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: 5 Section Name: CONSENT CALENDAR Account Number: 10-2131 File ID: 26-10835 TO: City Council
FROM: Alex Khojikian, City Manager
PREPARED BY: Finance Department
MEETING DATE: January 26, 2026
SUBJECT:
Enterprise Resource Planning System Subscription Increase — Approval RECOMMENDATION:
Approve a subscription growth and expansion increase to the City’s agreement with Workday for an enterprise resource planning system for years five (5) through ten (10) of the existing agreement in the amount of $242,000, for a new total amount of $4,513,883; establish a contingency reserve of $30,000; and authorize the Finance Director to execute the subscription growth acknowledgement in substantially the form presented and issue change orders within the contingency amount.
BACKGROUND:
In February 2022, the City of San Mateo entered into an agreement with Workday for software subscription, training, and delivery assurance costs related to the City’s enterprise resource planning (ERP) application. The Workday ERP supports the City’s core administrative functions of Human Capital Management (HCM), Payroll, and Core Financials and is used by all City of San Mateo and San Mateo Consolidated Fire Department employees. The City is now entering the 5th year of the 10-year software subscription agreement with Workday.
As part of the original Master Services Agreement with Workday, the City must report annually on various Workday usage metrics from the prior year to evaluate whether a higher annual subscription fee is needed. For the first years of the agreement, Workday accepted a baseline estimate of all the City’s usage metrics provided in January 2022 using 2021 data, because the Payroll and Human Resources modules had not been implemented yet.
Since the City went live with the Human Resources and Payroll modules in Workday in March 2025, City staff needed to provide Workday its first official headcount in addition to other usage metrics as part of the annual reporting due in January 2026, covering usage metrics from 12/26/24 – 12/25/25. The updated headcount, the first in four years, showed an increase in the City’s overall system users due to several factors including some increases in staffing, lower employee vacancy rates, and an updated method for counting part-time employees in the Workday system. As a result, the total reported headcount for the City of San Mateo and San Mateo Consolidated Fire Department was 10.4% higher in 2025 than in 2021.
In accordance with the Master Services Agreement, the subscription for each year may be adjusted and calculated using a predefined growth and expansion table. Given the updated usage metrics provided for 2025, Year 5 of the agreement with Workday (2/24/2026 through 2/23/2027) will cost $40,382 more than originally estimated due to the updated headcount.
In addition, City staff does not anticipate a change in the overall headcount in the remaining years of our agreement with Workday and expect the new baseline annual subscription cost to remain. To support this increase in subscription costs for Years 5 through 10, City staff recommends approving the Subscription Growth Acknowledgement (Attachment 1), increasing the agreement amount by $242,000 for the remaining 6 years of the agreement with Workday, for a total
CITY OF SAN MATEO
agreement amount of $4,513,883, and a $30,000 contingency to cover any unanticipated changes in subscription costs due to other usage metric increases.
BUDGET IMPACT:
The current subscription fee for Year 5 of the Workday contract is $382,336 and is included in the Information Technology Department's operating budget. The additional subscription fee for FY 25-26 is $40,382. Given some budget savings in other areas, the Department can absorb the additional cost this year and will budget for the additional subscription fees in the next budget year.
ENVIRONMENTAL DETERMINATION:
This Council action is not a project subject to CEQA, because it can be seen with certainty that there is no possibility that the approval of an increase in yearly subscriptions for the City’s ERP system may have a significant effect on the environment. (CEQA Guidelines Section 15061(b)(3).)
NOTICE PROVIDED
All meeting noticing requirements were met.
ATTACHMENTS
Att 1 – Workday Subscription Growth Acknowledgment
STAFF CONTACT
Abby Veeser, Finance Director
[email protected]
(650) 522-7102