SAN IPSE CAPITAL OF SILICON VALLEY

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1 CITY OF C: zz* SAN IPSE CAPITAL OF SILICON VALLEY TO: HONORABLE MAYOR AND CITY COUNCIL COUNCIL AGENDA: 11/29/16 ITEM: % Memorandum FROM: Julia H. Cooper Joe Angelo SUBJECT: SEE BELOW DATE: Approved^ I Date ll/l^/l c. SUBJECT: AGREEMENT TO UPGRADE WORKERS' COMPENSATION MANAGEMENT SYSTEM RECOMMENDATION Adopt a resolution authorizing the City Manager to: 1. Execute an Agreement with DAVID Corporation (Wakefield, MA) to upgrade the Renaissance Workers' Compensation System to the latest version (Navrisk Vision), including software, hosting, third party software, maintenance, and related professional services for an initial term commencing on or about December 1, 2016, and ending on or about June 30, 2022, for a not-to-exceed amount of $728,900, subject to the appropriation of funds; and 2. Execute change orders to cover any unanticipated changes in requirements or for future enhancements for a not-to-exceed amount of $145,780, subject to the appropriation of funds; and 3. Execute up to five additional one-year options to extend the term of the Agreement after the initial term through June 30, 2027, to provide ongoing maintenance and hosting services, subject to the appropriation of funds. OUTCOME Provide a new cloud-based Workers' Compensation System ("System") to replace the City's current aging legacy system in support of the Human Resource ("HR") Department requirements. The new System will optimize performance by utilizing the latest technology with integrated claims, analytics, and reporting into one comprehensive solution to help staff reduce claim costs, respond to regulatory compliance needs, and achieve productivity improvements through automated workflow, use of sophisticated business rules engine, and better compliance with best practices.

2 Page 2 BACKGROUND The City has used DAVID Corporation's ("DAVID Corp") Renaissance System for processing Workers' Compensation Claims since the 1990's. The System received its last major upgrade in 2003 and software has since been supported with minor upgrades through maintenance and support purchase orders. The Renaissance legacy system has grown obsolete, reached its end of life, is labor intensive, and is inadequately supported. The upgrade to the Navrisk Vision System is the next generation technology for worker's compensation claims processing, compliance and reporting. It includes enhanced performance, features and functionalities for optimum system operation currently used by HR staff. The HR Department's Workers' Compensation Unit is currently undergoing a state audit of its program, and numerous compliance challenges have been identified. At the conclusion of the audit (anticipated to be in November 2016), staff will have a limited window to correct the audit findings and demonstrate a clear plan of action to maintain a compliant workers' compensation program, or risk losing the City's self-insured status. Losing the self-insured status poses significant risk and exposes the City to significantly higher workers' compensation administration costs. The new software upgrade is required to comply with State and federal reporting requirements, and improve productivity as many features will automate some functions that the Workers' - Compensation adjusters and support staff manually perform. In addition, the upgrade will provide a comprehensive solution through the Navrisk Vision suite of software that consists of the following fully integrated modules: NAVRISK VISION Claims supports the claims lifecycle for Workers' Compensation from first notice of loss to final adjudication. It employs a user-defined rules engine to simplify claims processes, including setting up new claims, running reports, and viewing payment batches. Business rules can be configured to alert users of upcoming claim task deadlines and timeframes to prevent processes from slipping through the cracks and/or incurring penalties due to tardiness or non-compliance. In addition, it provides ad hoc reporting and performance dashboards, providing immediate visibility into claims activity across the organization. NAVRISK VISION Analytics is a highly configurable reporting, analytics and business intelligence module that offers insight into the data. Risk management analytics are needed for data interpretation. In addition to standard template reports, it has powerful ad hoc reporting capabilities for trend analysis, cost comparisons across lines of business, dashboard creation, and drill down to data capabilities (from dashboards and graphs) to gain greater visibility. This improved reporting tool allows management to make informed, intelligent, and proactive business decisions.

