Dropping the Ball

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.