title
RESOLUTION AUTHORIZING THE EXECUTION OF AGREEMENTS FOR THE IMPLEMENTATION OF AN ENTERPRISE RESOURCE PLANNING (ERP) PROGRAM INCLUDING AGREEMENTS WITH TYLER TECHNOLOGIES AND INFORMATIX INC.
recommended action
RECOMMENDATION
It is recommended that the City Council adopt a resolution to:
1. Authorize the City Manager to enter into an agreement with Tyler Technologies in the amount of $13,357,635 to implement an Enterprise Resource Planning solution. This includes the professional services, the software licenses and hosting for seven years;
2. Authorize the City Manager to enter into an agreement with Informatix Inc. in the amount of $342,290 to provide organizational change management services to support the ERP program;
3. Authorize the City Manager to enter into anticipated support contracts specific to the implementation of the new ERP solution. Each contract may be greater than $75,000, but the total for all contracts shall not exceed $1.6 million.
4. Approve findings to support and justify an exception to the competitive bid process;
5. Authorize the transfer of $2,256,149 from the General Fund Reserve and the appropriation of $5,000,000 in existing funds for the ERP program from the Computer Equipment Fund (502) fund balance for a total of increase in appropriation of $7,256,149.
It is further recommended that the City Manager be authorized to take all necessary and appropriate actions to carry out the purpose and intent of this resolution.
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Summary
An Enterprise Resource Planning (ERP) system is a computer software system that is the system of record for financial and human resource data. Daily, approximately 600 employees utilize the current ERP system in the City of Stockton. The current system processes financial information including accounting, accounts payable, budgeting, payroll, (core financial) and human resources (HR) information for benefits, labor relations, risk management, and workforce planning.
Replacing the existing ERP program will be a multi-year endeavor comprised of multiple projects. Modernizing the ERP is a strategic priority of the City and is a key element for addressing both the internal audit risk assessment conducted during bankruptcy and a multitude of external financial audit findings. Implementation of a new ERP system is necessary for modernizing the City’s core financial and HR systems which are outdated and nearly 30 years old. The current ERP system fails to provide the City with timely critical information that the decision-makers require.
A new ERP solution will eliminate many of the existing inefficiencies such as paper-based manual processes, workarounds and supporting the more than 80 standalone shadow systems. An ERP will enable the City to redirect those resources to higher priority activities, improve the City’s organizational capacity, strengthen its technology infrastructure and meet the City Council goals to achieve fiscal sustainability.
The new ERP solution will enable the City to employ best business practices in financial and human resources management. The solution will enhance productivity within administrative and HR functions and will reduce the risk of data loss and data breaches. The use of an integrated enterprise database system will address the City’s goals to:
• Resolve internal control deficiencies;
• Streamline the flow of information throughout the organization;
• Improve reporting capabilities and enhance real-time decision-making;
• Maximize system availability and promote outstanding customer service; and
• Utilize an up-to-date ERP system that meets the highest technological standards.
The City issued a Request for Qualifications (RFQ)/Request for Proposal (RFP) for both the ERP and the Organizational Change Management (OCM) work efforts. The ERP RFQ/RFP was issued on October 19, 2017, and a total of seven (7) proposals were received in December 2017. After a thorough and lengthy process, Tyler Technologies was selected as the company with the product, qualifications, expertise and knowledge base that best meets the City’s needs and requirements as outlined in the RFQ/RFP.
Accordingly, staff recommends that Council authorize the City Manager to enter into an agreement with Tyler Technologies in the amount of $13,357,635, which includes treasury and debt management software provided by Emphasys, to support the acquisition, implementation, and maintenance for the City’s new ERP solution.
The City issued the Organizational Change Management (OCM) RFP in May 2018, and staff received six (6) proposals. The City assembled a team from different departments to evaluate proposals and to conduct interviews. The proposals were evaluated based on experience working on municipal ERP projects, methodology, and OCM certifications.
Staff recommends that Council authorize the City Manager to enter into an agreement with Informatix Inc. in the amount of $342,290 to provide OCM expertise in support of the ERP program. OCM services are crucial to employee adoption of the new system and to help staff to prepare for new ways of doing business. Informatix’s professional services will increase employee engagement and improve adoption to ensure the success of the City’s ERP program.
