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Consent
Item No. 4.
| MEETING DATE: 03/06/2023 |
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| TO: | HONORABLE MAYOR AND COUNCILMEMBERS |
| FROM: | JIM SADRO, CITY MANAGER By: Mel Shannon, Director of Finance |
| SUBJECT: | APPROVE A SERVICE AGREEMENT WITH TYLER TECHNOLOGIES, INC., AND AN AGREEMENT FOR SERVICES WITH GLASS BOX TECHNOLOGY, INC., FOR THE LICENSING, IMPLEMENTATION, MAINTENANCE, AND HOSTING OF A NEW FINANCIAL MANAGEMENT AND HUMAN RESOURCES SYSTEM
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RECOMMENDATION:
That the City Council:
A. Authorize the City Manager to execute a Services Agreement (“Agreement”) with Tyler Technologies, Inc. (“Tyler”) for the software licensing, implementation, maintenance, and hosting of the comprehensive financial and human resources system also known as Enterprise Resource Planning (ERP) system, in an amount not-to-exceed $1,089,137 over five years; and,
B. Authorize the City Manager to execute an Agreement For Services with Glass Box Technology, Inc. (“Glass Box”) for consulting services relating to implementation and configuration of the ERP system in the amount not-to-exceed $462,890 over 24 months.
A. Authorize the City Manager to execute a Services Agreement (“Agreement”) with Tyler Technologies, Inc. (“Tyler”) for the software licensing, implementation, maintenance, and hosting of the comprehensive financial and human resources system also known as Enterprise Resource Planning (ERP) system, in an amount not-to-exceed $1,089,137 over five years; and,
B. Authorize the City Manager to execute an Agreement For Services with Glass Box Technology, Inc. (“Glass Box”) for consulting services relating to implementation and configuration of the ERP system in the amount not-to-exceed $462,890 over 24 months.
DISCUSSION:
The City's current financial management software (Bi-Tech) was purchased and implemented over 25 years ago. While Bi-Tech has served its purpose during this time, in its current form it is now considered to be a legacy system using technology that is no longer supported, with outdated financial tracking and reporting processes that are labor-intensive and not compliant with contemporary operating systems. This places significant demands on staff to learn outdated technology, manually enter data, cross-check financial results, and generate reports on behalf of end users who cannot navigate the current system. Furthermore, as the City has grown over the past three decades, so has its financial reporting and regulatory requirements. In some cases, the current software makes meeting those requirements extremely difficult as staff has to manually sort through financial records and manually assemble reports that then have to be verified to ensure accuracy.
Of greater concern, the City's current Bi-Tech system is the same version that crashed and failed in 2013. As a result of that catastrophic system failure, and the resulting inability to recover system back up files, the City lost over five years of financial data and had to manually recreate at least two years worth of records in order to prepare and submit audited financial statements. The process to recreate that lost year of data cost the City hundreds of hours in additional labor and tens of thousands of dollars in system recovery and stability efforts. While the City now has a more robust, multi-layered process to back up Bi-Tech financial records today, the obsolete and unsupported nature of the current system leaves in place an unacceptably high business interruption risk for the City if the system were to crash again.
Of greater concern, the City's current Bi-Tech system is the same version that crashed and failed in 2013. As a result of that catastrophic system failure, and the resulting inability to recover system back up files, the City lost over five years of financial data and had to manually recreate at least two years worth of records in order to prepare and submit audited financial statements. The process to recreate that lost year of data cost the City hundreds of hours in additional labor and tens of thousands of dollars in system recovery and stability efforts. While the City now has a more robust, multi-layered process to back up Bi-Tech financial records today, the obsolete and unsupported nature of the current system leaves in place an unacceptably high business interruption risk for the City if the system were to crash again.
In evaluating the City's aging software, staff determined that replacing the Bi-Tech software with a contemporary, windows based Enterprise Resource Planning (ERP) system is key to establishing a stable, redundant and fully supported windows based system with streamlined financial transaction processes, reduced manual entry, and an interface that will allow all authorized City staff to easily access financial and budget data in real-time on an as-needed basis.
At its meeting on Monday, March 7, 2022, the City Council approved its Fiscal Year 22/23 Goals and Objectives, one of which directed staff to "identify and evaluate options to upgrade the City's financial management system." To meet this goal, the staff issued a Request for Proposal (RFP) in September 2022 to determine which vendors provide ERP systems and which configurations and options would best meet the City's needs. In October 2022, the City received responses from two vendors, Tyler Technologies Inc. and Central Square.
