City closes in on fix for billing troubles
Four Þrms put in bids to replace the ßawed water bureau system
Replacing the Portland Bureau of Water Works' problem-plagued computer billing system is turning out to be far more complicated than simply buying new software.
Bureau ofÞcials hope the City Council will pick a company to replace the ailing system within the next two months. Four companies are competing for the project, and city ofÞcials hope the council will ratify the top two by July.
'I'm feeling pretty good, but there's still lots of work to be done,' said city Commissioner Dan Saltzman, who took over the bureau last June and began pushing to replace the system a few months later.
But before the project is completed, the council may have to buy all new computer hardware, too. Because the billing system has the bureau's computers working at full capacity, more hardware will have to be purchased for the new system.
Although ofÞcials have not ruled out contracting with a local utility such as Portland General Electric to operate the new system, only one of the four Þnalists has proposed such a solution.
The council also might have to streamline water and sewer rate structures to comply with the requirements of the new system. The council approved the current rates to achieve a variety of goals, such as encouraging conservation and covering the added cost of processing polluted wastewater at sewage treatment plants.
'Yes, we have software problems, but it's not as simple as just replacing the software,' said Richard Hoßand, an analyst for the city OfÞce of Finance and Administration. 'We have to make sure we can run the new software, and that might mean we have to change some of our rate structures.'
Despite the complications, the council has taken steps to avoid a repeat of the billing system Þasco, which eventually could cost the city $20 million or more in customer rebates and uncollectable unpaid bills.
Among other measures, the selection is being overseen by both Saltzman and Mayor Vera Katz. The mayor became involved in the controversy last year when she assigned the Þnance ofÞce to evaluate the system. The previous system was chosen by Commissioner Erik Sten, who was in charge of the water bureau until last June.
Katz and Saltzman soon will ask the council to approve two contracts with outside experts to help choose and install the replacement system.
One contract is with the Management Services Utility Group of Detroit, which has overseen the installation of municipal billing systems across the country. The other is with TMG, an international consulting Þrm based in Colorado that helped the council decide to replace the faulty system.
As things stand, the system probably will be provided by one of four companies selected from 12 that responded to a city request for proposals to serve the bureau's 180,000 accounts.
Bids on the table
The four companies and their bids are:
• SAP, a large German company with worldwide ofÞces, teamed with IBM on implementation services, $7.8 million.
• PeopleSoft Inc., a California-based company specializing in public agencies with under 300,000 accounts, $5.2 million.
• SCT Banner, a subsidiary of Indus International, based in Pennsylvania, $4.5 million.
• Cayenta Inc., a small but aggressive Vancouver, B.C., company focusing on public agencies with 10,000 to 250,000 accounts, $2.9 million.
'We have four credible contenders with proven track records, but there's still lots of work to be done checking them out,' said Saltzman, who is in charge of both agencies that use the billing system the water bureau and the Bureau of Environmental Services, which operates the sewers.
Three of the four proposals would require the city to buy new computer hardware to run the replacement billing system. The fourth proposal, SCT Banner's, offers the city the option of buying new hardware or contracting with a private utility company to run the software on its computers.
Accordingto the city's Hoßand, PGE uses SCT Banner software in its customer billing system. Hoßand said PGE ofÞcials have expressed a willingness to discuss operating the water bureau billing system for a yet-to-be negotiated fee if that option looks promising.
The city is not obligated to pick the low bidder. Instead, the selection criteria are weighted in favor of picking the company with the most functional system, Hoßand said.
All four companies are expected to send representatives to Portland in the next few weeks to demonstrate their proposed systems.
'We want to how they work and how they handle the kind of accounts they would be processing,' Hoßand said.
Hoßand said city ofÞcials hope to choose Þrst- and second-place companies by June. The City Council will be asked to approve a contract with the Þrst-place company by July to allow more thorough testing of its proposed system, including visits to other cities where it's being used.
'If it is decided that the Þrst choice is not adequate, we will move on to the second choice,' Hoßand said.
The tentative goal is to select the Þnal company by September. Installing and testing the replacement system is expected to take an additional 12 to 18 months, Hoßand said.
Whichever company is selected, Hoßand predicted, the Þnal cost will be different from the current bid. One variable is the cost of transferring all of the current data from the existing to the new system. The companies have not yet been given all of the details on the current data, in part because it is constantly being updated.
Another variant is the hardware cost. All bidders were asked how much it would cost to buy new computers and other hardware from them. The city would actually buy the hardware from a current supplier, however.
'Buying from someone we already do business with should reduce the actual cost,' Hoßand said.
A mix of rates
At the same time, the council may have to simplify the existing water and sewer rates to Þt the requirements of the software.
The city currently charges a variety of rates for water and for sewage disposal. To encourage conservation, water rates increase along with consumption. To help pay sewage treatment costs, disposal fees increase as wastewater becomes more polluted.
The result is a matrix of rates that can vary from bill to bill, increasing the requirements of the billing system.
'There are sound public policy rationales behind all of the rates, but they build on each other and become unwieldy,' Saltzman said.
According to Hoßand, a committee of water and sewer bureau employees is studying the rate system to determine if it can be simpliÞed. The council would have to approve any changes before the Þnal conÞgurations for the new system are set.
'Some bills may go up, some may go down. It's too early to know for sure,' Hoßand said.
The water bureau purchased the current billing system from Severn Trent Systems of Houston in 1997 for $6.5 million. The system never worked properly, failing to bill tens of thousands of customers for months at a time.
The bureau has spent millions trying to Þx the system and is currently spending between $3.6 million and $4.2 million for 60 additional employees to operate it. Although the number of malfunctioning accounts has now dropped to less than 1 percent of the bureau's 180,000 accounts, the losses could ultimately total $19 million or more.
The council decided to replace the system in December. The next month, the council reached a settlement with Severn Trent about legal and Þnancial responsibilities for the problems. The settlement requires Severn to pay the bureau $7 million.
In addition, the bureau is required to pay the company $385,000 a year to maintain the system for the next three years.