A Plan for the Implementation of Enterprise Resource Planning (ERP) for the State of Texas

The ERP Plan

Background, Purpose and Charge

In May 2007, the 80th Texas Legislature passed House Bill (HB) 3106, which addressed the concept of ERP for the state of Texas. From a practical standpoint, the term ERP for the state of Texas refers to an integrated software package that provides functionality similar to that offered in the existing statewide administrative systems (e.g., USAS, SPA, USPS, SPRS), as well as critical additional functionality currently provided by agency and institution of higher education administrative systems. The scope of this ERP project follows the definition stated in §5.300 Enterprise Resource Planning of Title 34 Texas Administrative Code effective Jan. 8, 2008. That definition excludes higher education student system administrations as well as community colleges.

HB 3106 requires the Comptroller to set clear standards for the implementation of ERP software for the State. The Legislation also requires the Comptroller to establish and coordinate an Enterprise Resource Planning Advisory Council (established Feb. 8, 2008) charged with the development of a plan that contains key requirements, constraints and alternative approaches for the Comptroller’s implementation of ERP standards, including related core functionality and business process reengineering requirements.

HB 3106 establishesthe Advisory Council members as the Department of Information Resources (DIR), Health and Human Services Commission (HHSC), Information Technology Council for Higher Education (ITCHE), Texas Comptroller of Public Accounts, and two State agencies selected by the Comptroller with fewer than 100 employees (Texas Commission on the Arts and Texas Soil and Water Conservation Board).

The Advisory Council adopted guiding principles fundamental to the ERP Plan. Those principles are as follows:

• Through workgroups and committees, we will engage statewide agencies and institutions of higher education in the project;
• We will establish and implement standardized business processes where possible;
• We will establish and implement common data standards where possible;
• We must ensure future ERP system projects are compatible with statewide standards;
• We will not throw out what works; and
• We will adapt our processes to the software rather than the software to our processes when possible.

Advisory Council’s Approach

In developing this ERP Plan for the State of Texas, it was the advisory council’s approach to consider work products, information and communications provided by numerous sources.

Five ERP Workgroups, consisting of agency and higher education subject matter experts, presented reports including findings, recommendations and other considerations related to the following focus areas. See Exhibit A for a summary of the five workgroup’s reports.

• Accounts payable (e-travel voucher)
• Statewide considerations (unique Texas business identifier)
• Global data standardization
• Asset management and inventory
• Vehicle fleet management

The Advisory Council has continued to meet on a monthly basis with the Comptroller. The meetings have been in public forum to ensure the opportunity for public comment as we have moved forward with the ERP initiative. The CFO/CIO ERP Committee was established to further statewide ERP communications and provide a forum for agency and higher education administrators to offer suggestions and ask questions.

• The Texas A&M University System;
• The Texas State University System;
• The Texas Tech University System;
• The University of Houston System;
• The University of North Texas System;
• The University of Texas System; and
• Texas Woman’s University (representing independent institutions of higher education).

In November 2007, the Comptroller’s Office developed a survey that was sent to all state agencies and institutions of higher education. The survey captured high-level information about administrative systems and expenditures related to the application scope listed in HB 3106. Additionally, the Comptroller’s Office asked survey participants to identify the amount of expenditures that were planned over a five-year time horizon to replace, upgrade or maintain these systems.

In June 2008, the Comptroller’s Office hired an independent consulting firm (Salvaggio, Teal & Associates) to develop a comprehensive business case analysis (BCA) and the related strategic planning associated with ERP, collectively referred to as the “study.” Included in the study was a subset of the 182 State agencies. This group was composed of 24 of the State’s largest and most complex agencies and represents at least 97 percent of the state’s total fiscal 2007 expenditures. System stakeholders were included that represent the existing statewide administrative systems (USAS, SPA, TINS, USPS, SPRS, USPS). The Study was completed on Sept. 17, 2008, and reviewed with the Advisory Council and Comptroller on Sept. 24, 2008. The purpose of the study was to provide the ERP Advisory Council and the Comptroller with alternatives, data and other information necessary to determine whether implementing a statewide ERP system is economically feasible for the state of Texas. The following three alternative scenarios were analyzed:

• Business Case Alternative 1: Status Quo (BCA 1) – The State continues on its current path and each agency and institution of higher education continues operating their existing administrative systems as currently planned. The 11-year cost for this approach per the business case was $1,342,400,000.
• Business Case Alternative 2: Statewide ERP Platform Deployment (BCA 2) – Replace the existing statewide legacy administrative systems (USAS, USPS, SPA, SPRS, USPS, TINS) with a new, fully integrated, commercially-available ERP system that would provide all functionality identified in HB 3106. One statewide ERP system for all State agencies and all institutions of higher education would be established and operated by the Comptroller. The 11-year cost for this approach per the business case was $1,813,400,000.
• Business Case Alternative 3: Hub Model (BCA 3) – Replace the existing statewide legacy administrative systems (USAS, USPS, SPA, SPRS, USPS, TINS) with a new, fully integrated, commercially-available ERP system that the Comptroller’s Office would operate as an Application Service Provider (ASP) for all State agencies with the exception of the Health and Human Services (HHS) agencies and institutions of higher education. The HHS agencies and Higher Education would operate under a decentralized processing model as data reporting “hubs.” They would interface into the Statewide Data Warehouse platform and their transactional data would interface into the new ERP system. The 11-year cost for this approach per the business case was $1,377,800,000.

Key Requirements and Functionality

HB 3106 defined the organizational scope to include all State agencies and institutions of higher education, and the functional scope to include the following application areas:

• General Ledger;
• Accounts payable;
• Accounts receivable;
• Budgeting;
• Inventory;
• Asset management;
• Billing;
• Payroll;
• Projects;
• Grants; and
• Human resources, including administration of performance measures, time spent on tasks and other personnel and labor issues.

