1 License Agreement for Performance Management Software to be Implemented under the Works Best Practices Program

(City Council on June 9, 10 and 11, 1999, deferred consideration of this Clause to the next regular meeting of City Council to be held on July 6, 1999.)

(City Council on May 11 and 12, 1999, deferred consideration of this Clause to the next regular meeting of Council to be held on June 9, 10 and 11, 1999; and the Commissioner of Works and Emergency Services was requested to submit a report directly to Council, for consideration therewith, on why a Proposal Call was not issued for this project.)

The Works and Utilities Committee recommends the adoption of the following report (March 25, 1999) from the Commissioner of Works and Emergency Services:

Purpose:

The purpose of this report is to obtain Council approval to enter into a software licensing and maintenance agreement with Alacrity Inc. of Toronto for the supply of software and related implementation services for use as a Performance and Operations Management System in the Water and Wastewater Services Division under the Works Best Practices Program.

Funding Sources:

On March 2, 3, and 4, 1999, City of Toronto Council, by adoption of Clause No. 1 of Report No. 3 of The Strategic Policies and Priorities Committee, approved the 1999-2003 Capital Budget and Five-Year Capital Program, which contained funding for the Works Best Practices Program, including funding for the acquisition and implementation of a Performance and Operations Management System for use by operations, maintenance and management staff across the Water and Wastewater Services Division. Accordingly, funds are available in the Water and Wastewater Services Division, Water Pollution Control Capital Account No. C-WP001 and Water Supply Capital Account No. C-WS026.

Recommendations:

It is recommended that:

(1) authority be granted to enter into a software licensing and maintenance agreement with the firm of Alacrity Inc. of Toronto, Ontario, for the purchase and implementation of the Alacrity Results Management System, to be implemented as the Performance and Operations Management System under the Works Best Practices Program, at a cost not to exceed $975,153.00 after the Municipal Goods and Services Tax Rebate; and

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

Council Reference/Background/History:

On July 2 and 3, 1997, the former Metropolitan Council adopted Clause No. 3 of Report No. 13 of The Financial Priorities Committee authorizing implementation of the Works Best Practices Program in the Works Department.

Accordingly, the Works Best Practices Performance and Operations Management Team initiated design and development activities for purposes of creating and implementing a Performance and Operations Management System in the Water and Wastewater and Solid Waste Management Services units, as identified in the Works Best Practices Program applications architecture.

Comments and/or Discussion and /or Justification:

The Performance and Operations Management System and its associated practices (generally referred to as "POMS") is a key component of the Works Best Practices Program (WBPP), which brings together new enabling technologies, work practices redesigned to take advantage of those new technologies, and a transformed organizational model which focuses on team processes aligned with overall operational and business goals. With the information-rich and highly functional POMS "toolkit", work teams and management will be provided with the ability to establish operational efficiency and improvement targets and measure performance against those targets. POMS is specifically configured to import operational and resource utilization information from a wide range of sources, and to analyse and display that information in both tabular and graphical forms in support of the three major performance dimensions: quality; efficiency; and effectiveness. The importance of this in supporting "continuous improvement" is a key ingredient in the long-term success of the WBPP.

The preliminary WBPP "applications architecture" included provisions to develop a custom (i.e., program it from scratch) Performance and Operations Management System for use across Water and Wastewater Services as well as in the Solid Waste Management area (in 1998, Solid Waste Management embarked on a varied approach to implementing specific components of the WBPP, with the intention of assessing the feasibility of implementing POMS at a later date). While buying a packaged system was known to be preferable to custom-development for long-term viability, it was felt at the time that the unique nature of our requirement precluded a "packaged" solution. However, in 1997, a "market scan" to locate and compare technical capabilities of business modelling systems uncovered the Alacrity Results Management (A.R.M.) System developed and marketed by Alacrity Inc. here in Toronto. This system was discovered to provide a solid architectural foundation on which to develop POMS, was technically and functionally superior to other modelling/business component-based products in terms of our specific requirements, and, as the only viable alternative to custom-building a system, represented a clear opportunity to the City. Representatives of the corporate information technology group were involved in this process.

A joint pilot development and implementation project was commissioned (via Purchase Order with the support of Corporate Purchasing) to prove the concept and applicability of the A.R.M. product to the POMS requirement. The system was configured and implemented on a field trial basis during 1998, and, as a result, the WBPP Program Management Office, in conjunction with the Technology Architecture Office, and in consultation with corporate information technology, determined that the system had clearly proven its capabilities and was the clear choice as the software technology platform for POMS implementation. Negotiations with Alacrity Inc. were carried out, resulting in the contract award recommendation contained herein.

Terms of Licensing Agreement:

It is intended that POMS will be used in a "front-line" capacity by plant technicians and maintenance staff to support day-to-day operations, by team coordinators and plant managers to support the performance of major plant functions, and by senior and executive managers to support overall business management. The implications on licensing of such ubiquitous use of a major, specialized software product can often be significant. For example, based on the published license fees for the basic Alacrity Results Management System, a 300-user license would cost US$475,000.00.

