Contract to Provide Banking Services for the City of Toronto

Transcription

1 STAFF REPORT May 26, 2003 TO: FROM: SUBJECT: Administration Committee Chief Financial Officer and Treasurer Contract to Provide Banking Services for the City of Toronto Purpose: To advise the results of a Request for Proposals (RFP) for the provision of banking services to the City for a five-year period and to request the authority to contract with the successful proponent. Financial Implications: The recommended action will award a contract to the Royal Bank of Canada, the highest scoring proponent, for a five-year period at an approximate annual budgeted cost of $1,275, for banking services. Recommendations: It is recommended that: 1. a five-year contract in an estimated amount of approximately $1,275, annually be awarded to the Royal Bank to provide banking services to the City of Toronto with transactional costs that are fixed over the term of the contract; 2. the Chief Financial Officer and Treasurer be authorized to implement additional services with the Royal Bank or other financial institutions where such services result in cost savings to the City and report back to Council on the services to be provided: 3. the procurement card portion of the RFP be considered separately at a later date in a report to be submitted by the Chief Financial Officer and Treasurer; and 4. the appropriate City officials be authorized and directed to take the necessary action to effect thereto.

2 - 2 - Background: Five years after the City of Toronto Act received Royal Assent in 1997, the new amalgamated City has achieved many of the banking services objectives envisioned when the basic administrative framework was established for the new municipality. Approval of Corporate Services Committee Report No. 7, Clause 11, entitled, Contract to Provide Banking Services for the City of Toronto at the City Council meeting of June 3 rd 1998 commenced the process of streamlining the banking services of the new municipality. A focus on efficiency in banking service operations as the underlying objective has guaranteed that the entire cash management process sustains and supports the delivery of programs and services for the City. As a result of amalgamation, the City has consolidated the banking operations of the previous area municipalities and Metropolitan Toronto s into one cash management structure with the assistance of the City s Banker (Royal Bank) by means of a gradual migration of services to a centralised system. It is anticipated that there will be further efficiencies over the next five years as the City works closely with the selected proponent to access the latest in client server technology, general ledger systems and human resource/payroll applications. It is the City s intention to maximise use of this technology in partnership with its provider of banking services. Currently, the five-year contracted term for the provision of banking services by the Royal Bank expires on July 1, To accommodate the City s banking requirements in the interim, the Royal Bank has agreed to extend the current terms and conditions of the outstanding contract until Council s approval of the new banking arrangements for an additional five- year period. Discussion: In order to select a banking proponent for the next 5-year term and improve services using new technologies, a Request for Proposal (RFP ) for these services was issued on February 17, 2003 to the six major Canadian banks. As well, American Express contacted the City independently and indicated interest in submitting a proposal on the procurement card portion of the RFP. A proponents meeting was held on March 7 th and final submissions were received on March 26th from the Royal Bank and Scotiabank for the general banking services of the City. A meeting to clarify aspect of the submissions for the Stage 2 Phase of the evaluations was held on May 9 th with the Royal Bank and Scotiabank. In respect to partial submissions, CIBC and the National Bank submitted responses for the procurement card portion of the City s business. And, as noted above, American Express submitted a response for the procurement card portion of the business. The Toronto Dominion Bank made a late submission that could not be accepted.

3 - 3 - The following table indicates services for which each of the proponents submitted a comprehensive and satisfactory response: Bank General Banking Social Services Revenue Collection Parking Tags Homes for The Aged Royal Bank Yes Yes Yes Yes Yes CIBC Procurement No Submission No Submission No Submission No Submission Card Only Bank of Montreal No Submission No Submission No Submission No Submission No Submission Scotiabank Yes Yes Yes Yes Yes National Bank Procurement No Submission No Submission No Submission No Submission Card Only Toronto Dominion Late Submission Late Submission Late Submission Late Submission Late Submission American Express Procurement Card Only No Submission No Submission No Submission No Submission An evaluation team consisting of senior City staff familiar with banking operation requirements reviewed each proposal. The evaluation team recommends that the Royal Bank be chosen to provide all of the required services with the exception of the procurement card portion, which will be considered separately at a later date. Further time is required to finalize the implementation plans for the procurement card program before a proponent is selected. Proponents were evaluated in accordance with the evaluation criteria outlined in the RFP as indicated below and scored on the merits of the proposal submitted. Each submission s structure, attributes and content were scored as follows: EVALUATION CRITERIA AVAILABLE POINTS a) Overall quality and scope of Services with respect to Solution functionality/business case b)ability, technical, financial and otherwise to 10 achieve desired objectives c)understanding of Services and RFP Goals 10 and Requirements d)methodology and solution 15 e)relevant experience, qualifications, performance capabilities and successes demonstrated f) Work Plan/schedule and ability to meet critical dates g) Cost of Services 25 TOTAL SCORE

