REPORT/RECOMMENDATION TO THE BOARD OF SUPERVISORS
OF SAN BERNARDINO COUNTY
AND RECORD OF ACTION
August 4, 2026
FROM
JOSHUA DUGAS, Acting Director, Department of Behavioral Health
SUBJECT
Title
Amendment to Contract with Ernst & Young LLP for Transition from the Mental Health Services Act to the Behavioral Health Services Act
End
RECOMMENDATION(S)
Recommendation
Approve Amendment No. 1 to Contract No. 4400031341, including a non-standard term, with Ernst & Young LLP, for the transition from the Mental Health Services Act to the Behavioral Health Services Act, updating the scope of work to include continued organizational realignment, increasing the contract amount by $3,335,000, from $200,000 to a total contract amount not to exceed $3,535,000, and extending the contract term by one year and six months, for a total contract period of March 26, 2026 through February 29, 2028.
(Presenter: Joshua Dugas, Acting Director, 252-5142)
Body
COUNTY AND CHIEF EXECUTIVE OFFICER GOALS & OBJECTIVES
Promote and Fulfill the Countywide Vision.
Improve County Government Operations.
Foster Sustainable Development Through Strategic Partnerships.
Provide for the Safety, Health and Social Service Needs of County Residents.
FINANCIAL IMPACT
Approval of this item will not result in the use of Discretionary General Funding (Net County Cost). The recommended increase of $3,335,000 will be funded by Behavioral Health Services Act (BHSA) funding. Adequate appropriation and revenue have been included in the Department of Behavioral Health’s (DBH) 2026-27 budget and will be included in the 2027-28 recommended budget.
BACKGROUND INFORMATION
Historically, DBH has contracted with the California Department of Health Care Services, the State’s primary regulatory agency responsible for overseeing standardized local mental health and substance use disorder (SUD) services. In March 2024, California voters approved Proposition 1, initiating a significant transformation of California's behavioral health system. Proposition 1 modernizes the Mental Health Services Act (MHSA) into the BHSA, expanding its focus to include both mental health and SUD services while addressing California's homelessness crisis. The measure also authorized a $6.38 billion bond to expand behavioral health treatment capacity and supportive housing statewide, including dedicated investments for veterans and individuals experiencing homelessness.
This expansion will have a substantial impact on DBH's operations, funding, and service delivery. In response, DBH has determined that specialized professional support is necessary to successfully navigate this time-sensitive transition, ensure compliance with BHSA requirements, and facilitate the effective implementation of the BHSA 2026-2029 Integrated Plan, which was approved by the Board of Supervisors (Board) on June 9, 2026 (Item No. 134) and became effective July 1, 2026. The BHSA 2026-2029 Integrated Plan is the County's required three-year strategic and expenditure plan, outlining how all behavioral health funding will be used to improve access to care, reduce homelessness, support recovery, and address serious behavioral health needs.
Ernst & Young LLP (EY) is a global leader in providing strategic consulting services designed to deliver a high-level organizational review with restructuring options to help organizations identify strengths and weaknesses and recommend improvements to align with major state reforms such as the MHSA to BHSA transition. With extensive experience across public, private, and nonprofit sectors, EY supports leadership teams in navigating and planning transitions resulting from organization reviews and regulation changes.
On September 23, 2025 (Item No. 33), following a formal procurement, the Board approved Contract No. 25-793 with EY for an organization and operational review of DBH in the amount of $396,693 for the contract period of September 23, 2025 through June 30, 2026.
The review conducted by EY identified important opportunities for improvement and growth within DBH. EY developed a phased plan outlining key challenges and providing a roadmap to support DBH in becoming a more efficient, coordinated, and resilient department. As a result of the review and the strategic plan provided by EY, updates to the scope of work (SOW) are necessary to reflect the expanded efforts required. This includes the addition of administrative support to effectively implement EY’s recommendations and sustain the progress initiated through the review and planning process.
EY’s professional approach and deep understanding of governmental operations, along with its familiarity with the needs of the County, underscored the value of continuing this partnership. EY established the framework and initiated key steps for the MHSA to BHSA integration, creating a foundation for ongoing collaboration and continuity as the County advances this mandated transition while maintaining focus on the department’s long-term objectives.
On March 26, 2026, the Purchasing Department (Purchasing) approved Contract No. 4400031341 (Contract) with EY, which included non-standard terms, to support DBH in the transition from MHSA to BHSA, in an amount not to exceed $200,000 for the period of March 26, 2026, through August 31, 2026.
At the time the Contract was approved, EY was engaged to provide short-term implementation support during the initial phase of the County’s transition from the MHSA to the BHSA. The original SOW was an approximately 12-week engagement focused on early implementation planning. Since that time, the SOW has expanded as DBH has progressed from planning into full implementation of the BHSA 2026-2029 Integrated Plan. The recommended Amendment No. 1 (Amendment) extends the contract term to support approximately 18-months of BHSA implementation activities and expands the scope to include project management, organizational implementation, strategic planning, regulatory compliance, performance management, stakeholder engagement, and implementation support necessary to meet state requirements.
