Professional Memo

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AMENDMENT NO. 1 TO 3/21/2013 SOLE-SOURCE JUSTIFICATION FOR SUPPLIES AND SERVICES Memo to File To:

Agreement # 2227 – J&B Software / DOR Remittance Application Upgrade

From: Oregon Department of Revenue (DOR), Administrative Services Division, Finance Analyst/Procurement Specialist: Jennifer Jolley Designated Procurement Officer: Stephanie Lehman Date:

January 8, 2014

Re: Sole Source Determination pursuant to Oregon Revised Statute (ORS) 279B.075 and Oregon Administrative Rule (OAR) 125-247-0275 for J&B Software to upgrade DOR’s remittance processing software by adding the Electronic Clearing Suite to the current Transaction Management System (TMS) software. This will give DOR the ability to deposit checks and money orders electronically using image exchange, also known as Check 21 or Image Cash Letter (ICL). Authority to enter into a Sole-Source Contract: OAR 125-246-0170(2)(c)(H) and [ DAS Delegation #741-13 Background:

The Oregon Department of Revenue uses proprietary remittance processing software that is solely owned by J&B Software called TMS 2011 Suite. TMS is a two Pass Imaging workflow. In Pass 1, the remittance transports read MICR (magnetic ink character recognition) and OCR (optical character recognition) data, endorses an audit trail on items, captures front and back images, and sorts checks and remittances according to batch type. The batch is then available for Intelligent Character Recognition (ICR) which reads amount fields (either machine or hand written) from checks and documents. The amount fields become part of that transaction for balancing. Following the ICR process, for data that could not be read by ICR, Data Entry Workstations display images of checks and documents to Bank Technicians for corrections and amount entry. Any transactions that do not balance are queued for balancing. Once all transactions are balanced for a batch, it is available for Pass 2 on the remittance transports. During this pass, checks are endorsed, encoded, imaged, and sorted. Following Pass 2, batches are in the state of Extract Waiting and ready to be extracted and uploaded to the department’s iSeries computer and image archive. DOR has used J&B’s software since 1997.

The following reasons are why the agency is seeking this procurement method.

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The department would like to expand the functionality of the current version of TMS so check items can be deposited electronically with an image cash letter (image exchange) rather than using armored car to deliver the paper check items to the bank for deposit. DOR plans on awarding J&B Software a sole source contract to upgrade the department’s remittance processing software by adding J&B Software’s proprietary Electronic Clearing Suite to the existing TMS 2011 Suite software. This software performs a very specialized and integrated function within the existing Banking Units financial systems. J&B Software has recommended that the department upgrade this software by adding the Electronic Clearing Suite to their TMS 2011 Suite software based on current and future business needs. Total cost is not to exceed $ 390,000. This includes 5 years of maintenance with a 5% increase per year, with the option to renew the maintenance in one year increments thereafter. Findings: Market Research Overall finding.

DOR researched the Association for Work Process Improvement, the Internet, had conference calls with J&B Software, and had J&B perform testing of our source documents. Our sole source determination is based on the following. 1) TMS is a proprietary remittance processing system, and J&B Software is the sole developer and owner of this product. 2) The remittance processing software (TMS SE 1200 including the Electronic Clearing Suite) must integrate with the department’s existing Unisys (proprietary hardware and software) remittance processing transports, and be fully tested and certified with J&B Software to operate in a wide area network and data center environments. 3) J&B Software is the sole provider of maintenance and support for the TMS system and all subsystem or third party software. Modifications or changes without the expressed written consent of J&B Software will void all warranty provisions and maintenance agreements. 4) The J&B Software TMS solution provided to DOR in 2002 was specifically designed, configured and implemented to allow the Department to subsequently upgrade the solution while minimizing cost, risks and any interruption in critical production operations. Pursuant to ORS 279B.075 (2)(a): Provide findings supporting your determination that the efficient utilization of existing goods requires the acquisition of compatible goods or services from only one source.

J&B Software’s TMS [SE 1200] 2011 Suite, including the Electronic Clearing Suite is proprietary software; this software must work with the character recognition software (A2iA) that the department has in place, also proprietary software and licensed to DOR through J&B, and be fully compatible, tested, and approved by J&B Software. This software must also work with the existing Unisys (proprietary hardware and software) remittance processing transports. The department also has 10 field offices that use a

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check image processing application that is solely owned and licensed by J&B and this application also is proprietary software. The software is tightly integrated with the main application at DOR’s central headquarters. Pursuant to ORS 279B.075 (2)(b): Provide findings supporting your determination that the goods or services required for the exchange of software or data with other public or private agencies are available from only one source.

See discussion above. Pursuant to ORS 279B.075 (2)(d): Any other findings that support the conclusion that the goods or services are available from only one source.

Any modifications or additions to the existing TMS system now in production, other than those provided by J&B Software, would void the current maintenance contract that DOR has in place. No other companies or third parties are authorized or certified to provide TMS Image software changes, enhancements, modifications, or support at this time.

[ Instructions for a Sole-Source Procurement All sole-source procurements must comply with the requirements of ORS 279B.075 and OAR 125-247-0275. These steps are outlined and clarified as follows: I. Initial Determination. The Authorized Agency must conduct research and make a Determination (above). See OAR 125-246-0170 for who is authorized to do this. If the State Procurement Office (SPO) has the authority, it is the “Authorized Agency.” II. Approval of the Determination. For sole-source procurements of Public Contracts exceeding $75,000, the Authorized Agency must obtain the prior written approval of its SoleSource Determination from the Chief Procurement Officer or delegatee. To make this request, submit on ORPIN a Purchase Request and attach the above Determination. Approvals may be conditioned upon: proper Notice, confirmation that no protests were received, or confirmation that any protests received were resolved. If a protest is not resolved, the Authorized Agency must deliver that protest to the SPO delegatee. III. Notice. The Authorized Agency must place a Notice on ORPIN for a continuous period of at least seven (7) calendar days. SPO is available for consultation prior to this posting. The Notice must include the minimum information listed in OAR 125-247-0275(2)(b)(B) and should also be understandable to the public. Here is a list of information that should be included in the Notice: (A) The Supplies and Services to be acquired; (B) The prospective Contractor; (C) The Authorized Agency’s determination, either by:

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(1) A summary and referral to a contact person for copies of this determination; or (2) Attachment of the Determination to the Notice; (D) A request that the public inform the Authorized Agency of any information contrary to that Agency’s Determination; (E) Identification of a contact person at the Authorized Agency who is available to provide copies of the Determination (if not attaché), answer questions, receive requested information, and receive any protests. (F) The date, time, and place that protests are due. IV. Contracts over $150,000. The SPO is the Authorized Agency for Contracts exceeding $150,000, unless SPO has delegated that authority in writing to an Agency. The Agency must submit a Purchase Request through ORPIN and also attach to the Purchase Request its proposed Determination (above) and a draft Statement of Work ]

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