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Home My WebLink About10D ERP Software System O � PRip� N � v � 4646 Dakota Street SE Prior Lake, MN 55372 � CITY COUNCIL AGENDA REPORT MEETING DATE: NOVEMBER 12, 2013 AGENDA #: 10D PREPARED BY: JERILYN ERICKSON, FINANCE DIRECTOR JANE KANSIER, ASSISTANT CITY MANAGER PRESENTED BY: JERILYN ERICKSON & JANE KANSIER AGENDA ITEM: CONSIDER APPROVAL OF A REPORT REGARDING A CONTRACT FOR AN ENTERPRISE RESOURCE PLANNING (ERP) SYSTEM. DISCUSSION: Introduction The purpose of this agenda item is to address questions raised by Council members during the October 28, 2013 workshop regarding the ERP software vendor and, if all questions have been satisfied, to request approval of the agreement with BS&A for an ERP system. Histo The City maintains $187 million in total assets, along with an annual budget of $26+ million. To effectively manage these assets and budgets, the ability to track expenditures and revenues in real time, to identify trends, and to create long term budgets and forecasts is imperative. The City's current 1984 vintage financial system is limited in some of these capabilities. Therefore, the City Council authorized staff to begin the ERP software selection project in November, 2012. The Council approved a tentative timeline in December, 2012, to assist staff as we moved forward with the project. A Request for Proposals (RFP) seeking proposals from qualified software vendors was released on July 1, 2013, using these parameters. The RFP focused on the need for two core modules: Financial and Human Resources. The groupings within these modules included: General Ledger, Budgeting, Purchasing, Accounts Payable, Accounts Receivable, Cash Recei ts, Pro'ect Accountin - Human Resources (Employee File), ,; �� = Pa roll These modules are necessary to address the most critical challenges in the current environment. Future functionality and modules may be considered in later phases. Three vendors submitted proposals and were selected to do product demonstrations in early September. Each vendor had two days in which to demonstrate the functionality of their software. An Evaluation Team, consisting of a cross section of City staff, scored each of the products and narrowed the selection to two vendors. The team then called references for each of the vendors to discuss software functionality, implementation approach and ongoing customer service. At this point, the scores were very close and the Evaluation Team asked the preferred two vendors (BS&A and New World Systems) to do an additional demonstration for very specific functional requirements defined by the staff. Both preferred vendors were also asked to walk through their respective cost proposals for software licensing, implementation services and recurring maintenance to gain a greater understanding of these proposals and to be certain we would only pay for those functionalities we need at this time. These demonstrations and discussions were completed on October 23, 2013. Several City staff have been involved throughout this process. A Project Management Team, consisting of Administration, Finance and Technical staff, has been leading the project from the beginning. The Evaluation Team includes the Project team and additional Finance, Community and Economic Development and Engineering staff. In addition, up to 20 staff from all sectors of the organization attended parts of each product demonstration and provided their feedback that was considered by the Evaluation Team. This cross-sector involvement is critical because, even though the ERP system is primarily a financial system, one of the goals of this project is to ensure the system provides efficiencies and process improvements wherever possible across the entire organization. Current Circumstances Based on the point totals, the Evaluation Team recommends the City contract with BS&A to provide the ERP system. The BS&A proposal for software and implementation is $214,190. These costs include: Software (includes discounts) $ 98,955 Data Conversions $ 47,610 Interfaces $ 21,000 Project Management $ 8,750 Implementation & Training $ 27,000 Post Go-Live Assistance $ 3,000 Discounts $ (5,000) Travel $ 12,875 Total $ 214,190 Annual service fees will be waived for the first year of use after the software is implemented. Beginning in year 2(2015), the City will incur $26,210 (or some portion, thereofl in annual service fees, as shown in the table below. In year 3, service fees may be increased by an amount not to exceed the yearly CPI. � General Ledger/Budgeting.NET $ 0 $ 2,500 Purchase Order.NET $ 0 $ 2,130 Accounts Payable.NET $ 0 $ 2,130 Cash Receipting.NET $ 0 $ 2,130 Miscelianeous Receivables.NET $ 0 $ 2,130 Fixed Assests.NET $ 0 $ 2,130 Human Resources.NET $ 0 $ 2,500 Payroll. N ET $ 0 $ 2, 750 Timesheets.NET $ 0 $ 1,530 Special Assessments.NET $ 0 $ 1,400 Employee Web Portal $ 0 $ 2,750 Purchasing Web Portal $ 0 $ 2,130 ANNUAL TOTAL $ 0 $ 26,210 At its workshop on October 28, 2013, the City Council directed staff to move forward with contract negotiations with BS&A by addressing a number of issues. Conclusion The staff is continuing to finalize the contract with BS&A. The contract which is the City's standardized document will need to be reviewed by the City Attorney. The staff recommends the Council continue this item to November 25, 2013. ISSUES: The Council asked the staff to further explore the following list of questions. 