REPORT TO COUNCIL
SUBJECT
Title
Action on Award of Task Orders Not to Exceed $2,231,704 to Kastech Software Solutions Group for PeopleSoft Upgrade and Functional Improvements in Purchasing and Central Warehouse Operations and Approval of Related Budget Amendments
Report
COUNCIL PILLAR
Deliver and Enhance High Quality Efficient Services and Infrastructure
BACKGROUND
Since 2002, the City of Santa Clara (City) has used PeopleSoft to manage essential functions across finance, human resources, benefits, accounting, payroll, and purchasing. The two primary PeopleSoft systems in use are:
• Financial and Supply Chain Management (FSCM): Managed by the Finance Department, this system supports financial operations such as general ledger, accounts payable, capital asset management, purchasing, inventory, accounts receivable, and billing.
• Human Capital Management (HCM): Managed by the Human Resources (HR) and Finance Departments, this system manages HR functions, including human resources, benefits, time & labor, and payroll.
Over the years, various modifications were made to PeopleSoft to address immediate operational needs, but some changes were inconsistent with the system’s intended use. Specific issues within FSCM include:
• System Configuration Challenges: Certain configurations across core modules, including Purchasing, Accounts Payable, and Inventory Management, were implemented to bypass controls due to limited staffing. However, these changes resulted in foundational issues that have hindered system efficiency.
• Ceasing Use of Requisition Module: Use of the Requisition module is a standard best practice for all Enterprise Resource Planning (ERP) systems and not just PeopleSoft. It provides a clear delineation of procurement responsibilities between operating departments and Purchasing. When use of the Requisition module was stopped, departments began entering purchase orders directly, resulting in limited control over procurement processes.
• Lack of Centralized Contracts Management: The Procurement Contracts module was never implemented, resulting in decentralized contract management. Departments have relied on manual methods to manage contracts and track spending, increasing the risk of inconsistencies and reducing oversight.
Recognizing these issues and the need for improved PeopleSoft functionality citywide, the City initiated a PeopleSoft enhancement initiative in 2020. An internal working group from the Finance, Human Resources, and Information Technology Departments identified over 70 areas for improvement. Following a Request for Proposals (RFP) process, the City Council approved nine master agreements, each with a five-year term, to support these initiatives. Under these agreements, the City Manager was authorized to issue task orders up to $250,000 without requiring additional City Council approval. Kastech Software Solutions Group (Kastech) was awarded one of these agreements, which was executed on September 1, 2020.
In January 2022, the Finance Department selected Kastech to implement several key improvements to FSCM. These improvements include the implementation of a capital assets module, along with enhancements to the billing, accounts receivable, and accounts payable modules. Building on these efforts, staff now proposes a series of projects with Kastech to optimize purchasing operations and to upgrade PeopleSoft to the latest versions.
This report seeks City Council authorization to issue task orders exceeding $250,000 to Kastech for four PeopleSoft projects, as outlined below.
DISCUSSION
I. Projects Related to FCSM
In June 2024, the Purchasing Division of the Finance Department requested a proposal from Kastech to implement the PeopleSoft Procurement Contracts and Expense Management modules and reinstate the Requisition module (currently, departments create their own purchase orders that bypass the requisition process). Due to uncertainties around project scope, an initial task order of $55,200 was issued for a preliminary review. Over four weeks, Kastech reviewed the configuration of the Purchasing module, assessed business processes, and identified system usage issues affecting purchasing and warehouse operations. This review led to a project roadmap to implement the Procurement Contracts module, reinstate the Requisition module, and address system-related issues. These efforts are identified below as Projects 1 - 3.
A. Project 1 - Procurement Contracts and Requisition Module
For this project, Kastech will work on the following tasks to improve the procurement process:
• Conduct a thorough review of system configurations across key PeopleSoft modules, including Purchasing, Commitment Control, Accounts Payable, Warehouse, Item Management, and General Ledger
• Address and correct system configuration issues
• Set up the traditional requisition channel
• Implement the PeopleSoft Purchasing Contracts module citywide, which will centralize contract management, provide uniformity across the organization on how contracts are stored, and enhance control over all contract-related activities throughout their term.
The completion of the project will streamline processes related to procurement and contracts management functions, allow staff to manage procurement contracts in a centralized system, resolve multiple system issues, and improve the ability to track contract expenditures more effectively.
