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Agenda Item
ASR
Control 22-001252 |
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MEETING
DATE: |
03/14/23 |
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legal entity taking action: |
Board
of Supervisors |
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board of supervisors district(s): |
All
Districts |
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SUBMITTING Agency/Department: |
Treasurer-Tax
Collector (Approved) |
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Department contact person(s): |
Shari
L. Freidenrich (714) 834-7625 |
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Jason
Prole (714) 834-4774 |
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Subject: Amend and
Extend Contracts with Bloomberg Finance, L.P. for Investment Services
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ceo CONCUR |
County Counsel Review |
Clerk of the
Board |
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Concur |
Approved Agreement to Form |
Discussion |
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3 Votes Board Majority |
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Budgeted: Yes |
Current
Year Cost: $122,474 |
Annual
Cost: FY 2023-24 $423,340 |
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Staffing
Impact:
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No |
#
of Positions: |
Sole
Source: Yes |
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Current Fiscal Year Revenue: N/A
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Prior Board Action: 3/9/2021 #12, 4/23/2019 #17, 3/12/2019
#17, 12/5/2017 #11 |
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RECOMMENDED
ACTION(S):
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1. |
Authorize the County Procurement Officer
or Deputized designee to execute Amendment No. 6 to amend and extend Contract
MA-074-15011660 with Bloomberg Finance, L.P. to provide access to real time
electronic investment and financial market information, an investment trade
order management system and add new security protocols for transmission of
trade data to the custodial bank for an amount not-to-exceed $798,680,
commencing March 15, 2023, through March 14, 2025, for a revised cumulative
contract amount not to exceed $3,540,280. |
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2. |
Authorize the County Procurement Officer
or Deputized designee to execute Amendment No. 4 to amend and extend
Agreement MA-074-16011321 with Bloomberg Finance, L.P. to provide daily
security market pricing for a not-to-exceed amount of $48,000 commencing April
1, 2023, through March 31, 2025, for a revised cumulative agreement amount
not-to-exceed $134,000. |
SUMMARY:
Amending the
Agreements with Bloomberg Finance, L.P. will allow the Treasurer-Tax Collector
to efficiently research, purchase and record investments and securely transmit
trade information for the $14 billion in public funds and will assist the
Treasurer-Tax Collector in meeting the public fund’s investment objectives of
safety, liquidity and yield.
BACKGROUND
INFORMATION:
There are two
contracts before the Board of Supervisors (Board) that the Treasurer-Tax
Collector (Treasurer) seeks to amend and extend. Both Contracts are for
investment services with Bloomberg Finance, L.P. (Bloomberg). These contracts
are before the Board pursuant to County Contract Policy Manual Section
3.3-105(3), which states, "In no case shall a service contract exceed five
(5) years in duration unless the contract is specifically approved by the Board
of Supervisors, or is extended from the original contract term by twelve (12)
months in accordance with Section 3.3-106 in this manual."
First, the
Bloomberg Professional Contract MA-074-15011660 is for real-time electronic
investment and financial market information and an investment trade order
management system with new security protocols to transmit trade date to the
custodial bank. The original Contract was for a two-year term commencing on
March 15, 2015, with the option to renew for an additional two-year term. After
exercising the first renewal term for years three and four, the fourth
Amendment extended the original Contract to years five and six, while the fifth
Amendment extended the original contract to years seven and eight. This
Amendment No. Six before the Board extends the original contract to years nine
and ten.
Secondly, the
Bloomberg Per Security Datalicense Pricing Contract MA-074-16011321 is for
daily security market pricing required by the County’s Investment Policy
Statement (IPS) to compute a daily market value of all securities in the County
Treasury. The original Contract commenced on February 1, 2016, and following
one renewal term, expired on March 31, 2019. The second Amendment extended the
original Contract past five years, while the third Amendment extended the
contract an additional two years for a total of seven years. The fourth
Amendment before the board extends the original contract for a two-year term as
the Treasurer expects to add daily pricing to its custodial bank contract in
2023 at no cost and allow this contract to lapse if this service is no longer
needed.