Alacrity Inc., however, believes as we do that there is great potential for widespread use of their product for specific operations performance management applications. Knowing that the success of our implementation would be very beneficial to the market outlook for A.R.M., Alacrity has agreed to a "site license" arrangement (more accurately, an "enterprise" license - this term is not used to avoid possible confusion with City-wide use) that would provide for unlimited use of the system across the entire Water and Wastewater Services Division as well as the Solid Waste Management Division. This agreement includes unlimited use in the business areas of the former municipalities (i.e., District operations). The negotiated cost, to be paid over a two-year roll-out period, is CDN$537,500.00. In addition to the designed POMS functionality, Alacrity has agreed to include in the license coverage full future use (not presently in the WBPP scope) of the budgeting features of the systems on a site-wide basis. Annual maintenance charges for the full site license are to be phased in through the year 2001 to the maximum amount of CDN$134,375.00.

The table below shows the payment plan for roll-out of Alacrity Results Management software licensing and maintenance components through to the end of Works Best Practices Program implementation in the year 2002. Maintenance costs beyond that time will be included in the appropriate operating budgets.

License Fees Maintenance Total

1997 $50,000.00 - $50,000

1998 $87,500.00 $12,000 $99,500

1999 $300,000.00 $31,750 $331,750

2000 $100,000.00 $96,750 $196,750

2001 - $134,375 $134,375

2002 _____-_____ $134,375 $134,375

Subtotal $537,500.00 $409,250.00 $946,750.00

GST after Rebate $16,125.00 12,277.50 $28,402.50

Total $553,625.00 $421,527.50 $975,152.50

Alacrity has agreed to incorporate in the licensing agreement software code protection through an escrow arrangement at no charge to the City.

Conclusions:

It is recommended that a software licensing and maintenance agreement be entered into with the firm of Alacrity Inc. of Toronto, Ontario, for the provision of Performance and Operations Management System software products and related implementation and support services to be implemented under

the Works Best Practices Program.

Contact Name and Telephone Number:

Jim Coe

Program Manager, Works Best Practices

Water and Wastewater Services Division

Telephone No. (416) 392-3141

(City Council on May 11 and 12, 1999, had before it, during consideration of the foregoing Clause, a communication (May 10, 1999) from Ms. Gina Gignac, National Representative, Toronto Civic Employees' Union, C.U.P.E. Local 416, respecting the Works Best Practices Program, pointing out that the value for money audit on the consultant services for this program has yet to be completed by the City Auditor.)

(City Council on June 9, 10 and 11, 1999, had before it, during consideration of the foregoing Clause, the following report (May 25, 1999) from the Commissioner of Works and Emergency Services:

Purpose:

The purpose of this report is to provide Council with additional information concerning why a proposal call was not issued in the selection of the Alacrity Results Management System, as discussed in the report titled "Licence Agreement for Performance Management Software to be Implemented under the Works Best Practices Program", consideration of which was deferred at the meeting of Council on May 11, 12 and 13, 1999 to the meeting of June 9, 10 and 11, 1999.

Funding Sources:

Funding information is provided in the above-referenced report.

Recommendation:

That this supplementary report be received for information.

Council Reference/Background/History:

At its meeting of May 11, 12 and 13, 1999, Council deferred consideration of the report titled "Licence Agreement for Performance Management Software to be Implemented under the Works Best Practices Program" (Clause No. 11 of Report No. 7 of the Works and Utilities Committee) to its meeting of June 9, 10 and 11, 1999, and the Commissioner of Works and Emergency Services was requested to submit a report directly to Council, for consideration therewith, on why a proposal call was not issued for this project.

Comments and/or Discussion and /or Justification:

Since the initiation of the Works Best Practices Program (WBPP) in 1996, it was intended that a "Performance Management System" would be implemented to assist management in a wide range of planning and decision-making activities to support the achievement of cost savings and service delivery improvements both during WBPP implementation and on an ongoing basis to ensure continuous improvement.

The envisaged system would continuously integrate and analyze operating and resource utilization information gathered from many sources, including process control systems, work management systems, laboratory systems, and financial systems. It was expected that this system would be highly complex, providing broad reporting and analytical functionality and an effective and efficient user interface, and that it would be able to scale up to handle the performance management workload of the entire Water and Wastewater Services Division. Because of the functional and technical demands of this application, it was anticipated that the system would be custom developed by a software development vendor, to be selected by means of a Request for Proposals.

In mid-1997, the Performance and Operations Management System (POMS) Team of WBPP, which was made up of both staff and industry expert consultants from a group of firms that included SHL Systemhouse, had sufficient design material to initiate the process of acquiring the needed system development services. However, it had recently been noted that some systems available in the marketplace had evolved capabilities to the point where a pre-built system might be a viable option to custom development. The WBPP Technology Blueprint, which is a set of standards and guidelines designed to govern all technical development in the Division, indicates the utilization of "packaged software" as clearly preferable to custom development. This is not only consistent with City policies, but with policies and practices throughout the information technology world. For this reason, the POMS Team considered alternatives to building the system, including buying and customizing an existing software package and assembling the application from pre-built software components. The former option was, however, similar to the "build" option, with its attendant high risk and ongoing support burden. The most current of technology directions, component-based software, was identified as the only practical alternative to building a system. There was therefore a need to find a solution which utilized object-based technologies in a business component/business modeling application architecture.