Though not included in HB 3106, the following functional areas were added to the plan scope:

• Procurement. The functionality is an integral component of an ERP system and procurement falls within the Comptroller’s authority. Procurement is the functional area that typically obtains the greatest process efficiencies and potential cost savings in the transition to an integrated ERP system.
• Fleet Management. Fleet management functionality is required to address the Texas Comptroller of Public Accounts (Comptroller or Comptroller’s Office) Rider 16, GAA 2008-2009, which requires the Comptroller to implement and maintain a state fleet data management system for agencies to report fleet operating expenses and uses, as required by Chapter 2171.101, Government Code. The system must be accessible through a Web-based interface, provide forms for efficient entry of data required by the State Vehicle Fleet Management Plan, allow agencies to batch load relevant data from internal legacy systems, provide fiscal and managerial reports for both direct asset management and oversight needs, and be flexible enough to accommodate future agency or legislative needs.
• Data Warehousing. It is assumed that a statewide data warehouse is required in order to provide functionality necessary to meet the state’s present and future analysis and reporting requirements, and to address the Comptroller’s new standards for transparency and accountability in state spending.

Recommendations

The advisory council recommends that the Comptroller implement BCA 3, the Hub Model, which was presented in the business case analysis prepared by STA and is shown in Figure 2. Under BCA 3, State agencies (with the exception of the Health and Human Services agencies and institutions of higher education) will migrate to a new Statewide ERP platform operated by the Comptroller’s ASP service. The HHS agencies and institutions of higher education would operate under a decentralized processing model as data reporting “hubs.” They would be interfaced into the Statewide Data Warehouse platform and their transactional data would be interfaced into the new ERP system. Should it be determined after requirements analysis that additional Hubs are needed, this model may be expanded. Under this model specific agency/institution transactional systems would be interfaced to the Statewide ERP System for addressing major functional needs such as financial and payment processing. The existing statewide legacy administrative systems (e.g., USAS, USPS, SPA, USPS, SPRS, TINS) will be replaced by the Statewide ERP system that will provide all functionality identified in HB 3106.

BCA 3 – Hub Model Diagram

A separate data warehouse will be established by each higher education system, independent higher education institutions, and by Health and Human Services. Each hub will develop its own data warehouse capability, and every hub component, agency or institution, will be required to provide data to its hub data warehouse. Component institutions in higher education and Health and Human Services will be able to operate and maintain whatever platform and application set they choose with the only restriction being the system data warehouse conforms to the statewide data standards for statewide reporting. Each hub will follow its own business processes as defined by their business requirements and as dictated by their specific application set. The Statewide ERP baseline code will be made available to every hub for its use, if desired, and will be maintained according to the ERP vendor’s recommended schedule.

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.

We recommend this solution for the following reasons:

• It addresses HB 3106 requirements and the functionality required by the Comptroller’s Rider 16 regarding fleet management.
• It complies with the ERP Advisory Council’s guiding principle of “not throwing out what works” by leveraging the considerable work done to date by Higher Education and Health and Human Services in implementing their own ERP systems.
• The state will achieve business process standardization based on best practices, economies of scale and efficiency gains through the implementation of a single, unified platform for almost all state agencies while still allowing for the differences in the functional requirements of the hubs.
• It provides for significantly enhanced statewide reporting for both higher education and the State agencies, which will greatly facilitate a “single source of the truth” and taxpayer transparency.
• It eliminates the use of SSNs as the primary identifiers in the statewide administrative systems, thus helping to reduce identity theft opportunities.
• It provides for compliance with Section 508 of the Americans with Disabilities Act regarding accessibility.
• It eliminates much of the fragmentation associated with the State’s existing administrative systems environment.
• Total project implementation costs are considerably less than the costs of implementing the alternative ERP scenario (BCA 2) presented by Salvaggio, Teal & Associates (STA) in their business case analysis.
• It is the model most often utilized by other states to meet their statewide administrative system needs, resulting in lower overall project risk.
• It eliminates proliferation of agency ERP and other administrative shadow systems, while allowing higher education to maintain its own ERP solutions that are integrated with other ERP functions such as patient care, student information, learning management and library systems.
• It provides a plan that allows the state to significantly upgrade the functionality and reporting capabilities of its statewide administrative systems and retire the legacy systems (USAS, SPRS, USPS, HRIS, SPA, TINS) over a period of seven years.
• It establishes a common language for reporting expenditures through use of commodity codes (NIGP) and focuses the use of Comptroller Object Codes on financial reporting (ACFR, GASB), thereby allowing for consistent reporting and better analysis of how the State’s money is spent.
• It provides for a statewide procurement system that will be fully-integrated with the financial accounting, asset management, and Inventory management modules, as well as the Online Ordering System currently in development by the Comptroller’s office.
• It provides for better tracking of the state’s assets, thus helping agencies and the Legislature in budget planning by identifying replacement costs and schedules.
• Hubs will gain the benefit of centralized reporting at the system or enterprise level through data warehouses that will be used to gather and normalize disparate institutional data to support effective statewide reporting goals.
• It allows for the hubs to consider ERP consolidations through an evolutionary process, should their existing systems reach the end of their useful lives.

The ERP cost to be funded under BCA 3 is:

This includes costs incurred during the 7-year project timeframe for pre-implementation services, the implementation project, ongoing support costs during this period and the contingency. These are the costs that would be considered “new funding” until the Comptroller is able to retire the existing statewide administrative systems. The following table provides cost categories by fiscal year for recommended BCA 3 (net of the 15 percent contingency).

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.