ITB 071I7000400



M E M O R A N D U M

TO: Kevin Dunn, Director

DTMB - Procurement

FROM: Mary Ostrowski, Buyer

DTMB - Procurement

DATE: July 18, 2012

SUBJECT: Award Summary for RFP 071I2200076 – Proxy Voting/Corporate Governance and/or Divestment Services

General:

This request is for a three year and three month contract with two-year options to provide the following services for Michigan Department of Treasury, Bureau of Investments (BOI):

1. Proxy Voting/Corporate Governance support, related consulting and reporting services; and

2. Divestment screening, related consulting, and reporting services.

The Contract will be effective September 1, 2012 through November 30, 2015. The period of September 1, 2012 through November 30, 2012 will be for implementation and transition. The Contractor must begin providing all services, without interruption, on December 1, 2012.

Bidders may choose to provide a proposal for Proxy Voting/Corporate Governance Services and/or Divestment Services. This Request For Proposal (RFP) may result in issuance of one or more Contracts as follows:

• Proxy Voting/Corporate Governance Services (see Section 1.022.A)

• Divestment Screening Services (see Section 1.022.B)

• Both Proxy Voting/Corporate Governance and Divestment Screening Services

Joint Evaluation Committee (JEC):

The JEC for this RFP consisted of the following individuals:

|Mary Ostrowski, Buyer (Voting) |

|Department of Technology, Management and Budget (DTMB) |

|Procurement |

| |

|Amanda York Ellis, Administrative Law Specialist (Voting) |

|Michigan Department of Treasury |

|BOI, Administration |

| |

|David Conarton, Information Technology Specialist (Voting) |

|DTMB |

|Technical Services, Server Services, Server Team 4 |

|Technical Services, Server Services, Server Team 4 |

|Cathy Murray, Paralegal (Voting) |

|Michigan Department of Treasury |

|BOI, Administration |

| |

|Semone James, Investment Specialist (Non-Voting) |

|Michigan Department of Treasury |

|BOI, Administration |

|Bureau of Investments, Administration |

|Lisa Winans, Departmental Analyst (Non-Voting) |

|Michigan Department of Treasury |

|BOI, Administration |

| |

|Gregory Pawlak, Purchasing Analyst (Non-Voting) |

|Michigan Department of Treasury |

|Purchasing |

Bidders:

The RFP was posted on on February 7, 2012, for four weeks and five days. The following Bidders submitted proposals by the published due date of March 12, 2012:

|Bidder |Address |City, State |Zip |SDV |Bid |

|Glass, Lewis & Co., LLC |1 Sansome Street, 33rd Floor |San Francisco, CA |94104 |No |Proxy Voting/Corporate |

| | | | | |Governance Services |

|Institutional Shareholder Services, |2099 Gaither Road |Rockville, MD |20850 |No |Proxy Voting/Corporate |

|Inc. | | | | |Governance Services and |

| | | | | |Divestment Services |

|IW Financial |80 Exchange Street, PO Box |Portland, ME |04112 |No |Divestment Services |

| |15059 | | | | |

Selection Criteria and Evaluation:

3.022 Technical Proposal Evaluation Criteria

The following chart represents the scoring of the particular factors:

| | |Weight |

|1. |Statement of Work (Article 1, excluding 1.031) |50 |

|2. |Bidder Information (4.011) |5 |

|3. |Prior Experience (4.012) |25 |

|4. |Staffing (1.031 & 4.013) |20 |

| |TOTAL: |100 |

Oral Presentation

Bidders who submit proposals may be required to make oral presentations of their proposals to the State. These presentations provide an opportunity for the Bidders to clarify the proposals through mutual understanding. DTMB-Procurement will schedule these presentations, if required.

Site Visit

The State may conduct a site visit to tour and inspect the Bidder’s facilities. DTMB-Procurement will schedule these visits if required.

3.023 Price Evaluation

(a) Only those proposals receiving a score of 80 points or more in the technical proposal evaluation will have their pricing evaluated to be considered for award.

(b) Evaluation of price proposals includes consideration for a Qualified Disabled Veteran Preference. 1984 PA 431, as amended, establishes a preference of up to 10% for businesses owned by qualified disabled veterans meeting the minimum point threshold for passing.