The Contract with EY was negotiated by the parties and deviates from the standard County contract terms and, in accordance with County Policy 11-05 and 11-05 Standard Practice, was submitted to the County Executive Officer for approval and thereby delegated approval to Purchasing to sign. These non-standard terms to the Contract included the following:
1. EY is not required to indemnify the County for the actions or omissions of its subcontractors.
• The standard County contract requires contractors to indemnify the County for the acts or omissions of their subcontractors.
• Potential Impact: In the event the County is sued because of the acts or omissions of EY’s subcontractor, EY has no contractual obligation to defend or indemnify the County for such claims.
2. EY limits its general indemnity obligations to third-party claims for bodily injury (including death) and property damage to the extent caused by its negligent or intentional acts or omissions.
• The County standard contract general indemnity provision requires contractors to indemnify, defend, and hold the County harmless from third-party claims arising out of the acts, errors or omissions of any person.
• Potential Impact: EY's indemnity obligation is more limited compared to the standard County general indemnity obligation. In the event a claim arises that falls outside the scope of EY's limited indemnity obligation, the County could be financially responsible for the defense of the claim and any resulting judgment/settlement.
3. EY excludes from its intellectual property infringement indemnity obligation claims that arise out of or that result from (a) the County’s information, (b) use of deliverables other than as contemplated under the contract, (c) any alterations or modifications of the deliverables, (d) a combination of the deliverables with materials not provided by EY, or (e) its compliance with the County’s designs, specifications, or instructions in the creation of the deliverables.
• The County standard contract provision relating to intellectual property infringement does not exclude any types of claims.
• Potential Impact: In the event an intellectual property infringement claim arises that falls within the scope of the exclusions, EY has no contractual obligation to defend or indemnify the County on such claims.
4. EY is not required to comply with all of the standard County insurance requirements.
• County policy requires contractors to carry appropriate insurance at limits and under conditions determined by the County's Risk Management Department and as set forth in County policy and in the County standard contract.
• Potential Impact: Without all of the standard County insurance terms, the County has no assurance that EY will be financially responsible for claims that may arise under the Contract, which could result in expenses to the County that exceed the total Contract amount.
The Contract also had a cap on EY’s liability to $400,000, with the exception to claims caused by its fraud or willful misconduct.
The Amendment to the Contract is being presented to the Board for approval in accordance with County Policy 11-05, Procurement of Goods, Supplies, Equipment, and Services, which requires the department to seek Board approval when a contract exceeds $200,000 annually. The Amendment to the contract with EY continues to have a cap on its liability, which is a non-standard term, as follows:
EY caps its liability to the value of the contract amendment amount at $3,335,000, but this limit will not apply to claims caused by its fraud or willful misconduct.
• Standard County policy does not include a limitation of liability.
• Potential Impact: Claims could exceed the liability cap and the contract amount, leaving the County financially liable for the excess.
Approval of the Amendment to the Contract with EY will allow DBH to continue implementation of the transition from the MHSA to BHSA, including the organizational and programmatic realignment efforts necessary to support the BHSA 2026-2029 Integrated Plan. The Amendment will also assist DBH in meeting new Behavioral Health Outcomes, Accountability, and Transparency Report requirements, as well as Individual Service Level reporting requirements. EY has been instrumental in helping DBH establish implementation priorities and focus areas during the initial phases of the BHSA transition. Continuing this partnership will provide continuity of support and facilitate the timely, coordinated, and effective implementation of key initiatives necessary to achieve compliance with regulatory requirements and successfully implement the BHSA 2026-2029 Integrated Plan.
PROCUREMENT
EY is uniquely qualified to support the implementation of the MHSA to BHSA mandated transition and provide ongoing advisory services for the associated organizational realignment and restructuring. EY possesses specialized expertise in organizational transformation, change management, and the implementation of complex public sector initiatives. In addition, EY has developed extensive knowledge of DBH's organizational structure, operational environment, and transition objectives, which will provide continuity and support the efficient and timely completion of project deliverables necessary to achieve the mandated transition.
Based on DBH’s justification and the specialized nature of the services, Purchasing continues to support this non-competitive procurement.
REVIEW BY OTHERS
This item has been reviewed by Behavioral Health (Diana Barajas, Administrative Supervisor, 388-0862) on June 30, 2026; County Counsel (Dawn Martin, Deputy County Counsel, 387-5455) on July 13, 2026; Risk Management (Stephanie Pacheco, Risk Analyst, 386-9039) on July 15, 2026; Purchasing (Jessica Barajas, Supervising Buyer, 387-2065) July 15, 2026; and County Finance and Administration (Iliana Rodriguez, Administrative Analyst, 386-8392) on July 17, 2026.