Report Prepared by: Jeff Bennyhoff, Director of Information Technology
Title
SUBJECT: Approval to Execute Amendment #18 with Tyler Technology for $296,200 and $49,859 for a Performance Bond for a Total not to Exceed Amount of $5,371,306 and Approval to Execute Amendment #3 with SDI Presence LLC for $293,973 for a Total not to Exceed Amount of $1,234,818, and Increase Expenditure Authority to Thor Inc. by $20,000 for a Total not to Exceed Amount of $879,690 for ERP CIP180003 Completion, and a Five-Year SaaS Agreement with Tyler Technologies for ERP Software, Hosting, Support, and Services with a Total Amount not to Exceed $2,655,064, Including a 5% Contingency
REPORT IN BRIEF
Considers approval to execute amendment #18 with Tyler Technology for $296,200 and $49,859 for a Performance Bond for a total not to exceed amount of $5,371,306 and approval to execute amendment #3 with SDI Presence LLC for $293,973 for a total not to exceed amount of $1,234,818, and increase expenditure authority to Thor Inc. by $20,000 for a total not to exceed amount of $879,690 for ERP CIP180003 completion, and a five-year SaaS Agreement with Tyler Technologies for ERP software, hosting, support, and services with a total amount not to exceed $2,655,064, including a 5% contingency.
RECOMMENDATION
City Council - Adopt a motion:
A. Approving eighteenth amendment with Tyler Technology for $296,200 for a not to exceed total contract amount of $5,321,447; and,
B. Authorizing the City Manager to execute a $49,859 future contract amendment to extend the duration of the performance bond for the duration of the Tyler ERP project for a not to exceed total contract amount of $5,371,306 and contingent upon approval as to form by the City Attorney; and,
C. Approving third amendment to the professional services agreement with SDI Presence LLC for $293,973 for a not to exceed total contract amount of $1,234,818; and,
D. Authorizing an increase of $20,000 to the expenditure authority under the services agreement with THOR, Inc; and,
E. Authorizing the City Manager to execute any necessary documents; and,
F. Waiving the City’s competitive bid requirements as per Merced Municipal Code Section 3.04.210; and,
G. Approving a 5-year contract with Tyler Technology for $2,528,632 and 5% contingency of $126,432 for a not to exceed amount of $2,655,064 for ERP Software, Hosting, Support, Training, Education and Services; and,
H. Authorizing the City Manager to execute future contract amendments with Tyler Technology with a not to exceed the expenditure authority from recommendation G and contingent upon approval as to form by the City Attorney; and,
I. Authorizing the City Manager to execute zero-dollar future contract amendments with Tyler Technology and contingent upon approval as to form by the City Attorney; and,
J. Authorizing the Finance Officer to make the necessary budget adjustments.
Body
ALTERNATIVES
1. Adopt the motion as recommended; or,
2. Decline to award contract; or,
3. Refer to staff with direction.
AUTHORITY
Charter of the City of Merced, Section 200 and Merced Municipal Code Section 3.04.210.
CITY COUNCIL PRIORITIES
As provided for in the 2024-2025 Adopted Budget.
DISCUSSION
Background
In March of 2020 staff brought forward to council an RFP to award a new Enterprise Resource Planning (ERP) software suite. The previous ERP software suite, which was purchased in 1989, no longer met the City’s evolving business and operational requirements. Given the estimated cost of $5 million, the project was classified as a Capital Improvement Project (CIP180033). The project was structured into six phases, with an anticipated completion timeline of five years. The project was awarded to Tyler Technology.
The six phases of the project were:
|
Phase Number |
ERP Module |
|
Phase 1 |
Financials |
|
Phase 2 |
Enterprise Assets Maintenance |
|
Phase 3 |
Enterprise Permitting and Licensing |
|
Phase 4 |
Human Capital Management |
|
Phase 5 |
Advanced Time and Attendance |
|
Phase 6 |
Utility Billing |
Project Adjustments
Over the course of the project, a total of 17 contract amendments were executed with Tyler Technologies to address changes in project scope, schedule adjustments, evolving technical requirements, and modifications to asset quantities. As part of the original project approval, the City Council authorized the City Manager to execute contract amendments within a contingency authority not to exceed $452,645.
