Request for Proposal for the Acquisition

of 2,000 Optical Scan Vote Tabulators

and 100 Touch Screen Voting Units

The Administration Committee recommends:

(A)the adoption of the following Recommendations Nos. (1), (2) (a), (3) and (4), embodied in the confidential report (September 2, 1999) from the City Clerk, viz:

"(1)authority be granted to enter into a contract with Election Systems and Software Inc. (ES&S) for the acquisition of up to 1,850 optical scan vote tabulators and up to 100 touch screen voting units, including all necessary support and service agreements, at a capital cost not to exceed $13.05 million ($1.0 million in 1999 and $12.05 million in 2000), such contract to be in accordance with the Request for Proposal and the Proposal submitted, and on terms and conditions satisfactory to the City Clerk, and in a form satisfactory to the City Solicitor;

(2)the final number of optical scan vote tabulators and touch screen voting units to be acquired be subject to:

(a)the Clerk's determination, in consultation with all Members of Council, of the final number of voting places that will be required for the 2000 municipal election;

(3)the contract include suitable enforceable performance guarantees which ensure the equipment acquired by the City remains fully operational for a period of at least fifteen years and that any recount costs associated with the performance of the equipment will be assumed by the supplier; and

(4)the appropriate City officials be authorized to take the necessary action to give effect thereto;"; and

(B)the adoption of following Recommendations Nos. (3), (9) and (10) embodied in the confidential report (August 24, 1999) from the City Auditor:

"(3)all financial justification analyses in regards to capital acquisitions be reviewed in detail by the Chief Financial Officer and Treasurer prior to submission to Council. Such analyses should include the following:

(a)an analysis of all options in regards to the project (eg leasing or purchasing);

(b)sources of financing; and

(c)quantification of savings/benefits;"

"(9)the Chief Administrative Officer be directed to prepare a policy in connection with the participation of City election staff in the elections of other jurisdictions; and

(10)a standard reporting format be developed by the Chief Administrative Officer in regards to the preparation of reports which recommend the selection of suppliers responding to a request for proposal."

The Administration Committee reports, for the information of Council, having referred the following motion to the City Clerk for report thereon directly to Council for its meeting scheduled to be held on September 28, 1999, respecting the cost involved:

Moved by Councillor Mahood:

"That the City Clerk be requested to re-examine the issue on the basis of looking at strictly renting the equipment for the next election with a possible option to buy."

The aforementioned confidential reports (August 23, 1999 and September 2, 1999) from the City Clerk and the confidential report (August 24, 1999) from the City Auditor, respecting the Request for Proposal for the Acquisition of Optical Scan Vote Tabulators and Touch Screen Voting Units, were forwarded to Members of Council under confidential cover.

The Administration Committee submits the following report (August 30, 1999) from the Chief Administrative Officer:

Purpose:

This report responds to a request from the Administration Committee for additional information with respect to financing options, the feasibility of renting the equipment from other jurisdictions and the ongoing maintenance costs of the batteries in the tabulators.

Source of Funds:

The Elections Voting and Vote Tabulation System was approved as part of the 1999-2003 Capital Works Program. One million was approved for expenditure in 1999 and $12.05 million was committed for 2000.

Recommendation:

It is recommended that this report be received for information.

Council Background/Reference:

On July 13, 1999 the Administration Committee considered a joint report (June 15, 1999) from the Chief Administrative Officer, Acting Commissioner, Corporate Services, Chief Financial Officer and Treasurer and City Clerk recommending that the City Clerk be given authority to enter into a contract with Election Systems and Software Inc., the proponent with the highest evaluated score, for the acquisition of the necessary optical scan vote tabulators and touch screen voting units, in accordance with the Request for Proposal and the Proposal submitted, and on terms and conditions satisfactory to the City Clerk, and in a form satisfactory to the City Solicitor.

The Administration Committee requested the Chief Administrative Officer to report to the September 7, 1999 meeting of the Administration Committee:

(i)on the various other options, including leasing and rental, in consultation with the proponents who submitted this as part of their proposal, such report to include financial comparisons to the purchasing options;

(ii)including information on the feasibility of borrowing this equipment from other jurisdictions; and

(iii)on the ongoing cost of maintenance of the batteries used for these voting units;

The Committee also requested the City Auditor for the September 7, 1999 meeting of the Administration Committee to:

(i)review the business case and the financial and technical evaluation of the proposals, including a rent-to-buy option, where included as part of the proposals; and

(ii)review and evaluate the systems used in Vancouver, Ottawa, Chicago, Cook County, Philadelphia and Seattle.

