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Council approves $38.1 million, five-year SAP contract amendment to ensure ERP continuity
Summary
The City Council approved an ordinance authorizing a five-year amendment to the City's SAP licensing and support agreement with SAP Public Services Inc. for a not-to-exceed $38.1 million to maintain on-premise support while the City transitions to a next-generation ERP.
The San Diego City Council on Nov. 3 voted unanimously to amend the City's agreement with SAP Public Services Inc., authorizing up to $38,100,000 over five years for licensing, maintenance, support and technical advisory services to preserve continuity of the city's enterprise resource planning (ERP) system.
City Chief Information Officer Jonathan Behnke and Deputy Director Arlo McPantay told the council the amendment includes a 5% annual CPI allowance and a 20% contingency for modernization or unforeseen regulatory requirements, and that the increase does not request additional budget authority but provides contract spending authority to be used only if needed. They said the amendment supports an ongoing ERP modernization project to migrate SAP to a private cloud (SAP S/4HANA) over multiple fiscal years.
The Office of the Independent Budget Analyst (IBA) Erin Noel reported no formal objection but urged council oversight. Noel recommended periodic reporting on contract expenditures, contingency use, and modernization milestones so council can ensure funds are used for true modernization and not routine expenses.
During public comment, speakers urged greater transparency and advance posting of supporting documents for direct-docketed items, questioned the size of the not-to-exceed authority and proposed exploring open-source alternatives. One commenter raised concerns about employee diversity data and how workforce reports are presented. Behnke and McPantay responded that the request seeks spending authority only and that actual spending remains contingent on the city's annual budget process.
Councilmember Foster moved the staff recommendation and Councilmember Moreno seconded. Members asked staff to provide periodic updates to the budget committee and to monitor subcontracting with minority-owned businesses. The motion passed 9-0.
The ordinance provides contract authority; it does not itself appropriate new funds. Any actual expenditures will be subject to annual budget approval and future reporting commitments promised by staff.