Within that same Council action, separate authority was specifically provided for the renewal of performance bonds associated with Amendment #3 and Amendment #9, totaling $46,147. These items are therefore excluded from the contingency threshold.
Excluding the performance bond renewals, the total value of amendments executed under the City Manager’s delegated contingency authority amounts to $341,907 expended to date. The remaining contingency authority available is $110,738. A summary of each amendment is provided in the table below:
|
Amendment Number |
Description of Change |
Amendment Value |
|
Amendment 1 |
Adjustment to project timeline due to COVID and Change to Purchasing Bid Module |
$8,622 |
|
Amendment 2 |
Change to Point of Sale cashiering equipment and reallocating professional services funds originally designated for travel to the Project Management and Consulting category. |
$0 |
|
Amendment 3 |
Renewal of performance bond |
$20,143 |
|
Amendment 4 |
Additional Professional Services |
$28,000 |
|
Amendment 5 |
Additional Professional Services |
$120,000 |
|
Amendment 6 |
Acquisition of additional Point of Sales/Credit Card equipment to support payment processing across all departments. |
$2,363 |
|
Amendment 7 |
Software enhancement for Citizen Self Service (CSS) online access, Vendor Self Service, and Employee Self Service |
$0 |
|
Amendment 8 |
Reallocating professional services funds originally designated for travel to the project management and consulting category. |
$0 |
|
Amendment 9 |
Renewal of performance bond |
$26,004 |
|
Amendment 10 |
Acquisition of Time Clocks equipment for Time and Attendance modules |
$3,010 |
|
Amendment 11 |
Acquisition of barcode scanners and software to enhance inventory control processes. |
$17,922 |
|
Amendment 12 |
Merced Connect/MyCivic Change Order for custom branding |
$37,300 |
|
Amendment 13 |
Modification to the credit card payment transaction system. |
$7,090 |
|
Amendment 14 |
Additional Professional Services |
$117,600 |
|
Amendment 15 |
Internal City Amendment for tracking purposes only |
$0 |
|
Amendment 16 |
Internal City Amendment for tracking purposes only |
$0 |
|
Amendment 17 |
Internal City Amendment for tracking purposes only |
$0 |
|
Amendment 18 (Proposed) |
Additional Professional Services and additional business licenses software |
$296,200 |
Current Status:
City staff from all departments have dedicated considerable effort to successfully implement each of the modules of the ERP software, transitioning from our legacy system. To date, the City has completed the implementation of Phase 1, Phase 2, and Phase 3 of the project. Phase 4 is scheduled to go live in July 2025 as this writing on this administrative report.
Phase 5 and Phase 6 are anticipated to be completed late FY25/26 or early FY26/27.
Factors Contributing to Project Delays
Several challenges contributed to the delay of the project, delaying the originally estimated timeline for completion. These challenges are outlined below:
1. COVID-19 Pandemic: Phase 1 of the project was scheduled to begin in April 2020, immediately following contract execution. However, within days of signing the contract, the COVID-19 pandemic significantly impacted operations, resulting in an unavoidable delay before the project had even commenced.
2. Flooding Events: Another phase of the project was originally planned for January 2023. However, due to the flood experienced in our local region, this portion of the rollout had to be postponed. The rescheduled implementation date of March 2023 coincided with a storm event, causing further disruptions, and necessitating additional adjustments to the project timeline.
3. Staffing Constraints: The level of effort required from City staff was greater than initially anticipated. Given existing workloads and competing priorities, staff availability for project implementation was limited. While the project budget accounted for supplemental support, the additional resources were insufficient to fully meet the demands of the transition.
4. Data Conversion and Migration: Data conversion from the legacy system to the new system presented significant challenges due to evolving data standards and inconsistencies in historical data entry practices. For example, address formatting varied across departments, with entries such as "678 W 18th Street" and "678 West 18th Str." leading to discrepancies that required extensive data cleansing and validation.
5. Scheduling Conflicts: Coordinating availability between City staff and vendor representatives proved to be an ongoing challenge. The scheduling of required meetings often faced delays due to conflicting commitments, impacting the project's overall timeline.
Project Budget Update
The ERP Project was allocated a total budget of approximately $7 million. As of this report, total amount of expenditures and encumbrance is $5,159,952, with a current CIP project balance of $1,840,048.
