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Agenda Item
ASR
Control 25-000150 |
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MEETING
DATE: |
03/11/25 |
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legal entity taking action: |
Board
of Supervisors |
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board of supervisors district(s): |
All
Districts |
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SUBMITTING Agency/Department: |
Auditor-Controller (Approved) |
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Department contact person(s): |
Andrew
Hamilton (714) 834-2457 |
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Laurence
McCabe (714) 796-0310 |
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Subject: Enterprise Resource Planning
Transformation and Modernization Project
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ceo CONCUR |
County Counsel Review |
Clerk of the Board |
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Concur |
Approved
Agreement to Form |
Discussion |
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3
Votes Board Majority |
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Budgeted: Yes |
Current Year
Cost: $2,562,942 |
Annual Cost: FY 2025-26 $23,035,817 |
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Staffing Impact: |
No |
# of Positions: |
Sole Source: No |
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Current Fiscal Year Revenue: N/A
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Prior Board Action: 7/23/2024 #14, 2/6/2024 #6, 1/11/2022
#12 |
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RECOMMENDED
ACTION(S):
Authorize the County Procurement
Officer or Deputized designee to execute contract with Deloitte Consulting LLP,
for Enterprise Resource Planning Transformation and Modernization Project,
effective upon Board of Supervisor’s approval through March 10, 2035, with an
amount not to exceed $94,757,628, and to execute related Oracle America, Inc.
Cloud Services Agreement and End-User Ordering Documents.
SUMMARY:
Approval of the contract with
Deloitte Consulting LLP and related Cloud Services Agreement and End-User
Ordering Documents with Oracle America, Inc., will allow the County to
transform and modernize to an integrated cloud-based Enterprise Resource
Planning System, increase operational automation and efficiency throughout the
County, improve collaboration, streamline business processes, strengthen
security and workflow, enhance internal controls, and maximize the latest
technological innovations.
BACKGROUND
INFORMATION:
On February 6, 2024, your Honorable
Board (Board) approved the release of a Request for Proposals (RFP) for an
integrated Enterprise Resource Planning (ERP) Software-as-a-Service (SaaS)
system. Since that time, the
Auditor-Controller's Office coordinated and led an extensive and collaborative
effort involving 14 departments and over 160 County Subject Matter Experts
(SMEs), resulting in the recommendation of Deloitte Consulting LLP (Deloitte).
The contract, attached as Attachment A and described in Attachment G,
Additional Background Information, is presented to the Board for consideration
and approval. This contract will allow
the County to transform and modernize its business by replacing its end-of-life
ERP system.
The County's legacy ERP system,
known as the County-wide Accounting and Personnel System (CAPS+), has been a
vital component of the County's infrastructure.
This critical system is maintained and supported by the
Auditor-Controller’s Information Technology division, as part of its core
duties. The County has utilized CGI
Technologies and Solutions Inc.’s (CGI’s) AMS Advantage software for the core
of its legacy ERP system for over 30 years using on-premises platforms.
Replacement of CAPS+ with a SaaS solution is required for the following
reasons:
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1. |
ERP
technology has changed and evolved. Mature and robust
SaaS ERP solutions are now commercially available and are regularly utilized
in the government sphere, including federal, state, and local government.
SaaS ERP solutions are always up to date as they routinely incorporate
changes and updates. This removes the
need for expensive and labor-intensive upgrades while making sure the latest
functionality and security features are readily available. In addition, SaaS ERP systems eliminate the
need to procure and maintain costly hardware infrastructure. |
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2. |
On-premises
ERP systems are being phased out, including the County’s legacy ERP system,
CAPS+. The entire
ERP industry is moving away from on-premises ERP solutions. This includes
CGI, who notified the County that they are attempting to move all their
customers to their new SaaS model. |
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3. |
Support
for the County’s legacy on-premises ERP system is ending. As CGI is moving to a SaaS model for
their ERP system, they will end support for the County’s on-premises software
in the near future. After support
ends, the County will not receive critical maintenance patches, including
security and tax updates. |
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4. |
ERP
SaaS Technology is available with improved security in the government cloud.
