TO: AC Transit Board of Directors
FROM: Salvador Llamas, General Manager/Chief Executive Officer
SUBJECT: Single Source Contract Renewal with Prophix Software, Inc
ACTION ITEM
AGENDA PLANNING REQUEST: ☐
RECOMMENDED ACTION(S):
Title
Consider authorizing the General Manager/Chief Executive Officer to execute a single-source contract with Prophix Software, Inc., to provide continued services and technical support for the District’s budget system for a term of three (3) years with two optional annual extensions.
Staff Contact:
Paul Kincaid, Interim Chief Financial Officer
Body
STRATEGIC IMPORTANCE:
Goal - Financial Stability and Resiliency
Initiative - Financial Efficiency and Revenue Maximization
Maintain Financial Stability and Resiliency for the District by continuing the facilitation of budget development, budget reporting, and budget analysis using Prophix.
BUDGETARY/FISCAL IMPACT:
Prophix Software, Inc. provides the District with secure Financial Planning & Analysis (FP&A) technology for compiling operating budgets, comprehensive and custom reporting capabilities, and PeopleSoft integration at a cost of $724,007 over the next three (3) years, from March 1, 2027 to February 28, 2030. Contract includes renewal option for the fourth and fifth years for $264,562 and $277,105, respectively. If options are exercised, the five (5) year contract will cost $1,265,674 and end February 28, 2032.
The current FP&A Classic contract with Prophix expires February 28, 2027. Staff recommendation, as discussed below, is to approve an upgrade from FP&A Classic to FP&A Plus. The proposal from Prophix will enhance the current FP&A setup to include query-based capabilities similar to common Artificial Intelligence (AI) tools. Additionally, the proposal includes a Cash Management module for use as soon as November of this year. The FP&A Plus proposal is offered for the same cost as maintaining the current FP&A Classic. Implementation is free of charge and would require 230 hours of Prophix time and take place in October 2026.
Annual cost increases are capped at 5% per year. In addition to the 5% cap, year one includes a $12,500 fee for the Cash Management module.
Current: $207,396
• Year 1: $230,266
• Year 2: $241,154
• Year 3: $252,587
• Year 4 (optional): $264,562
• Year 5 (optional): $277,105
Total: $1,265,674
BACKGROUND/RATIONALE:
The District requires a versatile solution for compiling and reporting budget data. In 2018, the District selected Prophix Software, Inc. through a competitive solicitation process. In 2021, and again in 2024, the Board approved staff’s recommendation for a three (3)-year single-source contract extension with Prophix Software, Inc, which critically enabled collaborative and effective budgeting during the challenges of the pandemic and now during the structural fiscal uncertainties of today. Prophix continues to fulfill critical business needs and is uniquely best suited to:
• Enable ready access to historical, current, and projected financials;
• Handle a high level of complexity in planning personnel and operating budgets;
• Be intuitive and easily accessible to users with diverse technical backgrounds; and
• Be integrated with PeopleSoft.
Prophix is considered an “Enterprise System” for AC Transit (as defined in Cal. Gov’t Code § 7922.7) and can therefore be awarded as a single-source contract (Board Policy 465, section VI(C)(5)(c)). Additionally, the system took more than a year to set up and cost nearly $620,000 to implement the design, integration, establish host setup, and staff training. Any alternative integrated budget planning and analysis solution would require similar effort and cost to reach a similar level of utility and maturity (Board Policy 465, section VI(C)(5)(a)(ii)).
The cloud-based, SaaS (Software as a Service) configuration makes Prophix especially adept for coordinating with departments to develop line-item-detail budgets and creating custom reports (not “out of the box”). The current system is also designed to relieve the need for regular technical support from the IT department, which would not be the case during the integration and implementation stages and possibly throughout regular use of a new SaaS budgeting system.
Prophix was among the first SaaS systems adopted by the District, which has since continued to shift from on-premises to cloud-based for the benefits of reduced infrastructure costs, increased scalability, and assurance in lower downtime during disaster recovery or troubleshooting. SaaS cost increases are currently high due to inflation, along with growing cybersecurity needs. Prophix teams with several large technology partners for cloud services, such as Microsoft (MS) and Amazon Web Services (AWS), which provide compatibility with software already in use by the District.