1. Split out traininq and implementation costs. The staff, along with BerryDunn, are continuing to work with BS&A on the appropriate way to manage this in the contract. BS&A has agreed to allow reallocation of any training in the pool without penalty. 2. How are reqular updates (in the operations phase) tested? Who does the testinq? BS&A offers biweekly updates, but the updates are not mandatory. Unit testing on all updates is built-in and completed by BS&A prior to the release of any update. The issue with updates is generally in customization, and the City does not expect to have any customizations to the software. On the user side, the process for updates will be very similar to what users see with Adobe updates. A message will be provided at login, and the user simply clicks install to receive the update. 3. Attempt to get a cost not to exceed auote on each. Where appropriate, the contract includes the not to exceed language. In most cases, the City will be billed for the time used, so costs may be less than noted in the contract. 4. What do BS&A staff qo throuqh for background checks as it relates to accessibility to sensitive Citv information? BS&A has agreed to provide the City with a copy of their privacy agreement but we have not received it as of this date. The hiring process at BS&A includes background checks, reference checks, and a 90-day internship prior to obtaining full-time status. 5. Obtain a recently completed SAS70/SSAE16 report. BS&A has agreed to provide a copy of this report, but we have not received it as of this date. As the Council is aware, the implementation of this new system will be a 12 to 18 month process. During that time a variety of other contracts are coming up for renegotiation. So that we can focus upon the ERP System, the staff would like to defer the various projects identified below until completion of the ERP. �R�i,� � �� r -U _ - � � h �� I� � Banking Services 2010 — 2013 with 1 one- Staff will review an US Bank 2009 year extension (through extension of the contract 2014 . throu h 2016. Audit years 2011-2013; Auditing Services contract allows for Staff will review an MMKR 2011 extensions for additional extension of the contract periods as deemed for audit years 2014-2016. a ro riate. Staff will need to consult IT Services with software vendor, CIT, Computer etc. to determine how Integrated N/A Month to Month much additional IT Technologies resources will be needed (CIT) during the implementation and the associated timing of those resources. Consider Financial Advisor issuing N/A Defer as necessary. Services RFP in 2015 Current contracts expire Will still need to negotiate Union Contracts N/A 12/31/2014. (in 2014) for contracts be innin 01/01/2015. FINANCIAL The initial staff estimate for the ERP System (software only) was $350,000. As a IMPACT: result of the BerryDunn assessment, this number was revised to $460,000. The estimate does not include the cost of the software selection consultant ($63,275), hardware upgrades required by the system ($35,700), or consultant implementation assistance ($200,000). If all of these elements are included then the total estimated cost is $514,575. These estimated cost are more completely laid out below including the likely timing for payment: , i i� . �� ... _ _ I f, � � �N 41K � Selection Assistance Consultant (BerryDunn) $ 63,275 2013 BerryDunn Additional Work $ 1,410 2013 Initial Software and Implementation $ 214,190 2014 Project Manager Services (estimate) $ 150,000 2013-2014 Additional IT Services (estimate) $ 50,000 2014 Hardware (receipt printers, etc.) $ 4,700 2014 Laptops for training $ 6,000 2014 Network equipment (servers) $ 25,000 TOTAL $ 514,575 These costs will be incurred over time. For example, the initial software selection consultant costs will be completed in 2013, while the software costs will not be billed until the 2014. Other costs will be incurred over 2014.The approving resolution will address the various funding sources to complete this project. Staff received multiple proposals for project management services. The cost came in higher than anticipated; therefore, Staff is reviewing options to assure we receive the services which are prerequisite to effective implementation most cost effectively. ALTERNATIVES: 1. Continue negotiations on the ERP Contract with BS&A and bring this item back to the City Council on November 25, 2013. 2. Direct the staff to investigate and provide responses to additional City Council questions. RECOMMENDED Alternative 1 MOTION: