Anchorage computer system’s flaws cost millions



The Anchorage municipality’s business software system, SAP, has by now cost taxpayers in Alaska’s largest city more than $90 million — most of it under the watch of Mayor Ethan Berkowitz. He promised to fix it if he became mayor, but the problems are compounding, according to a report that is under wraps at City Hall.

SAP has been problem-ridden for years, but now word is leaking about yet another problem.

The Cliff Notes explanation: The SAP computer system doesn’t understand all the different union contracts and how they pertain to worker overtime.

Over the years, the various union contracts have become so complex that it is all but impossible to properly compute pay. Even the old software, PeopleSoft, had trouble with it.

The public employee unions have no incentive to simplify the negotiated rules, and the programming in the new SAP software didn’t come with those complicated contracts pre-loaded.

Since SAP is managed by out-of-state contractors, they also have no incentive to fix it. They’re making bank.

Normally, an employee would get paid a certain amount based on straight time, and another rate based on overtime. But the unions have their own “if-then” logic rules based on seniority and on what days the overtime was accrued, as well as the time of day it is accrued.

Built into the union contracts are steep penalties against the employer for any payroll miscalculations. The union contracts specify that if payroll is miscalculated, huge awards go to the affected workers. These are not small bonuses, but extremely generous ones.

It appears that a major swath of the municipal employee sector has had their pay and benefits miscalculated by the SAP system, and they are due thousands of dollars per employee in penalties, with some employees looking at as much as $40,000 or so in awards — not for work performed, but simply because a minor miscalculation by the SAP system led to penalties piling up day after day.

The fire union contract charges $50 a day for every day an error has not been corrected. AMEA employees are awarded a $60 daily penalty, and there are over 500 of those employees. Several of the municipal employee unions have filed grievances over the more than 1,000 adjustment requests.

Note: We’re hoping some enterprising news organization will have the staff resources to get their hands on the report, which is a matter of concern to property taxpayers. Must Read Alaska will get around to submitting a public records request eventually.


  1. Those $50 day penalties are there for a reason. Employers agreed to pay their workers a set amount and when they don’t there should be an incentive to do so in a timely manner. That said,
    Most of the effected employees understand the system is broken and should come to a fair agreement.

    There are also employees that are being continually overpaid due to SAP. I know several that have received thousands of extra dollars that will at some point have to pay it back.

  2. A payroll Dept. for each union. Old school book keepers. Just cut losses and go back to what worked.

  3. My son’s last year federal taxes were incorrect due to SAP. So will the Muni fix federal issues too? Who will pay for those costs?

  4. That is completely nuts! The city, which used to be my city, should dump the unions. Until that happens, deduct the union contract bonuses from SAP payments and sue SAP for failure to deliver a proper working system.

  5. There’s no Service Level Agreement with SAP? The penalties should be paid by them, SAP, for not managing the system properly.

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