During the RFP review process, an invitation was sent to both firms to provide demonstrations of their software to staff. Both vendors presented all functional areas under evaluation including, but not limited to, Financial Management functionality (general ledger, procurement, accounts payable, project job costing, and budget), and Human Resources/Payroll functionality. The demonstrations showed the significant advances in software systems that have specifically designed for public sector entities using fund accounting, including vast improvements in functionality, data entry and retrieval, and reporting capabilities. It quickly became apparent to staff that contemporary ERP systems provide a highly efficient platform to manage the City’s finances, budgeting, human resources and payroll needs, as well has strengthening its internal controls and auditing capabilities.
During the evaluation process, staff conducted a survey of financial management software utilized by other cities in Orange County and found that 16 out of the 29 cities that responded to the survey currently use Tyler Technologies products, six utilized Central Square products, and seven cities used other providers. The vast majority of the cities that currently use Tyler products indicated that they were satisfied with the system.
At the end of the evaluation process, the City's evaluation team determined that Tyler presented the best overall proposal. Staff found that Tyler provides integrated information management solutions and services for the public sector with a focus on local governments in the United States. The company, founded in 1966, is headquartered in Texas and is the largest software company in the nation that solely focuses on providing software and technology services to public sector agencies including cities, counties, states, and school districts. Tyler’s enterprise software is currently installed in over 150 public sector entities in California, including many cities in Southern California such as Mission Viejo, Newport Beach, Yorba Linda, Westminster, Chino, Chino Hills, Covina, Glendale, Pasadena, Santa Monica, Simi Valley, Upland, and Victorville.
Due to the scope of the proposed ERP project and amount of work it will take to migrate the City's existing legacy system to a contemporary ERP platform, staff solicited proposals from experienced and reputable information technology consulting firms that have the expertise to provide ERP implementation consulting services. This type of service is critical as it allows City staff to continue their daily functions and operations during project implementation, as well as implement industry best practices to ensure that the migration process is effective and establishes a proper foundation in the new system. Consulting support will also enable staff to manage the overarching project goals, engage with stakeholders and system users, and ensure successful planning, oversight, and completion of the project while mitigating project risk.
The City received three proposals from the qualified consulting firms. After a thorough review and evaluation of proposals, staff recommends awarding a contract to Glass Box as the ERP system implementation consultant. Glass Box demonstrated significant experience and knowledge of Tyler's enterprise suite of products and staff contacted a number of cities that utilized similar services from Glass Box, and received positive feedback regarded their performance and expertise.
At its meeting on Monday, March 7, 2022, the City Council approved its Fiscal Year 22/23 Goals and Objectives, one of which directed staff to "identify and evaluate options to upgrade the City's financial management system." To meet this goal, the staff issued a Request for Proposal (RFP) in September 2022 to determine which vendors provide ERP systems and which configurations and options would best meet the City's needs. In October 2022, the City received responses from two vendors, Tyler Technologies Inc. and Central Square.
During the RFP review process, an invitation was sent to both firms to provide demonstrations of their software to staff. Both vendors presented all functional areas under evaluation including, but not limited to, Financial Management functionality (general ledger, procurement, accounts payable, project job costing, and budget), and Human Resources/Payroll functionality. The demonstrations showed the significant advances in software systems that have specifically designed for public sector entities using fund accounting, including vast improvements in functionality, data entry and retrieval, and reporting capabilities. It quickly became apparent to staff that contemporary ERP systems provide a highly efficient platform to manage the City’s finances, budgeting, human resources and payroll needs, as well has strengthening its internal controls and auditing capabilities.
During the evaluation process, staff conducted a survey of financial management software utilized by other cities in Orange County and found that 16 out of the 29 cities that responded to the survey currently use Tyler Technologies products, six utilized Central Square products, and seven cities used other providers. The vast majority of the cities that currently use Tyler products indicated that they were satisfied with the system.
At the end of the evaluation process, the City's evaluation team determined that Tyler presented the best overall proposal. Staff found that Tyler provides integrated information management solutions and services for the public sector with a focus on local governments in the United States. The company, founded in 1966, is headquartered in Texas and is the largest software company in the nation that solely focuses on providing software and technology services to public sector agencies including cities, counties, states, and school districts. Tyler’s enterprise software is currently installed in over 150 public sector entities in California, including many cities in Southern California such as Mission Viejo, Newport Beach, Yorba Linda, Westminster, Chino, Chino Hills, Covina, Glendale, Pasadena, Santa Monica, Simi Valley, Upland, and Victorville.
