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Portland's Permitting Software Project Mired in Uncertainty

Frustrated city officials have cut ties with the lead contractor after it failed to complete half its promised work by the end of a three-year-old contract.

(TNS) -- Add this to Portland's growing list of bungled technology projects: permitting software that's cost $3.9 million but is nowhere near complete.

Frustrated city officials this month cut ties with the lead contractor, Sierra-Cedar Inc., after the Georgia-based company failed to complete half its promised work by the end of a three-year-old contract.

That decision creates more uncertainty for a software project already years behind schedule and now even more likely to blow its $11.8 million budget. Almost half of what was spent so far went to management fees and travel expenses — and not lasting work on the project, records show.

Officials concede they aren't sure how much the project might cost and say it won't be ready for at least 2½ more years. Officials had once hoped to complete it by May 2015.

The setbacks extend beyond the city's bottom line and are expected to hurt businesses who won't be able to cut costs by submitting records electronically. The delay also highlights challenges of making seismic shifts inside government bureaucracy, raising questions about how easily officials can cut red tape for affordable apartments amid a construction boom.

"I can't deny that technology projects and government are sort of like oil and water," said Commissioner Dan Saltzman, who oversees the Bureau of Development Services, which has been leading the project. "But then again, there are a lot of screw-ups in the private sector that you just never hear about."

Hear about this, the Portland City Council has. But repeated public warnings since September 2014 did little to steer the project on track.

The so-called Information Technology Advancement Project was supposed to bring the city's permitting bureau into the 21st century.

Officials expected the software would let developers and architects submit permits and paperwork electronically. City employees would approve documents online and access records from the field. Historic permit and property information would be digitized and available online.

But the project has been plagued with problems. It joins a notorious list of city technology projects, including the Water Bureau's software fiasco in 2000 that left the city with millions of dollars in uncollected bills and a citywide payroll system that tripled in cost to $47.4 million in 2010.

In November 2010, the City Council moved forward with its now-troubled permitting project just days after Portland's auditor revealed problems with the payroll system – prompting Commissioner Nick Fish to call it the "elephant in the room." But officials supported a plan by then-Commissioner Randy Leonard to work exclusively with the state of Oregon's vendor for a proven software system.

When Saltzman took over the permitting bureau in 2011 he changed course and decided to seek competitive bids. The project was projected to cost $8.2 million and finish by May 2015. Officials in December 2012 approved a contract with Sierra Systems, which later became Sierra-Cedar. An aide for Saltzman called the company "a highly qualified implementation vendor."

Work finally began under the contract in June 2013, this time with Commissioner Amanda Fritz overseeing the permitting bureau. Sierra began warning of price and schedule changes in January 2014, according to documents obtained under the state's public records law.

Problems became public in September 2014 when a city oversight committee – created by Saltzman because of the payroll debacle – weighed in. The committee accused Sierra of falling behind and applying "faulty assumptions" to the original plan and schedule. Fritz maintained it would be built "on time, on budget, and it will work."

Every three months, the oversight committee updated the City Council on mounting problems, with a color-coded matrix showing the lagging project engulfed in red. In July 2015, officials said the project wouldn't be ready until the end of 2018, and even that was considered risky.

Last fall, a Sierra-Cedar representative flew to Portland hoping to reassure the City Council. By then, Saltzman was back in charge of the permitting bureau and had ordered Sierra to show what it could deliver within 90 days.

But members of the city's oversight committee questioned if Sierra-Cedar had enough talent to complete the project after massive staffing turnover.

"You will likely hear how the vendor is going to turn things around," Ken Neubauer, one of the city's oversight members, warned the City Council in an October 2015 meeting. "It is my opinion that while the vendor possessed the capabilities at the time the project was awarded, they have since lost that capability – along with the entire team, 17 people."

That scorching assessment didn't discourage the city. Officials kept working with Sierra and considered extending the company's contract beyond June. But the city ultimately dropped that plan and decided to cut ties.

"It was just a recognition that, I think, they weren't going to be able to produce the progress and achievements we were expecting" at the price Portland wanted to pay, Saltzman said.

Behind the scenes, both sides blamed the other.

In a May letter, Sierra blasted the city for providing "no leadership" and refusing to approve "efficiency-enabling measures." Sierra also said the city lacked enough staffing to oversee the project, which was a "key factor in the slow progress of the project to date."

Portland countered that Sierra "does not have the skills or knowledge to complete" some work and "continues to avoid acknowledging or owning its self-caused delays." What's more, the city said the company hadn't provided adequate information for more than two years, preventing the city from making informed decisions or "fully discovering how much work is completed" and "how much remains."

Sierra accused Portland of inaccuracies and myriad generalizations unsupported by facts. Portland accused Sierra of numerous allegations that "cast a false light" on the city.

In the end, Saltzman said, both sides decided to walk away. Under terms of a settlement agreement, neither will sue.

"It's an amicable parting of ways," Saltzman said.

An attorney for Sierra-Cedar did not respond to a phone call or an email seeking comment.

In the end, Portland spent nearly as much paying Sierra-Cedar's $35,000 monthly management fee and travel expenses as it did on software deliverables. Records show Portland paid nearly $1.1 million for management fees and more than $653,000 on travel expenses.

The contract spelled out 56 specific tasks or projects that needed completion. Half weren't accomplished, records show. Of the $2.2 million Portland spent on projects outlined in the contract, the city didn't pay full price on a single item. Portland spent an additional $180,000 paying two subcontractors directly.

Money for the project comes from permitting fees charged by the bureau.

Of the big-ticket items envisioned for the software project, Saltzman could point to only one – a way to submit and review building plans electronically – that is near completion. But Paul Scarlett, director of the permitting bureau, said city officials won't use it widely at first and instead will test it with a tiny sample of projects.

"We don't want to take on everything to begin with," Scarlett said. "We'd rather see with a few projects that it's working."

If completed, the overall technology project is supposed to benefit government and businesses alike. Officials estimate that a functioning system would eliminate the need for nine positions at a cost of $1.3 million annually, although those jobs don't currently exist. The technology is also estimated to cut costs for businesses by a total of up to $1 million a year.

Saltzman and Scarlett maintain the project will be completed, with Saltzman suggesting project oversight should shift to the Bureau of Technology Services. They hope to hire a new company or companies and are targeting the end of 2018 to finish the project – the same delayed timeframe linked to Sierra.

"The optimism remains strong," Scarlett said. "This is a critical project that needs to be implemented"

Asked if the timeframe is realistic, Saltzman said: "At this point, I believe it is."

City documents from the spring belie that optimism.

"There are extreme costs and risks," officials wrote in March about a November 2018 completion, "that come with a date so far in the future."

©2016 The Oregonian (Portland, Ore.) Distributed by Tribune Content Agency, LLC.