L.A.'S HIGH-TECH GLITCH CITY STUMBLES IN INTRODUCING STREAMLINED SUPPLY SYSTEM.

Byline: Beth Barrett Staff Writer

Los Angeles' new $22 million state-of-the-art procurement, inventory and billing system has failed so badly that dozens of vendors haven't been paid, sales tax has been miscalculated and crucial supplies have run out, city officials said Wednesday.

The supply management system was activated in January to make City Hall more efficient by consolidating warehouse space and adopting other streamlining practices.

Instead, it has caused headaches throughout city government and officials are doing a lot of finger-pointing, especially at human error in operating the new system.

The City Controller's Office has decided to hire an outside auditor to independently gauge the extent of the problems with the system called PRIMA (Procurement Receiving Inventory Management and Accounts Payable).

``The magnitude of it we haven't got our arms around, and that worries us,'' said Chief Deputy Controller Timothy Lynch.

City officials said dozens of suppliers have not been paid so the city has lost out on substantial discounts for timely bill payment. The loss has yet to be calculated.

Some departments, particularly the Los Angeles Police Department, have struggled too to get the supplies and materials they need to operate on a day-to-day basis because the system has not always identified low inventories.

Wray Hollemon, Los Angeles Police Department's Fiscal Operations Division commanding officer, said the LAPD ran out of citation books and urine sample bottles as the result of problems associated with the system.

``At one time we thought we ran out of flares but then they found them,'' said Hollemon, saying the computerized inventory system showed there were none, when in reality they were stacked on a warehouse shelf.

Larger purchases like guns and cars haven't been affected, he added.

Department of General Services Assistant General Manager Robert Jensen, overseeing the project, said the system ``is in the infancy stage,'' but that it is fundamentally sound with some 8,000 checks and 30,000 purchase orders already processed through it.

Jensen said many of the problems have to do with departments' inexperience with the new system, anchored by an $8 million PeopleSoft computer system. He estimated up to 90 percent of the LAPD's problems are the department's own fault.

A spokesman for PeopleSoft, a Pleasanton-based company, could not be reached for comment Wednesday.

``The system had some problems originally, but almost all of those have been been resolved,'' Jensen said. ``But users are still struggling with the system.''

Jensen said the most persistent problem now - the delay in paying vendors - has to do with new, centralized procedures where invoices aren't processed unless they are complete, including purchase order numbers.

In the past, departments handled the invoices, and because they were more familiar with the orders, they could fill in any missing information, he said.

Jennifer Roth, a deputy to Mayor Richard Riordan who backed PRIMA, said the system is ``reasonably sound.''

Departments and vendors, she said, are adjusting to a system that requires more accountability from them.

``Previously, when there were fewer controls and not centralized, employees would enter into an agreement with a vendor, then a contract would be developed,'' Roth said.

But even city managers who believe the system will work over the long term question the bumpiness of the start-up.

Craig Bloomquist, director of the Public Works Bureau of Accounting, said he's concerned the current tardiness of vendor payment doesn't ``snowball.''

Despite the elaborate computer technology, Bloomquist said, venders aren't paid until a paper invoice to back up the electronic receipt is received.

``If the vendor doesn't send the paperwork in, nothing is paid,'' he said.

Jensen, the project head, said most vendors have understood the delays as a start-up condition, with only one putting the city on ``credit hold,'' making future sales contingent on payment.

Jensen said other glitches with the system are more mysterious, particularly the periodic miscalculation of sales tax paid on purchases, which tends to happen in bunches.

PeopleSoft technicians claim it is not a software problem, Jensen said.

``We have to find the event that triggers it,'' he added.

Lynch, the chief deputy controller, said identification of the sales tax error is important to make sure the city doesn't get into trouble with the state.

Councilwoman Laura Chick, elected the city's new controller last month, said system managers and departments have to move past blaming one another.