Report Prepared by: Jeff Bennyhoff, Director of Information Technology
Title
SUBJECT: Award of Request for Proposals (RFP) for Legacy ERP System Support to THOR, Inc. for a Five-Year Term and a not to Exceed Amount of $196,300
REPORT IN BRIEF
Staff recommends awarding an RFP for Legacy ERP System Support to THOR, Inc. for a five-year term and a not to exceed amount of $196,300 with specialized expertise required to maintain the City’s Legacy ERP System during ERP transition.
RECOMMENDATION
City Council - Adopt a motion:
A. Awarding the RFP and approving the Agreement with THOR, Inc; and,
B. Authorizing the City Manager to execute the necessary documents
Body
ALTERNATIVES
1. Approve as recommended by Staff; or,
2. Deny; or,
3. Refer to Staff for further evaluation.
AUTHORITY
Charter of the City of Merced, Section 200.
CITY COUNCIL PRIORITIES
As provided for in the 2026-27 Proposed Budget.
DISCUSSION
The City utilized the CentralSquare Enterprise Resource Planning (ERP) system for more than 30 years as its primary financial management software supporting core municipal operations including finance, payroll, utility billing, permitting, and business licensing. The system operates on the IBM AS/400 platform and utilizes RPG programming language, a legacy technology that requires specialized technical expertise.
The City began transitioning away from this legacy ERP platform to a modern ERP system and anticipates completing the transition in late 2026. During the transition period, the City continues to rely on the legacy system while replacement modules and systems are being implemented. Due to the specialized nature of the platform and the limited number of professionals capable of supporting the applications, the City entered into professional services agreements with THOR, Inc. to provide services.
At the time, the City utilized THOR’s services agreement because staff was unable to identify qualified individuals or firms capable of providing these services. The market for AS/400 programmers with experience supporting the CentralSquare environment is extremely limited, and THOR provided access to qualified technical resources necessary to maintain the system.
Although the City has nearly completed the transition to the new ERP system, the legacy system must remain available to provide access to historical records that were not migrated and that remain subject to applicable records retention requirements until they can be archived or migrated through a separate data migration process. Staff anticipates issuing a Request for Proposals (RFP) for legacy ERP data migration, expected to be included in the FY26/27 City Manager’s proposed budget, with the migration effort anticipated to occur over multiple years.
Because several years have passed since the last procurement, the City issued a new Request for Proposals to determine whether additional vendors were available in the marketplace capable of providing these specialized services. Staff also sought to transition from the vendor’s services agreement to the City’s standard services agreement terms and conditions.
The City received one proposal in response to the RFP. Staff determined the proposal submitted by THOR, Inc. to be responsive and reasonably priced for the services requested. Due to the limited vendor pool for based CentralSquare ERP systems support vendors, receiving a single proposal is not unexpected. Staff recommends awarding a professional services agreement to THOR, Inc. as being in the best interest of the City.
Staff recommends a contract term of up to five years, with limited annual service hours, to ensure continued support for the legacy system while the City evaluates options for migrating historical data. Following issuance of a separate Request for Proposals for legacy data migration services, staff will assess the most cost-effective migration strategy. One potential approach is to sequence or delay portions of the migration to allow records eligible for destruction under applicable retention schedules to be purged, thereby reducing the overall scope and cost of the migration. Because the final migration approach and timeline will not be determined until that procurement process is completed, the proposed contract term provides necessary flexibility to maintain access to legacy records during this interim period.
The table below shows the cost structure over the 5-year term.
|
Year |
Estimated Hours |
Hourly Rate |
Annual Cost |
|
Year 1 |
260 (5 hours per week) |
$139 |
$36,140 |
|
Year 2 |
260 (5 hours per week) |
$145 |
$37,700 |
|
Year 3 |
260 (5 hours per week) |
$151 |
$39,260 |
|
Year 4 |
260 (5 hours per week) |
$157 |
$40,820 |
|
Year 5 |
260 (5 hours per week) |
$163 |
$42,380 |
|
|
|
Total Cost |
$196,300 |
The proposed agreement is structured on a time-and-materials basis with a not-to-exceed limit, and the City will only be billed for actual hours worked and services performed. Actual costs may be lower depending on the level of support required as the City continues transitioning away from the legacy ERP system. Staff anticipates a limited level of ongoing support, estimated at approximately five (5) hours per week, which should be sufficient to support occasional requests, and address minor issues associated with a legacy system that is no longer in active production.
If the planned data migration RFP to be issued in Fiscal Year 2026/27 results in a more cost-effective solution and the migration is completed, the need for ongoing legacy system support would be eliminated, expenditures under this agreement would be reduced to zero, and the agreement may be terminated.
IMPACT ON CITY RESOURCES
Funding is available in the FY26/27 Proposed Budget within account 70084710-511012.
ATTACHMENTS
1. RFP for Legacy ERP Application Support
2. Service Agreement with THOR, Inc.
3. Exhibits