(3)requested the appropriate staff to provide to the Members of the Committee and Councillors, this week on a confidential basis, additional information on the evaluation criteria, weighting and ranking, including copies of the resultant independent testing authority for compliance with the standards of the U.S. and Federal Elections Commission.

Previous Council Approvals on this Issue:

On March 2, 3 and 4, 1999, Council approved the 1999-2003 Capital Works Program which included $13.05 million for the acquisition of a vote counting system. Council directed the Clerk to prepare a report on the process for Election 2000, including updated costs of a recommended voting system and the costs and benefits of vote tabulation options. The 1999 expenditure of $1.0 million is subject to Council's direction on the Election 2000 process and approval of a specific voting system.

On June 9, 10 and 11, 1999, Council approved the use of voting place optical scan vote tabulators for the City of Toronto elections, with touch screen voting units to be used for institutional voting and the advance voting program. The Clerk was directed to report on the results of the Request for Proposal, together with a recommendation on the award of the contract, to the July 13, 1999 Administration Committee meeting.

Comments and/or Justification:

(1)Other Financing Options:

The Request for Proposal directed the proponents to provide any financing options or plans available to the City of Toronto. Only Election Systems & Software Inc. (ES&S) indicated it would be willing to discuss lease to purchase or full service rental options if of interest to the City of Toronto.

The recommended vendor, Election Systems & Software, was contacted by Finance Department staff and asked to provide the City with lease and rental options for our consideration. It should be noted that no attempt has been made to negotiate prices and/or lease rates in regard to any of the options presented by ES&S. However, if the decision to proceed with this acquisition is confirmed, the City Clerk, together with appropriate city staff will enter into negotiations with the successful vendor in regard to the specific equipment and services required.

For the purposes of this analysis all options were standardized in terms of equipment and the services the City would receive from ES&S. Furthermore, in order to facilitate a more meaningful comparison between the purchase/lease options and the rental option, the estimated useful life of the equipment was standardized. The rental option provided to the City by ES&S was for 3 elections. However, the estimated useful life of the equipment is expected to be 15 years. Following the 2006 election no additional capital spending is anticipated for the purchase and lease options until 2015. The average annual cost to the city of either the purchase or lease options for the first 7 years is approximately $2.72 million and $2.86 million respectively. In contrast, the average annual cost for the next 8 years would be approximately $385,000 in the case of either option - a substantial reduction in costs. With the rental option, additional rental costs will be incurred in each election year subsequent to the 2006 election.

The analysis contained in Appendix "A", provides details with respect to the capital requirements of the vote tabulating equipment as well as yearly service, storage and operating costs. All cash flows associated with the acquisition and maintenance of the equipment were then discounted in order to facilitate a comparison of costs. It should also be noted that our analysis assumed a seven-year term for the debenture required to purchase the equipment. The length of the term was again, chosen to facilitate a comparison of the three options. Should the City proceed with this acquisition the choice of term would depend on the market conditions for debt at the time of the purchase and be factored into the city's longer term capital financing strategy.

Our analysis reveals the rental option would be the most expensive for the City. The number of units, the nature of the equipment and the customization required limit the opportunities for ES&S to rent the units when not in use by the City of Toronto. We have been informed by ES&S that they would essentially be building the equipment for rent exclusively by the City.

The lease option also proved to be more expensive than purchasing the machines outright. It should be noted that the lease options are actually lease-to-purchase options, where the City owns the equipment at the end of the lease. In general, the attraction of a lease is the ability to defer a portion of the purchase price (as well as the decision to buy or not) until the end of the lease term. However, ES&S has not deferred a portion of the purchase price (that is, the residual value is zero). Rather, the entire value of the equipment has been included in the yearly lease payment. As with the rental option, ES&S would have limited alternatives if we did not actually purchase the equipment, and this is reflected in their financing arrangements.

