September 2, 1998

To:Corporate Services Committee

From:City Clerk and Commissioner of Corporate Services

Subject:Lease of Digital Networked Reproduction Equipment

Purpose:

To recommend the consolidation of all corporate high speed reproduction equipment leases, and the completion of a high speed digital networked reproduction system.

Funding Sources, Financial Implications and Impact Statement:

The consolidation of leases will result in a saving of approximately five percent each year as compared to expenditures under the existing leases.

Recommendations:

It is recommended that:

(1)authority be granted to enter into an agreement with Xerox Canada Ltd. to consolidate existing leases for high speed reproduction equipment and to complete the integration of a digital networked reproduction system, for a term expiring in 2003, at an annual cost (including maintenance) of:

1998 (remainder):$ 277,251.00

1999:$1,109,004.00

2000:$1,109,004.00

2001:$1,126,464.00

2002:$1,144,432.00

2003:$1,162,932.00; and

(2)the appropriate City of Toronto officials be authorized to take the necessary action to give effect thereto.

Discussion:

The City of Toronto is the successor to leases for high speed reproduction equipment entered into by the former municipalities, the leases having expiry dates at various points in four different years, the last being 2001. The current cumulative expenditure under these separate agreements amounts to approximately $1,200,000.00 annually (including maintenance) with each lease containing an annual escalation clause. Five of the seven leases are with Xerox Canada Ltd. The current cost of early termination of these leases is $1,045,000.00.

As a result of the need to specify and acquire reproduction equipment for the City Hall council chamber, discussions have been held with Xerox Canada Ltd. to obtain pricing on consolidating the leases and reconfiguring the equipment as necessary in order to establish a high-speed, digital, networked reproduction system (including a small unit to support the council chamber in City Hall). In response, Xerox has committed to total lease costs ranging from $1,109,004.00 (including maintenance) in 1999 through to $1,162,932.00 in 2003, with a payment of $277,251.00 for the balance of 1998. Overage rates (for excess of 60 million and 67 million copies respectively) will range between $0.0125/$0.0085 in the first year to $0.0137/$0.0094 in the last. These costs, when measured against the current and future expenditures for the existing non-digital, mostly non-networked equipment, represent a savings of approximately 5% for each year of the existing leases.

One advantage of networking, upgrading and supplementing the existing machines includes the ability to print documents at their intended point of delivery (each civic centre and Metro Hall), which will make more timely the delivery of legislative and other documents. By using digital equipment, reproduction jobs will be able to be sent from desktop computers connected to the City's network, be able to be produced faster than analog methods of reproduction, and will be able to be split amongst the various networked machines. Further, digital reproduction will make it easier to post Council's legislative materials to the internet and intranet.

As part of the lease consolidation, existing Xerox components will be reused, upgraded or replaced, and substitutions will be made for non-Xerox machines. The proprietary nature of a networked reproduction system prevents other manufacturers' equipment from being integrated into the recommended configuration. Indeed, even were it possible to include such equipment, operational inefficiencies, including a requirement for training on multiple platforms, would result.

Given the proprietary nature of the technology, the need to match new equipment to that technology, the operational need to establish and test a fully-networked reproduction system as soon as possible, the variety of termination dates in existing leases, and the cost of early termination of those leases, there is a sound business case for sole sourcing the equipment and services in question. One of the benefits in consolidating the existing leases is that in advance of the expiry of the recommended agreement, a single proposal call can be issued. The Chief Financial Officer and Treasurer has been consulted in this matter, and concurs in the approach being taken.

Summary:

The consolidation of existing high speed reproduction leases will result in net cost savings to the City, yet improve the productivity of reproduction services. The existing leases make it impractical to issue a request for proposals at this time, however the consolidation of lease termination dates does create the opportunity for a formal proposal call in advance of the expiry of the proposed agreement.

Entering into an agreement as recommended by this report will have no bearing on any procurement strategy related to the provision of floor photocopying services in the business offices of the City.

Contact Name:

Jeffrey A. Abrams

Director, Secretariat, Printing and Distribution

392-8670

City ClerkCommissioner of Corporate Services

J.A.Abrams/mt