CITY OF SAN MATEO
CITY OF SAN MATEO
Agenda Report
City Hall
330 W. 20th Avenue
San Mateo CA 94403
www.cityofsanmateo.org
Agenda Number: 8 Section Name: {{section.name}} Account Number: 10-2111 File ID: {{item.tracking_number}} TO: City Council
FROM: Alex Khojikian, City Manager
PREPARED BY: Information Technology Department
MEETING DATE: April 15, 2024
SUBJECT:
Enterprise Resource Planning Software Project - Supplemental Budget Appropriation and Change Orders RECOMMENDATION:
Adopt a Resolution to approve a supplemental budget appropriation of $211,305 of unassigned fund balance from the Equipment Replacement Fund to increase the budget for the Enterprise Resource Planning Software Project; approve Change Order No. 7 to the master services agreement with Collaborative Solutions, LLC for ERP implementation services in the amount of $396,705, for a new agreement total of $4,539,370; approve Change Order No. 443997 to the master subscription agreement with Workday, Inc. for delivery assurance services in the amount of $24,600, for a new agreement total of $177,355; and authorize the City Manager to execute the Change Orders in substantially the form presented.
BACKGROUND:
In February 2022, the City Council awarded a contract to Collaborative Solutions, LLC in the amount of $2,527,160 as part of the enterprise resource planning (ERP) system replacement project (Project). Collaborative Solutions, LLC is now known as Cognizant.
The ERP supports the City’s core administration functions of Human Capital Management (HCM), Payroll, and Core Financials. ERP implementation has occurred in phases. Phase 1 covered Core Financials, began in March 2022, and went live on November 1, 2022. Phase 2 began in October 2022 and covers HCM and Payroll. The Plan, Architect, and Configure Stages of Phase 2 have been completed, and project work is currently focused on the End-to-End Test Stage. When the End-to-End Test Stage is complete, the project will continue with Parallel testing, Deployment, and Post-Production Support. End-to-End testing is a critical time when HR and Payroll staff verify the system works as configured. Delays with End-to-End testing have resulted in the need for timeline extensions and Change Orders.
End-to-End testing was originally scheduled for completion on August 18, 2023, but was extended by 26 weeks with the approval by Council of Change Orders No. 5 and No. 6 on September 18, 2023. This resulted in a new target Go-Live in June 2024 and increased the Project budget by $780,580. However, in November 2023, it became clear that insufficient testing progress was occurring to meet the new Go-Live target. While Change Orders No. 5 and No. 6 extended the Project schedule and increased consultant resource commitments, they did not properly address the root causes of Project delays.
Approval of Change Order No.7 will extend the Project timeline an additional 26 weeks for a Go-Live in December 2024, concurrent with the first pay period of calendar year 2025. It will require significantly less funding than prior Change Orders. Rather than extend time and money on the same trajectory, the project team will address Project deficiencies and remediate them through a Project re-plan. This new approach will re-emphasize City staff doing the functional work, as is the best practice for Workday projects, rather than outsource that work to consultants to fill resource gaps. This re-plan also includes new Cognizant project managers and leadership to provide more support and guidance for the Project.
Additionally, the City’s Project Steering Committee formerly consisted of HR and Finance Directors who have since left City
CITY OF SAN MATEO
employment. These roles have been re-filled by the City’s new Finance Director, IT Director, and an Interim HR Director (recruitment for a permanent Director is underway). The Project Steering Committee reports to the City Manager, who serves as the Project Sponsor.
Change Order No. 7 is a critical step in the Project re-plan. Change Order No.7 extends the timeline through December 2024, but also takes a more efficient approach to the Project plan, work tasks, resources, and project execution. HR and Payroll staff are re-committed to the Project with full support of leadership. Project management flaws have been corrected, Project status is being closely monitored, and a clear escalation path is defined that goes directly to the City Manager. Change Order No. 7 increases project costs, but to a far lesser extent than previous change orders, and in a more tightly managed context where City subject matter experts and leadership are shouldering the appropriate burden, rather than paying for consultant resources to fill functional gaps. As reflected in Attachment 2 (Change Order No. 7), the additional scope cost is $370,705. Cognizant has provided a ‘project investment’ credit of $80,000, reducing that cost to $290,705. Recognizing the importance of organizational change management and training (OC&T), this change order also adds $106,000 on a time and materials basis to ensure successful system roll-out to the citywide user base. As reflected in Attachment 3 (Change Order No. 443997), the additional delivery assurance services from Workday for the extended period will cost $24,600. All told, the Project cost increase is $421,305, minus a $210,000 savings from City staff members performing the functional work rather than consultants, resulting in a net Project increase and new appropriation of $211,305.
BUDGET IMPACT:
The proposed resolution, included as Attachment 1, approves adding $211,305 supplemental budget appropriations for the ERP Project from unassigned fund balance of the Equipment Replacement Fund. This fund balance will be replenished over a 10-year period.
ENVIRONMENTAL DETERMINATION:
Approval of the change orders for ERP implementation support is not subject to CEQA review under the common sense exemption in it can be seen with certainty that there is no possibility that the activity in question may have a significant effect on the environment. (CEQA Guidelines Section 15061.) In addition, approval of a supplemental budget appropriation for the Project is not subject to CEQA review in that it consists of a governmental fiscal activity which does not involve any commitment to any specific project which may result in a potentially significant physical impact on the environment. (CEQA Guidelines Section 15378(b)(4).
NOTICE PROVIDED
All meeting noticing requirements were met.
ATTACHMENTS
Att 1 - Proposed Resolution
Att 2 - Change Order No. 7
Att 3 - Change Order No. 443997
STAFF CONTACT
Pete Owen, Director, Information Technology
[email protected]
(650) 522-7074
Karen Huang, Deputy Director
[email protected]
(650) 522-7110