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Burnaby- the blunders and hype of new municipal computer system
A letter which appeared in a free-distribution neighborhood newspaper, THE Burnaby NOW, is about to be auto-deleted from the web. The piece is the best written letter I have found in either Burnaby paper in 2007, and is certainly deserving of wider readership. It examines the subject of another costly infrastructure project, of the type routinely initiated by our tax and spend municipalities. I hasten to add that I do not know the letter's author, but I admire the care he took in making his point...
Computer system a troubling issue
G. Bruce Friesen, The Burnaby Now
Published: Saturday, November 03, 2007
I write in response to Brooke Larsen's story on Burnaby's troubled Enterprise Resource Planning (ERP) computer project (“Biz bill mounts for city,” Burnaby NOW, Oct. 24)
Kudos to Brooke for uncovering what seems to be an escalating failure of planning, budgeting and project oversight at city hall. Your readers will benefit by Brooke's continuing coverage of this story.
Mayor Derek Corrigan and his Burnaby Citizens' Association colleagues have long touted their fiscal competence to Burnaby voters. It will be interesting to watch them try to square claims of competence with emerging evidence of fiscal incompetence in
Brooke quotes $19.8 million as the current estimated cost for the full ERP system. This apparently does not include the $5.89 million spent upfront for software and licensing - making the total cost $25.7 million. And this may itself be an underestimate, as Burnaby's 2007 annual financial plan (pg. 125) contains the following statement on ERP: "Anticipated completion date is 2009 at a total estimated project cost of $27,915,070." $27.9 million would be $2.2 million more than $25.7 million.
Two short years ago, Burnaby's 2005 provisional financial plan (pg. 105) noted of ERP: "Anticipated completion date is 2007 at a total estimated project cost of $9,955,300." (That included $5.635 million for software.)
One year ago the city's 2006 provisional financial plan (pg. 99) noted of ERP: "Anticipated completion date is 2007 at total estimated project cost of $15,005,795."
How does a capital project escalate from $10 million to $15 million to $28 million over just three years without provoking rethinking of its ultimate scope?
The answer is simple: The officials in charge do not understand the potential costs to be incurred; they just pay the bills after the fact and raise the budget ceiling in the next fiscal year. This is not sound planning.
Burnaby taxpayers ignore this demonstration of incompetent BCA planning at their peril.
No city has unlimited funds. Giving ERP a blank cheque will force city hall to: (1) raise property taxes at rates faster than 2.95 per cent per annum; (2) dip into long-held reserves; or (3) stall non-ERP projects.
The funds already spent on ERP through 2006 are beyond recovery. But it is not too late to address failed budgeting.
Coun. Dan Johnston, among others, needs to own up to his lack of understanding of ERP systems and hire competent outside help to properly estimate the incremental costs/benefits of phases 4 and 5 so that one can be weighed against the other to make sound "go/no-go" decisions.
Assuming that benefit does outweigh cost, the finance committee then has to ask itself three basic questions.
One, should taxpayers be asked to wait on other projects while ERP is completed so that council does not have to raise taxes or dig deeply into reserves to pay for it?
Two, should taxpayers be assessed larger annual tax increases so that ERP and other large projects (potentially including lake dredging) can proceed simultaneously without depleting the reserves?
Three, is the ERP system truly a rainy-day project for which Burnaby should draw down long-term reserves while avoiding accelerating the annual rate of tax increase or deferring other public works (potentially including lake dredging)?
It would be nice to read that Johnston is thinking about these questions rather than thinking inane thoughts about "getting $19.8 million worth of value" from ERP.
The fact that he so easily confuses spending with value is further proof of his lack of qualification to be finance committee chair.
Cost and value are two very different concepts. I close by offering this illustration of my point.
Burnaby will have spent tens of millions on ERP by 2009. But Burnaby will only realize value from this spending as ERP reduces the costs of running city hall or gives citizens faster access to higher quality city services. Until then, ERP will only have been spending without value.
Maybe Johnston can explain this rather basic point of finance to Corrigan when they are seated next to each other on their next junket to Japan or China or Mesa, Arizona.
And then that trip will be sure to show some value for the spending.
G. Bruce Friesen is a Burnaby resident.
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