mayor's office distracted from focusing on the project over the last three months?

"Absolutely not," says Adams' chief of staff, Tom Miller. "We support the work that our bureau has done and we're working diligently to ensure the SAP system goes live as soon as we can be sure it will meet our expectations."

Miller had no comment as to why the committee of outside experts met so near to the project deadline. "The mayor made the request of the bureau to establish a committee shortly after taking office," he says.