A Plan for the Implementation of Enterprise Resource Planning (ERP) for the State of Texas
Summary of Advisory Council’s Recommended Plan
While the recommendation in this Plan regarding the ERP solution is based on the Study conducted by STA, the ERP Advisory Council’s final recommendations are based on our assessment of the project scope, timeline, and budget, as well as the legislative appropriation cycle and best value for the state of Texas.
From a financial and business perspective, the Advisory Council believes that BCA 3 is by far the best of the three alternatives evaluated in the Study. The business case Executive Summary, which is Exhibit B of this document, provides an 11-year perspective. Under BCA 3 approximately $249 million would be needed over a 7-year ERP implementation period. The reconciliation between the 11-year business case and 7-year project is presented in Exhibit C. The Advisory Council recommends that an additional contingency amount be reserved equal to $37 million (15 per cent) of the total estimated project budget to address unforeseen costs and/ or costs that could not adequately be addressed as part of the STA study due to specific information not being available at the time the study was performed. This brings the recommended project total to $285.7 million, which would be spent as described below:
|Fiscal Year||Activity||Estimated Cost|
|FY 10/11||Planning; statewide ERP requirements development; Procurement of ERP software
and integration services; contingency established; develop ERP blueprint
|FY 12/13||32 Agency deployments||$82,774,000|
|FY 14/15||92 Agency deployments; replace statewide system; hub interfaces completed||$73,534,000|
|FY 16||11 Agency deployments; replace remaining statewide systems; software upgrade||$45,606,000|
|Total ERP Project Cost||$285,727,000|
In arriving at the contingency, we considered the risks associated with the state’s ability to successfully implement a project of this nature, as well as the perception of the state’s ability to adapt to such a significant change. The Advisory Council recommends following a planning, development and deployment schedule that postpones the start and completion of the project by approximately one year when compared to the Business Case Study. The contingency includes the time value of money with the shift of the project one year into the future.
Given that the contingency is to address “unknown” costs, the contingency amount is being presented as a total add-on to the estimated project cost as opposed to being allocated across project years and phases.
Total ERP Project Cost $248,458,000
15% Contingency $37,269,000
These collective costs are what would be considered “new funding” until the Comptroller is able to retire the existing statewide administrative systems. The following table provides project and ongoing operations costs by fiscal year for recommended BCA 3.
The Assumptions provided in the ERP Advisory Council’s Plan are very important to the recommendations regarding BCA 3. Changes to any of the Assumptions or any future negotiations with vendors may materially impact the project’s timeline, cost, scope, resources and expectations.
|Cost Category||Fiscal Year|
|Total Project Costs||$1,805||$41,339||$41,860||$22,883||$29,668||$12,817||$16,147||$166,519|
|Total Operations Costs||$3,400||$3,502||$14,529||$15,255||$15,794||$29,459||$81,939|
|Contingency (15 percent)||$37,269||$37,269|
|Total Annual ERP Cost||$39,074||$44,739||$45,362||$37,412||$44,923||$28,611||$45,606||$285,726|
|Cumulative ERP Cost||$39,074||$83,813||$129,175||$166,587||$211,510||$240,121||$285,726|