June 19, 1998

Ms. Novina Wong
Clerk
City of Toronto
Station 1071, 7th Floor
Metro Hall
55 John Street
Toronto, Ontario
M5V 3C6

Dear Ms. Wong:

At its meeting on Wednesday, June 17, 1998, the Commission considered the attached report entitled, "Project Approval And Procurement Authorization - General Business Computer."

The Commission approved the Recommendations contained in the above report, as listed below:

"It is recommended that the Commission approve:

1) Awarding a contract to GlassHouse Systems Inc., in the amount of $1,433,900 to replace the existing IBM 9121/480 with an IBM 2003/225, including the hardware and IBM operating system software;

2) An additional $350,000 for the transfer and upgrade of existing third party (non IBM) software;

3) An additional $24,495 is required to pursue the option to purchase nine additional channels, for a total upset limit of $1,808,395;

4) Approval to declare the current IBM 9121/480 surplus and authorize the Manager of Materials & Procurement to dispose of it in the best interest of the Commission;

5) Forward this report to the City of Toronto Council requesting increased project approval be granted in the amount of $1,608,395 gross ($731,820 net) by advancing approved expenditures from future years; and

6) Authorize staff to proceed with the award of this contract, due to the critical nature of the request and hold in TTC accounts, pending City Council approval."

The foregoing is forwarded to City of Toronto Council for the necessary approval, as detailed in the report.

Sincerely,

Vincent Rodo

General Secretary

1-64

Attachment

TORONTO TRANSIT COMMISSION

REPORT NO.

MEETING DATE: June 17, 1998

SUBJECT: PROJECT APPROVAL AND PROCUREMENT AUTHORIZATION - GENERAL BUSINESS COMPUTER

RECOMMENDATION

It is recommended that the Commission approve:

1) Awarding a contract to GlassHouse Systems Inc., in the amount of $1,433,900 to replace the existing IBM 9121/480 with an IBM 2003/225, including the hardware and IBM operating system software;

2) An additional $350,000 for the transfer and upgrade of existing third party (non IBM) software;

3) An additional $24,495 is required to pursue the option to purchase nine additional channels, for a total upset limit of $1,808,395;

4) Approval to declare the current IBM 9121/480 surplus and authorize the Manager of Materials & Procurement to dispose of it in the best interest of the Commission;

5) Forward this report to the City of Toronto Council requesting increased project approval be granted in the amount of $1,608,395 gross ($731,820 net) by advancing approved expenditures from future years; and

6) Authorize staff to proceed with the award of this contract, due to the critical nature of the request and hold in TTC accounts, pending City Council project approval.

FUNDING

Funds are available in the 1998 - 2002 Capital program under Information Technology Infrastructure project within the Computer Equipment and Software Program (pages 541-550), in the amount of $200,000 for 1998 and $1,975,000 in the years 1999 - 2001. The total amount of $1,608,395 is to be advanced to 1998 from future years upon the approval from the City of Toronto.

BACKGROUND

In planning the 1998 budget it was not known that the IBM mainframe (General Business Computer) system software (VM/ESA and VSE/ESA) were not year 2000 compliant. An amount of $1,975,000 was budgeted for the years 1999 - 2001 to cover additional DASD requirements and mainframe hardware/software replacement.

Subsequent to the budget plan IBM declared that the VM/ESA and VSE/ESA system software are not year 2000 compliant and must be replaced along with an appropriate expanded mainframe. The cost of this upgrade is $1,808,395. An advance of $1,608,395 from the years 1999 - 2001 is required immediately. For the period 1998 - 2001 the total budget amount is reduced from $2,175,000 to $1,808,395 yielding a savings of $366,605.

The General Business Computer is an IBM mainframe supporting many mission critical applications, including Materials Management, Vehicle Maintenance, Personnel/Payroll and Finance – General Ledger and Accounts Payable. These applications are crucial to running daily businesses at the TTC in order to operate an efficient and safe public transit system.

The current version of the system software required to operate the IBM mainframe is not compliant to the year 2000 standards. The applications running in this operating environment will fail as year 2000 approaches. All date-dependent information will become inaccurate. In order to provide the necessary testing environment immediately and the future product environment, both system software components (VM/ESA and VSE/ESA) must be upgraded immediately.

In order to run mainframe applications successfully in year 2000, full-scale testing of all applications on a mainframe that is fully year 2000 compliant must commence no later than September 30, 1998. Failure to thoroughly test these applications in a certified year 2000 compliant operating environment will expose the Commission to the risk of being unable to maintain service.

DISCUSSION

Staff issued a tender for the replacement of the IBM mainframe. Four companies were invited to submit tenders in addition to a public advertisement appearing in the Globe and Mail on Wednesday, April 22, 1998. Three companies submitted responses (see Appendix 'A'). Glasshouse Systems Inc. was judged to offer the best solution package at a cost of $1,433,900. In their tender response Glasshouse Systems Inc. identified the need for additional channels to match the total number of channels on the existing IBM 9121/480. An additional $24,495 is required to pursue this option. This includes the hardware and IBM operating system software and technical assistance and installation, as specified. The vendor will certify that both the hardware and operating system software of the replacement mainframe will satisfy the year 2000 compliance requirements.

The vendors were requested to submit a trade-in offer and removal costs for the current IBM 9121/480. None of the vendors offered a trade-in value.

A leasing analysis was conducted and the difference over three years was approximately $5,000 more to own. The purchase option is recommended because at the end of the term the Commission will own the IBM 2003/225 mainframe. Whereas under the lease option, the Commission would have to buy the mainframe at the end of the lease, bringing the total cost of the lease/buy option over the straight purchase cost. As a matter of note, the lease term would be three years. The Commission intends to keep this mainframe for as long as seven years.

JUSTIFICATION

Failure to immediately award a contract to replace the IBM mainframe and software within the current schedule would result in our inability to create a year 2000 test environment which would negatively impact the current Management Information Services initiatives to rectify year 2000 problems with application code. Not addressing these problems would impact the ability of the TTC to maintain service.

- - - - - - - - - - - -

June 23, 1998

14.117.79

Appendix 'A'

Tenders were requested for the supply and installation of an IBM Mainframe:

Company

GlassHouse Systems Inc. (Leasing Option) $ 1,428,161

GlassHouse Systems Inc. 1,433,900* (1)

GSS Marketing Inc. (Leasing Option) 1,437,947

GSS Marketing Inc. 1,450,270*

GlassHouse Systems Inc. (Option 2) 2,392,224

Cover-All Solutions Ctr. Inc. 4,501,969*

* prices have been adjusted.

(1) Recommended for award

STAFF SUMMARY SHEET