3 November 7,2016 Page 3 ANALYSIS Upgrading the system will enable HR staff to process claims more efficiently by automating labor-intensive processes, streamlining access to information, improving processing and workflow, and automating reporting. This automation will save substantial staff time in adjusting claims. In addition, the upgrade will provide electronic reporting to the Centers for Medicare and Medicaid Services ("CMS") with the details of settlements, judgements, awards or other payments to Medicare recipients and help prevent $1,000 per day/per claim penalty for non-compliance. Additional benefits include continued support of the City's employees and retirees currently receiving Workers' Compensation benefit payments, and minimizing costs by leveraging existing interfaces, programming and staff training. The interfaces included with the upgrade are listed below: Automated Monthly Membership Report (MMR). Integrate and automate the MMR to CMS using the Franco Signor LLC (third party). Electronic Data Interchange (EDI) capability. Integrate with HealthTech Inc. (third party) for EDI data submission to State of California.. Oracle PeopleSoft HR/Payroll System. Wells Fargo Bank Since it is not prudent to introduce significant risk and cost that may be associated with changing to another Workers' Compensation System, it is advantageous to have DAVID Corp. provide its next generation technology and complete the System upgrade to ensure continuity of this mission-critical system. The upgrade to the Navrisk Vision solution will enable the City to meet its complex and rigorous State and federal regulatory compliance and provide enhanced functionality to improve efficiency and productivity. To ensure competitive pricing, staff benchmarked pricing with a similarly situated government agency, the County of Marin. Staff validated that the pricing for software, hosting, and related professional services for implementation/migration and maintenance services is fair and reasonable. The upgrade pricing reflects a 5.0% discount in software programs and services costs. Staff has determined that upgrading the existing legacy system is the most cost effective solution with minimal risk. Competitive procurement is not practicable for the reasons stated above. Staff recommends that the City Council authorize award to DAVID Corp. under San Jose Municipal Code Section , entitled "Unique Services," because a unique situation makes complying with the requirements for a competitive procurement contrary to the public interest.

4 Page 4 Summary of Agreement: The Agreement with DAVID Corporation includes fixed pricing for software licenses, hosting professional services including implementation, data conversion, data migration, integration, training, and maintenance during the initial term. The Agreement will also include a detailed statement of work defining all deliverables and a compensation schedule with payments tied to the successful completion of key project milestones, and a retainage amount that will be paid after System acceptance. After the initial term, renewal quotes, if exercised, shall be subject to review and approval by the City, and are subject to the appropriation of funds by the City. EVALUATION AND FOLLOW-UP This memorandum will not require any follow-up from staff. PUBLIC OUTREACH This item will be posted on the City's website for the November 29, 2016 City Council Agenda. COORDINATION The memorandum has been coordinated with the Department of Information Technology, City Attorney's Office, and the City Manager's Budget Office. COMMISSION RECOMMENDATION/INPUT No commission recommendation or input is associated with this action. FISCAL/POLICY ALIGNMENT This action is consistent with the City's Adopted Operating Budget City Service Areas (CSA) Delivery Framework for Performance-Driven Government for Operational Services: 1) Front Line Service Delivery, 2) Make Improvements, and 3) Strategic Support's Effective Use of Technology.

5 Page 5 COST SUMMARY/IMPLICATIONS The following outlines the elements of the contract and other project-related costs. 1. AMOUNT OF RECOMMENDATION (5-year term): $728, COST ELEMENTS: - Installation (software*, report setup, maintenance/hosting) - Year 2 Ongoing software*, maintenance/hosting - Year 3 Ongoing software*, maintenance/hosting - Year 4 Ongoing software*, maintenance/hosting - Year 5 Ongoing software, maintenance/hosting. Subtotal Not-to-Exceed *The NAVRISK VISION Software is amortized at $15K per year over four years (last installment is in Year 4) Contingency/Change Orders TOTAL 3. SOURCE OF FUNDING: Fund 001, Non-Personal/Equipment 163, ,000 $728,900 $145,780 $874, FISCAL IMPACT: After the five-year term, ongoing maintenance/hosting, cost is estimated at $130,000 per year with any future maintenance renewal cost adjustments capped at 3% annually. BUDGET REFERENCE The table below identifies the fund and appropriations proposed to fund the contract and contingency costs recommended as part of this memorandum. Fund # Appn. # Appn. Name Non-Personal/ Equipment Adopted Operating Budget Page Last Budget Action (Date, Ord. No.) Current Total Appn. Amt. for Contract $3,472,725 $874,680 VIII /18/2016, #29803 CEOA Not a Project, File No. PP (a) Agreements and Contracts. /s/ JULIA H. COOPER Director of Finance /s/ JOE ANGELO Director of Human Resources For questions, please contact Mark Giovannetti, Finance Deputy Director at (408)