Bell Canada Integrated Telecommunications Infrastructure Contract Amendment and Extension. Government Management Committee

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1 STAFF REPORT ACTION REQUIRED GM2.6 Bell Canada Integrated Telecommunications Infrastructure Contract Amendment and Extension Date: February 2, 2015 To: From: Wards: Reference Number: Government Management Committee Chief Information Officer, Information & Technology Division and Director, Purchasing and Materials Management Division All P:\2015\Internal Services\I&T\ Gm15001I&T (AFS# 20713) SUMMARY This report requests authority to increase Contract number for the Integrated Telecommunications Infrastructure (ITI) and related Services with Bell Canada by $5.131 million, net of HST recoveries ($5.042 million excluding taxes). The revised contract will be a total of $ million net of HST recoveries ($ million excluding taxes). This change will provide sufficient funding for the final year of the initial five (5) year contract. The initial term of the contract is October 1, 2010 to September 30, It is important to note that while the contract authority (i.e. purchasing limit) is increasing, the City is now saving $4.5 million annually for the telephone system by converting to Voice over Internet Protocol (VoIP). This report also requests authority to extend annually Contract number for up to five (5) additional separate one (1) year renewable terms in the total estimated amount of $ million net of HST recoveries ($ million excluding taxes), at the sole discretion of the Chief Information Officer. The ITI Request for Proposal (RFP) and contract included provisions for extensions of up to five (5) additional separate one (1) year renewable terms at the same pricing, terms and conditions. Staff report for action on Bell Canada Integrated Telecommunications Contract Amendment and Extension 1

2 RECOMMENDATIONS The Chief Information Officer and the Director, Purchasing and Materials Management Division recommend that: 1. City Council grant authority to increase contract number for the Integrated Telecommunications Infrastructure and related Services with Bell Canada by $5.131 million net of HST recoveries ($5.042 million excluding taxes) from $ million net of HST recoveries ($ million excluding taxes), so that the new financial authority during this period will be an upset of $ million net of HST recoveries ($ million excluding taxes). 2. City Council grant authority for the Chief Information Officer to extend the current Integrated Telecommunications Infrastructure contract and increase the contract value with Bell Canada for five (5) additional separate one (1) year renewable terms commencing October 1, 2015 ending no later than September 30, 2020, for an additional estimated amount of $49,859 million net of HST recoveries ($ million excluding taxes) based on the same pricing, terms and conditions. Financial Impact For 2015, the expected expenditure against the current October 1, September 30, 2015 ITI contract is $59,335 million net of HST recoveries ($ million excluding taxes), which includes the additional authority request of $5.131 million net of HST recoveries ($5.042 million excluding taxes). The total contract extension expenditure for the period October 1, 2015 September 30, 2020 is $ million net of HST recoveries ($ million excluding taxes). The annual estimated spending net of HST recoveries for the five (5) additional separate one (1) year renewable terms contract extension is as follows: 2015 Q Q1-Q3 Total Operating $2,060,448 $7,972,574 $8,455,159 $8,981,541 $9,569,320 $7,494,755 $44,533,797 Capital - $1,070,000 $2,430,000 $1,500,000 $205,000 $120,000 $5,325,000 Total $2,060,448 $9,042,574 $10,885,159 $10,481,541 $9,774,320 $7,614,755 $49,858,797 Funding for Operating expenditures is included in the various accounts of the 2015 Recommended Operating Budgets of the appropriate Divisions. Appropriate additional Staff report for action on Bell Canada Integrated Telecommunications Contract Amendment and Extension 2