Some SaaS ERP systems are certified by the Federal Risk and Authorization
Management Program (FedRAMP). FedRAMP is a government-wide program that
promotes the adoption of secure cloud services across the federal government
by providing a standardized approach to security assessment, authorization,
and continuous monitoring for cloud products and services. |
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5. |
The
County currently requires a complex network of over 20 systems to support its
ERP functionalities. As implemented, the County has over 20
disparate systems and more than 80 interfaces that support the County’s ERP
functionalities. In addition, many of
these systems rely on nightly batch processes to pass data back and forth,
requiring continuous monitoring. Having so many systems and their related
interfaces also requires extensive support. |
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6. |
SaaS
ERP systems enhance the growth of employee skillsets. Modern ERP systems allow for the growth of
employee skillsets, as they allow employees to shift their focus from data
entry to analytics and improved decision-making. With this growth of skillsets, retaining
and recruiting employees becomes an important initiative as all employees
gain expertise using the new ERP system. |
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7. |
A
modern system enables business processes to be more efficient for employees.
A modern system will allow County employees to leverage leading modern
business practices. For example, employees can make real-time decisions in
modern systems as they process information immediately. |
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8. |
Modern
systems provide enhanced internal controls.
Modern SaaS systems have a higher emphasis on
internal controls integrated into their design. Examples include additional
monitoring for many business processes, such as procurement, payments,
subrecipients, etc. |
Knowing support for CAPS+ would end
and recognizing the need for improved technology, the Auditor-Controller’s
Office has submitted replacement of the legacy system as a Strategic Priority
since 2016.
On January 11, 2022, the Board
approved a contract with Intueor Consulting Inc., for an independent analysis
and assessment of the County’s ERP environment, which recommended the issuance
of an RFP. Attachment G provides
additional information about the independent analysis and assessment.
On July 23, 2024, the Board
approved a Quality Assurance Services contract with the Government Finance
Officers Association (GFOA). GFOA’s
experience, expertise, and detailed approach to ERP projects has been used by over
600 governmental entities. GFOA’s role
during the RFP review process and ongoing is to mitigate key risks in the
County’s SaaS ERP Transformation and Modernization project by providing
third-party guidance and quality assurance from vendor selection through
project implementation. See additional information on GFOA’s role in Attachment
G.
Solicitation
Process
The Auditor-Controller’s Office is
committed to a transparent, fair, and competitive procurement process. The Office has also taken a very collaborative
approach in developing the solicitation and evaluating the responses and has
involved over 160 County SMEs from over a dozen departments in the process, as
further detailed in Attachment G, Additional Background Information. The
Auditor-Controller’s Office also partnered with GFOA to provide Quality
Assurance Services for the evaluation and contract negotiations (also detailed
below). In addition, to protect the integrity of the RFP process and to
leverage their expertise, the Auditor-Controller was in close communication
with County Counsel (CoCo), the County Procurement Office (CPO), the County
Executive Office (CEO), and GFOA throughout the entire procurement process.
RFP Release
On February 6, 2024, the
Auditor-Controller’s Office released an RFP for a SaaS-based ERP solution and
associated implementation and support services.
Of the eleven proposals received, ten were found to be responsive by the
Auditor-Controller’s Deputy Purchasing Agents (DPAs).
Evaluation Panel Selection
After
conducting an extensive review of ten written proposals, attending a total of
160 hours of demonstrations, 40 hours of interviews, and several hours of panel
deliberations, the RFP evaluation panel selected Deloitte and their proposal to
implement the Oracle SaaS ERP solution. The panel determined that this proposal
was the best solution for meeting the County’s requirements and business needs.
The panel determined that Deloitte demonstrated:
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Their staff had the most comprehensive
knowledge and experience in all functional areas |
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They had experience successfully
transitioning large organizations into the Oracle solution |
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The Oracle software met virtually all
County requirements as well as the County’s future state goals while
requiring only minimal integrations |
The Deputy Purchasing Agent conducted
reference checks for Deloitte and found the responses to be satisfactory. The referenced entities for Deloitte included
similar services implementing Oracle solutions are as follows:
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State of North Carolina |
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City of Atlanta, Georgia |
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Providence Health and Services, a
not-for-profit health care system |
The evaluation panel scores for this RFP
are tabulated in Attachment D.