While staff has exercised fiscal prudence and completed several components under budget, project delays and evolving requirements have led to additional funding needs to complete the project. An estimated $400,000 in additional appropriations, representing approximately 5.7% of the total project budget is estimated to complete implementation.
The estimate accounts for remaining system configuration and development work; however, due to the variable nature of custom software development, some cost uncertainty remains. As a result, staff will return to the City Council for a final budget adjustment prior to project closeout.
Recommended Course of Action
Actions to Complete the Project
1. Execute Contract Amendment #18 with Tyler Technology:
Amendment No. 18 will provide for the remaining Enterprise Resource Planning (ERP) system components, including software licensing, cloud hosting, system support, and professional implementation services required to complete the Capital Improvement Project (CIP) scope. The proposed amendment is in the amount of $296,200. As we are proposing extending the project duration an additional performance bond will need to be secured with a cost of $49,147. Staff is requesting separate City Council authority to execute Amendment #18 and obtaining the performance bond, above and beyond the previously approved contingency threshold. This approach will preserve the remaining $110,738 in contingency authority for future unforeseen needs related to the project, ensuring continued flexibility and responsiveness through project closeout. With approval of this amendment, the total value of the Tyler Technologies contract, including all prior amendments and Council-authorized actions, will be $5,371,303, summarized as follows:
|
Description |
Amount |
|
Original Contract |
$4,526,455 |
|
Contingency Authority |
$452,645 |
|
Performance Bonds - Completed |
$46,147 |
|
Performance Bonds - Remaining |
$49,859 |
|
Amendment #18 (proposed) |
$296,200 |
|
Total Contract Value |
$5,371,306 |
2. Execute Contract Amendment #3 with SDI Presence LLC for Project Management Services: Authorize execution of Amendment #3 to the agreement with SDI Presence LLC in the amount of $293,973. This amendment will provide for the continued delivery of project management services in support of the Enterprise Resource Planning (ERP) Capital Improvement Project. The original agreement was awarded at $251,250. Amendment one increased the not-to-exceed amount to $467,950, and Amendment two further increased it to $940,845. Amendment two was to provide project management services through Phases 3 and 4 of the Tyler Technologies. The proposed Amendment three will extend project management services through Tyler Phases 5 and 6, ensuring continuity of oversight, alignment with vendor deliverables, and coordinated execution of remaining project tasks. With this amendment, the revised not-to-exceed contract value will total $1,234,818.
3. Approval of a One-Time Expenditure Authority Increase to the Thor Contract: Authorize a one-time increase in expenditure authority in the amount of $20,000 to support potential contingency needs related to the continued operation and maintenance of the City’s legacy Enterprise Resource Planning (ERP) system. This increase is in addition to previously authorized amounts, including $839,370 for a three-year term of ongoing support services and $20,320 for programming modifications required to accommodate payroll changes resulting from recently negotiated bargaining unit agreements. With this $20,000 increase, the revised not-to-exceed expenditure authority under the existing agreement will total $879,690. This additional authority will be utilized only as necessary to address unforeseen issues and will help ensure operational continuity of the legacy ERP system through the end of the contract term, which extends through July 2026. As legacy system data may continue to be required for operational or reporting purposes beyond the expiration of the current agreement, staff anticipate initiating a formal Request for Proposals (RFP), prior to contract expiration to secure ongoing support services for the legacy system.
|
Vendor |
Description |
Current Authority |
Amendment Amount |
Revised Total Authority |
|
Tyler Technology |
ERP software, hosting, support, and implementation services (Amendment No. 18) |
$5,025,247 |
$296,200 |
$5,321,447 |
|
Tyler Technology |
Performance Bond |
N/A |
$49,859 |
$49,859 |
|
SDI Presence LLC |
ERP project management services (Amendment No. 3) |
$940,845 |
$293,973 |
$1,234,818 |
|
Thor INC |
Legacy ERP system support (One-time increase in expenditure authority) |
$859,690 |
$20,000 |
$879,690 |
|
|
Totals |
$6,825,782 |
$660,032 |
$7,485,814 |
As reflected in the chart above, the total requested increase in contract authority and expenditure across all three vendors is $660,032, resulting in a revised total ERP program investment of $7,485,814. Funding for these actions will be supported through a combination of the unencumbered balance of $1,180,016 available within the Enterprise Resource Planning (ERP) Capital Improvement Project (CIP) and a new appropriation request of $400,000. The $400,000 appropriation has been submitted as a below-the-line funding request in the City Manager’s Proposed FY 2025/26 Budget, with $200,000 proposed for appropriation in FY 2025/26. The remaining $200,000 is anticipated to be requested during the FY26/27 budget development process to complete the final phases of ERP implementation.
