Anchorage city officials likely will not file lawsuits related to the near decade-long implementation of new software programs, despite large cost and time overruns.
The transition from PeopleSoft software to SAP programs, used to help run nearly every function of city government, was supposed to cost about $10 million and take 18 months to get up and running. Instead, it ran up a bill of around $81 million over several years, leaving the city with a large debt.
In the past year or so, the city settled with workers’ unions over payment errors caused by the software, giving out paid leave worth an additional $16 million.
Now, as city officials are weigh how to move forward, they say legal action could actually increase the amount of taxpayer dollars spent on SAP.
“We do not think it is productive to spend more taxpayer dollars on a lawsuit than we would stand to recover,” City Attorney Becky Windt Pearson said. “That said, we will continue to assess the facts and the law of this situation as work on the project continues.”
In 2011, under the leadership of former Mayor Dan Sullivan, the city agreed to pay $1.5 million for the software, and gave third-party vendor Black & Veatch $8.1 million to implement the program. Black & Veatch said it would take 18 months.
“It’s not as simple as ‘the (city) bought a program from SAP and it didn’t work as promised,’” Windt Pearson said.
Almost immediately, it became clear the time frame would not be met and there would be cost overruns, Windt Pearson said.
Starting in 2012, the city worked with Black & Veatch on ways to avoid litigation. In the end, the company provided some free and discounted services and the city signed away its right to sue.
Black & Veatch was unable to implement the software program, so the city started working directly with SAP Public Services near the end of the Sullivan administration. When Mayor Ethan Berkowitz took office in 2015, he continued working with SAP.
“This phase of the project has also not gone smoothly,” Windt Pearson said.
Transitioning to the software was troublesome throughout city departments, as workers had to learn the nuances of a new system. The implementation of the payroll system was by far the most significant issue, which resulted in many employees getting incorrect pay.
Those issues have largely been resolved. Now, as the city decides whether to move forward or to try to claw back some of that money, it is trying to learn from the others’ experience.
Like Anchorage, other cities and companies have experienced tempestuous rollouts of SAP software programs. Some have sued, with less-than-desirable outcomes.
Windt Pearson pointed to Marin County, California, which sued SAP and a third party hired to integrate the software. The county was initially seeking $30 million, and ended up settling for $3.9 million.