The Treasurer
receives or coordinates receipt of all public funds into the County’s
depository bank. Once deposited, the Treasurer is responsible for investing
these funds based on the annual delegation of investment authority from the
Board. In addition, the Board approves annually the IPS that governs the
investment of these public funds. The Treasurer currently invests and ensures
compliance with the IPS on $14 billion of public funds for the County, various
county agencies, school districts, community college districts and various
voluntary pool participants.
The IPS Section
XII. Performance Evaluation requires the Treasurer to submit a monthly
investment report, and California Government Code (CGC) Section 53646 requires
that the report shall include a current market value as of the date of the
report. The IPS Section V.4. Mark-To-Market also establishes that The Treasurer
currently calculates the market value of the Orange County Treasurer’s Pool’
securities on a daily basis as required by the IPS. This data file is configured to automatically
import nightly into the County’s investment accounting software and update
market values of all portfolio securities.
Bloomberg Professional:
The Treasurer
contracts with Bloomberg for four separate services that they call Bloomberg
Professional. The first service, Bloomberg Anywhere, is a real-time market
information system for global financial markets, economic news and current
events, which is widely used by the investment industry, and allows authorized
users both onsite and remote access. Bloomberg Anywhere also provides
analytical tools for valuing investment opportunities and modeling portfolio
performance. Additionally, Bloomberg Anywhere is a source of financial and
other governance information used in due diligence of debt issuers on the
approved issuer list including researching credit ratings, news releases and
other information. The Bloomberg Anywhere system is accessible remotely and is
an important part the County's disaster planning.
Secondly,
Bloomberg provides an online investment trading order management system that
includes both onsite and remote trade purchase and approval, which is part of
the County's disaster planning services. This system enables the Investment
Division to access current inventories of investment securities, execute trades
with appropriate management approvals, and send trade information
electronically to the back-office investment accounting and to the County’s
custody bank for settlement on a "straight-through processing" basis,
thereby streamlining input, reducing data entry and input errors. This system
also includes a pre-trade portfolio compliance module that enables controls to
implement the IPS investment constraints and prevents the Investment Division from
buying investments that would be non-compliant with the IPS and internal
trading policies. Without
straight-through processing trades would be manually inputted into the
investment accounting system and manual compliance would occur that would
increase operational risk and costs. Use of this online automated trading order
management system enables the Treasurer, Treasury and Investment staff to
efficiently execute trades and eliminate any pre-trade non-compliance controls
established within the system and securely send information to the custodial
bank.
Thirdly, the
Treasurer is upgrading the security protocols used to transmit securities trade
data from the County system to the custodial bank. Bloomberg is eliminating this service that
previously was provided by them, and now provides a third-party software that
can be included in the contract to transmit this data using the Society for
Worldwide Interbank Financial Telecommunications Straight Through Processing
(SWIFT STP) protocols. This service reflects industry standard security
protocols and transmission integrity that materially reduces operational risk
between all of the parties.
Lastly, Bloomberg
provides a dedicated network to the Treasurer and staff to access the products
above that aids in disaster recovery.
Contract
Extension:
The proposed
extension for the two-year term includes an increase in costs to the Bloomberg
Anywhere, Terminals of 9.65 percent and Bloomberg Order Management of 9.9
percent. In addition, this contract adds the new SWIFT STP transmission service
at a 100% increase, as this service previously was included at no cost.
Bloomberg Per Security Datalicense
Pricing:
The Amendment
provides for an average cost of 76 cents per unique security priced per month
with a maximum charge of $2,000 per month or up to a not to exceed amount of
$48,000 annually as additional data may be transmitted, and the County would
incur charges above the minimum level.
Contract
Extension:
The proposed
extension is for a two-year term that includes an 11 percent change in the Per
Security Datalicense Pricing, and there is no increase in the monthly minimum
charge.