This renewal includes an option for a software upgrade - at no additional cost - requiring 230 hours of reconfiguration. The pro-bono upgrade from FP&A Classic to FP&A Plus provides a more robust user interface and significantly enhances data storage and analysis through natural-language, query-based reporting - allowing staff to ask questions of the data directly rather than building reports manually. In addition, user licenses will be expanded, which will eliminate District staff waitlist for a Prophix license.
Of concern is District risk associated with AI software. A coordinated internal review by staff in Procurement, Legal, IT, and Budget departments, as well as joint meetings with Prophix, have resulted in mutual agreement on how to address AI-related concerns associated with the FP&A Plus proposal. Concerns regarding District information being used by the AI system have been allayed due to the cloud-based nature of the system, ensuring that only data stored in the Prophix system will be accessible by any AI tools. Those files contain no Personal Identifying Information (PII) or other risk exposures.
Budget staff recommends adopting the upgraded FP&A Plus capability as it allows staff to work more efficiently with financial information that is growing in complexity. FP&A Plus uses a robust financial planning tool platform that is ahead of current industry standards and represents future trends in areas of AI.
Staff negotiated a reduced-cost proposal with Prophix. The first annual payment increases 11%, from $207,396 to $230,266 - a total increase of $22,870. This reflects two components: the contract's standard 5% annual inflation adjustment (approximately $10,370) and $12,500 for the addition of new Cash Management capabilities, which the current FP&A Classic configuration does not include.
Cash Management allows for visibility of granular cash flow and will save staff time and effort to generate reports and identify the District's cash position. As the District enters a critical time of financial uncertainty, it is imperative to be able to leverage working capital, reduce borrowing costs, and keep a handle on anticipated levels of debt.
Annual increases are capped at 5% inflation. The District has the option to continue with the FP&A Classic configuration, or - at no additional cost - upgrade to FP&A Plus, the latest FP&A generation tool offered on the Prophix One platform.
ADVANTAGES/DISADVANTAGES:
The primary advantage associated with this single-source procurement of the Prophix budget software is the cost avoidance of implementing a new software system to integrate with PeopleSoft and the re-training of 100+ users that such a new system would require.
Keeping Prophix is in the District’s best interest as it is a crucial tool to support the daily business operations for the Budgeting department.
Staff cannot identify any disadvantages to issuing this single-source contract to Prophix.
ALTERNATIVES ANALYSIS:
An alternative to awarding a three (3)-year single-source contract with two optional annual extensions is to award a shorter three (3)-year single-source contract. This shorter contract price would total $724,007 (instead of $1,265,674 for three (3) years and two annual optional extensions). Staff prefer the longer contract term as it gives longer price certainty and more time for return on the investment from report development and system functionality.
The proposal affords an option to upgrade from FP&A Classic to FP&A Plus, which includes AI capability. Because this is a cost-neutral option, Staff is able to negotiate an option with Prophix to terminate the FP&A Plus configuration and revert to the FP&A Classic should circumstances warrant this change. Work done between the conversion - in particular for Cash Management - will likely be lost. The Cash Management module is in addition to FP&A Plus for $12,500 per year and involves staff time to set up during the initial configuration.
Another alternative would be to leave out the Cash Management module, which is not included in FP&A Plus. This add-on could be considered a separate integration project later, although staff recommends including it with the proposed pro-bono upgrade work for cost efficiency.
Another alternative would be to issue a Request for Proposals (RFP) for new budgeting system software. However, this is not recommended due to the massive opportunity costs of both money and human resources that would be required, as detailed above.
PRIOR RELEVANT BOARD ACTION/POLICIES:
Board Policy 465, Procurement Policy
SR 21-107 Renewal
SR 23-526 Renewal
ATTACHMENTS:
None
Prepared by:
Mary Archer, Budget Manager
In Collaboration with:
Michael Daly, Senior Contracts Specialist
Alicia Okupe, Senior Attorney
Tas Jalali, Cyber Security Manager
Approved/Reviewed by:
Salvador Llamas, General Manager/Chief Executive Officer
Richard Oslund, Director of Management & Budget
Michael Silk, Director of Procurement & Materials
Manjit K. Sooch, Director of Innovation & Technology
Aimee L. Steele, General Counsel/Chief Legal Officer
Paul Kincaid, Assistant General Manager/Chief Executive Officer