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Austin Energy faces cost overruns on IBM-based billing system

Thursday, August 22, 2013 by Michael Kanin

Austin Energy finds itself, in the words of Electric Utility Commission Chair “Bernie” Bernfeld, “over a barrel.”


At issue is the much-delayed $61 million redesign of the utility’s billing system, and a cost escalation for necessary work on the project by contractor IBM from roughly $140,000 to $700,000. At Monday’s meeting of the Electric Utility Commission, Bernfeld summed up the situation.


“In a sense, one could speculate that they underbid the job to begin with and now they are reflecting truer costs,” Bernfeld said.


With only five EUC commissioners, the contract amendment for the $700,000 new software construction failed to pass by a vote of 3-2. Commissioners Shudde Fath and Karen Hadden voted against it.


First approved in April 2009, the deal awarded IBM a contract to create new system software that would also bridge the utility’s meters and its billing system. At the time of the award, the agreement was for $58.5 million.


After multiple delays and 22 contract amendments, the agreement is now worth $61 million to IBM. The most recent of the amendments is for work that will allow meters and the billing system to communicate.


Austin Energy Vice President of Customer Care JJ Gutierrez told commissioners Monday that the IBM proposal now called for more than the $700,000 included in the amendment.


New Commissioner Varun Rai pressed Gutierrez on the potential of cost savings thorough in-house work. “We have stripped away all of the work that does not have to be performed by IBM and what remains is this $700,000,” Gutierrez replied.


Later, Gutierrez offered further explanation. “It’s proprietary code and it’s a system that they maintain,” she said.


Hadden asked Gutierrez how long it took for the proposal to escalate from $140,000 to $700,000. Gutierrez replied that the figure rose in the span of just 18 months.


Later Rai asked Gutierrez if she was comfortable with IBM’s reasoning behind the cost escalation. “We have accepted their explanation. Are we comfortable with it? No,” she offered. “But we have accepted their detailed backup and their explanation.”


Commissioners were not thrilled to vote for the contract. With Fath and Hadden voting against it, Commissioner Clay Butler absent and the seat left vacant by former Commissioner Steve Smaha still unfilled, the votes of Bernfeld, Commissioner Linda Shaw, and Rai were not enough to pass the item.


It is now set for Council approval Thursday.

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