With millions spent so far, Berkowitz to press 'pause' on troubled software project

Anchorage Mayor Ethan Berkowitz said Thursday his administration is going to halt spending on a city data systems upgrade that has been marked by missed deadlines and spiraling costs.

As of late July, the city had spent about $35 million on the complex new system, made by the international technology company SAP and designed to automate payroll and other government functions. Another $11 million has been budgeted, and external consultants are costing the city $250,000 a week, said City Manager Mike Abbott.

At a Thursday meeting with Anchorage Assembly members, Berkowitz said a full accounting of the project is unclear, as well as the future costs of maintenance.

"At this juncture, the responsible course of action for us to follow is to take a pause, and assess," Berkowitz told the Assembly members.

Berkowitz said his administration will be evaluating a wide range of options, and isn't ruling out scrapping the project. He also announced the creation of an external review board to evaluate options and offer advice.

Because of contract obligations, it will take the city about two weeks and cost between $300,000 and $500,000 to halt the project and lay off professional contractors, according to Abbott. No city employees will be laid off, but about 40 contractors have been working on the project.

The vast majority of the contractors have been stationed in a leased space in the Sunshine Plaza building in downtown Anchorage, Abbott said. Many of the contractors came from outside Alaska, and the city has been paying for their apartments, he said.


The administration's decision drew support from Assembly members Thursday. Amy Demboski, who ran against Berkowitz and has been a critic of the project, said she'd hoped for a more definitive path forward but said she recognized mounting expenses.

"I think it's a very wise choice, to step back and make sure that you're completely, 100 percent convinced this is the right path," Demboski said during the meeting.

Jennifer Johnston of South Anchorage said she also agreed with stopping the project. She said the Berkowitz administration should look at bringing in officials from San Diego, a city that successfully installed the SAP software system, for guidance.

This is the third such "pause" since the administration of Mayor Dan Sullivan launched the project in September 2011 with a $9.6 million budget. It was supposed to be finished the following July. The current system by Peoplesoft has been characterized as outdated.

In fall 2013, the Sullivan administration cut ties with one contractor, Black and Veatch, after missed deadlines. The second contractor, Peloton, still has staff involved but is no longer the project lead, officials said.

Last fall, the city's new chief fiscal officer, Kate Giard, halted the project for two months in order to bring in experts and analyze the botched rollout.

An independent SAP group dispatched consultants in January to conduct a "quality assurance" audit on the project's technical design. The city paid $750,000 for the work.

The SAP analysis will be part of the project record moving forward, Abbott said.

Separately, the Assembly hired an external consultant to look at project management with a budget of $200,000. That consultant, Zig Berzins, told Assembly members in February that the project could be salvaged, but only with significant changes in management and project flow.

Total cost estimates for the project, if left on its current path, have ranged between about $60 million and $80 million. On Thursday, Abbott told Assembly members that there were too many unanswered questions and big decisions to stay the course.

"(There are) many implications of those choices that we do not believe the muni is prepared to make at this point," Abbott said.

Berkowitz has charged a new deputy chief fiscal officer, Alden Thern, with overseeing the SAP project. He said Thursday he'd also recruited an "external review team" to evaluate and give advice on the project.

Its members include: Pat Shier, chief information officer of the University of Alaska Anchorage; Bill Rosetti, chief information officer of Alyeska Pipeline Service Co.; Kathleen Plunkett of the Anchorage School Board; Sunil Sethi, president of Computing Alternatives; Michael Carr, vice president of finance at ConocoPhillips; Paul Wiltse, co-owner of The Venture Group North; Jeff Yauney, president and chief executive of AlasConnect Inc.

No timeline was released Thursday for when and how the Berkowitz administration will decide how to proceed.

Devin Kelly

Devin Kelly was an ADN staff reporter.