Contract
Negotiations
The Auditor-Controller’s Office partnered
with GFOA, CPO, and Deloitte to build a robust Statement of Work based on
Deloitte’s proposal. County Counsel
assigned to the Auditor-Controller's Office played a crucial role through their
intense involvement in many hours of discussions on legal and security terms.
Similarly, the County’s Chief Information Officer and team were instrumental in
negotiating security-related terms and conditions in accordance with the terms
of the RFP. As it is a significant
investment to switch to a new ERP system, this ten-year agreement provides an
added benefit of providing the County with agreed-upon pricing for the duration
of the contract. See Attachment A for
the proposed contract with Deloitte.
The contract with Deloitte is a fixed
price contract, where the vendor will only be paid for services as deliverables
are met. This contract also includes a
fixed price for SaaS Cloud Services as well as well as minor usage-based
expenses for Platform/Infrastructure as a Service. Also included in the total
not-to-exceed amount is a Management Reserve fund, equivalent to 10% of the
services listed in the contract. This amount is not guaranteed to Deloitte but
will allow the County to take advantage of additional transformation
opportunities or unanticipated requirements within the existing scope of the
contract. The Statement of Work also
includes 2,000 “Innovation Hours” which is additional time that Deloitte will
dedicate to improving the County’s business processes per the County’s request.
The County has the right to
immediately terminate the contract with Deloitte without penalty after 30 days’
written notice for termination without cause, or in the event of a termination
for cause, Deloitte will have the opportunity to cure within such notice period.
In the event the County terminates the contract with Deloitte, the County may
continue to license the Oracle Cloud Services and Deloitte will continue acting
as payee agent for the remaining term of the Contract. In the event funds
are not appropriated to fund Cloud Services for a new fiscal year period, the
County may terminate the Oracle license order without penalty or expense upon
written notice to Deloitte and Oracle.
The
following standard County terms have been modified through negotiations with
Deloitte: Insurance, Indemnification, and Limitation of Liability. County Counsel and CEO Risk Management have
reviewed and approved the changes. Please see Attachment F for the approved
Risk Assessment and Modification of Insurance Terms Form.
The contract is being presented for Board
approval less than 30 days before the effective date as it is the soonest
available Board date after completing negotiations with the vendor, as well as
to allow sufficient review time by the CEO, CFO, and the CIO before submitting
the ASR to the Board for approval.
Deloitte is acting as a reseller
for Oracle Cloud Services, and all payments will flow through Deloitte. Oracle
requires the users of their Cloud Services to sign a separate Cloud Services
Agreement and associated End-User Ordering Documents directly with Oracle. See Attachment B for the associated Oracle
documents and Attachment C for the Contract Summary Form.
Deloitte
Consulting LLP
Deloitte has implemented Oracle
software over 2,000 times globally, across over 1,400 distinct clients. Over
750 of these implementations were Oracle Cloud implementations. Deloitte’s
Government & Public Services practice accounts for 10% of their total
implementations to date; the other 90% is spread across eight industries.
Deloitte has implemented a
full-suite ERP across all SaaS ERP software suites. The list below includes
implementations that are close in size and scope to the County:
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State of North Carolina (Finance): Oracle |
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State of
Illinois: SAP |
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City of Atlanta:
Oracle |
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State of Idaho:
Infor |
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District of
Columbia (Finance/Budget): Oracle |
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City of Seattle:
Workday |
Through
Deloitte’s proposal, demonstrations, and interviews, they demonstrated an
understanding of the County’s future vision to transform business processes and
demonstrated that they had the skills and experience necessary to be
successful. For more information on Deloitte, see Attachment G.
Business
Transformation and Modernization
With this system, the County will
have the most comprehensive and integrated ERP system available to county
governments in the country. Oracle is
among the largest companies that provides ERP solutions, providing unparalleled
stability to the County. The transition
to Oracle’s SaaS ERP system will provide the County with the opportunity to
address current gaps in capabilities, retire ancillary systems, and leverage
the advantages of next-generation offerings that Oracle Cloud Services
provides.