B. Project 2: Inventory/Warehouse Management
This project focuses on enhancing inventory and warehouse management. Kastech will:
• Perform data cleansing to remove duplicate records
• Conduct item maintenance and correct inventory locations
• Setup additional inventories as needed
• Address mobile inventory issues to improve real-time data entry
• Review and correct cost accounting rules to ensure accurate cost accounting entries for inventory transactions are posted and reflected in the General Ledger
• Automate various warehouse management activities, including the inventory replenishment process.
Upon completion, this project will improve data management, inventory management, and cost accounting entries to the General Ledger, automate the stock replenishment process, and enhance the use of mobile devices for real-time data entry.
C. Project 3: Purchase-Cards (P-Card), Expense Management, Dashboards, and Other Functionalities
This project includes a series of improvements to optimize several functionalities. Kastech will:
• Implement the P-Card and Expense Management feature within PeopleSoft Purchasing
• Develop and automate approval workflows within Accounts Payable
• Configure dashboards and work centers for staff to manage their day-to-day activities around Purchasing, Accounts Payable, and Commitment Control more efficiently
Upon completion, this project will streamline purchasing activities through the P-card and Expense Management modules, automate approval workflows in Accounts Payable, and provide staff with user-friendly dashboards and work centers to improve daily task management.
II. System-Wide Upgrade (Applicable to Both FSCM and HCM)
This effort is part of necessary system maintenance to ensure the compliance and performance of the PeopleSoft platform. The implementation will involve city-wide participation outside of the core departments of Information Technology, Finance, and Human Resources to address system-wide capabilities.
A. Project 4 - General PeopleSoft Upgrade
A Request for Proposals (RFP) was conducted for the PeopleSoft upgrade. Sixteen proposals were received and evaluated. In October 2024, Kastech was selected based on “best value” pursuant to Section 2.105.140(c) of the Santa Clara City Code.
This project will upgrade PeopleSoft infrastructure and applications to the latest releases for compliance and performance and improve the architecture for external access to support planned enhancements. In addition, new functional and technical capabilities available and desired will be prioritized and implemented. Upon completion, this project will strengthen data security and ensure delivery of Oracle security patches, enhance system performance, and support business continuity.
To maintain streamlined management of the various tasks that will be issued to Kastech, staff plans to issue a task order under the existing agreement with Kastech, so that all project and contract management activities can be managed under one agreement.
Total Estimated Project Costs
Table 1 provides the total estimated cost for all four projects.
Table 1
|
Project Name |
Total |
|
Project 1: Procurement Contracts and Requisition Module |
$623,599 |
|
Project 2: Inventory/Warehouse Management |
$362,799 |
|
Project 3: P-Card, Expense Management, Dashboards, and Other Functionalities |
$317,599 |
|
Project 4: General PeopleSoft Upgrade |
$724,825 |
|
Subtotal |
$2,028,822 |
|
Contingency (10%) |
$202,882 |
|
Maximum Compensation |
$2,231,704 |
Staff is requesting City Council authorization to issue task orders to Kastech for the projects outlined above, with a total aggregate amount of $2,231,704, inclusive of a 10% contingency. Payments will be based on successful completion of key project milestones and deliverables.
The City currently holds all necessary licenses to complete the projects, except for the Expense Management module, which will be procured under the existing agreement with Oracle Corporation, the provider of PeopleSoft, if needed.
Task Orders Process and Project Timelines
To facilitate the successful implementation of the PeopleSoft upgrade and improvements, task orders will be issued for each of the projects (Projects 1 - 4). Given the complexity of the effort, these projects will not necessarily follow a sequential order. Instead, staff will work closely with Kastech to define the specific activities and ensure the successful completion of major milestones before issuing additional task orders.
This phased approach is typical of complex software implementations where coordination across multiple activities is crucial to achieving the overall project objectives. Such projects often require flexible scheduling, allowing the project team to address unforeseen challenges and adjust timelines. The implementation will also involve coordination across multiple departments and will be planned around any key operational periods to minimize disruptions.
Table 2 provides the estimated completion dates, which are subject to change based on the progress of the implementation and other factors.
