REPORT TO COUNCIL
SUBJECT
Title
Modify an Existing Purchase Agreement with the California Department of Technology for the Purchase of Microsoft Online Subscription Services, Increasing the Amount from $2,234,910 to a new Not-to-Exceed Amount of $2,251,724.05, and Award a new Five-Year Purchase Agreement with the California Department of Technology for the Purchase of Microsoft Online Subscription Services for a Not-to-Exceed Amount of $5,428,038.70 (F26-318 & F26-362)
Report
REPORT IN BRIEF
The City uses various Microsoft products to conduct its everyday work. The licenses associated with that software are expiring and need to be renewed. The City has used an Enterprise Agreement offered through the California Department of Technology (CDT) to obtain better pricing and contract terms for this software compared to what the City could have procured on its own. The City issued a purchase agreement (PA) with CDT, and the term of the PA expires on March 31, 2026. The proposed modification to the existing purchase agreement represents a minor cost increase over the current contract and includes the ability to purchase additional Microsoft subscription licenses.
EXISTING POLICY
Pursuant to Section 2.08.040(d) of the Sunnyvale Municipal Code (SMC), Council approval is required for the procurement of goods and/or services greater than $250,000 in any one transaction.
Further, SMC section 2.08.220 (b) authorizes the Purchasing Officer to participate in a cooperative agreement for the procurement of goods and/or services publicly solicited by another governmental, public or quasi-public entity.
ENVIRONMENTAL REVIEW
The action being considered does not constitute a “project” within the meaning of the California Environmental Quality Act (“CEQA”) pursuant to CEQA Guidelines section 15378(b)(5) in that it is a governmental organizational or administrative activity that will not result in direct or indirect changes in the environment.
BACKGROUND AND DISCUSSION
Existing Agreement Expiring on March 31, 2026:
On September 27, 2022, Council approved a three-year and four-month agreement with the California Department of Technology (CDT) for Microsoft online subscription services in an amount not-to-exceed $2,034,910 with contingency in the amount of $200,000 (RTC No. 22-0951). That agreement allowed the City to participate in the CDT program, which provides discounted Microsoft 365 Government (G5) subscriptions designed to meet federal, state, and local government security and compliance standards.
Under the existing agreement, the mechanism to provide on-demand licenses is through Crayon Enterprises. User counts and service needs have evolved since the original contract execution. To ensure continued compliance with licensing requirements and to support ongoing City operations, staff recommends increasing the overall PA amount from $2,234,910 to a new not-to-exceed amount of $2,251,724.05 to cover licenses through March 31, 2026, the end of the PA’s term.
New 5-Year Agreement:
Staff additionally recommends procuring subscriptions through a new Enterprise Agreement administered by the California Department of Technology (CDT) with SHI International Corp (SHI) as the authorized reseller (Attachments 1 & 2 to the report). The new contract includes access to increase City use and number of staff licenses for the following Microsoft license types: Microsoft 365 G5 which includes Outlook (email), Office Suite, OneNote, Teams (chat and phone), OneDrive, SharePoint (collaboration and sites), Power BI, CoPilot, Defender (threat protection), and Purview (data governance); Microsoft Project; Microsoft Visio; and Microsoft Dynamics.
To participate in the CDT program, the City will pay the following fees:
• 2.79% CDT Service Fee - pass-through fee to the supply vendor (SHI)
• 3.5% CDT Cost Distribution Fee - CDT administration and support of the program
These fees are consistent with the structure of the previous CDT agreement, which included a 2.71% pass-through fee and 3.5% CDT fee. The CDT Enterprise Agreement provides pricing and contractual terms that are more favorable than those otherwise available to the City through standard commercial channels. The CDT program continues to offer price-protected discounted licensing throughout the term. Based on current license counts and contract pricing, including base license costs plus CDT fees, the estimated annual expenditure is as follows:
|
Contract Year |
Estimated Annual Cost |
|
Year 1 |
$970,878.25 |
|
Year 2 |
$970,878.25 |
|
Year 3 |
$997,608.40 |
|
Year 4 |
$997,608.40 |
|
Year 5 |
$997,608.40 |
|
Five-Year Total |
$4,934,581.70 |
Staff requests a 10% contingency of $493,458 for additional licenses and other license types to meet organizational requirements during the term of this contract. The 5-year total, including the 10% contingency amount, results in a not-to-exceed amount of $5,428,038.70.
FISCAL IMPACT
Funding for Microsoft online subscription services is available in Fund 7027 - Technology and Communication Services Fund under Program 15200 - Information Technology Services and Support. Funding for subsequent years will be incorporated as part of future budget cycles. Information technology services are funded through transfers from other funds via internal service charges.
When compared to the current contract, there is a $167,000 annual increase in costs due to the addition of the cybersecurity tool, Microsoft Defender, for advanced threat detection; the data governance tool, Microsoft Purview, for unified data risk and compliance; and upgrades from M365 G1 and G3 licenses to the G5 level providing advanced email security, compliance and voice capabilities along with endpoint protection.
PUBLIC CONTACT
Public contact was made by posting the Council meeting agenda on the City's official-notice bulletin board at City Hall, at the Sunnyvale Public Library and in the Department of Public Safety Lobby. In addition, the agenda and this report are available at the City Hall reception desk located on the first floor of City Hall at 456 W. Olive Avenue (during normal business hours), and on the City's website.
RECOMMENDATION
Recommendation
Take the following actions:
- Modify an existing Purchase Agreement (PA) with the California Department of Technology for Microsoft online subscription services, increasing the amount from $2,234,910 to a new not-to-exceed amount of $2,251,724.05 to cover licensing requirements for the remaining PA term set to expire on March 31, 2026;
- Award a new five-year agreement with the California Department of Technology for the purchase of Microsoft Online Subscription Services in the amount of $4,934,581.70; and
- Approve a 10% contingency in the amount of $493,458 to accommodate additional license needs for new staff and to purchase other required license types through this contract.
Levine Act
LEVINE ACT
The Levine Act (Gov. Code Section 84308) prohibits city officials from participating in certain decisions regarding licenses, permits, and other entitlements for use if the official has received a campaign contribution of more than $500 from a party, participant, or agent of a party or participant in the previous 12 months. The Levine Act is intended to prevent financial influence on decisions that affect specific, identifiable persons or participants. For more information see the Fair Political Practices Commission website: www.fppc.ca.gov/learn/pay-to-play-limits-and-prohibitions.html
An “X” in the checklist below indicates that the action being considered falls under a Levine Act category or exemption:
SUBJECT TO THE LEVINE ACT
___ Land development entitlements
___ Other permit, license, or entitlement for use
_X_ Contract or franchise
EXEMPT FROM THE LEVINE ACT
___ Competitively bid contract*
___ Labor or personal employment contract
___ Contract under $50,000 or non-fiscal
___ Contract between public agencies
___ General policy and legislative actions
* "Competitively bid" means a contract that must be awarded to the lowest responsive and responsible bidder.
Staff
Prepared by: David Battaglia, Purchasing Officer
Reviewed by: Matthew Paulin, Director of Finance
Reviewed by: Kathleen Boutté Foster, Chief Information Officer
Reviewed by: Sarah Johnson-Rios, Assistant City Manager
Approved by: Tim Kirby, City Manager
ATTACHMENTS
1. CDT Agreement
2. Quote