(c) The State reserves the right to consider economic impact on the State when evaluating proposal pricing. This includes, but is not limited to: job creation, job retention, tax revenue implications, and other economic considerations.

3.024 Award Recommendation

The award recommendation will be made to the responsive and responsible Bidder who offers the best value to the State of Michigan. Best value will be determined by the Bidder meeting the minimum point threshold and offering the best combination of the factors stated in Section 3.022, and price, as demonstrated by its proposal.

Evaluation Results:

Glass, Lewis & Co., LLC (Proxy portion)

The JEC determined that Glass, Lewis & Co, LLC, based on a score of 81, could meet the requirements of the RFP. This determination was accomplished by evaluating their responses to the selection criteria noted above.

1. Statement of Work (Article 1 - excluding 1.031 which was evaluated under Staffing)

Score: 44 / 50

- 1.022.A.2.o Work and Deliverable Section, page 20: Bidder does not have a formal service for monitoring the proxy voting of a client by external managers, and they would need to learn more about the scope and requirements of this service.

- 1.022.A.3.a Work and Deliverable Section, page 21: Bidder did not indicate their compliance to the requirement. Bidder stated they have the experience and capability to support public inquiries. Bidder stated they would need to learn more about the State’s requirements and expectations associated with this service before committing to it.

- 1.022.A.5.d Work and Deliverable Section, page 24: Bidder did not indicate full compliance to the requirement; instead, Bidder stated that report requests for very large data set will be run offline and users will be provided their reports via email within five minutes.

- 1.041.1,2,3 Project Plan Management Section, page 30: Bidder did not address nor indicate their compliance to one and two of this section. Bidder did not include all details noted in Section 1.041.4 in their Project Plan. Bidder provided minimal detail in their draft project plan.

- 1.041.6 Project Plan Management Section, page 32: Bidder did not indicate full compliance to the requirement; instead, Bidder stated they will discuss the scope of these requirements with the State to ensure the 60 day requirement can be met as described above.

- 1.042.2 Reports Section, page 32: Bidder did not indicate full compliance to this requirement; instead, Bidder stated they will discuss the scope of these requirements with the State to ensure the 60 (15) day requirement can be met as described above.

2. Bidder Information (4.011)

Score: 4 / 5

- Bidder did not provide sales volumes for the last five years.

3. Prior Experience (4.012)

Score: 20 /25

- Bidder provided minimal detail of the three specific experiences provided.

- Bidder did not provide the costs of the three projects provided as prior experiences.

- Bidder did not provide the dates Bidder has been a proxy voting client for their Ohio reference.

4. Staffing (1.031 & 4.013)

Score: 13 / 20

- 1.031 Contractor Staff, Roles, and Responsibilities: Bidder did not identify all staff who will be involved in the project, including the name of each individual, work locations, and detailed descriptions of their roles and responsibilities; specifically the CSA role.

- 1.031.4 Contractor Staff, Roles, and Responsibilities: Bidders response did not provide a Corporate Governance Analyst.

- 4.013 Staffing: Bidder did not provide resumes, instead Bidder provided Staff biographies. Bidder did not provide a resume for the CSA role. Bidder did not provide a resume for Alec Castellanos.

Total Score: 81 / 100

Institutional Shareholder Services, Inc. (Proxy portion)

The JEC determined that Institutional Shareholder Services, Inc., based on a score of 73, could not meet the requirements of the RFP. This determination was accomplished by evaluating their responses to the selection criteria noted above.

1. Statement of Work (Article 1 - excluding 1.031 which was evaluated under Staffing)

Score: 35 / 50

- 1.022 In Scope Section, page 11: Bidder did not address 1.021A Proxy Voting/Corporate Governance; instead Bidder only addressed 1.021B Divestment Screening Services.

- 1.022.A.2 Work and Deliverable Section, page 12: Bidder did not indicate that their platform is web-based; instead Bidder stated “state of the art rules engine.”

- 1.022.A.2.a. Work and Deliverable Section, page 12: Bidder did not indicate they would provide the company’s current proxy statements and subsequent amendments or contests and Annual Report in the web-based proxy voting recommendation platform; instead Bidder misunderstood requirement by responding of their own proxy statements, annual report, SEC filings, and corporate governance.