Table 2
|
Project Name |
Estimated Start Date |
Estimated Completion Date |
|
Project 1: Procurement Contracts and Requisition Module |
April 2025 |
February 2026 |
|
Project 2: Inventory/Warehouse Management |
November 2025 |
April 2026 |
|
Project 3: P-Cards, Expense Management, Dashboards, and Other Functionalities |
June 2025 |
August 2026 |
|
Project 4: PeopleSoft HCM Upgrade |
April 2025 |
April 2026 |
|
Project 4: PeopleSoft FSCM Upgrade |
April 2025 |
April 2026 |
Future Projects
Additional projects, such as e-Signature integration and supplier management, have been identified for future consideration. These will be presented to the City Council at a later date should a decision be made to move forward with them.
ENVIRONMENTAL REVIEW
The action being considered does not constitute a “project” within the meaning of a California Environmental Quality Act (“CEQA”) pursuant to pursuant to section 15378 (b)(5) of Title 14 of the California Code of Regulations in that it is an administrative activity that will not result in direct or indirect physical changes in the environment.
FISCAL IMPACT
Existing funding is available in the Financial and Human Resources Management System Update Project in the General Government Capital Fund (539-6501) to partially cover the cost of these projects. An additional $1,466,705 is needed to fully fund the four projects and 10% contingency.
In anticipation of these additional costs, $1.0 million was allocated to the project from the General Fund as part of the FY 2023/24 Year End Close Report approved by the City Council on December 3, 2024. At that time, the allocation of costs to other funds was unknown. With the further development of the project scopes, an equitable distribution of costs has been calculated to determine the funding share of the General Fund and other funds. This distribution is based on the anticipated usage of the four projects. While the General Fund’s portion of the costs, $361,995, is below the $1.0 million that was already appropriated, it is recommended to retain the remaining amount of $638,005 in the project for future needed improvements. Additional funding of $1,104,710 is recommended to be allocated from the Electric, Water and Sewer, Solid Waste, Recycled Water, Building Development, and Fire Development Funds in the budget amendments below.
Budget Amendment
FY 2024/25
|
|
Current |
Increase/ (Decrease) |
Revised |
|
General Government Capital Fund (539) |
|
|
|
|
Transfers From |
|
|
|
|
Electric Utility Fund |
$377,700 |
$902,586 |
$1,280,286 |
|
Water Utility Fund |
$150,456 |
$89,048 |
$239,504 |
|
Sewer Utility Fund |
$27,404 |
$57,597 |
$85,001 |
|
Solid Waste Fund |
$19,256 |
$29,514 |
$48,770 |
|
Recycled Water Fund |
$251 |
$6,311 |
$6,562 |
|
Building Development Services Fund |
$43,111 |
$16,425 |
$59,536 |
|
Fire Development Services Fee Fund |
$8,481 |
$3,229 |
$11,710 |
|
|
|
|
|
|
Expenditure |
|
|
|
|
Human Resources Management System Update Project (CIP 6501) |
$2,662,831 |
$1,104,710 |
$3,767,541 |
|
|
|
|
|
|
Electric Utility Fund (091) |
|
|
|
|
Transfers To |
|
|
|
|
General Government Capital Fund |
$377,700 |
$902,586 |
$1,280,286 |
|
|
|
|
|
|
Ending Fund Balance |
|
|
|
|
Unrestricted Fund Balance |
$64,769,140 |
($902,586) |
$63,866,554 |
|
Water Utility Fund (092) |
|
|
|
|
Transfers To |
|
|
|
|
General Government Capital Fund |
$150,456 |
$89,048 |
$239,504 |
|
|
|
|
|
|
Ending Fund Balance |
|
|
|
|
Unrestricted Fund Balance |
$2,004,664 |
($89,048) |
$1,915,616 |
|
Sewer Utility Fund (094) |
|
|
|
|
Transfers To |
|
|
|
|
General Government Capital Fund |
$27,404 |
$57,597 |
$85,001 |
|
|
|
|
|
|
Ending Fund Balance |
|
|
|
|
Unrestricted Fund Balance |
$1,966,377 |
($57,597) |
$1,908,780 |
|
Solid Waste Fund (096) |
|
|
|
|
Transfers To |
|
|
|
|
General Government Capital Fund |
$19,256 |
$29,514 |
$48,770 |
|
|
|
|
|
|
Ending Fund Balance |
|
|
|
|
Operations and Maintenance Reserve |
$10,354,799 |
($29,514) |
$10,325,285 |
|
|
|
|
|
|
Recycled Water Fund (097) |
|
|
|
|
Transfers To |
|
|
|
|
General Government Capital Fund |
$251 |
$6,311 |
$6,562 |
|
|
|
|
|
|
Ending Fund Balance |
|
|
|
|
Unrestricted Fund Balance |
$918,589 |
($6,311) |
$912,278 |
|
Building Development Services Fund (155) |
|
|
|
|
Transfers To |
|
|
|
|
General Government Capital Fund |
$43,111 |
$16,425 |
$59,536 |
|
|
|
|
|
|
Ending Fund Balance |
|
|
|
|
Unrestricted Fund Balance |
$34,036,388 |
($16,425) |
$ 34,019,963 |
|
Fire Development Services Fund (158) |
|
|
|
|
Transfers To |
|
|
|
|
General Government Capital Fund |
$8,481 |
$3,229 |
$11,710 |
|
|
|
|
|
|
Ending Fund Balance |
|
|
|
|
Unrestricted Fund Balance |
$2,373,910 |
($3,229) |
$ 2,370,681 |
COORDINATION
This report has been coordinated with the Information Technology Department and City Attorney’s Office.