3 funding for possible growth, if needed, will be included in the annual Operating Budget Submissions for the appropriate Divisions. It should be noted that pricing remains fixed as per the original agreement. Funding for Capital expenditures will be included in the Capital Budget Submissions for the Information and Technology's Division's Life Cycle Management Program (WBS# CIT702). The Deputy City Manager and Chief Financial Officer has reviewed this report and agrees with the financial impact information. DECISION HISTORY At its meeting of January 13, 2010 Government Management Committee approved the award of a five (5) year ITI contract to Bell Canada for the provision of four (4) service bundles of telecommunications services, funded from both Capital and Operating Budgets. ISSUE BACKGROUND The ITI contract was based on Request for Proposal (RFP) for the Integrated Telecommunications Infrastructure and related Services which was awarded to Bell Canada. The ITI contract is comprised of four (4) service bundles, as set out below: 1. Centrex and other Carrier services; 2. Low-medium speed Wide Area Network (WAN) data communications services; 3. Network Cabling services; and 4. A Unified Communications (UC) -Voice over Internet Protocol (VoIP) solution which consists of Internet Protocol (IP) telephony, IP phones, Unified Messaging, Call Centre Management services and other related equipment and services. The RFP and contract specified that there was to be an initial five (5) year term, with provision for extensions of up to five (5) additional separate one (1) year terms at the same pricing, terms and conditions. Government Management Committee approved the initial award and financial authority of $ million net of HST recoveries ($ million excluding taxes) for the first five (5) years. Any extension for the optional contract period would require additional Council approval. Although the RFP contemplated the award to be for an initial award of a five (5) year term plus the option to extend for five (5) additional separate one (1) year renewable terms contract extension, Information & Technology could not clearly identify the estimates for the option years at the time of award. Growth was anticipated; however, given the changes in the telecommunications infrastructure technology, staff were not Staff report for action on Bell Canada Integrated Telecommunications Contract Amendment and Extension 3

4 able to provide a realistic ten (10) year estimate. The Staff Report submitted to Government Management (GM27.13) only considered the award for the first five (5) year term, and not for the full ten (10) years. Information & Technology felt it prudent to assess the growth requirements following the initial implementation to provide a more reasonable estimated dollar value to report back to Council. COMMENTS Additional Funds Required, Increase Contract (October 1, 2010 September 30, 2015) The financial authority for the initial five (5) year period was based on estimated expenditures for all four (4) service bundles, including a planned transition from Centrex to VoIP services for about 75% of the City`s Centrex phones, and a transition of high speed WAN services from Bell to the Cogeco Canada contract. Although the contract is not overspent at this time, based on our analysis, we anticipate that the initial financial authority of $ million net of HST recoveries ($ million excluding taxes) will be insufficient to get to the end of the current contract period of September 30, 2015 by $5.131 million net of HST recoveries ($5.042 million excluding taxes). This is a result of: a) Delays to the commencement and rate of transition from higher cost Centrex to lower cost VoIP services. While the City is now realizing savings of approximately $4.5 million per year as a result of this transition, it took longer to achieve than originally forecast; and b) Delays to the build out of the Cogeco high speed WAN network, which resulted in the City maintaining more of its data communications service requirements with Bell Canada than originally planned. The forecasted spend for the current term is $ million net of HST recoveries ($ net of all taxes), which is an increase of $5.131 million net of HST recoveries ($5.042 million excluding taxes), about 9.4% per cent of the original authority required for the balance of the contract period ending September 30, Grant Authority to the CIO to Extend the Contract Staff are recommending that: a) the City exercise its option to extend the current contract for all four (4) service bundles with Bell Canada for the five (5) additional separate one (1) year terms commencing October 1, 2015 and terminating September 30, 2020; and Staff report for action on Bell Canada Integrated Telecommunications Contract Amendment and Extension 4

5 b) the City increase the financial authority in the estimated total of $49,859 million net of HST recoveries ($ million excluding taxes) for the next five (5) additional separate one (1) year renewable terms commencing October 1, 2015 and terminating September 30, This amount has been estimated as the requirement for delivery of the various telecommunications services to Bell based on recent expenditure levels projected for the future term. Bell Canada was awarded the ITI RFP for the four (4) service bundles based on being the highest scoring proponent offering the lowest price meeting all requirements of the RFP. The contracted services are performing to service level agreements and remain competitive in the market place. Any transition of services (e.g. changing out the core voice and data communications infrastructure services) at this time will be disruptive, as was contemplated at the time a "5 plus 5" year term was included in the RFP and contract. Exercising the option to extend the contract for the five (5) additional separate one (1) year term will limit the complications and provide continuity in Bell Canada's four (4) service bundles as well as provide cost savings. CONTACT John Davies Deputy CIO, Technology Infrastructure Services Elena Caruso Manager, Purchasing Goods & Services Purchasing & Materials Management Information & Technology Division Tel: (416) (416) jwdavies@toronto.ca ecaruso@toronto.ca SIGNATURE Rob Meikle, Chief Information Officer Michael Pacholok Director, Purchasing and Materials Management Staff report for action on Bell Canada Integrated Telecommunications Contract Amendment and Extension 5

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