4 - 4 - The mandatory criteria listed in the Request for Proposal and awarded points in the scoring methodology are as follows: General Banking Requirements Bank Account Structure requirements stipulated by City Account Activity using electronic banking medium and interest rate advise Bank Statements and Documentation listing all daily activities Cheque Requirements and Reports Payroll Direct Deposit Services Deposits Workstations Bank Card Services Kiosks/Automated Teller Machines Procurement Card Credit Reports Missing Deposits/Cash Transactions Armoured Car arrangements E-Commerce Banking proposal Pre-authorised Debit Payments Lines of Credit City s Revenue Collection Requirements Payments Made at Bank Branches Telephone Banking Payments Pre-Authorized Payments processing Mail Processing Requirements stipulated by City Customer User Guide Access Code and Password protocols Customer Service availability Technical Requirements suitable to City s requirements Courier Services provisions Parking Tag Operations Mail Administration and Payment Processing Payments Received at Parking Tag Operations Banking Requirements

5 - 5 - Additional Services in RFP and Accompanying Addendum Within the general banking operations of the City, services such as cheque encashment, convenient deposit facilities for all City locations, payroll services and banking provisions for the Homes for the Aged Division were noted. Also, the requirements for revenue collection includes the consolidation of water, tax and miscellaneous payments made at financial institutions. And finally, the requirements for Parking Tag Operations includes a payment processing service. Review and Scoring of Submissions The review of submissions for the general banking services for the City of Toronto involved only two proponents namely the Royal Bank and Scotiabank. Due to the City s operational and mandatory criteria in the RFP, no other banks seemed willing to address the many challenges presented by the technical and extensive non-standard processing requirements of the Corporation. The method of scoring the two proponents was given in considerable detail earlier in this report and was based on criteria established by the City. Out of a possible score of 100 for the Stage- Two Evaluation, the Royal Bank s marks ranged between 85 and 90 while the Scotiabank s marks ranged between 60 and 65. Scotiabank did not meet the minimum requirement of 65 to proceed to the Stage 3 Evaluation. In respect to the Scotiabank s submission and based on the mandatory requirements of Stage One of the Evaluation Criteria, the bank complied with the minimum requirements and was advanced to Stage Two of the evaluation process. However, notwithstanding the sufficiency of Scotiabank s responses to the mandatory criteria that permitted further consideration, the actual content of those business solutions fell short of the standards set by the evaluation team. Most significantly, there were minimum responses to a number of essential service expectations of the City. The proponent stated the ability to achieve the desired objectives for various banking operations but in some cases did not discuss how this would be done. In the Revenue Services Section, the bank did not respond to questions 3.2, and 3.5 which outlined the City s volumes and timelines. And, in respect to understanding the service requirements of the City, the proponent was not consistent with the quality of its responses regarding methodology. Focus was primarily geared to e-commerce methodology, without much detail provided for regular City operations. In the Banking Services component, the proponent offered the full scope of services for business needs but the submission did not elaborate on certain services such as comprehensive payables for all its disbursement activity and the procedures for the timely investigation of missing transactions. In addressing the Parking Tag component of the RFP there seemed to be a lack of experience in dealing with parking ticket operations.

6 - 6 - While the proponent has experience with smaller municipal governments there is no evidence of the expertise and commitment required to provide a leadership role in the management of banking operations for a municipality of Toronto s size and complexity. In the costing analysis of the submissions, the Scotiabank s proposal was approximately $960,000 higher than the Royal Bank s submission. Consequently, without evidence that Scotiabank could effectively manage the banking operations of a major Canadian municipality, its higher costs and notable deficiencies compelled the selection committee to reject the submission. In respect to the Royal Bank s submission - the City s recommended proponent - the bank addressed each of the key areas identified in the RFP and provided a detailed analysis of all the banking operations. The Royal Bank presented a well-documented blueprint for maximizing efficiencies and achieving critical operational objectives through automated service solutions in the second phase of streamlining operations. With the demonstrated ability to overcome the operational challenges inherent in combining the financial system of the former municipalities, over the last contracted period, the Royal Bank is well suited to continue the journey toward rationalization of operations and addressing the City s financial complexities using advanced technologies and management practices. The following measures highlight the Royal Bank s proposal: 1) A primary objective of continued rationalization is cost savings. To achieve cost reduction it is crucial that internal controls remain strong and the solution proposed be seamless and efficient. The Royal Bank s proposal represents the lowest cost. In fact, the Royal Bank s submission provides lower annual costs of $960, below the next closest proponent should they be awarded the general banking services. 2) By awarding the Royal Bank the banking services contract with the exception of the procurement card component which is to be separately awarded at a later date, potential rebates and cost savings are available thus reducing the overall costs of banking services. At the discretion of the Finance Department, additional arrangements that may generate potential savings are as follows; i. A service fee rebate, ii. Pay-tickets Revenue sharing, iii. Social Service cheques cashed through RBC branches and, iv. Parking Tag Operations Retail Lock-box savings. The costs for services to be provided are quoted on a per transaction basis and are fixed for the five year contract term. Total costs are based upon the volume of transactions being generated by the City and will vary according to these volumes. Each RFP response was costed according to projected transactional volumes multiplied by the fixed transaction quoted price.