- 1.022.A.2.b. Work and Deliverable Section, page 12: Bidder did not indicate they would provide a current copy of the State’s corporate Governance Core Principles and Guidelines and Proxy Voting Policy, as amended in the current year, in the web-based proxy voting recommendation platform; instead Bidder stated that a current copy will be available and easily accessible upon request from the account manager.

- 1.022 A.2.h Work and Deliverable Section, page 15: Bidder did not address proxy statements, recapitalizations, and charter and by-law amendments.

- 1.022.A.2.l Work and Deliverable Section, page 22: Bidder stated they have a five-year limitation on the record retention.

- 1.022.A.2.o Work and Deliverable Section, page 24: Bidder did not indicate full compliance to this requirement; instead Bidder proposes an alternative solution using an audit process.

- 1.022.A.3 Work and Deliverable Section, page 25: Bidder did not indicate they will display the proxy voting history on BOI’s website.

- 1.022.A.5.a Work and Deliverable Section page 28: Bidder did not indicate that their software would be compatible with Microsoft Internet Explorer version 6.0 or later.

- 1.022.A.5.c Work and Deliverable Section, page 29: Bidder did not indicate that the three bullet points (length of interruption, reason for interruption, and resolution and estimated time to resolve) would be provided in their notification.

- 1.022.A.5.d Work and Deliverable Section, page 29: Bidder did not indicate full compliance of data populating within 10 seconds and reports within one minute.

- 1.022.A.5.e Work and Deliverable Section, page 29: Bidder did not agree to provide telephone support from 8 a.m. to 6 p.m. EST, or provide compliance to the two business day requirement.

- 1.022.A.5.i Work and Deliverable Section, page 29: Bidder did not indicate that any modifications will be transparent to BOI.

- 1.022.A.5.l Work and Deliverable Section, page 30: Bidder did not indicate full compliance of backing up data daily; instead Bidder stated “daily differential backups of production data and vendor database files”.

- 1.022.A.5.n.1 Work and Deliverable Section, page 31: Bidder provided minimal detail on the frequency of system upgrades in stating “periodic system upgrades on an as-needed basis”.

- 1.022.A.5.q Work and Deliverable Section, page 32: Bidder did not indicate full compliance to the requirement of notifying the Contract Compliance Inspector (CCI) seven days in advance; instead Bidder states they will give the State of Michigan advance notice.

- 1.022.A.5.q.1 Work and Deliverable Section, page 32: Bidder did not indicate full compliance of reporting outages/shutdowns immediately to the CCI or designee; instead Bidder stated they will give the State of Michigan advance notice.

- 1.022.A.5.q.2 Work and Deliverable Section, page 32: Bidder did not indicate full compliance of the specific requirements in this section.

- 1.041.1,2,3 Project Plan Management Section, page 39: Bidder did not address or indicate their compliance to one and two or provide a Project Plan; instead Bidder stated that this section is N/A, and there would be a continuation of services.

- 1.041.4,5,6 Project Plan Management Section, page 39: Bidder did not indicate compliance to these sections; instead, Bidder stated N/A for all three sections.

- 1.042.1 Reports Section, page 40: Bidder did not indicate compliance to the requirement; instead Bidder stated N/A.

- 1.042.2 Reports Section, page 40: Bidder did not address c and d. Bidder did not indicate compliance of the 15 day requirement for the External Managers Report; instead Bidder states it is dependent on timely delivery of the record by External Managers.

2. Bidder Information (4.011)

Score: 4 / 5

- Bidder did not provide sales volumes for the last five years.

3. Prior Experience (4.012)

Score: 17 / 25

- Bidder did not provide costs, starting and completion dates, or detail of the three prior experiences; instead Bidder states that all information related to contracts is strictly confidential and not available for inclusion in submission.

4. Staffing (1.031 & 4.013)

Score: 17 / 20

- 1.031.1 Contractor Staff, Roles, and Responsibilities page 36: Bidder did not state their staffs work locations in their response for this section. Bidder did not identify all staff who will be involved in the project, including the name of each individual, work locations, and detailed descriptions of their roles and responsibilities: specifically the Information Technology Manager role. Bidder did not provide resume for Information Technology Manager.

Total Score: 73 / 100

Institutional Shareholder Services, Inc. (Divestment portion)

The JEC determined that Institutional Shareholder Services, Inc., based on a score of 77, could not meet the requirements of the RFP. This determination was accomplished by evaluating their responses to the selection criteria noted above.