Due to the scope of the proposed ERP project and amount of work it will take to migrate the City's existing legacy system to a contemporary ERP platform, staff solicited proposals from experienced and reputable information technology consulting firms that have the expertise to provide ERP implementation consulting services. This type of service is critical as it allows City staff to continue their daily functions and operations during project implementation, as well as implement industry best practices to ensure that the migration process is effective and establishes a proper foundation in the new system. Consulting support will also enable staff to manage the overarching project goals, engage with stakeholders and system users, and ensure successful planning, oversight, and completion of the project while mitigating project risk.
The City received three proposals from the qualified consulting firms. After a thorough review and evaluation of proposals, staff recommends awarding a contract to Glass Box as the ERP system implementation consultant. Glass Box demonstrated significant experience and knowledge of Tyler's enterprise suite of products and staff contacted a number of cities that utilized similar services from Glass Box, and received positive feedback regarded their performance and expertise.
FISCAL IMPACT/SOURCE OF FUNDING:
The table below summarizes the final pricing data for the recommended ERP system modules, including bundled system discounts and staff negotiated reductions in pricing. At its meeting on December 5, 2022, City Council approved a Land Management System service agreement with Tyler Technologies that had been proposed by the Community Development Department. That agreement provided for an additional five percent bundle discount if the City selected both the Tyler Land Management System and its ERP system.
| Module(s) | Annual Software Fee (ongoing) | Implementation & 3rd Party Services (one-time) | Total Cost |
| Implementation, Training and Support | -- | $365,800 | $365,800 |
| 3rd Party Hardware & Software | -- | $2,363 | $2,363 |
| Financial Management Applications | $90,354 | -- | $90,354 |
| Human Resources Management Applications | $39,338 | -- | $39,338 |
| Revenue Management | $22,438 | -- | $22,438 |
| Content Management | $12,060 | -- | $12,060 |
| Data Insights & Forms Processing | $25,018 | -- | $25,018 |
| Sub Total | $189,208 | $368,163 | $557,371 |
| Less 5% Bundle Discount | ($9,460) | -- | ($9,640) |
| Less Negotiated Discount | ($39,821) | -- | ($39,821) |
| Annual Net Cost (Year 1 through 3) | $139,927 | $368,163 | $508,090 |
| Total Thee-Year Cost | $419,781 | $368,163 | $787,944 |
| Total Year 4 and Year 5 Cost (City Option) | $301,193 | -- | $301,193 |
| Total Tyler Five-Year Cost | $720,974 | $368,163 | $1,089,137 |
| Glass Box Implementation Consulting Cost | -- | $462,890 | $462,890 |
| Total Five-Year Cost | $720,974 | $831,053 | $1,552,027 |
If approved by City Council, the agreement with Tyler will have an initial cost of $648,017, which includes the first two years of the ERP system software fees, implementation costs, data conversion, staff training, and system maintenance. This cost will be fully funded through grant funding from the American Rescue Plan Act (ARPA) which the City Council previously appropriated for cybersecurity modernization.
Beginning in the third year, the annual maintenance and software fees are anticipated to be $139,927 and will be funded through I.T. service rates charged to all City Departments. These rates are established annually during the budget process. The annual maintenance and software costs will be partially offset by the elimination of approximately $46,000 in existing licensing, maintenance, and support costs that the City currently pays each year for the existing Bi-Tech system which the new Tyler ERP system will replace. As a result, the annual net increase in costs for the new ERP system will be approximately $94,000, of which approximately $37,600 will be allocated to the General Fund.
The proposed Glass Box professional services contract of $462,890 will also be paid for with grant funding from ARPA funds. Staff has verified that the consulting services that Glass Box will provide to help implement the new proposed ERP system is an eligible expense under the ARPA category which the City Council has previously approved for cybersecurity modernization.
GENERAL PLAN RELEVANCE/CITY COUNCIL GOALS & OBJECTIVES:
General Plan Relevance:
Goal ED 9 Fiscal Strength-Stability. Systematic budget, negotiation, and operating practices that serve to strengthen the City’s fiscal operating position over the long-run.
City Council Goals & Objectives:
Goal 2: Management of Public Revenues and Fiscal Assets
Objective A: Closely monitor revenues, expenditures, and fiscal trends to ensure the City’s long-term fiscal stability
Objective D: Identify and evaluate options to upgrade the City’s financial management system.
Goal 5: Development Activity and Business Assistance
Objective E: Continue to evaluate and improve the City’s development review process and continue to foster a “business friendly” environment with all City departments.