'No fault' settlement to sorry tale of the US city of Philadelphia's efforts to move its water billing system from 30-years old mainframes.

The US city of Philadelphia has restarted a troubled water billing system project after signing a contract for new software that will replace most of the Oracle applications it initially planned to use.

Citing figures released by the city solicitor, Philadelphia CIO Terry Phillis said this week that the city also has signed an amended contract with Oracle in which the company agreed to pay or forgive costs totalling $6.9 million (£3.5m) as part of the revived Project Ocean initiative.

In addition, Phillis said that a team of managers from three city agencies has been created to oversee the billing system project. Phillis will directly oversee the integration of the new billing software in an effort to better control costs. “My head’s going to be on the block anyway, so I’d rather have control of my own destiny than have it in the hands of a third-party,” Phillis said.

Work on Project Ocean was suspended in October 2005 after the city had spent $18m (£9.1m) – twice what it initially expected to – without getting a working system. Last September, officials said they had reached an agreement in principle with Oracle that would let the city install unidentified third-party utility billing software at no extra cost.

Phillis became acting CIO in September after predecessor Dianah Neff left to become a consultant, and he was given the job on a permanent basis in late November. This week, he said the city plans to use Basis2, an off-the-shelf billing and revenue management package developed by Prophecy International, an Australian Oracle business partner.

Most of the custom-built software that Oracle developed for the billing system “will be thrown out”, and Oracle will have “no part” in the revived project, Phillis said. He added, though, that Basis2 will run on top of an Oracle database and work with a set of Oracle's E-Business Suite back-office applications that are used for a variety of city functions, including its finance operations.

Work on the Basis2 implementation began 11 December 2006. Phillis said that the software is already running in test mode and that he expects a proof-of-concept bill for an average customer to be produced within four months or so. He added that the billing system should be up and running by December – which would meet a goal of having the system in place before Mayor John Street leaves office January 2008.

In signing its amended contract, Oracle admitted no wrongdoing but agreed to the $6.9m (£3.5m) in payments and givebacks, Phillis said. Among other things, the deal includes $1.5m (£763,000) to cover the cost of Prophecy's software, a payback of $1m (£508,000) for prior consulting services and a promise not to charge the city for another $1.6 million (£814,000) worth of work done by the company.

Altogether, the expected cost of Project Ocean has reached about $25m (£12.7m) with Oracle’s givebacks included. But Phillis said the city’s expenses have been capped at less than $19m (£9.7m).

Oracle officials wouldn’t discuss the amended agreement, beyond a statement from Stephen Holdridge, vice-president of the company's Oracle Consulting unit. “Oracle and the city have reached agreement on an amendment to the current contract that defines a revised go-forward plan to achieve the city’s objectives,” Holdridge said.

Project Ocean is designed to replace a 30-year-old, Cobol-based mainframe application that still relies on punch cards. The project was run by Philadelphia’s Finance Department when it was initially launched in 2003 and later was taken over by the Mayor’s Office of Information Services. Now it is being jointly overseen by the IT unit and the city's separate Water and Water Revenue departments, Phillis said.

“I know it’s second guessing but the city suffered somewhat by not maturing the organisation to care for a project like this,” he said. Under the new project structure, he added, “we’re getting along terrifically. We're singing ‘kumbaya’ – not well, but we’re singing it.”

Phillis said he is hiring 20 contractors to work on the Basis2 deployment, including a programme director. But he predicted that there will be no need to customise the software for the city.

Philadelphia will be the first Basis2 user in the US, but city officials inspected the software at a comparable water agency in the U.K. before committing to buy it. Phillis said that on the kinds of features the city wants for bill presentation enhancements and an expanded customer history, Basis2 scored higher than rival products from SAP AG and SPL WorldGroup, a company that Oracle acquired last fall.

Peter Barzen, general manager of Prophecy Americas, a subsidiary of Prophecy International, said an earlier version of the company’s software – known simply as Basis – is being used by Aquarion that provides water to communities in four states. The earlier product was built on the Ingres database, but Prophecy began working with Oracle’s software in the mid-1990s, Barzen said. He added that Basis2 is natively integrated with Oracle's E-Business Suite.