Intergovernmental Cooperation ON ERP Systems: This article describes the joint procurement and implementation of an ERP solution by three Nebraska governments: Douglas County, the City of Omaha, and the Omaha/Douglas Public Building Commission.

• Author: Hall, Kathleen A.
• Position: Enterprise resource planning

Investment decisions related to financial management systems are shaped in part by the associated economies of scale. It is reasonable that small and mid-size governments spend less--and usually get less--on financial system packages, because the scale of their operations does not justify a large investment. By pooling their technology investments, however, it is conceivable that two or more of these governments could gain access to a system that is far better than what any one of them could have obtained on their own.

Intergovernmental cooperation is not a new idea. For as long as there have been local governments, cities, counties, and special districts have jointly funded and/or performed services whereby each of the entities was better off. Cooperation in the areas of economic development, public safety, public buildings, roads, and internal services such as fleet management and copying are well known. But there are few examples of intergovernmental cooperation in the area of technology.

This article reviews the systematic process by which three Nebraska local governments collaborated to replace their existing financial systems with a new enterprise resource planning (ERP) system. The involvement of multiple governments significantly increased the complexity and degree of an already daunting task. However, through executive-level leadership, staff-level cooperation, and intergovernmental collaboration, participating governments achieved benefits that are easier to establish in theory than they are to achieve in practice.

Case for Action

Several years ago, officials from Douglas County and the City of Omaha met to discuss the possibility of a joint effort to procure and implement an integrated financial system. Until that time, both governments had used the same accounting system under a joint agreement with the vendor. Two separate databases for the accounting package resided on the county's mainframe system--one for each government, each with a different set of legacy systems feeding into the main accounting package (Exhibit 1). The software had been configured and customized to meet the unique requirements of both governments.

When the system was originally installed in the mid-1980s, the contract included a clause requiring that the vendor make the software Y2K compliant. However, because the county and the city had decided against upgrading to the client-server version of the accounting package and were the vendor's only customers still using an older operating system, the vendor decided not to extend its support of the system beyond Y2K compliance. This decision, combined with a common desire to replace the legacy system with a more integrated system that extended beyond traditional financial functions, prompted the governments to jointly pursue the procurement and implementation of an ERP system.

Achieving Intergovernmental Consensus

During initial discussions, officials concluded that they would need the assistance of consultants on several aspects of the project. Since both the county and the city engage the same auditing firm, this firm was commissioned to perform a high-level needs assessment and to present its findings in a joint session of the Douglas County Board of Commissioners and the Omaha City Council. A representative from the Mayor's Office also was resent at this session. The consultants presented enough information about the need for and the benefits of an integrated financial system to convince the Board, the Council, and the mayor to move forward with the project.

Representatives from both the county and the city agreed that the two governments lacked the in-house expertise to develop a comprehensive request for proposals (RFP) for an ERP system. Accordingly, the Board of Commissioners and the City Council entered into an interlocal agreement to contract with the Government Finance Officers Association (GFOA) to help develop the RFP and to assist in the evaluation of RFP responses, the selection of a software and services vendor, and the negotiation of the final contracts. Although the governments could have contracted with one of the major accounting firms to perform this work, local officials believed that the ties between some of these firms and the ERP vendors could jeopardize their independence and thus limit the range of options. GFOA had extensive experience in public-sector ERP procurement and considered the joint procurement effort to be consistent with its mission. More specifically, GFOA sought to establish a methodology for joint system procurement and to p ublicize the effort so that other governments could follow suit.

As initial discussions of the project were taking place, the Omaha/Douglas Public Building Commission (ODPBC) was considering the procurement of a separate accounting system, and had included an estimate of the system's cost in its annual budget. The ODPBC is a five-member board--with taxing authority--created by state statute for the construction and maintenance of the primary buildings used by the two governments. The Commission is comprised of two members of the Douglas County Board of Commissioners, two members of the Omaha City Council, and one at-large member who is elected by the other four members. Project proponents were successful in lobbying the ODPBC to use the funding designated for a new accounting system to fund the consulting fees for system selection services. In exchange, the ODPBC's accounting needs would be met by the new system, which was to be paid for primarily by the county and the city. The ODPBC's accounting and payroll functions are performed by the county clerk/comptroller, who by statute has authority to audit all of the commission's transactions.

Organizational Considerations

The organizational structures of the county and the city are very different. The City of Omaha is relatively centralized, with a finance division that includes both the budget and purchasing functions, which, at the county level, are separate divisions. The city controller is appointed by and reports to the mayor, whereas the county clerk/comptroller is an elected official who is not accountable to the Board of Commissioners. By statute, the clerk/comptroller's function is to "act as the general accountant, chief auditing officer, internal auditor, and fiscal agent of the county" (Revised Statutes of Nebraska, 23-1401, Reissue 1997). Because of the clerk/comptroller's role as internal auditor, there is the potential for conflict between that department and those departments supervised by either the Board of Commissioners or any of the other eight elected county officials. In fact, such a conflict resulted in 1970s legislation that removed the purchasing agent and the fiscal administrator from the office of th e clerk/comptroller and placed them under the administration of the Board of Commissioners.

The differences in the degree of centralization posed a significant challenge to the joint procurement effort. A starting point for addressing this problem was the establishment of a joint steering committee on the recommendation of GFOA. The steering committee consisted of the following individuals: the ODPBC administrator, county clerk/comptroller, county chief administrative officer, county fiscal administrator, county purchasing agent, county IT director, city finance director, city purchasing agent, city IT director, and aides to both the City Council and the mayor. The steering committee's function was to direct the activities of the selection team and to receive, deliberate, and act upon this team's recommendations. The selection team also was comprised of key staff members from each of the governments. In forming this team, the goal was to secure inter-jurisdictional knowledge of key business processes and balanced representation from all of the functions...