San Francisco payment system issues causes 4,000 contractor invoices to go unpaid

The city of San Francisco has failed to pay thousands of contractor invoices and left some contractors waiting in excess of seven months for payment.

While the city says a remedy is in the works, the gap in pay has left some struggling to pay their bills. 

The Controller’s Office confirmed on Monday that the problem is attributed to issues surrounding the city’s new payment system. Right now, 200,000 invoices have been paid totaling $5.8 billion. But at least 4,000 other invoices have not been paid out, totaling several million dollars.

2 Investigates obtained a letter from United Contractors, an organization that represents union contractors, which lays out a pattern of payment delays, software issues and a lack of action.

“We implore the city controller and other responsible parties to resolve this matter with urgency of the highest priority,” United Contractors Executive Vice President Emily Cohen wrote in the Jan. 23 letter, which was sent to a variety of city agencies and politicians.

The new payment system took two years of planning and came online in June 2017, to replace an old, outdated payment system first installed in 1980. While some glitches and issues were expected, some of the platform problems have persisted.

University of California Berkeley Professor Harley Shaiken, who specializes in labor issues, was upset that, according to the letter, contractors had been sued or some had to take out second mortgages on their homes just because the city isn’t paying up on time. The letter claims the greatest impact is on small contractors who are now considering closing their doors because of late payments.

“For them not to get their money is just not acceptable,” Shaiken said. “Whether it’s technical glitches or bureaucratic ineptitude hardly matters to those who aren’t getting paid. It’s an issue that is urgent and needs to be treated that way.”

2 Investigates questioned San Francisco Controller Ben Rosenfield, who explained that software glitches and bugs, along with city staff and vendors who don't know how everything works, contributed to confusion and late checks.

The Controller’s Office said it is running checks daily instead of weekly and in some cases twice a day just to get caught up. 

“We have made a lot of payments using this system so the fundamentals are working but we’re not yet where we need to be and want to be and we’re sorry for any hardship we’ve provided some contractors,” Rosenfield said. “We have the staff working every day to make sure they’re paid the money they’re due.”

United Contractors said it was originally told by the city that the software and technical issues would be fixed in a couple of weeks but it has been going on for more than six months. As a result, the association is demanding interest paid on these outstanding payments.

There is a law in California that states local agencies must pay undisputed invoices within 30 days, otherwise those agencies shall also pay interest to the contractor. The Controller said no decision has been made but there is discussion about paying interest.

“These system project occur once in a generation,” Rosenfield said. “It takes time to kick the tires on the system. It’s taken time to get our employees comfortable using it and I’m sorry it hasn’t occurred faster but I’m comfortable that we will get there soon.”