1. Statement of Work (Article 1 - excluding 1.031 which was evaluated under Staffing)

Score: 42 / 50

- 1.041.1,2,3 Project Plan Management Section, page 39: Bidder did not address nor indicate their compliance to number one and two or provide a Project Plan; instead Bidder stated that this section is N/A, and there would be a continuation of services.

- 1.041.4 Project Plan Management Section, page 39: Bidder did not indicate compliance to this section; instead, Bidder stated N/A.

- 1.042.1 Reports Section, page 40: Bidder did not indicate compliance to the requirement; instead Bidder stated N/A.

2. Bidder Information (4.011)

Score: 4 / 5

- Bidder did not provide sales volumes for the last five years.

3. Prior Experience (4.012)

Score: 14 / 25

- Bidder did not address their divestment service experience in their response for this section.

- Bidder did not provide costs, starting and completion dates, or detail of the three prior experiences; instead Bidder states that all information related to contracts is strictly confidential and not available for inclusion in submission.

4. Staffing (1.031 & 4.013)

Score: 17 / 20

- 1.031.1 Contractor Staff, Roles, and Responsibilities: Bidder did not state their staffs work locations in their response for this section. Bidder did not identify all staff who will be involved in the project, including the name of each individual, work locations, and detailed descriptions of their roles and responsibilities; specifically the Information Technology Manager role. Bidder did not provide resume for Information Technology Manager.

Total Score: 77/ 100

IW Financial, LLC (Divestment portion)

The JEC determined that IW Financial, LLC, based on a score of 90, could meet the requirements of the RFP. This determination was accomplished by evaluating their responses to the selection criteria noted above.

1. Statement of Work (Article 1 - excluding 1.031 which was evaluated under Staffing)

Score: 47 / 50

- 1.022.B.1,2 Work and Deliverable Section, page 18: Bidder did not indicate full compliance in regard to “active business operations in state sponsors of terror”, instead Bidder states “Iran, Sudan, Syria, and Cuba”.

- 1.041.1,2,3 Project Plan Management Section, page 23: Bidder did not include 1.041.4 a and b as part of their project plan. Bidder’s project plan did not reference state sponsors of terror. Bidder’s project plan did not include a column for identifying the parent companies and subsidiaries on the scrutinized company lists.

2. Bidder Information (4.011)

Score: 4 / 5

- Bidder did not provide sales volumes for the last five years.

3. Prior Experience (4.012)

Score: 23 /25

- Page 61: Bidder did not provide costs of the three prior experiences.

4. Staffing (1.031 & 4.013)

Score: 16 / 20

- 4.013 Staffing Section, page 61: Bidder did not provide resumes including detailed chronological work experience; instead bidder provided staff biographies.

Total Score: 90 / 100

Evaluation Summary:

| |Glass, Lewis & Co. |Institutional |Institutional |IW Financial |

| |(Proxy bid) |Shareholder Services, |Shareholder Services, |(Divestment Bid) |

| | |Inc. (Proxy bid) |Inc. (Divestment Bid) | |

|SOW (50) |44 |35  | 42 | 47 |

|Bidder Info |4  | 4 | 4 | 4 |

|(5) | | | | |

|Prior Exp. |20 |17  | 14 | 23 |

|(25) | | | | |

|Staffing | 13 | 17 | 17 | 16 |

|(20) | | | | |

|Total (100) |81  | 73 | 77 | 90 |

Pricing Summary

|Proxy/Corporate Governance Services|Initial Bid Total |Revised Bid Total** |

|Glass, Lewis & Co., LLC |$207,000+* |$193,500 |

*Bidder submitted undetermined pricing.

** Price structure was modified to more accurately reflect the services to be utilized under the scope of the RFP resulting in firm pricing and/or price caps.

|Divestment Services |Initial Bid Total |Revised Bid Total |

|IW Financial |$208,800 |$150,000* |

*Bid total includes noted optional service.

Award Recommendation:

Award recommendation is made to the responsive and responsible Bidders who passed the Technical Evaluation and offered the Best Value to the State of Michigan.

Based on all of the information discussed above, award is recommended to the following Bidders:

| |Bidder |Contract Value |

|Proxy/Corporate Governance Services|Glass, Lewis & Co., LLC |$193,500 |

|Divestment Services |IW Financial |$150,000 |

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