COUNTY OF SAN MATEO

Inter-Departmental Correspondence

Information Services Department

DATE:

January 21, 2004

BOARD MEETING DATE:

February 24, 2004

TO:

Honorable Board of Supervisors

FROM:

Chris Flatmoe - CIO/Director, Information Services Department

SUBJECT:

Execution of a termination letter with Avnet Computer

Recommendation

Adopt a resolution authorizing the County Manager to notify Avnet Computer in writing of the County's intent to terminate its agreement with Avnet Computer (the "Agreement") and assume title of all equipment covered under the Agreement.

Background

On December 17, 1996 the Board executed a 5-year lease agreement with Avnet Computer to upgrade the Health Services data center. Subsequently, on June 23, 1998 your Board approved an amendment to the Agreement to extend the term to six years and increase the not to exceed amount to $3,083,340 to further expand the Health Services data center capacity and to obtain personal computer equipment. The Agreement included funding for upgrading and replacing personal computer equipment in future years through an exchange privilege process offered as part of the lease with Avnet Computer. On January 14, 2003 your Board approved an amendment to utilize a portion of the funds available through the exchange privilege to obtain additional personal computer equipment for San Mateo Medical Center (SMMC).

Discussion

The balance of the County exchange privilege is $151,000. The County can apply the unused exchange privilege funds towards an early buyout of the Agreement. By applying these funds, the County can terminate the Agreement, as well as assume title for all equipment itemized under the Agreement. Currently, under the terms of the Agreement, the County would be responsible for monthly payments in the amount of $42,923 until the end of the term, at which point the County could either purchase the equipment at fair market value or return the equipment to Avnet Computer. Purchasing the Avnet Computer supplied equipment or returning the Avnet Computer supplied equipment would represent additional costs to the County. Therefore, we recommend exercising the early termination provision and assuming title of all the equipment covered under the Agreement.

Vision Alignment

Executing this early termination and assuming title of the equipment from Avnet Computer Corporation keeps the commitment to responsive, effective, and collaborative government, specifically goal number 22: County and local governments effectively communicate and collaborate in order to develop strategic approaches on issues affecting the entire County.

Fiscal Impact

There is no direct impact on Net County costs or charges to customer departments, but rather a monthly savings of $42,923 for the three months remaining under the lease, in addition to saving either the purchase price of the equipment or the expense of returning the equipment upon the expiration of the Agreement.