The city of Minneapolis is cutting ties with the company behind its largest contract, IT provider Unisys, ending a relationship ultimately worth about $147 million to the Pennsylvania-based firm.
The city has outsourced much of its IT services to Unisys since 2003, at an annual cost of about $13 million in recent years. Officials sought a new company for the work last year, however, amid concerns that the Unisys agreement was out of date and too rigid. The current contract expires in December.
At a City Council meeting next week, technology officials will recommend switching to Arizona-based OneNeck IT Solutions and bringing some of the technology jobs back to the city. Eighteen companies, including Unisys and two local firms, bid for the work.
If approved, the change would result in annual taxpayer savings of about $3 million, or 25 percent, according to a staff report. But the transition will also carry a one-time cost of $10 million, about $7.3 million more than outlined in November budget presentations.
“If you want to stop the bleeding, you’ve got to buy a Band-Aid,” said Council Member Andrew Johnson, a former systems engineer who has helped steer the effort. He expects the final transition cost to be lower.
City spokesman Matt Lindstrom said the original transition cost estimate of $2.7 million did not account for the expense of paying two vendors simultaneously and insourcing some services. The city’s IT department will cover the difference using money from past billing of other departments, according to city finance staff.
Johnson emphasized the annual savings from the change, as well as improved security and tech support. “It’s the city’s largest contract, and by making this switch, we are going to be saving taxpayers more than $3 million a year,” Johnson said. “And the city’s going to have better support as a result of it.”
While Unisys represents the largest cumulative spending on one contract, Lindstrom said the city spends more annually on its medical insurance contract.
Based in Scottsdale, OneNeck actually comprises several tech companies that a Chicago company acquired in the Midwest and Colorado. They include Eden Prairie-based VISI Inc., now called OneNeck, which was bought by the parent company in 2010. OneNeck declined to comment Wednesday.
Services from Unisys, a massive IT company with global clients, reach into nearly every corner of city government. Its tasks range from providing city employees with PCs to storing reams of city data.
A 2012 Star Tribune report showed that many of the former city employees who initiated and guided the contract over the years had employment ties to Unisys. It dates back to the beginning: A former Unisys employee ran the city’s IT department when the contract was signed. The city has since renewed and extended it without seeking competitive bids.
This past December, a Unisys executive made a last-ditch effort to save the contract by highlighting the expected $2.7 million 2015 transition cost in a letter to council members. Unisys Vice President Scott Vogel noted that racial equity and environmental programs were simultaneously facing cuts in budget discussions.
“As you and other city leaders labor to decide how you will pay for the important services that impact citizens’ safety, economic well-being and general ability to live together as ‘One Minneapolis,’ this unwarranted, seven-figure spending hike is surprising,” Vogel wrote in an e-mail, obtained by the Star Tribune through a records request.
The company said in a statement Wednesday that they are “disappointed with the city’s decision” but will cooperate through the contract’s expiration in December. “We are proud of the results we have achieved in managing the city’s IT infrastructure for the last 12 years,” Unisys spokesman Brian Daly said.
The proposed change involves hiring 33 new city employees to take over the service desk and provide technical support. Johnson said this will help the city function more smoothly, since in-house support staff can dedicate more time to finding the root cause of problems — rather than merely solving them on a case-by-case basis.
Precisely how the new arrangement would save so much money remained somewhat unclear Wednesday.