7 - 7-3) Increased use of technology: A comprehensive implementation program for innovative technologies has been outlined that recognizes the scope of the task at hand and has identified key issues as well as time lines to the process. Throughout the RFP document, emphasis is placed on increasing the use of technology in the delivery of banking services and gaining internal efficiencies. (i) (ii) (iii) (iv) (v) The Royal provides the commitment to technology in the form of capital invested and resources available. The Royal indicated that it will assist the City in moving to increased use of electronic commerce and web based applications. The bank will provide reports and data in hard copy format, or by way of electronic transmission mainframe to mainframe or personal computer to personal computer. The submission contained a discussion of an electronic data interchange solution that may increase the efficiency of the disbursement process. The submission included a discussion of technological developments that will promote customer service initiatives and requirements. 4) The Royal Bank was the only proponent able to provide a satisfactory response to the City s requirement for a full range of services inclusive of all aspects of the Revenue, Banking Service and Parking Tag Operations. The following comments highlight the Royal Bank s submission: Revenue: i. The Royal Bank displayed ability to perform and meet capacity of the City s billing cycles and accommodate billing schedules and volumes. ii. They demonstrated the ability to process all receivables directed to them the same day. iii. The Royal Bank will provide tracing and investigation capabilities and outline steps for remittance file transmission. iv. They specifically confirmed the ability to meet all requirements for this section. Banking Services: i. The Royal Bank responded to all the Mandatory Criteria to the satisfaction of the evaluation team. ii. Their direct deposit service met the requirements to disburse directly to certain vendors and employees.

8 - 8 - iii. iv. The Royal Bank was the only proponent to describe service commitment (update report within 48 hours, resolution within 5 business days and notification if investigation requires additional time). Interest adjustment is provided when bank error is responsible for deposit not being posted on the correct day. The Royal Bank provided a full description of its Pre-Authorized Debit Program. Enhancements of this functionality will improve with the introduction of electronic Payment Manager software in Parking Tags: i. The Royal Bank demonstrated the ability to manage large volumes of payments and lockbox operations related to parking infraction notices. ii. The Royal Bank had demonstrated experience in dealing with parking tickets. 5) With an understanding and appreciation of the issues and financial hurdles facing the City, both short term and long term, and the ability to recommend appropriate solutions, the Royal Bank is well placed to meet the City s banking service needs in the future. 6) The Royal Bank assisted over the last five years in the transition of the City s banking operations to a centralized system demonstrating the commitment and expertise necessary to achieve the City s goals as listed below: i. for achieving the long term financial management goals of the corporation a comprehensive implementation program has been outlined that recognizes the scope of the task at hand and has identified key issues as well as time lines to the process. ii. The Royal Bank provided a thorough discussion on other alternatives that will enhance the City s revenue collection processes and cash management operations. 7) Long term commitment to the City s goals: i. In addition to the experience of the last five years, the Royal Bank is committed to servicing public sector organizations and presently provides banking services to major cities across Canada. ii. The Royal Bank submitted the only proposal that comprehensively addresses the City s unique banking requirements.

9 - 9 - Conclusion: This report requests authority to issue a five-year contract to the Royal Bank of Canada for the provision of banking services to the City of Toronto. Th evaluation team scored the Royal Bank highest in all the critical banking service operations by a significant margin. Additionally, it was the lowest acceptable quotation received by the City that meets the requirements of the RFP. Contact Name: Len Brittain, Director of Corporate Finance Phone number: Fax number: address: lbrittai@toronto.ca Joseph P. Pennachetti Chief Financial Officer & Treasurer G:\fin\it1\TFS\TREASURY\Banking Contract\Banking Contract\RFP report 2003 final.doc