How the SAP project went from $10 Million to $81.5 Million in 6 years
It’s been called an expensive, monster of a project and it’s about to eat up another $5.8 million. That’s the amount Anchorage Assembly members will be asked to approve Tuesday night, to wrap up the controversial SAP software project that’s years overdue, and millions of taxpayer dollars over budget.
When former Mayor Dan Sullivan proposed the project to Assembly members in 2011, it came with a price tag of just under $10 million and was supposed to be ready to go within 18 months. But here we are today, six years in, with an estimated total cost that’s eight times higher, at $81.5 million.
SAP is an enterprise resource planning software system designed to automate several government programs, like payroll, and is expected to save the Muni millions.
Former Anchorage Assembly member Elvi Gray-Jackson was serving at the time the project was presented and wondered at the time if there were better options available.
“I’m not saying SAP is bad, by no means, but there are issues, expensive issues that are costing our taxpayers through the roof, and it’s unfortunate,” she said.
The projected 18-month launch date came and went after the assembly approved the project, and it wasn’t anywhere close to being done. Years later, audits found poor planning and project management were to blame.
When Mayor Ethan Berkowitz took office in 2015, he halted the project to study it.
“He inherited a monster… He made a commitment to see it through, which was the right thing to do as the new mayor, but Mayor Berkowitz, I feel bad, you know?” Because he inherited this,” said Gray-Jackson. “I think things should have been done differently from the beginning.”
In a statement, municipal manager Mike Abbott wrote:
“By mid-2015, under the Sullivan administration, the Municipality had committed almost $50 million into a projected originally budgeted for $9 million. Both the Assembly and an external review commission agreed the most prudent path forward was bringing the project to completion. We are now near the finish line.”
“It was too late to back out because there was too much money invested,” Gray-Jackson echoed.
An additional $25 million was added to the project under the Berkowitz administration, even before the latest request for another almost $6 million.
Before the Muni started down the long, expensive road, SAP had already failed other companies. Reports claim in 1999, the failed implementation nearly tanked Hershey’s, a fortune 500 company, and HP experienced a massive disaster in 2004 to the tune of $160 million, more than five times their projected project cost.
Other published reports indicate an SAP project in Portland ultimately cost twice as much as the initial $31 million estimate and the cost for San Diego was $50 Million dollars. Both projects cost less than Anchorage, even though both cities are considerably larger.
Gray-Jackson says when she and current Assembly Chair Dick Traini realized the project was in trouble, they reached out to the City of San Diego, and the CFO met with them via teleconference.
“The prior administration did not do their research because if they had, I think they would have thought a little bit differently,” said Gray-Jackson.
The new date the project is expected to be operational is October 2.
KTVA left a voicemail for former Mayor Dan Sullivan, which has not yet been returned.