REPORT TO COUNCIL
SUBJECT
Title
Action on Proposed Master Services Agreement with Unisys Corporation for Information Technology Outsourcing Services with a Not-to-Exceed Maximum Compensation of $29,804,800
Report
BACKGROUND
The City has relied on Information Technology (IT) Outsourcing Services for close to 40 years. In May 2017, following a comprehensive Sourcing Strategy and Request for Proposals (RFP) process, the City Council approved an agreement with Unisys Corporation (Unisys) for IT Outsourcing Services (Attachment 1). The eight-year agreement consisted of an initial four-year term and four one-year renewals authorized by Council on June 15, 2021 (Attachment 2), and most recently, a short-term six-month extension through December 31, 2025, approved on May 27, 2025 (Attachment 3) at a cost of $4,359,478 for this period. The total authorized amount under the agreement through this date is $74,363,020.
Under the current agreement, Unisys provides comprehensive Citywide IT services, including infrastructure support, enterprise and web applications, end-user support, cybersecurity services, and 24/7 monitoring of mission-critical systems. The agreement also incorporates enterprise-class tools such as the ServiceNow platform to manage incidents, service requests, and configuration, ensuring service performance through Service Level Agreements (SLAs).
Over the course of this partnership, Unisys has played a key role in modernizing and maintaining the City’s IT infrastructure and applications. Unisys has supported several major citywide technology initiatives, including a significant network, storage and server refresh, upgrades to the City’s enterprise systems, implementation of collaboration tools, and ongoing improvements in cybersecurity maturity.
When Council approved the short-term extension in May 2025, staff advised that a longer-term agreement with Unisys would be brought back for Council approval once detailed negotiations and analyses were completed. The short-term extension was intended to maintain service levels while allowing time to finalize negotiations for a new Master Services Agreement (MSA) that will ensure continuity of services through upcoming major events in 2026, including Super Bowl LX and the FIFA World Cup, and beyond the major events to allow for additional evaluation, as described below.
To support this process, staff issued an RFP in October 2024 to engage a third-party consultant to evaluate the current agreement, interview key stakeholders, and support negotiations for a contract extension or a new contract with Unisys. Avasant, LLC, (Avasant) was selected and engaged in January 2025 to provide this advisory support.
DISCUSSION
The proposed Master Services Agreement (MSA) with Unisys will provide continued stability for City operations, support the delivery of major enterprise technology initiatives, and advance ongoing digital transformation efforts to enhance public services. In addition to maintaining continuity of mission-critical IT services through June 2028, the MSA period will serve as a strategic bridge to assess and prepare for the City’s long-term IT service delivery model.
Over the next two and a half years, staff intends to use this period to:
• Conduct an Organizational and Service Delivery Review: Evaluate the current IT operating model, including the City’s reliance on outsourced services versus in-house capabilities. The review will assess organizational alignment, cost efficiency, service quality, cybersecurity posture, and the City’s readiness for future technology needs.
• Develop a Long-Term Sourcing Strategy: Building on insights from the organizational review, staff-supported by an independent advisory firm-will develop a comprehensive sourcing strategy that considers multiple service delivery options (fully outsourced, hybrid, or insourced models).
• Plan and Execute a Competitive Procurement Process: Based on the recommended strategy, staff will prepare and issue a Request for Proposals (RFP) for the City’s next-generation IT services contract. This process will allow the City to evaluate competitive alternatives, leverage market innovations, and ensure best value and alignment with City priorities.
Over the past year, staff, supported by Avasant, have worked closely with Unisys to complete a comprehensive review of the current services provided, identification of gaps in service areas, and identified required updates to contract documents. As a result, the new MSA modernizes the City’s contract framework and aligns service delivery with current operational needs, including 23 updated schedules covering services solution, scopes of work, and SLAs.
The new MSA introduces several key contractual updates compared to the prior agreement, including:
• Updated Independent Contractor Language: Strengthens and clarifies that Unisys is an independent contractor and its employees operate as independent contractors, rather than as City employees.
• Provider Key Personnel: Clarifies the onboarding, approval, and removal processes for Unisys key personnel as defined in the agreement.
• Insurance: Updates insurance provisions to align with current City requirements and includes additional (new) insurance requirements.
• Indemnification: Expands indemnity provisions to better protect the City from potential liability.
• Compliance and Audit: Expanded requirements for compliance with applicable laws and industry standards to include HIPAA compliance and Payment Card Industry Data Security Standards.
• Data Security: Includes requirements pertaining to access control, data breach, and remediation.
• Limitation of Liability: Mutual limitation of liability in most first-party dispute scenarios.
The MSA incorporates 23 updated schedules that define the services, performance metrics, and financial terms. Key components include:
• Streamlined SLAs: Optimizes the number of SLAs to focus on key performance areas based on past Unisys performance.
