City Council
Staff Report
From: City Manager
Report Type: CONSENT CALENDAR
Lead Department: IT Department
Meeting Date: December 1, 2025
Report #:2509-5266
TITLE
Approval of Purchase Order C26196043 with Carahsoft, Utilizing a General Services Administration Cooperative Agreement, to Procure S/4 Hana Implementation Services, for a term of Twelve Months and a Total Amount Not-To-Exceed of $5,839,230, including $4,399,300 for Basic Services and $439,930 for Additional Services, and Approval of Budget Amendments to the Information Technology; CEQA Status – Not a Project.
RECOMMENDATION
The Finance Committee and staff recommend the City Council:
1. Approve and authorize the City Manager or their designee to execute PO C26196043 with Carahsoft, utilizing a General Services Agreement (GSA) Cooperative Agreement Contract Number 47QSWA18D008F, to procure SAP S/4HANA implementation services for a total not-to-exceed amount of $5,839,230, including $4,399,300 for basic services, $439,930 for additional services, for a term of 12 months (Attachment A)
2. Amend the Fiscal Year 2026 Budget Appropriation for the Information Technology Fund by [requires a two-thirds approval by the Council]:
a. Increasing the expenditure appropriation for the Enterprise Resource Planning Upgrade 2026 Project (TE-19000) in the Information Technology Department by $5,839,230 ($4,839,230 to fund this PO and up to $1,000,000 to fund existing SAP on-call agreements for additional implementation support), and b. Decreasing the Technology Reserve by $5,839,230.
EXECUTIVE SUMMARY
Approval of these consulting services in combination with the Council previously approved purchase of S/4 Hana licensing on September 29, 2025 will result in the upgrade of the City’s Enterprise Resource Planning (ERP) system, currently SAP, to the most current version. This contract specifically, working alongside City staff, will help implement the new version and provide increased functionality for City staff.
This project (Phase I) is critical to ensure the City’s Finance, Payroll/HR, and Utilities systems remain secure, reliable, and supported beyond 2027 when the current platform support will end on January 1, 2028. In total, the upgrade is estimated to cost $13.3 million over five years.
BACKGROUND
SAP is the City’s core business system, also known as our Enterprise Resource Planning (ERP) system. It supports essential functions including Finance, Payroll/HR, and Utilities billing. The City has relied on SAP as its core Enterprise Resource Planning (ERP) system since 2003, enabling integration and support for key business functions such as Finance, Human Resources, Payroll, Procurement, Budgeting, and Utilities. Over time, the City has continued to invest in the platform—most notably with a major upgrade in 2021 that transitioned the system to SAP HANA, enabled cloud hosting, improved performance, and introduced single sign-on (SSO).
These improvements have delivered meaningful gains in efficiency, accuracy, and user experience.
SAP has announced that support for the current SAP ERP platform will end on January 1, 2028.
Running the system beyond this date would introduce increased risk, including the loss of vendor support, potential security vulnerabilities, and limited access to future enhancements.
The Finance Committee heard staff’s recommendation at its meeting on September 16, 20251, and unanimously recommended City Council approval of the recommendation to migrate to SAP S/2HANA – SAP’s latest cloud-based ERP platform. The Committee commented on the importance of being on a fully support version and innovations using features such as AI to improve process efficiencies. City Council approved the upgraded licensing costs for five years of $6.6 million unanimously on September 29, 20252. The Committee review and Council approval acknowledged the total cost of $13.3 million once implementation and transition costs, recommended in this report, and additional temporary staffing costs were included.
ANALYSIS
In 2021, staff issued a competitive Request for Proposals (RFP 182051) for cloud hosting and SAP support services. Sixteen proposals were received and carefully reviewed. After extensive evaluation, EPI-USE was identified as the top vendor. The City plans to contract with EPI-USE through Carahsoft, an established government contracting vehicle. Key qualifications include:
Strong track record and expertise in SAP cloud migrations Experience with public-sector clients
1 Finance Committee, September 16, 2025, Item #3, Staff Report # 2507-5015 https://portal.laserfiche.com/Portal/DocView.aspx?id=223086&repo=r-704298fc&searchid=96d03863-2689-4821- 84f0-a01b93b3e812
2 City Council Meeting, September 29, 2025, Item #AA1, Staff Report # 2509-5240 https://portal.laserfiche.com/Portal/DocView.aspx?id=225755&repo=r-704298fc&searchid=ad3bba21-91d9-4fbc- 8881-e510025f460d
Qualified staff and proven customer references
Competitive pricing and partnership with SAP
Project Approach:
The migration will take place in two phases:
Phase I – Migration and Upgrade (Contract through Carahsoft) Timeline: Approximately 12 months from project start
Scope:
Upgrade to the latest SAP software to ensure long-term support and stability Move the City’s SAP systems and data to the secure S/4 HANA cloud platform Identify potential enhancements and efficiencies to be considered for Phase II Provide “train-the-trainer” sessions so staff can guide end users on the updated system Deliver one month of post Go-Live support
Engage limited-term staff as part of phase I to assist with implementation and transition activities in preparation of Phase II
Phase II – Enhancements
Timeline: To be determined after Phase I.
Scope:
Implement business process improvements and new SAP tools (such as AI features and WalkMe for user support)
Enhance productivity and streamline workflows
Costs for Phase II will be refined as part of Phase I planning. Staff will return to Council for approval once solidified.
FISCAL/RESOURCE IMPACT
Funding for this purchase order is available in the Information Technology Fund, specifically the Technology Reserve. This Reserve is intended to cover system upgrades costs such as these.
The FY 2026 forecasted ending balance for the Technology Reserve is $16.4 million. If this budget amendment is approved, the reserve balance is anticipated to be $10.5 million at year- end. There are no ongoing costs associated with this purchase order.
The Phase I five-year estimated project cost of $13.3 million is comprised of licensing costs $6.6 million, implementation and transition services $5.8 million, and approximately $900,000 in other costs such as limited-term staffing backfill costs. Additional one-time funding for limited- term staffing to support Phase I enhancements is anticipated to be requested as part of the FY 2027 budget process. These temporary costs will be funded by the Information Technology Reserve and will not increase the City’s authorized FTE count.
The Information Technology (IT) Department is funded by an Internal Service Fund (ISF) that allocates costs across the City to provide technology-related services to other departments and funds. Approximately 49% of services are provided to the General Fund, with the remaining 51% supporting Enterprise, special revenue, and other internal service funds.
STAKEHOLDER ENGAGEMENT
The services were coordinated with internal stakeholders and the service provider.
ENVIRONMENTAL REVIEW
The approval of these contracts is exempt from review under the California Environmental Quality Act (CEQA) under CEQA Guidelines section 15061(c)(3) because it can be seen that there is no possibility that the activity in question may have a significant effect on the environment.
ATTACHMENTS
Attachment A: Carahsoft_EPI-USE S4 HANA Implementation; C26196043 APPROVED BY:
Darren Numoto, Chief Information Officer
Staff: Lisa Bolger, Assistant Director Information Technology/CTO