Lastly, staff recommends the City Council authorize the City Manager to execute additional support contracts specific to the implementation of the new ERP solution.
Not to exceed $1.6 million in funding for unanticipated expenditures to ensure the project will meet the milestone dates and deliverables as specified in the contract.
DISCUSSION
Background
The City currently utilizes Central Square HTE/NaviLine as its ERP system for financial, human resource, payroll, land management, and utility billing functions. This system has been in place since 1990 making it nearly 30 years old. Additionally, the existing system does not adequately meet the needs of the City.
As cited in the 2013 Pun & McGeady audit report: “the financial systems employed by the City in managing its overall fiscal operations, are inadequate for a city the size of Stockton.” Additionally, in 2014, Pun & McGeady further expanded on the 2013 audit finding by specifically addressing the inability to automatically post activity from outsourced operations, and a high volume of manually recorded transactions creating significant delays in month and year-end closing processes in a non-integrated financial system. In its most recent audit, Pun continued to cite the age of the financial system (“the City has a twenty plus-year-old outdated accounting system that needs to be updated”) and “The City is strongly urged to begin the process of review of other software applications that are specifically designed for municipal entities and have the full functionality needed for a City of this size and complexity.”
It is well recognized within the Information Technology (IT) industry that there are multiple factors that assist in the successful implementation of new technology. First, the core application should be capable of meeting the City’s business requirements. Second, the City’s workforce needs to be prepared for how business operations will be changing and how staff will learn and adapt to the use of the new tools. This effort is a large enterprise-wide program that will impact every department and every employee in the City and will require several years to implement fully. Third, new technology projects always encounter unanticipated issues that frequently require rapid response from the implementation team to remain in scope and on schedule. Occasionally these unanticipated tasks require the City to bring in outside resources for brief portions of work effort.
The City expends a significant amount of staff time to support its antiquated financial system. Staff must rely on manual processes, a myriad of standalone “shadow” applications, and other workarounds to address the deficits of the Central Square HTE/NaviLine solution. Such workarounds result in numerous manual financial controls that place the City at risk and are inefficient. City staff utilize approximately 80 standalone shadow systems such as ATS, Acom, Advantis, SETS, Class, Evals, Questica, Microsoft Excel, Microsoft Access, and Target Solutions to handle payroll, invoicing, timesheets, asset management, and human resource functionality. As cited in the Citywide Technology Strategic Plan approved by Council in January 2012, the existing system has limited functionality, deficiencies and fails to meet the City’s business requirements.
Currently, the City has limited capacity and resources to perform the work required for this program due to competing priorities and projects. The ERP project will be one of the City’s highest priorities and will require redirecting significant resources and management attention in the Administrative Services, Human Resources, Information Technology, and other departments. Beginning June 2019, the ERP program phases 1 through 3 will impact all other City projects from a resource perspective. As a result, other City projects may encounter delays over the next three years.
On January 12, 2016, Council approved Motion 2016-01-02-1203 to authorize the completion of Phase 1, ERP Assessment which consisted of the following four tasks: 1) Gap Analysis; 2) Plan of Action; 3) Evaluation and Selection of an ERP Software Vendor; and, 4) Contract Negotiations, followed by Phase 2, Implementation Support to replace the current ERP System.
Council actions in January 2017 included the establishment of 11 new positions for the ERP project duration at an estimated annual cost of $1.6 million. The City has been proactively recruiting since 2016 and has faced challenges in filling these positions with qualified candidates with financial and human resources experience and ERP skills to support the multi-year program. Even when all 11 positions are filled, significant assistance from multiple departments will be needed to support the ERP.
Significant upfront work is necessary to ensure proper oversight of the multi-year project is complete. The ERP governance model, Project Charter, and Steering Committee are defined and already in place to guide the project implementations.
Present Situation
On October 19, 2017, the City posted the RFQ/RFP for an ERP Software Vendor on the City’s procurement website (Bid Flash). Proposers were requested to present their solution, qualifications, and capabilities to assist the City in the implementation of a modern ERP system specializing in the unique needs of municipal government business requirements while eliminating the need for approximately 80 standalone shadow systems, manual processes, and workarounds. An ERP will enable the city to redirect those resources to higher priority activities, improve the City’s organizational capacity, strengthen its technology infrastructure, and meet the City Council goals to achieve fiscal sustainability.
