Anchorage's troubled SAP project to continue under Berkowitz

Anchorage Mayor Ethan Berkowitz said Friday he will restart a troubled and expensive city data systems upgrade project after a two-month suspension and take responsibility for seeing it to completion.

In one of his most significant policy decisions since taking office, Berkowitz said completing the project -- which has cost tens of millions of dollars so far, with no clear end yet in sight -- is in the city's best interest. The project would install software made by the international technology company SAP to replace a 16-year-old system that automates payroll and other government functions.

Berkowitz's decision coincided with the release Friday of an external advisory committee report that concluded the SAP project is salvageable. The report, discussed at a work session with the Anchorage Assembly, made a series of recommendations to get the project on track.

The recommendations include making SAP the lead on developing and installing the system (instead of city workers), a tactic that helped save expensive, botched rollouts in Portland, Oregon, and San Diego, California, the report says. The committee's report also made clear that the project's success or failure falls on the shoulders of the mayor, something Berkowitz acknowledged Friday.

"We've got to finish this," Berkowitz, who recently surpassed 100 days in office, said in an interview after the meeting. "It's part of the responsibility I have as mayor to make sure that a project in the (city's) best interest comes to completion."

The SAP project began in September 2011 under the administration of Mayor Dan Sullivan to replace the city's outdated PeopleSoft system. The project is now in its fourth year and the city has spent $36.2 million to date, more than three times the original budget.

The costs will only increase, officials said Friday. The current budget is $49.2 million, but the advisory committee's recommendations call for a "substantially increased budget" to get the system to a launching point. The report noted the price tags in Portland (about $60 million) and San Diego (about $50 million) as a comparison.


Deputy chief fiscal officer Alden Thern, in presenting the advisory group report to the Assembly, said the city plans to negotiate a fixed-price contract with SAP for the completion of the system.

Assembly member Amy Demboski, a critic of the project, pointedly asked during the meeting for at least a "ballpark" figure of how much more the project would cost. Thern said he didn't yet want to float a number, adding that estimates could jeopardize the city's bargaining power on a contract with SAP.

But the city can't afford to scrap or substantially overhaul the project now, according to the advisory committee's report. Canceling the project or restarting from scratch would require up to $36 million in write-downs and immediate loan repayments, a major cost burden, Thern said.

He said there would also be "morale concerns" for staffers who have worked on the project for the last several years.

While a cost estimate did not emerge Friday, a rough timeline did. Thern told Assembly members that the project won't be completed until at least January 2017.

In its report, the mayor's advisory committee reaffirmed the findings of earlier audits. In January, an independent section within SAP dispatched consultants to conduct a "quality assurance" audit on the project's technical design. The city paid $750,000 for the work.

The Assembly also retained a separate consultant to look at project management at a cost of $89,000 to date, according to Assembly member Elvi Gray-Jackson.

Reports from the separate reviews, released in February, detailed major issues with the scope of the project, an unrealistic budget and staffing issues. But the overarching finding was that a crisis in leadership, organization and project management, rather than technological failures, was at the heart of the project's failure to launch.

Thern, reiterating that message, said the mayor's external committee had confidence that SAP was the right product.

"It's basically not the software's problem that we're not up and running at this time," Thern said. He added that at this point, the blueprint, or the design for the new system, is only half-completed and will be an immediate priority for the city.

Assembly member Bill Evans said that from the first time he was briefed on the project's issues, no specific person would stand in front of him and take the blame.

"Somebody has to own it," Evans said. "I think the mayor is going to own it, and I think that's the right answer."

Gray-Jackson, who chairs the Assembly's SAP review committee, applauded the administration's efforts. She said that Berkowitz had inherited a "beast."

"He has no choice, because he is the mayor now, to figure it out, and he has," Gray-Jackson said.

Thern said the project's executive steering committee will start Monday to review areas where key decisions need to be made to move forward.

Devin Kelly

Devin Kelly was an ADN staff reporter.