TO: ADAM PIRRIE, CITY MANAGER
FROM: KATIE WAND, ACTING ASSISTANT CITY MANAGER
DATE: OCTOBER 27, 2026
Reviewed by:
City Manager: AP
SUBJECT:
Title
AUTHORIZATION TO ENTER INTO AN AGREEMENT WITH SHI INTERNATIONAL CORP. FOR MICROSOFT OFFICE 365 LICENSING AND APPROPRIATION OF FUNDS (FUNDING SOURCE: TECHNOLOGY FUND)
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SUMMARY
Microsoft Office 365 supports the City’s daily operations through email, document creation and management, secure access to cloud-based applications, and centralized identity and device management. Renewing the City’s licensing will maintain these services and accommodate increased staffing, additional City-issued mobile devices, and updated licensing needs.
Staff solicited quotes from three qualified Microsoft partners and identified SHI International Corp. as the most qualified and lowest-priced provider. Staff recommends that the City Council authorize a 36-month agreement with SHI International Corp., at a total estimated cost of $298,197, including contingency and anticipated sales tax, and approve the renewal of the City’s participation in a joint Microsoft Enterprise Agreement for the period of December 1, 2026, through November 30, 2029. An appropriation of $36,067 from the Technology Fund balance is recommended to fully fund the first two years of the agreement. Funding for the third year will be included in the proposed 2028-29 operating budget.
RECOMMENDATION
Recommended Action
Staff recommends the City Council:
A. Authorize the City Manager to enter into a 36-month agreement with SHI International Corp. to provide Microsoft Office 365 licensing in the amount of $265,832, plus a five percent contingency and applicable sales tax in the amount of $32,365, for a total contract amount of $298,197;
B. Appropriate $36,067 from the Technology Fund balance to fully fund the first two years of the agreement; and
C. Authorize the City Manager to execute the required documents to renew the City's enrollment with Microsoft Corporation as part of a joint Microsoft Enterprise Agreement.
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ALTERNATIVE TO RECOMMENDATION
In addition to the recommendation, there is the following alternative:
• Request additional information from staff.
FINANCIAL REVIEW
The quoted cost of the 36-month agreement with SHI International Corp. is $265,832, excluding applicable taxes. Staff recommends including a five percent contingency of $14,200 for future licensing needs, bringing the total cost before taxes to $280,032 to be paid over three annual payments.
Beginning January 1, 2027, Senate Bill 122 expands the application of California sales and use tax to qualifying digital products, including electronically delivered and remotely accessed prewritten software. For budgeting purposes, staff anticipates that applicable taxes will be applied on the second and third payments of the agreement. Based on the current tax rate of 10.25 percent, estimated taxes total $18,165 over those two years, including an allowance for taxes on additional licensing purchased using the contingency. The total estimated cost of the agreement, including contingency and anticipated taxes, is $298,197. Actual tax costs will depend on the applicable tax rate and taxable purchases.
The current Administrative Services budget includes funding of $80,276 for 2026-27 and $79,276 for 2027-28 for Microsoft Office 365 licensing. The agreement will consist of three annual payments, each due on December 1 of the corresponding year. The estimated first-year cost, including contingency, is $93,041, requiring an additional appropriation of $12,765. The estimated second-year cost, including contingency and anticipated taxes, is $102,578, requiring an additional appropriation of $23,302. Staff recommends appropriating a total of $36,067 from the Technology Fund balance to fully fund the first and second years of the agreement. Funding for the third year, estimated at $102,578, will be included in the proposed 2028-29 operating budget.
The increase in Microsoft 365 licensing costs is driven by three primary factors: additional licenses required to accommodate increased City staffing, expanded device management licensing to support the growing number of City issued mobile devices, and adjustments to licensing types to align with Microsoft's licensing structure and the specific services required by employees. These changes ensure that staff have access to the appropriate Microsoft services while maintaining centralized device management, security, and compliance with City technology standards.
The services were quoted by three Microsoft Corporation partners to ensure that the City of Claremont receives the best price for these services. This purchase complies with all City purchasing guidelines. Bid and contract documents are available for review in the City Clerk's office. The staff cost to prepare this report and administer this contract is estimated at $2,054 and is included in the operating budget of the Administrative Services Department.
ANALYSIS
In 2014, the City purchased Microsoft Office 365 licensing from an approved reseller and migrated the City’s email server to a Microsoft cloud hosted solution. Microsoft Office 365 allows staff to complete daily tasks and efficiently conduct business in a manner consistent with current technology and organizational practices. This includes email communications and the creation and management of documents, reports, spreadsheets, and presentations. The platform also supports centralized identity management through Microsoft Entra ID, which authenticates users and manages access to various cloud-based software applications used by the City. As the City has transitioned additional services to cloud-based applications, this identity platform has become an integral component of the City’s technology infrastructure, supporting secure access and consistent user account management across connected systems.
Staff solicited quotes from qualified partners and received three responses. Staff determined SHI International Corp. was the most qualified and lowest priced option and therefore recommends entering into an agreement with SHI International Corp. to provide Microsoft Office 365 licenses to the City. Below are the quotes received from each vendor.
|
Vendor Name |
Annual Cost |
Total Cost for 36 Month Term |
|
SHI International Corp. |
$88,611 |
$265,832 |
|
Insight Enterprises, Inc. |
$89,181 |
$267,543 |
|
Dell Technologies Inc. |
$91,116 |
$273,347 |
These prices do not reflect the 5% contingency, nor the anticipated charge for sales tax due to SB122 due to take effect January 1, 2027.
Since Microsoft does not sell Office 365 licensing directly to consumers, upon City Council approval, the City must enter into an Enterprise Agreement between the three parties: Microsoft Corporation, an approved Microsoft Corporation Partner, which in this case, would be SHI International Corp., and the City. The City will also enter into a separate agreement with SHI International Corp. for the required licenses. SHI International Corp. will invoice the City directly, and the City will remit payment directly to SHI International Corp.
RELATIONSHIP TO CITY PLANNING DOCUMENTS
Staff has evaluated the agenda item in relationship to the City’s strategic and visioning documents and finds that it applies to the following City Planning Documents: Council Priorities, General Plan, and the 2026-28 Budget.
CEQA REVIEW
This item is not subject to environmental review under the California Environmental Quality Act (CEQA).
PUBLIC NOTICE PROCESS
The agenda and staff report for this item have been posted on the City website and distributed to interested parties. If you desire a copy, please contact the City Clerk’s Office.
Submitted by: Prepared by:
Katie Wand Andrew Erickson
Acting Assistant City Manager Information Technology Officer