REPORT TO COUNCIL
SUBJECT
Title
Award a Contract to CherryRoad Technologies, Inc. for an Oracle Cloud Enterprise Resource Planning System and Implementation Services (F17-157)
Report
REPORT IN BRIEF
In June of 2017 the City issued a Request for Proposals (RFP) for the purchase and implementation of an Enterprise Resource Planning (ERP) System to replace the City’s legacy financial and human resources systems. The RFP sought an integrated solution for the City’s core financials, human resources, and payroll systems. An evaluation team consisting of staff from the departments of Finance, Human Resources, and Information Technology evaluated the eight proposals. After a comprehensive evaluation process the team recommended the City negotiate with CherryRoad Technologies, Inc. (CherryRoad) for the purchase of the Oracle Fusion Cloud platform suite, other necessary third party tools, and implementation services.
Staff is recommending the award of a ten-year agreement in the amount of $12,072,676 to CherryRoad Technologies of Morris Plains, NJ for the implementation services, Software-as-a-Service (SaaS) cloud licensing of the Oracle Fusion Cloud platform suite for Enterprise Resource Planning (Finance and Human Resources), and licenses for associated third party tools. The contract consists of implementation services in the amount of $5,345,000, third party tools/services in the amount of $672,176, a flat ten-year Oracle licensing agreement in the amount of $4,355,000 and optional services in the amount of $1,700,500 report development, Oracle Planning & Budgeting Cloud module, and Oracle Enterprise Performance Reporting Cloud module. Approval is also requested for 10% contract contingency on implementation services in an amount of $534,500.
EXISTING POLICY
Pursuant to Section 2.08.040 of the Sunnyvale Municipal Code, City Council approval is required for the procurement of goods and/or services exceeding $100,000 in any one transaction.
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(a) as it has no potential for resulting in either a direct physical change in the environment, or a reasonable foreseeable indirect physical change in the environment.
BACKGROUND AND DISCUSSION
ERP Project Overview
One of the City Council’s strategic priorities has been the modernization of the City’s
information technology systems and infrastructure. The single largest effort in support of this strategic priority is the replacement of the City’s central business systems. The City’s current financial, human resources and payroll systems are antiquated, a bottleneck to process improvement and expensive to maintain. Options for on-going support of the aging financial systems, of which there are several discrete systems, are limited and the flexibility needed for process improvements is lacking. The City’s HRIS/Payroll system requires customization to meet minimum business requirements, making it difficult to support. These systems require widespread use of paper, manual data entry, and duplicate data entry or custom integrations to pass data between systems. Staff determined that the best approach was to procure an Enterprise Resource Planning (ERP) Solution.
The City’s objectives for the project include:
• Implementation of an Enterprise Resources Planning (ERP) solution to replace
functionality provided by current legacy information systems
• Enhanced operational effectiveness by making more timely, accurate and complete information available to residents, the Mayor and City Council, City Manager, and other City personnel
• Increased productivity by eliminating redundancy and unnecessary tasks
• Improved management and public policy decision‐making by increasing the ability to analyze data
• Utilize and manage technology in a cost‐effective manner
• Elimination of multiple systems (and the interfaces between them), ad‐hoc databases, and spreadsheets through the implementation of a single, comprehensive, and integrated solution
• Increased operational effectiveness via the use of a learning management system
• Enhanced cross‐departmental collaboration through the use of information technology and improved business processes
• Improvement in the sharing of information between the City and external agencies
• Implementation of best business practices (i.e., encourage streamlining and automation of standard business transactions, enhanced processing and on‐line capabilities, etc.)
• Implementation of enhanced features and functionality to support increased automation and operational efficiencies (i.e., workflow, self‐service, document imaging, accounts receivable, cashiering, refunds, grant management, etc.)
• Improve the availability of financial, human resources, and payroll data to City personnel
• Reduce the extent of custom modifications to the City’s application portfolio through the adoption of best business practices
ERP Procurement Process
City staff formed a joint Steering Committee consisting of representatives from the Finance, Human Resources, and Information Technology Departments to begin the process to define the scope and procure an ERP. The Steering Committee is governed by an Executive Committee consisting of the Directors of Human Resources, Information Technology, and Finance, with the Assistant City Manager functioning as the Project Executive Sponsor.
An innovative procurement approach (Attachment 1) was used to simplify and reduce cost for interested vendors to propose. The flow of the procurement did not require proposers to make a significant investment until clearly identified as finalists in the final stages of the process.
In June of 2017 the City issued a Request for Proposals (RFP) for the purchase and implementation of an Enterprise Resource Planning (ERP) System. The City received eight proposals. An evaluation team consisting of staff from the departments of Finance, Human Resources, and Information Technology evaluated the proposals. The evaluation team invited five proposers to conduct high level demonstrations of their solutions to the evaluation team and staff from the three departments. The evaluation team narrowed the field to two proposers who were invited to scripted proof of capabilities sessions where a detailed presentation of their solutions was provided to the same evaluation team.