• Clarified Service Scope Responsibilities: Updates statements of work to better clarify Unisys’s responsibilities under the scope of services (e.g., Account Team Training, Asset Management, Software License Management, Application Services, IT Security Services).
• New Operational Deliverables and Service Improvement Plans: Identifies key operational deliverables and introduces Service Improvement Plans, supported by defined service levels and credits for Unisys’ failure to meet those levels.
• Governance: Updates the governance schedule to add a defined Unisys Account Executive role, clarify committee structures, and better delineate committee inputs, outputs, and meeting cadence.
The new MSA establishes a two-and-a-half-year (30-month) term, beginning on January 1, 2026 through June 30, 2028, with a maximum compensation of $27,095,273, plus approximately 10% contingency ($2,709,527), for a total not-to-exceed amount of $29,804,800.
The MSA covers several key service categories, including cross-functional IT lifecycle and support services, service desk support, end-user services, application services, core enterprise infrastructure compute services, key personnel roles, service enhancement commitments, key operational deliverables, and service enhancements.
Compared to the previous year, the proposed costs reflect adjustments tied to the Consumer Price Index (CPI), updated labor rates aligned with current market conditions, and modernization enhancements. As shown in Table 1, the cost for the first full year of services (FY 2026-27) is approximately $10,569,432, with a slightly lower cost of $10,382,194 for FY 2027-28, following the initial six-month period.
Table 1 - Cost Summary
|
Service Categories |
1/1/26 - 6/30/26 (6 Months) |
7/1/26 - 6/30/27 |
7/1/27 - 6/30/28 |
Total Estimated Cost |
|
Enterprise Compute Services |
$1,339,107 |
$2,762,632 |
$2,683,397 |
$6,785,136 |
|
Service Desk Services |
$227,836 |
$355,344 |
$250,608 |
$833,788 |
|
End User Services |
$1,032,245 |
$2,119,201 |
$2,115,934 |
$5,267,380 |
|
Application Services |
$1,459,955 |
$3,035,207 |
$3,035,207 |
$7,530,369 |
|
Key Roles |
$1,131,041 |
$2,297,048 |
$2,297,048 |
$5,725,137 |
|
Service Enhancements |
$953,463 |
N/A |
N/A |
$953,463 |
|
Total |
$6,143,647 |
$10,569,432 |
$10,382,194 |
$27,095,273 |
|
Contingency (~10%) |
$2,709,527 |
|
Maximum Not-to-Exceed Compensation |
$29,804,800 |
The proposed MSA will provide continued stability for City operations, support the delivery of major enterprise technology initiatives, and advance ongoing digital transformation efforts to enhance public services. In addition, it will provide sufficient time to conduct a sourcing and service delivery strategy and to plan and conduct a new competitive procurement process for the City’s next generation IT service delivery model.
ENVIRONMENTAL REVIEW
The action being considered does not constitute a “project” within the meaning of the California Environmental Quality Act (“CEQA”) pursuant to CEQA Guidelines section 15378(a) as it has no potential for resulting in either a direct physical change in the environment, or a reasonably foreseeable indirect physical change in the environment.
FISCAL IMPACT
The FY 2025/26 Operating Budget includes sufficient funding for Unisys services in the Information Services Fund. The contract cost for the first six months of FY 2025/26 is $4,359,478, while the cost for the remainder of the fiscal year (January 1, 2026 through June 30, 2026) is $6,143,647, a total cost of $10,503,125. The not-to-exceed maximum compensation amount for the contract totals $29,804,800 through June 30, 2028. Funding for future years is subject to annual appropriation of funds.
COORDINATION
This report has been coordinated with the Finance Department and the 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 or at the public information desk at any City of Santa Clara public library.
RECOMMENDATION
Recommendation
1. Authorize the City Manager or designee to execute the Master Services Agreement with Unisys Corporation for Information Technology Outsourcing Services, for a two-and-a-half-year term beginning on January 1, 2026 through June 30, 2028, with a not-to-exceed maximum compensation of $29,804,800, subject to the appropriation of funds and to review and approval as to form by the City Attorney; and
2. Authorize the City Manager or designee to take any actions as necessary to implement and administer the Master Service Agreement, including negotiating and executing amendments to the Master Service Agreement to (a) add, modify or delete associated services and (b) make de minimis changes, provided that the maximum compensation is not exceeded, subject to the appropriation of funds and to review and approval as to form by the City Attorney.
Staff
Reviewed by: Adam Kostrzak, Director/CIO, Information Technology Department
Approved by: Jovan Grogan, City Manager
ATTACHMENTS
1. Original Agreement and RTC 13.B1
2. RTC 21-706 and Option Documents
3. RTC 25-337
4. New Master Services Agreement with Unisys
5. Accompanying Schedules 1-29 to New Master Services Agreement with Unisys