PUBLIC CONTACT
Public contact was made by posting the Council agenda on the City’s official-notice bulletin board outside City Hall Council Chambers. A complete agenda packet is available on the City’s website and in the City Clerk’s Office at least 72 hours prior to a Regular Meeting and 24 hours prior to a Special Meeting. A hard copy of any agenda report may be requested by contacting the City Clerk’s Office at (408) 615-2220, email clerk@santaclaraca.gov <mailto:clerk@santaclaraca.gov> or at the public information desk at any City of Santa Clara public library.
RECOMMENDATION
Recommendation
1. Authorize the City Manager or designee to negotiate and execute task orders with Kastech Software Solutions Group under the agreement for services dated September 1, 2020 (Agreement) for PeopleSoft upgrades and functional improvements in Purchasing and warehouse operations, with a total aggregate amount not to exceed $2,231,704, subject to the appropriation of funds and the review and approval as to form by the City Attorney;
2. Authorize the City Manager or designee to (a) take any necessary actions to implement and administer the Agreement or any task orders; and (b) amend the Agreement to extend the term as needed to complete the task orders or amend any task orders authorized herein, subject to the review and approval as to form by the City Attorney; and
3. Approve the following FY 2024/25 budget amendments:
A. In the General Government Capital Fund, recognize transfers of $902,586 from the Electric Utility Fund, $89,048 from the Water Utility Fund, $57,597 from the Sewer Utility Fund, $29,514 from the Solid Waste Fund, $6,311 from the Recycled Water Fund, $16,425 from the Building Development Services Fund, and $3,229 from the Fire Development Services Fee Fund, and increase the Human Resources Management System Update project by $1,104,710 (five affirmative Council votes required to appropriate additional revenue);
B. In the Electric Utility Fund, increase the transfer to the General Government Capital Fund and reduce the unrestricted ending fund balance by $902,586 (five affirmative Council votes required for the use of unused balances);
C. In the Water Utility Fund, increase the transfer to the General Government Capital Fund and reduce the unrestricted ending fund balance by $89,048 (five affirmative Council votes required for the use of unused balances);
D. In the Sewer Utility Fund, increase the transfer to the General Government Capital Fund and reduce the unrestricted ending fund balance by $57,597 (five affirmative Council votes required for the use of unused balances);
E. In the Solid Waste Fund, increase the transfer to the General Government Capital Fund and reduce the Operations and Maintenance Reserve by $29,514 (five affirmative Council votes required for the use of unused balances);
F. In the Recycled Water Fund, increase the transfer to the General Government Capital Fund and reduce the unrestricted ending fund balance by $6,311 (five affirmative Council votes required for the use of unused balances);
G. In the Building Development Services Fund, increase the transfer to the General Government Capital Fund and reduce the unrestricted ending fund balance by $16,425 (five affirmative Council votes required for the use of unused balances); and
H. In the Fire Development Services Fee Fund, increase the transfer to the General Government Capital Fund and reduce the unrestricted ending fund balance by $3,229 (five affirmative Council votes required for the use of unused balances).
Staff
Reviewed by: Kenn Lee, Director of Finance
Approved by: Jovan Grogan, City Manager
ATTACHMENTS
1. Agreement with Kastech, dated September 1, 2020
2. Kastech Task Order for PUR-001-0