On November 6, 2017, the City held a mandatory pre-proposal conference to provide proponents with an opportunity to ask questions regarding the City’s RFQ/RFP process. On December 21, 2017, the following seven (7) entities submitted proposals:
• Sierra-Cedar Inc., Alpharetta, GA
• CherryRoad Technologies, Sacramento, CA
• Tyler Technologies, Yarmouth, ME
• Application Soft Technology LLC, Santa Clara, CA
• Graviton Consulting Services, Sacramento, CA
o (disqualified due to the non-responsive proposal)
• CGI Technology Solutions, Sacramento, CA
• KPMG, Sacramento, CA
To support the evaluation and selection of the proposals, the City formed a 39-member evaluation team comprised of City staff and consultants. The breadth of the evaluation team ensured a broad spectrum of representation from current core financial and human resources module users with a diverse understanding of business needs. It was anticipated that the selection process would be extensive and time-consuming for staff due to the project scope and nearly three thousand functional requirements, internal process changes, and coordination of multi-departmental involvement. The proposals were evaluated based on proponent qualifications, experience, capacity, and ability to provide services on time, budget, and in accordance with the City objectives as stated in the RFQ/RFP.
Another component of the proponent selection included comprehensive four (4) day demonstrations of the top two proponents’ ERP solutions. These demonstrations provided key impacted program areas with ample opportunity to ask questions, to assess whether the proposed ERP solutions represented the best fit for the City, and to ensure the implementation partner had the experience and qualifications to be successful. Staff also communicated with Lodi, Tracy, Pleasanton, Berkeley, Long Beach, and Chula Vista to learn from their ERP implementation experiences.
On June 27, 2018, the Evaluation and Selection Team evaluated the proposals and based its recommendation on the following assessment categories:
Assessment Main Categories
|
Proponent’s Qualifications (Corporate References/Experience) |
20% |
|
Proponent’s Approach to Providing Required Services (Administrative, Functional, Technical and Management Requirements) |
45% |
|
Proponent Demonstration |
15% |
|
Cost Proposal |
20% |
|
Total |
100% |
As a result of the above assessment, Tyler Technologies was ranked as the ERP solution best suited to meet the City’s needs. The Team’s key considerations in reaching this determination included the following criteria:
1. Tyler Technologies specializes in developing and designing public-sector software applications throughout the country, including California, with over 35 years of local government successful implementations. Their proposal demonstrated a deep understanding of city government operations. Additionally, Tyler Technologies has extensive experience in migrating data from the Central Square HTE/NaviLine platform, which serves as the City’s current ERP system.
2. Tyler Technologies has a solid working knowledge of municipal government operations, which will add significant value to the City during implementation, especially in business process redesign efforts to incorporate best practices. Tyler has a proven history of success with other municipalities, including easy-to-use, feature-rich software that does not require software development customizations, includes role-tailored security to address audit requirements, and involves business best practices to ensure the City will achieve a solid return on investment.
3. Tyler Technologies’ Munis Solution is a Software as a Service product, together with the Emphasys solution for treasury and debt management, ensures that the City will always have industry-leading functionality and services. This structure will allow the City to continue to take advantage of new versions that provide legal compliance, feature enhancements and security updates without having to relicense the software for the term of the contract.
4. To date, Tyler Technologies implemented ERP solutions in over 800 municipalities across the nation, including a half dozen cities within driving distance, and utilized the Project Management Institute’s proven methodologies that will support on-time and on-budget implementation. The replacement of the City’s legacy ERP system represents a key component of the City Council’s goal of achieving fiscal sustainability through operating efficiencies and improved reporting, which will enhance the City’s organizational capacity and decision-making capabilities. Additionally, the new ERP solution will address the Council’s strategic objective of modernizing and strengthening the City’s antiquated technology infrastructure.
Organizational Change Management Services
Organizational Change Management (OCM) is a structured and intentional approach to support employees and organizations when instituting a change in business operations. This change may involve a change in the organization’s structure, strategy, policies, procedures, technology, or culture. The primary focus of OCM services is to prepare, train, and support employees through the process changes in their daily work routine. OCM services help ensure the successful management of employee engagement, awareness, desire and adoption of new internal processes, and new technologies across City departments.