Upon completion of the proof of capabilities demonstrations, the evaluation team consulted with the Executive Committee and recommended a finalist for reference checks and to go through a best and final offer process. The Executive Committee approved moving forward to check references on CherryRoad Technologies as an implementer of the Oracle Fusion Cloud Financials and Human Capital Management (HCM) ERP suite.
Reference checks confirmed Fusion Cloud to be a newer product that does not have any current live public sector clients in California. One California public agency is close to final implementation of this software and will go-live later this year. The product is live with multiple public sector clients around the country and several California public sector clients have recently selected the system for implementation. Given Oracle’s public sector clientele from other platforms, and the product’s configurable design, the evaluation team recommended the software to the Executive Committee. The Executive Committee supported this recommendation and entered into negotiations with CherryRoad.
Contract negotiations proceeded with a City negotiating team, consisting of the Executive Committee, a representative from the Office of the City Attorney, and a consultant specializing in ERP procurement and Implementation (SDI Presence, Inc). Negotiations included the individual contracts described in detail below, as well as the detailed implementation Statement of Work (Exhibit A of Attachment 2). During the negotiations, additional optional services were discussed that provide an additional benefit to the City, which include report writing, additional training, use of the Oracle Planning & Budgeting Cloud module, and Oracle Enterprise Performance Reporting Cloud module.
Implementation Approach
Successful implementation of an ERP is a very resource intensive and focused effort. The Sunnyvale ERP project constitutes the following phases of implementation, which is described in further detail in the Statement of Work:
• Phase I - Financials: General Ledger (Chart of Accounts), Vendor Management, Purchasing/eProcurement, Accounts Payable, Accounts Receivable, Inventory/Warehouse Management, Fixed Asset Management, Contract Management, Bank Account Management & Reconciliation, Cashiering & Till Management, Expenses, Projects & Grants
• Phase II - Human Capital Management (HCM): Payroll, Time Entry, Human Resources, Benefits, Leave Management
• Phase III - HCM: Performance Reviews/Management, Risk Management, Certification/Training/Learning Management/Career Development, and Expense reporting
Overall, the project will consist of implementing the following Oracle products:
• Fusion Financials Cloud
• Fusion Procurement Cloud
• Supply Chain Management Cloud
• Fusion Project Portfolio Management Cloud
• Fusion Human Capital Management Cloud
• Fusion Talent Management Cloud
• Expense Cloud
• Learning Cloud
The following additional Third Party products will be implemented as well:
• CORE iPayment (Cashiering/Point of Sale)
• ADP (W2 and reporting)
• Asset Tag Management
• RF Smart (barcoding/scanning)
The following are potential optional products to be implemented:
• Planning & Budgeting Cloud Service
• Enterprise Performance Reporting Cloud Service
The timing for proposed implementation is aggressive and is required to be as upgrades to the Microsoft platform will make operating the legacy financial system difficult as it does not function on Windows 10. The timeline assumes a 1-month review of the Chart of Accounts, Financials implementation in twelve months, and a HCM implementation in ten months, with extended HR functions implemented two months later. This schedule will require significant backfill staffing for the next year, and heavily impact the Departments of Human Resources, Finance, and Information Technology.
The core project team will consist of a Project/Change Manager contracted through Plante Moran, a consulting firm who specializes in this area and can also provide depth in key Subject Matter Expertise (SME) areas as needed. The core team will also be staffed by a Functional Lead from each key department (Finance, Human Resources, Information Technology) and a business analyst from the Finance Department who supports both financials and HCM systems. These employees will be assigned to the project full time and their regular duties backfilled by term limited and possible contractual appointments. Together with CherryRoad, the team will implement the system. Overall go-live of phases one and two are scheduled for October 2019 for Financials and HCM and December 2019 for HCM and expense reporting (Phase III).
Staffing
The implementation effort will significantly impact City staff in the departments of Human Resources, Information Technology, and Finance. The project scope forecasts up to twenty Full Time Equivalents in some months to complete the work. The impact will span all disciplines from accounting to benefits to data conversion and application interface development.
The City will be hiring a mix of term limited, casual, and contract staff as augmentation and backfill for regular day-to-day responsibilities within the departments. To ensure successful implementation, required project staff must remain dedicated to the project. This will require coordination and oversight by management, the Project/Change Manager as well as by the Executive Committee to avoid an impact to regular City operations or delays to the project. Funding for backfill staff has been included in the budget for the project.