Benefits to the County include:
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Improved
efficiency and automation. The Oracle
system will automate repetitive tasks such as invoicing, payroll, and
inventory management, which will reduce manual data entry and human errors. |
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Enhanced
internal controls. The architecture of the entire system
contains enhanced internal controls that represent a significant advancement
over the existing internal controls in the legacy ERP system for the
following four reasons: 1. Comprehensive incorporation of stand-alone systems
will be consolidated into the new system. 2. Compared to the legacy ERP
system, Oracle leverages cutting-edge technology. 3. Oracle contains
increased functionality that manages internal controls and monitors/controls
user access and activity. 4. The new solution will have Integrity Risk
Management functionality in the Integrity Data Enhanced Analytics (IDEA)
system as defined in Attachment A – Statement of Work, section 1.7. |
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Real-time
access to information that matters.
The Oracle system allows real-time, on-demand analytics, reports and
dashboards that will enable data-driven decision making. |
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Enhanced
collaboration between County functions. The Oracle system will centralize data
across departments, enhancing interdepartmental communication and workflows. |
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Brings
more functionality into the core ERP system. Consolidates 20 separate
systems such as budget, requisitioning, timekeeping, and employee
reimbursement into one integrated solution. See System Replacement section in
Attachment A, page 56. |
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Improved
transparency. The majority of County businesses processes
will be within the Oracle system from beginning to end, including procurement
to payment, payroll, budget, and grants. This will allow better visibility
and transparency of these processes.
Internal Audit will also be able to complete audits utilizing a
comprehensive ERP system with a single source of information to conduct their
audits. |
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Remote
access to all system functionalities.
The Oracle SaaS solution can be accessed remotely on any device. |
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Better
employee experience.
The new system will be a single source that meets employees’ needs, such as
entering timesheets, checking accrual leave balances, accessing W2 and
Employee’s Withholding Allowance Certificates, managing direct deposit forms,
processing employee reimbursements, managing voluntary contributions, and
accessing pay stubs. |
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Enhanced
services for suppliers. The new system will include a self-service portal
for managing supplier activities and transactions, including invoice submission
and status. |
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24/7/365
system availability. The Oracle Cloud Services are designed to
be available 24 hours a day, 7 days a week, 365 days a year, except during
maintenance periods and technology upgrades, with 99.9% contractual uptime.
In contrast, the legacy ERP system, as implemented, utilizes batch processing
that requires nightly system downtime while employees monitor the process
overnight. For customers of US
Government Cloud Service, the maintenance schedule frequency is monthly to
account for regulatory requirements regarding security
patching. Downtime for monthly maintenance is up to an hour, and
downtime for quarterly maintenance is up to two hours. Downtime will occur
during non-core business hours. |
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Grant
management and reporting functionality.
Grant management will be simplified and streamlined as the Oracle
solution utilizes one integrated platform for Oracle Financials, Procurement,
Project Management, Human Capital Management, and Time and Labor. These
applications include complete functionality to manage, record, report and
even bill for projects and grants. |
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Automated
subrecipient monitoring capabilities. All monitoring activities will be
tracked within the new system and the system will automate the review of
compliance processes from external data sources. This new functionality
enhances due diligence of entities to drive compliance and mitigate
risks. |
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Long-term
efficiencies.
As an integrated system, the Oracle solution will markedly enhance
operational efficiencies and IT costs.
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Robust Security
Implementation
Deloitte
is contractually required to only use staff within the United States of America
for all services provided to the County.
Oracle
Cyber Security
The Oracle support for this system
will be provided by U.S. Persons within the United States of America. The SaaS ERP system will be implemented in
the Oracle U.S. Government Cloud with the control requirements of the FedRAMP
Moderate baseline. The Government Cloud
Service is hosted within U.S. data centers which provide an isolated hosting
environment that aligns to U.S. Federal information security framework. Physical access to data centers requires five
layers of security including biometric hand readers and visual verification by
security guards.
Simplified Support
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With a SaaS-based ERP system, Oracle
will be responsible for maintaining the system with the most current and
up-to-date hardware and software. This
eliminates the need for the County to procure and maintain a costly
infrastructure. |
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Patches and
updates will be managed by Oracle with minimal system downtime, eliminating
costly and time-intensive software upgrades.