Actions to Ensure Ongoing ERP Operations
To maintain the new ERP system and ensure long-term stability, we must:
1. Execution of A Contract for Ongoing Software Maintenance - A separate five-year agreement is necessary to continue utilizing the Tyler Technologies ERP software suite, including licensing, cloud hosting, system support, and related services. The negotiated contract total is $2,528,632. As part of the contract negotiations, staff secured a 0% cost increase in Year 1 compared to the City’s previous ERP maintenance agreements. The agreement includes a 4% annual escalation in Years 2 and 3, followed by a 5% annual escalation in Years 4 and 5. Failure to execute this agreement would result in the City losing its legal right to use the ERP software and associated services that have been implemented over the past five years.
2. Authority for Future Contract Amendments - staff will need authority to account for changes that will occur over the next five years, including adding or removing staff licenses, incorporating new features, adapting to process or regulatory changes that require technological updates, and responding to changes in technology. Staff is seeking for authority to execute future contract amendments that do not exceed 5% of the value of the contract. This authority will allow us to proactively manage necessary adjustments without requiring additional approval for each change, ensuring flexibility and continuity in operations. With the 5% contingency the total not to exceed amount of $2,655,064 would be authorized.
Given the substantial investment in the current ERP system, the operational efficiencies already realized, and the complexities associated with system transitions, staff recommends waiving the City’s competitive procurement requirements under Section 3.04.210 of the Merced Municipal Code to maintain continuity of service. From a procurement standpoint, transitioning to a new ERP system would necessitate a significant reinvestment in vendor selection, contract negotiation, implementation, and staff retraining-incurring substantial costs and potential operational disruptions. By extending the existing contract, the City can leverage prior investments, ensure uninterrupted system functionality, and maximize the value of its procurement strategy without incurring unnecessary delays or inefficiencies.
Results of Implementing the New ERP System
The new ERP system has improved City operations by making processes more efficient and accessible. While our previous system had digital components, many workflows still relied on manual, paper-based processes. The transition to a digital-first approach has provided several key benefits:
1. More Efficient Processes
• Tasks that previously required paper forms, interoffice routing, and manual approvals are now handled digitally, reducing delays.
• Approval workflows are now systematically documented and tracked, ensuring process integrity, timely execution, and accountability at every stage.
2. Better Data Accuracy & Management
• A centralized digital system reduces the risk of missing details, misfiled paperwork, or errors from manual data entry.
• System-driven validations and standardized workflows ensure compliance with established policies and procedures, minimizing errors and maintaining consistency in record-keeping.
3. Easier Access & Transparency
• Staff can retrieve records and track financial data more easily compared to navigating multiple systems or requesting information manually.
• Digital tracking of approvals and transactions provides a clear audit trail, strengthening oversight.
4. Improved Public Access to Services
• The new system includes online portals that allow residents and businesses to access City services, submit requests, and complete transactions remotely.
• This reduces the need for in-person visits, increases convenience, and enhances engagement with the community.
Overall, the new ERP system enhances accountability, oversight, and process integrity, reducing reliance on outdated practices and making operations more efficient.
Post-Project Completion and Records Retention Management
Once the City has successfully completed this project, the legacy ERP system will still contain historical records that must be properly retained and managed in accordance with the City's records retention schedule. Since this requirement was not included in the initial project scope, a separate initiative will be necessary to ensure continued access to these records. A request for expenditure authority to support this effort will be brought forward to the City Council at a future date and aligned with the budget cycle.
IMPACT ON CITY RESOURCES
Funding for the contracts to complete the ERP System implementation is allocated within Project CP180033. While the amount allocated for ongoing operations is in Fund 7008-Support Services, Information Technology Division.
ATTACHMENTS
1. Tyler Amendment #18
2. SDI Presence Amendment #3
3. Original Thor Agreement
4. Tyler SaaS Service Agreement