County finance overhaul faces crisis System replacement over budget, behind schedule

Friday, April 14, 2000

By NEIL MODIE SEATTLE POST-INTELLIGENCER REPORTER

A $38 million project to replace King County's obsolete financial-systems programs is running as much as $10 million over budget and nearly a year behind schedule.

Due partly to a coincidental spate of retirements and resignations of top-level managers, the project is facing what a consultant calls "a significant crisis in leadership and program management."

The continuing cost escalation has County Council members looking at several expensive options -- even including the unlikely prospect of abandoning the project, on which $25 million already has been spent.

The project was launched shortly after Metro was merged into county government in 1994. It required combination of incompatible payroll, personnel, purchasing and accounting programs. In the case of the county, it was a 25-year-old system that had been designed to last 10 years.

The last part of the project was to have been completed next month. But the latest target date is March 2001 -- at the earliest.

County Finance Director Brad Duerr said yesterday it will be "no earlier than March." He said it depends on whether the county must hire an additional consultant to integrate the new systems with existing ones, as he considers likely.

The work already done has had major snafus. Issuing retroactive pay raises to 4,470 employees -- mostly Metro Transit drivers and mechanics -- the system overpaid 1,936 workers by an average of $167 and underpaid another 380 by an average of $151 last year.

That part of the system replaced payroll functions that weren't Y2K compliant and had to be in place before the new millennium.

Duerr said the payroll software was "set up in the system incorrectly in our eagerness to get checks out to individuals." He attributed it to "just the stress of a new system, an unfamiliarity."

Of the overall system problems, the finance director said, "This is typical of a very large and complex installation for a government that has not experienced a system change for 25 years." He cited a study indicating that the average cost overrun on information technology projects is 187 percent, compared to King County's 25 percent overrun.

The county's solution is unclear.

Duerr, who is retiring May 31, said he will probably recommend to County Executive Ron Sims that the county uncouple the problem-plagued half of the project, a payroll and personnel software program, from the less-troubled half, a "core financial" program for accounting functions.

That way, the core financial program can go online about Oct. 1 and the payroll program possibly next March, Duerr said.

But Sims disagreed yesterday, saying that division "would not solve any problems. It would compound our cost issues. We would have a payroll system that could not talk to the core financials."

Members of the County Council's budget committee Wednesday strongly criticized handling of the project by the county and KPMG Peat Marwick, a consulting firm hired to manage the program.

The committee wants Sims' staff to respond by May 10, giving firm estimates of final costs and completion dates and recommendations for finishing the work.

Sims said he will announce soon the appointment of two "very talented" county managers to take over the project.

Sims promised, "We're going to be able to move rapidly to have the systems fully integrated."

Tim Easton, with Pacific Consulting Group, a firm hired by the County Council to monitor the project, said the problems aren't with the program's software but are "a program or project management issue."

In dealing with the innumerable policy issues involved in implementing complex software, Easton said, "If you don't manage those in an aggressive way, they start managing you."

He said the problem appears to lie jointly with project leaders for the county and those with KPMG, but that part of the problems stemmed from existing county financial-management policies.

Sims disagreed with Easton's assertion that the project has a management crisis. The executive said although he's displeased with the cost overrun, "the project is still far under cost, relative to other projects of similar size and complexity" elsewhere.

Exacerbating the building costs have been the departures of several key program leaders -- not only Duerr but Joe Castleberry, KPMG's project manager, who cited medical reasons when he resigned last week, and Rudy Caluza, the county's financial management division manager, who left last week to take a new job.

Cindy Lee was the county's payroll project manager but was reassigned in February.

Another problem is looming: litigation by county workers has forced the county to limit the length of time it can employ a contract worker.

That might mean KPMG personnel might have to be replaced by others less familiar with the project.

Frustrated County Council members are pondering how much further they should let the project grow beyond its budget, whether they can curtail it without depriving the county of essential information services, and what other county programs to cut to cover the rising cost.

"Basically, we're left with the decision of whether to amputate our foot or our hand," Councilman Chris Vance, R-Auburn, complained at Wednesday's budget committee hearing.

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-- Martin Thompson (mthom1927@aol.com), April 14, 2000