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ERP disaster recovery is included within
this contract. |
Collaboration
with County Stakeholders
The Auditor-Controller will closely
collaborate with CEO and County stakeholders who are broadly representative of
affected departments to guide the ERP Transformation and Modernization
project. This collaborative group will
be responsible for the governance of the project.
During the procurement,
Auditor-Controller convened regular meetings with County stakeholders,
including executive representatives of CEO, Sheriff’s Department, and Human
Resources Services, and the Auditor-Controller provided this group with timely
updates on the progress of the procurement process. The County stakeholders have indicated their
support of the evaluation panel’s recommendation to award this contract to
Deloitte.
During this project, Deloitte will
be responsible for implementing the Cloud Oracle solution. The Auditor-Controller’s project manager will
work with an assigned Orange County Information Technology (OCIT) resource
manager to facilitate all engagement activities that require the managed
service of Orange County’s data center services and Science Applications
International Corporation (SAIC) network services. These services may include but are not
limited to database administration and network set up and management. The Auditor-Controller’s
project manager will also work with OCIT to include this project’s status in
the Quarterly IT Status Report to the Board of Supervisors.
OCIT, through its Security
Operations Center, will provide 24x7x365 security coverage over the project’s
operational network between the Orange County data center and the Oracle data
center. OCIT’s security coverage will extend over the preparation of the local
data to be exported as part of the effort.
Following the
County’s standard practice on IT projects, the Internal Audit Department will
be engaged on this effort where needed to ensure there is oversight and
transparency.
System Replacement
There are over 20 systems that the
County intends to replace with the ERP Transformation and Modernization
Project. See Attachment A, page 56 for a list of those systems.
Project Management
and Subject Matter Experts
The Auditor-Controller’s Office
will lead the ERP Transformation and Modernization Project. The Auditor-Controller’s Office has a broad
base of knowledge, training and experience in the ERP environment. In addition,
the ERP system heavily incorporates internal controls which is the duty of
Auditor-Controller. The Auditor-Controller’s Office has led all past ERP
upgrades and has a history of performing successful system upgrades to
implementations of the ERP and its ancillary systems, along with winning
National Association of Counties (NACo) Achievement Awards for the development
and implementation of other systems.
To ensure success of this ERP
Transformation and Modernization effort, the Auditor-Controller and CEO will
provide an implementation team of 35 SMEs from multiple County departments who
can supply business knowledge, quality assurance and system testing support to
the project, and management oversight of a project that is critical to the
County’s future. In addition, GFOA will continue to provide third-party guidance
and quality assurance during project implementation to mitigate key risks. The
project team will also develop and execute a comprehensive organizational
change management plan to ensure all users are kept informed of project status,
receive adequate training to use and to support the new ERP, and are prepared
for transition to the new system.
FINANCIAL
IMPACT:
Appropriations for the ERP project
costs are included in the Auditor-Controller’s FY 2024-25 Budget for Budget
Control 014, CAPS Program, and will be included in the budgeting process for
future years. Project costs incurred in Budget Control 014, CAPS Program, will
be reimbursed by transfers in from Fund 15I, Countywide IT Projects Non-General
Fund, funded 100% by General Fund. If any additional appropriations are
necessary for this contract, they will be requested through the mid-year budget
adjustment process. Over the ten-year
Deloitte contract, $65,580,592 is a project implementation cost, and $29,177,036
is ongoing maintenance and support post go-live. A full breakdown of the
estimated costs for the project is provided in Attachment E, Project Cost
Summary.
A significant portion of the funding for
this project will be reimbursed in arrears through indirect cost recoveries
from Federal and State grants or reimbursements, County non-general fund, and
certain special districts via the Countywide Cost Allocation Plan. An initial and preliminary analysis estimates
that at least 50% of the ERP implementation expenses may be reimbursed to the
General Fund.
STAFFING
IMPACT:
N/A
ATTACHMENT(S):
Attachment
A – Deloitte Contract MA-003-25010777
Attachment B – Oracle Cloud Services Agreement and End-User Ordering Documents
Attachment C – Contract Summary Form
Attachment D – RFP Bid Tabulation
Attachment E – ERP Transformation and Modernization Project Cost Summary
Attachment F – Risk Assessment and Modification of Insurance Terms Form
Attachment G – Additional Background Information