Alaska News

City plans $7.5 million in additional spending on software project

The Sullivan administration revealed plans Friday to spend an additional $7.5 million and take an extra nine months to finish a software project that was already $5 million above its original estimate and a year behind schedule.

At an Assembly work session at City Hall, officials said they want to break ties with the consultant that has been installing the software, and hire a new one called The Peloton Group -- which has a history of salvaging troubled projects.

"We have very good references from people who were in these very same difficult situations who have brought in this group and loved how things went," said Lance Ahern, the city's chief information officer. "We think that the team we're bringing on has a proven track record of executing their plan."

Assembly members will consider the proposal at their next meeting, on Oct. 22.

The city started work on the project in September 2011, with an initial price tag of $9.6 million and a launch planned for the following July, Ahern said in an interview.

The software, known as SAP after the German company that makes it, will handle the city's finance and human resource systems -- replacing an outdated application called PeopleSoft.

The city and Black and Veatch, its consultant, missed their first deadline, then a second one on January 1 of this year. Since then, Black and Veatch's employees have been working for free, Ahern said, though the project budget still rose to $15 million before the new request.


While the city could have pushed Black and Veatch to finish the installation, it opted to cut ties and bring in a new consultant, with the goal of launching the SAP software by July 1, 2014, said Chief Fiscal Officer Lucinda Mahoney.

"We wanted to avoid litigation and stay focused on a successful project," Mahoney said in an interview.

The city is wrapping up settlement negotiations with Black and Veatch, under which the company will get about $1 million out of $2.7 million in outstanding payments -- though not until the end of next year, or until the project is finished.

A spokesman for Black and Veatch said that no one from the company was immediately available for comment, though he provided a written statement.

"This has been a very complex project that required additional enhancements which have affected the scope, cost and project schedule," said the spokesman, Patrick MacElroy.

The SAP project was proposed in 2010, which Mahoney said was a low point in the market. Black and Veatch, she added, "bid way too low, and they couldn't deliver."

Ahern, the chief information officer, acknowledged that the project's initial schedule was probably too aggressive.

"The law and the procurement process forces you down a path," he said. "Anybody who's had to deal with the complexity of running a large, multi-million dollar project that involves many organizations with many competing goals -- you know, it doesn't get done in nine months for $10 million. It doesn't."

Peloton, the same company that the city is now planning to hire, had reviewed the software project in late August.

It identified several problems with the way that the city and Black and Veatch had approached the installation -- namely that they were rushing through testing to hit the Oct. 1 deadline, and that the project was understaffed.

The city now plans to revisit the testing with Peloton, Ahern said, and to dedicate more staff time.

"We recognize, going forward, that that's absolutely critical -- that Lucinda's got to get that team on board, and working on the project," he said, referring to Mahoney.

At the work session, Assembly members asked a Peloton representative if the firm had bid on the original project -- it hadn't -- and questioned whether the new consultants could do any better than the old ones.

"We want to make sure we don't repeat the same mistake," said Assemblyman Paul Honeman. "I've been there, where I've picked a bad contractor and I had to pay for it."

Peloton's representative, Wade Hunter, said that his staff would change the way that city workers spent their time on the project.

He described, as an example, how one employee working full-time on a project could get much more done than four employees working sporadically. And he said that Peloton would restructure certain elements of the project to improve efficiency, though he didn't provide specifics.

Previously, "the team could have been doing triple the amount of effort, and they still wouldn't have completed the tasks," Hunter said.


While the city plans to spend an additional $7.5 million completing the installation, Mahoney said that some fiscal house-cleaning tied to the project had turned up more than $1.3 million to help cover those costs.

When that's combined with the $1.7 million that's being withheld from Black and Veatch, the city will only have to come up with about $4 million in new money, she said -- though the total price tag will still end up far higher the $10 million that was originally projected.

"I'm disappointed, no doubt, that we couldn't deliver as originally contracted," Mahoney said in an interview.

But she also referred to the city's presentation at the work session, which pointed out that in today's dollars, the cost to install PeopleSoft -- the 15-year-old system that's being replaced -- was $28 million.

Reach Nathaniel Herz at or 257-4311.


Nathaniel Herz

Nathaniel Herz is an Anchorage-based journalist. He’s been a reporter in Alaska for nearly a decade, with stints at the Anchorage Daily News and Alaska Public Media. Read his newsletter, Northern Journal, at