Selection process for Auckland supercity SAP questioned

Implementation process changed over past year, sources within council say

New information obtained from council IT sources raises questions around how SAP was selected for the Auckland Council ERP project.

Sources within the council say the implementation approach has changed significantly over the past year, from a minimalist top-layer integration approach to an extensive project, involving high use of external consultants.

Documents obtained by Computerworld under the Local Government Official Information Act earlier this year indicated that the Auckland Transition Agency (ATA) was likely to apply a “veneer” of integration and keep most existing council systems in place for the launch of the supercity, with council CIOs recommending keeping change to a minimum.

However, Auckland Transition Agency spokesperson Wally Thomas disagrees. “The scope of the ERP project was always full implementation and has not changed since the project was formally signed off,” he says.

SAP was selected as the provider for Auckland Council’s ERP system without a formal RFP process late last year. An ATA working group, consisting of senior council staff and ATA stream leaders, identified SAP as the most appropriate solution and this was supported by the regional CIOs, according to an ATA ICT background paper. Computerworld understands that the decision to forego the tender process was based on that three councils – Waitakere City Council, Auckland Regional Council and Auckland City Council – were already using SAP systems and that those systems could be leveraged.

The three councils had made significant investments in their SAP systems over many years and using that investment would be the least costly and complex way to set up the Auckland Council ERP system, say the sources. According to the council documents obtained by Computerworld, a number of CIOs were concerned about the limited time frames for selecting an ERP system provider.

Given the time pressure, the choice of SAP made sense from a cost and complexity perspective, says one source. A limited tender process was then run to select the implementation partner to deliver the ERP solution. A consortium consisting of SAP, Deloitte, Hewlett Packard and Soltius won the tender. But it is what followed that has raised concern among senior IT people within the council.

Concerned staff say that instead of leveraging existing investment, as outlined earlier, it was decided to build a new SAP system from the ground up, involving extensive use of consultants, which has driven the cost up. They claim this approach does not support the earlier decision to select SAP without a formal tender process – because that decision was based on the intention of leveraging existing systems in order to keep costs and complexity to a minimum.

When asked if ATA still thinks it was the right decision to select SAP without a formal tender process, Thomas referred back to the decision made by the ATA working group.

Thomas confirms that a new instance of SAP has been created. “Where appropriate and where we have been able to ‘uplift’ configuration from existing systems we have,” he says. “Existing IP has been leveraged from the three current entities running SAP. Costs have not risen. To date all milestones in the programme have been met – the project remains on time and on budget.”

However, one person spoken to claims the cost of the SAP system has ballooned from $62 million to $70 million. In the last issue of Computerworld, it was pointed out what is considered by some to be a similar SAP system, was built for Auckland Transport Agency for around $2 million.

ATA declined to comment on how much of total cost is going to SAP, how much is going to consultants and what other costs the $60 million-plus sum involves.

When asked how many consultants work on the project, Thomas responded:

“[The consortia members] may well have consultants or contractors working directly for them — how many and the cost is a question you would need to put to them. The ATA has some independent contractors working on the project — the number alters depending on the phase and requirements of the project, but on average there would be around 10 at any one time.”

Modules that will be up and running on November 1, the first day of the supercity, are Finance(GL/AR/AP), Procurement, Project Accounting, Human Capital Management, Payroll, Asset Accounting, Employee/Manager Self Service, Identity Management and Solution Manager, says ATA.

Mike Foley, ATA’s leader of the business process and systems work stream, wrote to ATA executive chairman Mark Ford on November 13, 2009. In the memo, obtained by Computerworld, Foley wrote: “It will also be necessary to deliver and implement the core operational HR/Payroll/Finance/Procurement functions. This system would initially only support Tiers 1-3 of the organisation. This programme of work will take approximately 6-8 months to complete … Given the scale of change required to the core technology layers and the operational systems deemed required for ‘Day 1’, the time frames are limited to deliver the necessary outcomes. Any attempts to increase the current scope, even with more resource, significantly increase the risk of complete failure”.

“Given the current risk profile and the volume of work underway/being initiated it is recommended that no further activities be undertaken across the Business and Process work stream.”

“How did we go from this [the memo] to spending millions in a matter of a few months?” asks one council management team member.