OCM has a crucial role in minimizing resistance to change and maximizing employee buy-in, acceptance, adoption and training for changes in “doing business.” A Gartner article published on November 20, 2012, (“Address Eight Key Factors for Successful ERP Implementations”) listed inadequate change management and training in fourth place as a potential risk of project failure. The City of Berkeley hired an OCM vendor and other cities like Long Beach, Pleasanton, and Tracy shared their post-ERP implementation lessons learned with the conclusion to that it is critical to have OCM included in an ERP program. The investment in OCM is essential for the success of ERP implementation to avoid employee resistance and to accomplish proactive preparedness of all staff and ensure that the desired business objectives are achieved. Replacing the current antiquated ERP system that has been in place for nearly thirty (30) years may be difficult for City staff to adopt the new technology and accept the major business process changes. Transforming staff’s day-to-day operations, procedures, and tools require an experienced firm specializing in OCM. If the organization is not ready to embrace the new business processes, the investment in modern technology will not achieve the full range of benefits.
On May 31, 2018, staff posted the OCM RFP on the City’s procurement website (Bid Flash), and on June 21, 2018, the following six (6) proposals were received:
• Berry Dunn McNeil and Parker, LLC, Portland, ME
• Cambria Solutions, Inc., Sacramento, CA
• Change Works Consulting, LLC, Chandler, AZ
• CivicMakers, LLC, San Francisco, CA
• The Highlands Consulting Group LLC, Sacramento, CA
• Informatix, Inc., Sacramento, CA
The City assembled a team from different departments to evaluate proposals and to conduct interviews. The proposals were evaluated based on experience working on municipal ERP projects, methodology, and OCM certifications. Informatix, Inc. from Sacramento, CA was evaluated as providing the best fit for OCM services related to the City’s ERP project.
ERP Implementation Schedule
Upon contract award, the City’s ERP project team will work with the selected vendors and staff to develop a plan of action and to kick-off the ERP program. The following table provides approximate time frames for key tasks and milestones associated with the proposed ERP Program:
|
Phase |
Functional Area |
Modules |
Target Go-Live Date |
|
Pre-Phase |
Data Cleanup & Data Migration Preparation |
Current ERP Systems and financial modules |
On-going |
|
All Phases |
Organization Change Management (OCM) |
N/A |
2021 |
|
Phase 1 |
Core Financials |
• Accounting/General Ledger • Budget • Accounts Payable • Bid Management • Capital Assets • Cash Management • Contract Management • Inventory • Project & Grant Accounting • Purchasing • Quatred Asset Scanning Interface • Quatred Inventory Scanning Interface • eProcurement • CAFR Statement Builder • Miscellaneous Cash Receipts • General Billing • Tyler Content Manager SE • Tyler Forms - Financial Library • Tyler Forms - General Billing Library |
Nov 2020 |
|
Phase 2 |
Billing & Collections |
• Accounts Receivable • Tyler Cashiering for Munis • Business License • Citizen Self Service • Tyler Content Manager SE • Tyler Forms - Business License Library |
Jan 2021 |
|
Phase 3 |
Core Human Capital Management & Payroll |
• Payroll with Employee Self Service • Human Resources & Talent Management • Recruiting • Risk Management • ExecuTime Time & Attendance • ExecuTime Advance Scheduling • Tyler Content Manager SE • Tyler Forms - Payroll Library Tyler Forms -Personnel Action Library |
Apr 2021 |
|
All Phases |
Productivity |
• Tyler Forms Processing • Transparency Portal • Munis Analytics & Reporting |
2021 |
|
TBD |
Utility Billing |
• Optional functionality |
TBD |
|
TBD |
Retire current ERP Systems |
• Retire current ERP software and hardware |
TBD |
The projected April 2021 implementation completion date allows for two years of parallel operation of the legacy and replacement ERP systems, plus one year of system stabilization, which represents a prudent approach to an implementation effort of this magnitude. Successfully implementing a new technology like an ERP is a labor-intensive effort that will require continued prioritization from leadership, dedication from City staff and departmental support from the business areas to work alongside the vendors.
