DATE:
TO:
FROM:
CONTACT:
SUBJECT:
Summary:
AG EN DA REPORT City of Poway
March 3, 2026
Honorable Mayor and Members of the City Council
Craig Schmollinger, Director of Finance @.__
Brad Rosen, Assistant Director of Finance Operation~.-.--::::t7 __ (858) 668-4452 or [email protected] +zr,---
CITY COUNCIL
(
Approval of Agreement Between the City of Poway and the California Department of Technology (CDT) for the Purchase of Microsoft Product and Services The City's current five-year Microsoft software licensing agreement purchased through the State of California Department of Technology (CDT) expires on April 30, 2026. This software provides the required Microsoft licensing which includes the Office 365 applications (Outlook, Word, Excel, Teams, One Drive, SharePoint) as well as licensing for Microsoft Visio and Project. As such, the City needs to renew its agreement. An Enterprise Level Agreement (ELA) for Microsoft 365-G5 which includes the noted applications, Visio, and Project licenses with CDT is the most cost-effective solution available.
The Microsoft 365-G5 licensing comprises Microsoft's best security products including advanced threat protection, identity protection, cyber security, voice, information archiving and data analysis tools. The agreement includes all upgrades distributed by Microsoft and consolidates the City's software purchases at a reduced cost while streamlining the software license management and accounting process.
Recommended Action:
It is recommended the City Council authorize the City Manager to execute an agreement with the California Department of Technology for a five-year Microsoft Enterprise Level Agreement.
Discussion:
As part of its technology procurement practices, the City's Information Technology (IT) Division typically upgrades and deploys core software on a timescale that keeps software versions at, or near, current commercial release versions. This practice is necessary to ensure core City software is current with product features and security-related improvements.
In 2021, the CDT offered local governments the ability to purchase Microsoft licensing from the State. 1 of 6 March 3, 2026, Item #6
After review of the options available at that time, purchasing through the CDT was the most cost effective solution. The current agreement ends on April 30, 2026. The State has been negotiating with Microsoft and working on a new agreement over the past several months and notified the City on January 27, 2026 that a new five-year Microsoft agreement is available to local agencies. The new Microsoft CDT agreement begins on May 1, 2026, and is effective through April 30, 2031 for the Microsoft 365-GS licensing.
CDT conducted a full procurement process through a Request for Offer (RFO) for Microsoft 365 (M365) products and services and awarded the consolidated contract to SHI International Corp. CDT has broad responsibility and authority over all aspects of technology in California state government and partners with local government and educational entities to deliver and develop responsive solutions for business needs. The agreement includes discounted and fixed pricing over a period of time. CDT will facilitate the City's enrollment through SHI International Corp. for the M365 licensing and their online services.
After a review of the licensing options available to the City, entering into an agreement for Microsoft Office 365-GS, Visio and Project products and services with the CDT provides the most cost-effective model. To administer this program, CDT charges both a 2.79% service fee and a 3.5% cost distribution fee which are included in the total cost as identified in the fiscal impact section below. The service fee recovers the cost of the program that allows CDT to deliver negotiated enterprise service level agreements, provide ease of onboarding, negotiate volume pricing, and eliminate the need for entities to perform a formal procurement. The Cost Distribution fee is a method that CDT uses to distribute their administrative and overhead costs.
In addition to the user accounts and M365 Office application licensing, the M365-G5 license provides the City Microsoft's best security products including advanced threat protection, identity protection, cyber security, voice, information archiving and data analysis tools. The City does procure other Microsoft products including Windows server licensing, SQL database licensing and M365-F3 user licensing through other existing agreements as those are not available on the CDT contract.
At the end of each contract year with CDT, the City must report to Microsoft any products that need to be added to the agreement. Microsoft identifies these license additions as true-up fees. Any additional Microsoft licenses required by the City would be added under these agreements at the prices identified. Historically, the City has not seen increased pricing under this portion of the ELA as the number of licenses has remained fairly consistent.
Environmental Review:
This action is not subject to review under the California Environmental Quality Act (CEQA).
Fiscal Impact:
The cost of the five-year agreement including M365-G5 licensing, Visio licensing, Project licensing and CDT service and cost distribution fees is $937,293.88. The table below details the quoted annual cost of the Microsoft licenses.