The analysis also addressed the financial impact of purchasing modems for each of the tabulators and the differences in cost associated with service agreements available to the City. Our analysis revealed that purchasing modems adds a substantial net cost to the acquisition and maintenance of the vote tabulating equipment. By purchasing the modems the City will save close to $500,000 (in current dollars) for telephone lines and operators but at a cost of approximately $2 million in increased capital spending. It is recommended that, subject to operational requirements, this be considered in the negotiations with the vendor as a means to reduce the cost of this project.

With respect to the service agreements offered by ES&S our analysis revealed that a limited service agreement is the most cost effective. It is also the preferred service agreement of the Clerk's Department. The primary difference between the two agreements is that the full service agreement includes election programming, testing and other Election Day support that can be performed with existing Clerks personnel.

The outcome of our analysis is not surprising. Elections equipment, while continually being improved upon, does not become obsolete as quickly as other information technology equipment. Furthermore, by using the same equipment/process for a number of elections in succession, the public and staff will become more familiar and proficient with the equipment and its use. Because of the long useful life of the equipment, estimated at 15 years, the customized nature of the equipment and software and the number of units we require this equipment does not lend itself to lease or rental. Further, Clerk's staff have advised us that service agreements are structured so as to require the vendor to upgrade software or hardware during the tenure of these agreements, thereby ensuring the city continues to benefit from new technology that will improve our election system and process. As noted previously, ES&S has indicated they will have a difficult time renting or leasing the equipment when not in use by the City. As such, the rental and lease options are not as attractive as they might be for more generic types equipment.

Based on our analysis the most cost effective method of acquiring the vote tabulating equipment is to purchase the equipment as was originally approved by Council as part of the 1999 Capital Works Program.

(2)Renting the Equipment from Other Jurisdictions:

The recommended optical scan vote tabulator and touch screen voting unit are currently in use in several jurisdictions in the United States. In addition, Venezuela has 7,350 tabulator units.

It is not possible to rent the equipment from any jurisdiction in the United States as their voting day precedes Ontario's municipal voting day by only a few days. The US voting day is the Tuesday after the first Monday in November, Ontario's is the second Monday in November. (In the year 2000, the US voting day will be held on November 8, 2000 and Toronto's municipal election will be held on November 14, 2000.)

The tabulator units in Venezuela were modified to satisfy the particular needs and election laws of the country. For example:

(a)There are no printers in the tabulator units. Venezuela's law requires the election results to be printed on legal size paper so a separate large printer is attached to the unit to print out the results. Not having a printer in the unit means it would not be possible to print either the zero tape, the results tape or any audit reports in the voting place;

(b)The tabulator units are programmed for Spanish. Extensive software reprogramming would be necessary to convert the units to English;

(c)The tabulators have been programmed for a four column ballot. Toronto has traditionally used a three column ballot. A four column ballot leaves less space for candidates' names and numbers beside the names;

(d)The tabulator units each have a six pound battery. In addition to the added weight of shipping the units, there are some costs to properly maintain the batteries. (See item number 3 of this report.); and

(e)The units do not contain serial ports which would be required for any future growth applications.

Venezuela conducts elections on a fairly regular basis. They had elections in November 1998 (Governors and Senate), December 1998 (President), July 1999 (Assembly) and will be conducting another election in the fall of 1999. As elections can be called on short notice, it is doubtful Venezuela would be willing to commit in advance to share the equipment.

For the foregoing reasons, there currently is no viable opportunity for renting the recommended optical scan vote tabulator from another jurisdiction.

(3)Cost of Battery Maintenance:

The recommended optical scan vote tabulators have an optional internal backup battery. The tabulator utilizes this 12 volt 7 Ah lead acid battery for backup in the event of a power failure. The battery is completely sealed and can be operated, charged or stored in any position. The life expectancy of the battery is approximately five years however there are certain maintenance steps that must be taken to insure that the battery's service life is not inadvertently shortened.

Storage time and temperature both have an effect on the life of the battery. When stored at 68 degrees Fahrenheit the approximate charge retention is as follows: 1 month = 97 percent, three months = 91 percent, and six months = 85 percent. However, higher storage temperatures do have an adverse effect on the batteries charge retention. One situation that should be avoided is allowing batteries to fully discharge, whether in storage or in a tabulator. If this occurs, lead sulfate will form on the negative plates of the battery. This sulfate acts as an insulator and the more advanced the sulfation the lower the charge acceptance of the battery. For this reason it is recommended that the batteries be put through a charge program approximately every six months. With the expected number of tabulators required for the City (approximately 2000) this equates to 100 man hours every six months or approximately $3,600.00 per year.

