May 11, 1998

TO:Corporate Services Committee

FROM:Chief Financial Officer and Treasurer

SUBJECT:CONTRACT TO PROVIDE BANKING SERVICES FOR

THE CITY OF TORONTO

Purpose:

To select a provider of banking services to the City of Toronto

Financial Implications:

 The recommended action will result in annual cost savings of $414,000 for existing banking services, with the potential for further savings should other proposed services be adopted by the City.

Recommendations:

It is recommended that: (1)a five year contract in an estimated amount of $392,000 annually be awarded to the Royal Bank of Canada to provide banking services to the City of Toronto;

(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

(3)the appropriate City Officials be authorized and directed to take the necessary action to give effect thereto.

Council Reference/Background/History:

N/A

Discussion:

The former Area Municipalities and the Municipality of Metropolitan Toronto currently have the following arrangements with various financial institutions to provide banking services.

  In order to achieve cost savings and to rationalize banking services in the amalgamated organization, a Request for Proposal (RFP) for these services was issued on March 11, 1998 to the five major Canadian banks. The deadline for submissions was April 9th and all of the five major banks submitted a response to either part or all of the service areas in the proposal.

 An evaluation team consisting of City staff familiar with banking operations requirements reviewed each proposal. Proponents were evaluated in accordance with the evaluation criteria outlined in the RFP which were as follows: proposed pricing structure and terms, proposed services and alternatives, proponents= qualifications, performance capabilities and references and ability to provide all banking services. The final criteria listed above was included to determine whether additional cost savings could be realized through having one proponent service the needs of the City.

 All proponents were also invited to make a formal presentation to the evaluation team. Presentations occurred in the middle of April. The following table indicates which services each of the proponents submitted a comprehensive and satisfactory response for:

  The evaluation team recommends that the Royal Bank be chosen to provide all of the required services. The services awarded are: (1)the requirements for general banking, which include cheque encashment services, convenient deposit facilities for all City locations, payroll services, as well as the unique banking requirements for social services;

 (2)the requirements for revenue collection, which include the consolidation of water, tax and miscellaneous payments made at financial institutions;

 (3)the requirements for Parking Tag Operations, which include a payment processing service; and

 (4)the general banking requirements for the Homes for the Aged Division.

  The evaluation team recommends that the Royal Bank be chosen for the following reasons: (1)The Royal Bank proposal represents the lowest cost. The proposal submitted provides annual cost savings on existing services of $414,000, savings of 51 per cent from the current cost of $806,000, should they be awarded all services.

 (2)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.

 (3)Their understanding and appreciation of the issues and challenges facing the City, both short term and long term.

 (4)They were the only proponent able to provide the full range of services, including an acceptable solution for the Social Services Division.

  The following is an overview of how the Royal Bank, the recommended proponent, addressed each of the key areas identified in the RFP that were considered important in evaluating the submissions:

 (1)Cost savings to be realized through consolidation of banking operations A primary objective of consolidation is cost savings. To achieve cost reduction it is crucial that internal controls remain strong and the transition process be seamless and efficient.  (i)The Royal Bank proposal represents the lowest cost. The proposal submitted by the Royal Bank provides annual cost savings of $414,000 should they be awarded all services. The next closest offer from a proponent would have resulted in cost savings of $216,000.

 (ii)The offer includes a dedicated >bank= staff person for 6 to 8 months to assist with the transition, at no charge to the City.

 (iii)In addition, the proposal includes a three month waiver on fees worth approximately $98,000 for existing services.

 (iv)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.

 (v)They were the only proponent to provide an acceptable solution for Social Services requirements.

 (vi)They were the only proponent able to provide the full range of services.

  (2)Consolidation of revenue collection activities Reliable, cost effective presentment and remittance processing are essential to the City. The transition and implementation from decentralized systems to a centralized system requires significant commitment and expertise from the preferred service provider.

 (i)The Royal Bank proposal represents the lowest price.

 (ii)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.

 (iii)The Royal will provide all services requested in part or in full depending on final requirements of the City.

 (iv)The Royal Bank provided a thorough discussion on other alternatives that will enhance the City=s revenue collection processes and cash management operations.

 (v)The Royal Bank currently provides this service for two of the former municipalities, and Parking Tag Operations.

  (3)Increased use of technology Throughout the RFP document, emphasis is placed on increasing the use of technology in the delivery of banking services and gaining internal efficiencies.

 (i)The Royal provides the commitment to technology in the form of capital invested and resources available.

 (ii)The Royal will assist the City in moving to increased use of electronic commerce.

 (iii)The Royal will provide reports and data in hard copy format, or by way of electronic transmission mainframe to mainframe or personal computer to personal computer.

 (iv)The submission contained a discussion of an electronic data interchange solution that may increase the efficiency of the disbursement process.

 (v)The submission included a discussion of technological developments that will promote customer service initiatives and requirements.

 (4)Long term commitment to the City=s goals

 (i)Based on the information provided and the collective experience of the former municipalities, the Royal Bank is committed to servicing public sector organizations.

 (ii)The Royal Bank submitted the only proposal that comprehensively addresses the City=s unique banking requirements.

 (iii)They have a very good understanding of the issues and challenges facing the City.

 Besides basic services, the RFP also asked proponents for pricing and discussion on several technologically advanced services such as electronic data interchange facilities, electronic commerce solutions, procurement card solutions, lock box facilities and imaging capabilities. Staff have made a preliminary analysis that has identified the potential for further savings through innovative use of the bank=s services in these areas and it is recommended that the Chief Financial Officer and Treasurer be authorized to implement solutions which result in cost savings to the City.

Conclusion:

It is recommended that the Royal Bank be awarded a five year contract to provide banking services to the City of Toronto.

Contact Name:

Len Brittain, Director of Treasury and Financial Services

Phone number: 392-5380

Fax number: 392-3649

E-Mail address: lbrittai@city.toronto.on.ca

W. A. Liczyk

Chief Financial Officer and Treasurer

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