A number of available "software toolsets" were evaluated at a high level for use in configuring the POMS solution, specifically looking at business functionality; ease of use of the user interface; flexibility to support enhancements; reliability to ensure accuracy, data integrity and system availability; scalability; cost; and compliance with essential elements of the WBPP Technology Blueprint.

Applying these criteria, the POMS Team identified only three proven products available in the global marketplace which had the potential of supporting the specified business and technical requirements:

1. Gensym G2/Rethink

2. Panorama Business Views (pbVIews)

3. Alacrity Results Management (ARM).

City staff and professional services staff evaluated these options through a process of documentation review, detailed analysis, vendor meetings and product demonstrations. The evaluation considered the potential of each product to form the basis for POMS implementation, with the intention that, if even two of the products were viable candidates, a call for proposals would be issued to procure the best solution.

The detailed analysis included:

• •An assessment based on mandatory business functionality and technical requirements
• •An assessment based on preferred business functionality and technical requirements
• •An assessment based on perceived risks.

This analysis clearly concluded that both Gensysm G2 and Panorama Business Views were unsuitable to the business and technical requirements of the Performance Management System, and left only the Alacrity Results Management (ARM) system from Alacrity, a Toronto-based firm, as a viable candidate product.

It was clear that a proposal call was not a workable option where no more than one viable candidate existed. The options were therefore effectively limited to continuing with the original plan to develop our own custom system, or seek a proposal from Alacrity to provide a solution based on the ARM product. The former solution was attractive only because it would involve a proposal call, but it represented the worst scenario for system "ownership" and ongoing maintenance and support - that being a custom built system with us as the only "client". The latter solution could not be gained through a multi-vendor proposal call because the product was available only through Alacrity, and no other commercially available product existed that could even come close to meeting the requirements. At the same time, it offered the significant advantage of being a licence-able software product with other clients sharing the ongoing costs of maintenance (i.e. staying technologically current), support and development. Metro's Corporate Information Technology Division were in full agreement that the benefits of a licenced software product vastly outweighed those of a custom-built system.

It was therefore recommended in 1997 by the POMS Team that a pilot implementation of the ARM system be performed to prove its usability. The WBPP Program Management Office (PMO), including representatives of Water and Wastewater, Management and Technical Services (Engineering), Information Systems, and also representatives of CUPE Local 43 and Local 79, agreed with the recommendation. Purchasing assisted in initiating the procurement of a pilot implementation from Alacrity, and the system was successfully implemented in a field trial at Highland Creek Treatment Plant.

Alacrity has incorporated many improvements into their product as a result of their pilot work at Highland Creek. While certain of those improvements were specifically required by and paid for by Water and Wastewater (for example, to handle interim data collection functions until other WBPP systems, such as process control, come online), the majority were paid for by Alacrity as an investment in the product, providing value to us as well as to their other clients. In addition, Water and Wastewater have gained significant licence fee reductions through negotiations with Alacrity. These concessions have come about as a result of the division taking the position that sole sourcing a packaged product as an alternative to custom building a system could only be acceptable to the City if advantages similar to those that are generally achievable through a competitive process could be demonstrated. To this point, Alacrity have invested over 250 person-days in development and implementation effort specifically in support of our pilot implementation.

With regard to licencing, Alacrity has offered rates which are equivalent to the best that could be expected from a competitive procurement process, well below their standard licence fees. Our licensing arrangement will allow full use of the system by an unlimited number of users across all of Water and Wastewater Services, including District operations, as well as across all of Solid Waste Management, should they chose to implement Performance and Operations Management. For no additional charge, Alacrity have authorized expanded use of the product's capabilities as a budgeting aid to the division. This is a significant opportunity (budget modeling for water and wastewater operations is highly complex and time-consuming) which will be explored in more detail in the future stages of WBPP implementation.

Conclusions:

Procurement practices under the Works Best Practices Program have always been carried out in full accordance with corporate policies and procedures. In the case of the selection of the Alacrity Results Management System, while no feasible opportunity existed for a proposals call, the division performed a full and fair assessment of alternatives, and in the end has gained access to what is clearly the best available solution, based on terms that are attractive to the City and fair to the vendor.

Contact Name and Telephone Number:

Jim Coe

Program Manager, Works Best Practices

Water and Wastewater Services Division

Telephone No. (416) 392-3141)

Respectfully submitted,

BETTY DISERO

Chair

Toronto, April 21, 1999

(Report No. 8 of The Works and Utilities Committee, consisting of one Clause only, and an addition thereto, was deferred by City Council on June 9, 10 and 11, 1999, to the next regular meeting of City Council to be held on July 6, 1999.)