Conclusion:

Based on staff's analysis, the most cost effective method of acquiring the vote tabulating equipment is to purchase the equipment as was originally approved by Council as part of the 1999 Capital Works Program.

There is currently no viable opportunity for renting the recommended optical scan vote tabulator from either Venezuela or an American jurisdiction.

To maintain a battery within the vote tabulator is a relatively inexpensive option for the Clerk's division to maintain. The City Clerk should determine the necessity of the battery in the purchase of vote tabulators.

Contact Names:

Val Sequeira, Manager, Administration Committee and Finance397-4225

John Hollins, Director of Elections392-8019

Comparison of Alternatives for the Acquisition of Vote Tabulating Equipment

Assumptions:

Inflation:

Inflation was assumed to be zero. All costs (purchase/lease and service agreements), except storage will be determined when the contract is signed. The cost of storage applies equally to the purchase and lease alternatives. Storage costs are not applicable to the rent alternative. However, given the rate of inflation in recent years the impact would not be material.

Discount Rate:

The appropriate discount rate has been assumed to be the City's cost of borrowing.

Equipment Life:

The equipment is expected to last at least 15 years or 5 elections. A conservative estimated useful life of three elections has been chosen for the purposes of this analysis. In addition a useful life of three elections allows for a comparison with the information provided by the vendor with respect to the rental option.

Insurance:

Existing insurance policies will cover this new equipment.

Storage:

The Clerks Department has estimated that 10,000 square feet of storage space will be required at a cost of $9.00 per square foot.

Salvage Value:

As noted in the preamble to the Appendix, the number of units, the nature of the equipment and the customization required limit the opportunities for the vendor to rent the units when not in use by the City. For this same reason we have assumed that when the City is finished with the equipment the resale and/or salvage value will be zero.

Revenues:

As per information provided by the Clerks Department, the City could net $100,000 per year undertaking contract elections. This is based on the experience of the former Municipality of North York. North York averaged $50-75,000 in net revenues during non-election years with 425 machines. In addition, the Clerks Department is in early discussion with Calgary and Edmonton to run their municipal elections during our non-election years. Additional net revenues of $300,000 and $200,000 respectively are anticipated. We have not included these amounts in our analysis.

Residual Value:

According to the vendor the residual value has been included in the yearly leasing cost.

Operators and Telephones:

This line item includes telephone lines, operators, supervisors and software.

Tax Rate:

GST (7 percent less 4 percent rebate) and PST (8 percent) have been included in the purchase cost when calculating the required debt financing. In the lease and rental options GST and PST must be remitted at the time of each payment.

The Service Agreements could be subject to both GST and PST. However, a definitive calculation of applicable taxes for the election year Service Agreements would require a detailed breakdown of each component. For the purposes of comparing options the tax applicable to the election year Service Agreements includes both GST and PST. One would expect the actual election year taxes to be lower than we have estimated.

The Administration Committee also submits the following report (August 23, 1999) from the City Clerk:

Purpose:

The purpose of this report is to respond to a request from the Administration Committee on the provision of orientation sessions for candidates, agents and scrutineers, the use of non-composite ballots and a request to the Province to amend its legislation to allow a municipal ballot design similar to the ballot used in Provincial elections.

Source of Funds:

Not applicable.

Recommendations:

It is recommended that this report be received for information.

Council Background/Reference/History:

At its meeting of July 13, 1999 the Administration Committee requested the City Clerk to report to the September 7, 1999 meeting of the Administration Committee on the following:

"6.4(i)give consideration to and report on providing orientation sessions for candidates, agents and scrutineers; and

(ii)report to the aforementioned meeting of the Administration Committee on the option of using a non-composite ballot, and on the option of requesting a change in Provincial legislation to allow a ballot design based upon the Provincial ballot"

Comments and/or Justification:

4(i).Provision of Orientation Sessions for Candidates, Agents and Scrutineers:

Prior to the Municipal Elections Act, 1996 (hereafter referred to as the Act), municipal election legislation provided for Provincial regulations governing the use of vote-counting equipment. These regulations required a public testing of the equipment to be conducted.