Change Management and Training
One of the Project Manager’s responsibilities, with support from other Plante Moran staff, will include organizational change management. This project will affect every employee in the City, at least minimally through the employee self-service portal. Having a full change management plan, as well as a careful and detailed roll out of the system to the City will be critical to project success. Through the initial stages of the implementation (where internal tasks such as chart of accounts and interface development are being completed) the project manager will develop a detailed change management plan with the Executive Committee. Sunnyvale-specific implementation project team, train-the-trainer and end-user training will be provided by CherryRoad. Implementation staff will also need to attend additional training through Oracle University for more in-depth product training and will be governed by a separate agreement executed directly with Oracle under the City Manager’s authority.
Documents to Approve
Staff is recommending approval of a Services Agreement with CherryRoad for purchase and implementation of the Oracle Fusion Cloud platform suite product. The agreement contains four key exhibits:
- Exhibit A - Statement of Work: This document details the process for implementation, the various deliverables agreed to by the City and CherryRoad, the timeline, and the detailed payment schedule.
- Exhibit B - CherryRoad/Oracle Public Sector Cloud Services Agreement Terms: They include terms of agreement (ten years), terms on the services provided, how data will be protected, and other details related to the Oracle Public Sector Cloud Services. This agreement holds flat the annual fee for all ten years (no escalation).
- Exhibit C - Cloud Services and Third Party Tools Bill of Materials: This is a list of products to be purchased.
- Exhibit D - ADP Global Master Services Agreement: The agreement will also contain an additional small agreement with ADP for the production of W2s and some other payroll related services. This agreement will be incorporated once it is received from CherryRoad.
The contract consists of implementation services in the amount of $5,345,000, third party tools/services in the amount of $672,176, a flat ten-year Oracle licensing agreement in the amount of $4,355,000 and optional services in the amount of $1,700,500 report development, Oracle Planning & Budgeting Cloud module, and Oracle Enterprise Performance Reporting Cloud module. Approval is also requested for 10% contract contingency on implementation services in an amount of $534,500.
In summary, replacing this key business system is one of the highest priorities for information system replacement. The City’s financial, payroll, and human resource systems support key operations across multiple business units in multiple departments. Consolidating to a single ERP solution will streamline work effort, automate outdated processes, and provide new and modern reporting and analytical capabilities. Should this project be delayed, the City will encounter compatibility issues with Windows 10 and its legacy systems in early calendar year 2020.
FISCAL IMPACT
The one-time implementation and staffing costs and the initial ongoing costs are funded over four years Project 830521 - ERP System Acquisition, Implementation, and Support which has approximately $12.6 million available. Approximately $9.7 million is planned to be absorbed in the project budget. The remaining $2.5 million in ongoing costs (specifically years five through ten of this agreement) which total approximately $500,000 annually, will be included in the Technology and Communications Internal Service Sub-Fund, and will be offset by savings through the elimination of the costs for several existing systems which will be eliminated by the ERP.
Funding Source
Funding for the ERP is provided in the Technology and Communications sub-fund of the General Services Internal Service Fund. Information Technology systems are funded through transfers from all other funds based on operational use of the systems.
PUBLIC CONTACT
Public contact was made by posting the Council agenda on the City's official-notice bulletin board outside City Hall, at the Sunnyvale Senior Center, Community Center and Department of Public Safety; and by making the agenda and report available at the Sunnyvale Public Library, the Office of the City Clerk and on the City's website.
ALTERNATIVES
1. Award a contract in the amount of $12,072,676 to CherryRoad Technologies, Inc. of Morris Plains, NJ for the implementation and cloud licensing of an Oracle Enterprise Resource Planning solution, in substantially the same form as Attachment 2 and authorize the City Manager to execute the contract when all necessary conditions have been met. Approval is also requested for 10% contract contingency in an amount of $534,500.
2. Do not award a contract and Direct staff to continue negotiations with CherryRoad Technologies, Inc
3. Do not award a contract to CherryRoad Technologies, Inc.
RECOMMENDATION
Recommendation
Staff recommends Alternative 1: Award a contract in the amount of $12,072,676 to CherryRoad Technologies, Inc. of Morris Plains, NJ for the implementation and cloud licensing of an Oracle Enterprise Resource Planning solution, in substantially the same form as Attachment 2 to the report and authorize the City Manager to execute the contract when all necessary conditions have been met. Approval is also requested for 10% contract contingency in an amount of $534,500.
Staff
Prepared by: Timothy J. Kirby, Director of Finance
Reviewed by: Kathleen Boutté Foster, Chief Information Officer
Reviewed by: Tina Murphy, Director of Human Resources
Reviewed by: Teri Silva, Assistant City Manager
Approved by: Kent Steffens, City Manager
ATTACHMENTS
1. ERP Procurement Flow Chart
2. CherryRoad Technologies Services Agreement
a. Exhibit A - Statement of Work
b. Exhibit B - Cherry Road/Oracle Public Sector Cloud Services Agreement
c. Exhibit C - Cloud Services and Third Party Tools Bill of Materials (List of Products to be Purchased).
d. Exhibit D - ADP Global Master Services Agreement [to be provided by CherryRoad at a later date]