Findings
Stockton Municipal Code sections 3.68.070 and 3.68.070 A.3 authorizes the City Council to award contracts with an exception to the competitive bid process in those cases where facts exist which would support and justify an exception. In this case, the following findings exist, and if adopted by Council would constitute sufficient justification for authorizing the execution of a contract with Tyler Technologies, Inc. for the purchase and implementation of a new ERP system, including treasury and debt management software provided by Emphasys, and Informatix Inc. for OCM services:
Tyler Technologies, Inc.
1. Tyler Technologies has the specialized skills and experience in successfully implementing ERP systems within municipal governments similar in size and complexity to the City of Stockton.
2. The City does not have the specialized personnel and resources necessary to implement and support the selected ERP software solution.
3. The use of the RFQ/RFP process was appropriate for this project because it relies on the evaluation of professional qualifications and performance as the basis for selection of a consultant.
4. The RFQ/RFP process ensures the selection of a firm that meets the highest standards and minimizes risk.
5. The RFQ/RFP process also ensures that the City benefits from a new ERP system that meets the City’s core financial and human capital management requirements.
6. The contract was negotiated following the solicitation of competitive proposals, and the negotiated contract pricing and terms are beneficial to the City.
Informatix, Inc.
1. The RFP process ensures the selection of a firm that meets the highest standards.
2. Informatix Inc. has provided a diversified range of services to both government and private industries and has 25 years of experience in successfully supporting OCM projects.
3. Informatix Inc. has the depth and breadth of experience in organizational change management in information technology transformational projects.
4. The contract was negotiated following the solicitation of competitive proposals, and the negotiated contract pricing and terms are beneficial to the City.
FINANCIAL SUMMARY
The total anticipated seven-year program cost (see Table 1) for the ERP system implementation is $30,118,168. Personnel services and associated supports costs are $12,665,212 of the project costs. Contractor costs total $17,452,956 which includes the Tyler Technologies, Emphasys and Informatix, Inc. agreements, as well as $1.6 million for anticipated support contracts.
This action authorizes agreements with Tyler Technologies and Emphasys to implement an ERP solution and Informatix Inc. to provide organizational change management services. The Tyler Technologies agreement with a total cost of $13,357,635, which includes the one-time implementation of software and professional services associated with project management ($4,518,200), travel expenses ($1,198,000), software licensing and hosting for seven (7) years (averaging $828,000 per year), as well as optional hardware, software, and services totaling $2,117,698. The total cost of the Informatix, Inc. agreement is $342,290.
Total ERP Program Cost (Table 1)
|
7 Year ERP Expense Projection Summary |
|
|
Prior Years |
2018-19 |
2019-20 |
2020-21 |
2021-22 |
2022-23 |
2023-24 |
2024-25 |
Total |
|
Total Personnel Services & Support Costs |
860,640 |
2,303,942 |
2,870,847 |
2,492,932 |
1,747,431 |
1,105,961 |
682,477 |
600,982 |
12,665,212 |
|
Total Contractor Costs |
222,629 |
5,608,804 |
3,555,087 |
2,195,917 |
2,659,382 |
1,068,713 |
1,070,683 |
1,071,742 |
17,452,956 |
|
Expense Subtotal |
1,083,269 |
7,912,746 |
6,425,934 |
4,688,849 |
4,406,812 |
2,174,674 |
1,753,160 |
1,672,725 |
30,118,168 |
To date, the City has set aside over $12.5 million through rate collection and prior Council actions. In further support of the project, staff recommended transferring $2,256,149 from the General Fund Reserve and $5 million from the Computer Equipment Fund to the ERP project. Other City funds will be charged based on their share of the services provided by the IT Department. In addition to the General Fund, the largest contributing funds will be Library, Development Services, Water Utility, and Wastewater Utility. Funding for additional modules, including utility billing, will be determined through the annual budget process.
Additional funding will be incorporated in future year’s budgets towards the ERP program. Table 2 below details the funding sources for the entire ERP program.
Funding sources (Table 2)
|
Funding Sources |
Total |
|
General Fund Reserve (recommended action) |
$2,256,149 |
|
General Fund Mission Critical |
5,000,000 |
|
Computer Equipment Fund Balance (recommended action) |
5,000,000 |
|
IT Internal Service Fund Technology Project fund |
4,241,550 |
|
Annual ISF charges over five fiscal years (all funds) |
8,624,868 |
|
One-Time Contribution from other City Funds |
4,995,601 |
|
Total Project Fund Sources |
$30,118,168 |