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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:
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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. |
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