Subsection 42(3) of the Act now directs the clerk to:

"At least 30 days before voting day, the clerk shall,

(a)establish procedures and forms for the use of,

(i)any voting and vote-counting equipment authorized by by-law, and

(ii)any alternative voting method authorized by by-law; and

(b)provide a copy of the procedures and forms to each candidate."

All the former municipalities conducting automated elections in 1997 adopted the provisions of the former Provincial regulations to continue the practice of holding a public testing of the equipment.

In both the 1997 municipal election and the 1998 Ward 1 by-election, candidates or their scrutineers were invited by City staff to witness the testing of the vote-counting equipment. During this testing session, the operation of the equipment was explained to candidates and they were given the opportunity to mark ballots and insert them into the equipment prior to the actual testing.

In addition, the Candidate's Guide, which was made available to all candidates, made reference to the use of vote-counting equipment.

Leading up to the 1997 municipal election, four candidate information sessions were held. In addition to general election information (e.g., legislated dates), the financial requirements of the Act were fully explained.

It is the intention of the City Clerk to once again conduct these sessions for candidates, agents and scrutineers during the 2000 municipal election.

4(ii).(a)Use of a Non-Composite Ballot:

Prior to the enactment of the Municipal Elections Act, 1996, the authority to decide whether separate or composite ballots were to be used rested with the municipal council. The Act was amended to give the Clerk this authority out of recognition that this was an administrative not a political decision.

The last known use of separate ballots in the City of Toronto was 1969.

A separate ballot provides for only one office, question or by-law. A composite ballot is one that combines the separate ballots for all offices, questions or by-laws. If separate ballots are used, the City would require six ballot styles, one each for mayor, councillor and the four school board trustees, plus additional ballots for any questions or by-laws. In deciding whether to use composite or separate ballots, several factors must be considered.

Firstly, the security of the ballots, from the time voting begins to the end of voting day needs to be considered. It is fundamental to the integrity of the election that all ballots be accounted for. Multiple ballots, coupled with five different voting entitlements based on elector qualifications, places a profound burden on election officials, particularly during the 5:30 p.m. to 8:00 p.m. rush. It is imperative that voters receive the ballots that they are entitled to and that the ballots in the voting place balance at the close of voting. All of these variables present an unusually high risk of error.

Secondly, there is the issue of costs. If each voter is entitled to an average of three ballots, three times as many ballots would have to be produced. While the cost per ballot would be less, with the costs of padding, counting and packaging, the overall costs for the ballots would not be substantailly reduced.

In trying to locate a municipality that was still using separate ballots, staff at the Ministry of Municipal Affairs and Housing were unable to provide us with a name.

(b)Ballot Design:

The Provincially regulated form for the municipal ballot is currently identical to that used for Provincial elections in that it is reverse printed (black background with white lettering) and contains a circular space for marking the ballot. This ballot design is used by those municipalities that have a manual count.

When a municipality uses vote-counting equipment, it is necessary to modify the ballot design to match the capabilities of the equipment. Using a ballot that is similar to the Provincially regulated form is not possible when utilizing optical scan tabulators.

Contact Name:

John Hollins, Director of Elections, City Clerk's Division

Telephone: (416) 392-8019 E-mail: jhollins@city.north-york.on.ca

The Administration Committee also submits the following communication (July 20, 1999) from City Clerk, Audit Committee:

Committee Action:

The Audit Committee reports having approved the following request to the City Auditor from the Administration Committee and having directed him to submit his report to the Audit Committee:

(1)That the City Auditor review the business case and the financial and technical evaluation of the proposals, including a rent-to-buy option, where included as part of the proposals; and

(2)That the City Auditor review and evaluate the systems used in Vancouver, Ottawa, Chicago, Cook County, Philadelphia and Seattle, based on information in the City Clerk's Department.

Background:

The Audit Committee, on July 19, 1999 considered the following request from the Administration Committee to the City Auditor:

"(1)That the City Auditor review the business case and the financial and technical evaluation of the proposals, including a rent-to-buy option, where included as part of the proposals; and

(2)That the City Auditor review and evaluate the systems used in Vancouver, Ottawa, Chicago, Cook County, Philadelphia and Seattle,

and submit a report thereon to the meeting of the Administration Committee, to be held on September 7, 1999.

The Committee's action is noted above.