2 of 6 March 3, 2026, Item #6
Year1 $172,225.44 $408.24 $267.72 $172,901.40
Year 2 $172,225.44 $408.24 $267.72 $172,901.40
Year 3 $177,998.76 $408.24 $267.72 $178,674.72
Year4 $177,998.76 $408.24 $267.72 $178,674.72
Year 5 $177,998.76 $408.24 $267.72 $178,674.72
TOTAL $881,826.96
The CDT will invoice the City annually, which includes the cost of the Microsoft licenses, the CDT 2.79% service fee, and the 3.5% cost distributions fee as detailed in the table below.
Year1 $172,901.40 $4,823.95 $6,051.55 $183,776.90
Year 2 $172,901.40 $4,823.95 $6,051.55 $183,776.90
Year 3 $178,674.72 $4,985.02 $6,253.62 $189,913.36
Year4 $178,674.72 $4,985.02 $6,253.62 $189,913.36
Year 5 $178,674.72 $4,985.02 $6,253.62 $189,913.36
TOTAL $937,293,88
The City proactively plans for the purchase of Microsoft licensing by setting aside a portion of the anticipated licensing costs by charging Departments annually for the number of licenses assigned to the staff in each Division. The adopted FY 2025-26 budget includes $434,305 (115010-61222) for this purpose. Future internal rent charges will be updated to reflect the new costs associated with the updated licensing model to ensure adequate funding is set aside for these costs. Future year costs for years two through five will be budgeted annually in the 115010-61222 account as part of the regularly adopted annual fiscal year budget.
Public Notification:
None.
Attachments:
A. Quote: SHI International Corp.
Reviewed/ Approved By:
Assistant City Manager
3 of 6
Reviewed By:
Alan Fenstermacher
City Attorney
Ap~)
Chris Hazeltine
City Manager
March 3, 2026, Item #6
CA-City of Poway
Brad Rosen
PO Box789
Poway, CA 92074
United States
lrll
Phone: (858) 668-4452
Fax:
Email: [email protected]
All Prices are in US Dollar (USO)
Additional Comments
Payment Schedule:
Year 1 (4/1/26 -3/31/27): $172,901.40
Year 2 (4/1/27 -3/31/28): $172,901.40
Year 3 (4/1/28 -3/31/29): $178,674.72
Year4 (4/1/29-3/31/30): $178,674.72
Year 5 (4/1/30 -3/31/31): $178,674.72
Total: $881,826.96
**Budgetary Pricing does not include CDT Fees••
Pricing Proposal
Quotation #: 27102443
Reference #: Budgetary
Created On: Jan-28-2026
Valid Until: Feb-28-2026
------------------·-----------·-
Microsoft Inside Account Manager
Brian Smith
290 Davidson Ave
Somerset, NJ, 08873
Phone: 732-584-4484
Fax:
Email: [email protected]
Year 1 located on sheet 2
Years 2-5 located on sheet 3
Disclaimer: The pricing provided in this quote is based on estimated statewide license volumes. CDT will confirm the final statewide pricing tier once all customer commitments have been received.
This quote has been marked as budgetary, as certain pricing may require approval from Microsoft. Please note, SHI is unable to process Purchase Orders against budgetary quotes. Kindly reach out to your SHI sales team for a Final Quote once you have determined your required counts and licenses.
Due to the potential impact of any current or future tariffs, the price and availability of hardware items on this quote may be subject to change.
Thank you for choosing SHI International Corp! The pricing offered on this quote proposal is valid through the expiration date listed above. To ensure the best level of service, please provide End User Name, Phone Number, Email Address and applicable Contract Number when submitting a Purchase Order. For any addiUonal information including Hardware, Software and Services Contracts, please contact an SHI Inside Sales Representative at (888) 744-4084. SHI International Corp. is 100% Minority Owned, Woman Owned Business. TAX ID# 22-3009648; DUNS# 61-1429481; CCR# 61- 243957G; CAGE 1 HTF0
The produc°is offered under this proposal are resold inaccordance with-the tenns and conditions of the Contract referenced under that applicablellne ilem. 4of6 ATTACHMENT A March 3, 2026, Item #6
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SC
25 -
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9 8
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-20
30 Ma
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3 $1
3 6
.
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S4
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.
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5 of
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March 3, 2026, Item #6