COUNTY OF SAN MATEO

Inter-Departmental Correspondence

Information Services

DATE:

July 7, 2003

BOARD MEETING DATE:

July 15, 2003

TO:

Honorable Board of Supervisors

FROM:

Luther Perry, CIO/Director Information Services

SUBJECT:

Extend Agreement for IBM Proprietary Software and Related Services

Recommendation

Adopt a resolution:
(1) Waiving the Request for Proposal Process:
(2) Extending the umbrella agreement with IBM Corporation for IBM proprietary mainframe software and related services per Board Resolutions 60298, 61946 and 63761 in the additive amount of $829,896; and
(3) Authorizing the CIO/Director of Information Services to approve modifications, additions, deletions or upgrades, within the total authorized by Board Resolution, but not to exceed a total of $100,000 in any one fiscal year unless approved by the County Manager.

Background

Your Board adopted at your June 18, 1996 meeting Board Resolution 60298 approving supplemental agreements within an umbrella agreement with IBM Corporation for all IBM mainframe products and services, to replace the County's 3090 mainframe computer. The supplements contemplated a likely need for mid-term technology upgrades for the equipment and included a Technology Upgrade Option (TUO) that could be exercised during months 18-24 of a 36 month lease. Subsequently your Board adopted at your May 12, 1998 meeting Board Resolution 61946 exercising the TUO and authorizing a system upgrade. This action established an new 36 month lease period with a new mid-term TUO that could be exercised during months 18-24.

You Board then adopted at your July 11, 2000, meeting Board Resolution 63761 exercising the TUO, authorizing a system upgrade and establishing a new36 month lease to purchase period ending August 1, 2003 at which time the County will own the equipment.

The computer is an "open system" server (OSS) that supports UNIX and Linux applications, as well as the County's traditional mainframe legacy systems. This server is adequately sized for all current and planned purposes and does not require a major upgrade. Consequently we recommend that the County skip a technology generation in this area as part of our cost containment/reduction efforts.

System software and related services, the major cost aspects of any large system, continue and action to address these elements is required this month. The ongoing hardware maintenance and a specific subset of the systems software (referred to as EGO software) can be competitively procured by purchase order; these items have been referred to the Purchasing Division of EPS. The remaining systems software and services (referred to as non-EGO) can only be procured from IBM and are the subject of the attached Resolution.

IBM manages its contractual relationships for mainframe products and services via an umbrella agreement that addresses general contractual issues, intellectual property rights, invoicing, and administrative processes. Actual products and services are addressed via Supplements. Currently all Supplements to the County's umbrella agreement, except the Supplement for the non-EGO software, are fulfilled and will lapse August 1, 2003. The umbrella agreement and the Supplement for non-EGO software do not have expiration dates and remain in effect.

The umbrella agreement provides for the CIO/Director Information Services to authorize modifications, additions, deletions, or upgrades, but not to exceed 10% unless approved by the County Manager. We believe the limits on such action should be clarified to a specific amount ($100,000) that is approximately 10% of the total in any fiscal year.

Discussion

The series of three-year actions with mid-term upgrade options described above have provided a flexible framework for managing fast-evolving technology and a growing workload. An important by-product has been multi-year price protection that has kept maintenance and EGO software prices level. Non-EGO software and services are subject to periodic price increases, typically about 6% per year.

The county will save an estimated $14,385 monthly in hardware payments for continuing to use equipment that is fully paid off, and the EGO software can be price-protected for two years via separate competitive procurement. Unfortunately the non-EGO software (and after two years the EGO software) is subject to an estimated 6% inflation rate and periodic increase for major version upgrades. The costs will reduce the County's overall saving to an estimated $6,858 monthly averaged over three years. The projected saving have been included in the 2003-04 budget and customer rates.

We recommend that your Board continue the practice of reviewing the umbrella contract, costs and services every three years. We also recommend shifting the end point for contract management by one month to September 1 so administrative work related to the contract does not conflict with Budget Hearing and year-end closing activities.

It remains our intention to use competitive procurement for the mainframe-related products that can be procured from alternate sources and use the umbrella agreement for those products that are available only from IBM. Occasionally IBM is the selected vendor in a competitive procurement, and in such cases the County is usually required to use the umbrella agreement for such transactions as well.

We have achieved an aggregate savings for this contract during the past three year period (August 1, 2000 through July 31, 2003). The estimated savings, under Board Resolution 63761, is estimated at $235,000 and is primarily attributable to the intentional retirement of three major systems software components. This remaining authorization can be applied to the projected costs over the next 37 months (ending September 1, 2006) of $1,064,896 for an additive total of $829,896.

Vision Alignment

The recommended actions address the County vision primarily through the CJIS integrated criminal justice system (serving all justice agencies in the County), the Case Data System (supporting most County Human Services programs) and all County departments through the integrated Personnel/Payroll system.

Specifically these actions contribute to Vision Goal measurements #7 maintain and enhance public safety, #8 help vulnerable people achieve a better quality of life, #9 housing for all people at all income levels, #17 all households experience real gains in income, #20 government decisions are based on careful consideration of future impact, #22 County and local governments effectively communicate, and #23 leaders throughout the County provide the impetus for broader regional solutions.

Fiscal Impact

The recommended action will extend contract authorization for three years and will authorize the additional $829,896 required to fund the contract for this time. The funds for this contract for each fiscal year will be included in that year's Information Service budget. The amounts required for 2003-04 and 2004-05 have been included in the budget and in the customer rates for 2003-04. There will be no financial impact on customer departments, the Count budget or Net County Cost.