Performance Measures:
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Fiscal
Year Ending |
2018 |
2019 |
2020 |
2021 |
2022 |
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Total Quantity
of Trades |
1,391 |
1,603 |
1,173 |
927 |
461 |
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Total Direct
Costs ($) |
357,840 |
360,168 |
365,820 |
359,697 |
346,540 |
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Cost per trade
($) |
257 |
225 |
312 |
388 |
752 |
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Average trade
size in millions ($) |
17,125,499 |
16,825,006 |
21,665,525 |
32,018,821 |
42,758,963 |
Risk Management:
The terms and
conditions of the original Contracts and Amendments deviate from the County’s
standard terms and conditions including, but not limited to, warranty,
limitation of liability and insurance provisions. County Executive Office Risk
Management has reviewed the original Contracts and has determined that the
risks of the Contracts are minimal. The Treasurer believes that it is in the
County’s best interest to approve the Amendments to the Contracts and to extend
these two Contracts.
Sole Source Contract:
The proposed
Contracts are sole source Contracts and completed Sole Source Request Forms are
attached to this Agenda Staff Report. For the first contract, the Treasurer has
identified that only one source exists that meets the County’s requirements
based on the following evidence related to technological and programmatic
justifications. The County requires a system that has online trading
capability, integrated compliance features including customizable pre-trade
compliance, strong security with dual authentication, remote access for
disaster planning purposes, access to approved broker/dealer inventory and only
authorized investment securities, ability to request competitive bids/offers
online, electronic trading and real-time economic/market news and other fixed
income security data. For the second contract, in order to have
"straight-through processing" connecting trading by secure
transmission to custody banking services and investment accounting/compliance
software, this datalicense is required and
can only be provided by Bloomberg as it resides in the system. These Contracts
are essential and necessary to ensure that the Treasurer continues to
efficiently manage public fund investments, research and purchase securities,
and price securities daily to manage risk.
Renewal Submitted
within 30 Days:
The
Treasurer did not meet the 30-day requirement for the item to be timely
agendized for Board approval due to continued negotiations with the vendor to
finalize terms and pricing.
Prior Board Actions:
|
03/09/2021 #12 |
Approved a
two-year extension for Contract MA-074-15011660 and MA-074-16011321. |
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04/23/2019 #17 |
Approved the
two-year extension under Contract MA-074-16011321. |
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03/12/2019 #17 |
Approved the
two-year extension under Contract MA-074-15011660. |
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12/05/2017 #11 |
Approved the
14-month renewal as permitted under the January 26, 2016, Agreement
MA-074-16011321 allowing for up to an additional successive two-year term. |
The Contractor’s
performance under the previous contract has been confirmed as at least
satisfactory. The Treasurer has verified there are no concerns that must be
addressed with respect to the Contractor’s ownership/name, litigation status or
conflicts with County interests. This Contract does include subcontractors or
pass through to other providers for the SWIFT STP service. See Attachment G for
Contract Summary Form. The Orange County Preference Policy is not applicable to
the contract award.
FINANCIAL IMPACT:
Appropriations for
these Contracts are included in the Treasurer’s Budget Control 074 FY 2022-23
Adopted Budget and will be included in the budgeting process for future fiscal
years. The cost of the Bloomberg services is charged to all public funds invested
by the Treasurer as part of the Investment Administrative Fee as allowed by
California Government Code Section 27013, and the Code requires it to be netted
against interest income. The mix of the Pools currently by funding source is
General Fund 9 percent, state (Education Pool) 52 percent and County
Non-General Fund and Other Agencies 39 percent as of November 30, 2022. County
and other Agencies include their share of these costs in their budgeted
appropriations, offset by interest income earnings.
STAFFING IMPACT:
N/A
ATTACHMENT(S):
Attachment A - Amendment No. 6 to
Bloomberg Schedule of Services to No. MA-074-15011660 Terminals and Network
Attachment B - Amendment No. 4 to Bloomberg Datalicense (Per Security) Pricing
Schedule of Services Contract No. MA-074-16011321-Datalicense
Attachment C - Sole Source Request Form and BidSync Approval – Terminals, OMS,
server, STP
Attachment D - Sole Source Request Form and BidSync Approval – datalicense
Attachment E - Contract Summary Form
Attachment F - Risk Assessment or Modification of Insurance Terms Form
Attachment G - California Government Code Section 27013
Attachment H - California Government Code Sections 27130-27137
Attachment I - California Government Code 53646
Attachment J - California Government Code 26920(a)(b)