EXHIBIT 99.514
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A PROPOSAL TO
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CALIFORNIA POWER
EXCHANGE (CalPX)
August 31, 1999
[PEROT SYSTEMS LOGO]
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DISCLOSURE PROTECTION NOTICE
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This proposal to the California Power Exchange (CalPX) is the property of
Perot Systems and contains confidential and/or proprietary information of
Perot Systems. It shall not be disclosed outside of CalPX and shall not be
duplicated, used, or disclosed--in whole or in part--for any purpose other
than to evaluate this proposal. CalPX's review of this material is
considered acceptance of this Disclosure Protection Notice. Should this be
unsatisfactory, please return this material to Perot Systems. This
response and any contract subsequently awarded to Perot Systems as a
result of--or in connection with--this submission shall be subject to the
agreed confidentiality, proprietary rights, and nondisclosure provisions
of the resulting contract.
Perot Systems and the perotsystems logo are trademarks of Perot Systems.
All other brands, product names, and trademarks are the property of their
respective owners.
Copyright (C)1999 Perot Systems Corporation. All rights reserved.
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Perot Systems Confidential August 31, 1999 Page ii
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TABLE OF CONTENTS
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<Table>
EXECUTIVE SUMMARY ............................................. 1
Implementation Timeline .................................. 1
Pricing .................................................. 3
Benefits ................................................. 4
Perot Systems' Major Achievements at CalPX ............... 5
Our Approach ............................................. 9
INTRODUCTION .................................................. 11
Our Company ................................................. 14
THE CURRENT ENVIRONMENT AT CalPX .............................. 16
OUR SOLUTION .................................................. 23
Overview of Solution ..................................... 23
Employee Transition ...................................... 24
Program Management Approach .............................. 30
Organization ............................................. 36
Applications Management .................................. 38
Computer Operations ...................................... 43
Plan and Schedule ........................................ 51
FINANCIAL SUMMARY ............................................. 54
Pricing ..................................................... 54
APPENDIX A: Perot Systems' Qualifications ..................... 57
North American Independent System Operator (ISO) ............ 57
North American Reliability Coordinator ...................... 57
</Table>
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Perot Systems Confidential August 31, 1999 Page iii
California Power Exchange Executive Summary
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<Table>
International Car Rental Company ............................ 58
APPENDIX B: ADDITIONAL PROJECTS ............................... 62
APPENDIX C: SAMPLE SERVICE LEVEL AGREEMENT .................... 66
</Table>
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Perot Systems Confidential August 31, 1999 Page iv
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EXECUTIVE SUMMARY
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CalPX is seeking an IT service solution that would enable it to have:
o A predictable performance with agreed upon service levels for
its information systems;
o A predictable expenditure for its information systems;
o The ability to quickly respond to the changing business
requirements of the California energy marketplace; and
o The ability to rapidly introduce new products and services
both for the California energy market and other energy markets
worldwide.
We hereby propose an IT service solution that not only would meet all the
above desired outcomes but also is expected to provide CalPX with
significant cost savings.
Our solution calls for Perot Systems to provide IT program management,
applications development and computer operations services to CalPX
initially for a 36 month time period. We would phase in these services
over a six month time period beginning around October 18, 1999 -- see
below for our proposed implementation timeline. Our approach is described
in the body of this proposal.
Perot Systems' customer first service philosophy and proven track record
at CalPX, our credibility and smooth working relationship with business
organizations at CalPX, our worldwide experience with providing IT
services and our established IT processes and methodologies will
underwrite the success of our proposed solution.
Finally, we look at this proposal in terms of a long-term partnership with
CalPX, not only in providing IT services but also a potential business
partner in ventures that are highly beneficial to both companies.
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IMPLEMENTATION TIMELINE
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We propose to provide IT program management, applications development and
computer operations services to CalPX for a period of 36 months beginning
with the execution of the "Services Contract", which is expected to be
around October
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Perot Systems Confidential August 31, 1999 Page 1
California Power Exchange Executive Summary
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18, 1999. Our proposal calls for a phased transfer of CalPX IT services to
Perot Systems according to the following timetable.
[] CalPX IT SERVICE PROVISION IMPLEMENTATION TIMELINE
MONTH 1 2 3 4 5 6 7 8 9 TO 36
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o CalPX ACCEPTS THE PROPOSAL
CONTRACT NEGOTIATION AND DUE DILIGENCE REVIEW
o CONTRACT IS SIGNED
TRANSITION PERIOD FOR PROGRAM MANAGEMENT AND APPLICATIONS
DEVELOPMENT
PROGRAM MANAGEMENT AND APPLICATIONS DEVELOPMENT BY PSC
STUDY COMPUTER OPERATIONS TRANSFER
TRANSITION PERIOD FOR COMPUTER OPS
COMPUTER OPERATIONS BY PSC
According to our proposal:
1. CalPX and Perot Systems will start the Services Contract
negotiations immediately after the acceptance of this proposal
by CalPX -- expected to be around September 17, 1999.
2. We foresee contract negotiations to last for about one month
during which time Perot Systems will conduct a due diligence
study under the existing Task Order 5 between CalPX and Perot
Systems. All funds collected for the due diligence study will
be credited to CalPX should CalPX agree with the Services
Contract with Perot Systems. Once signed, the Services
Contract will supercede Task Order 5.
3. We would start the transition of all program management and
applications development services to Perot Systems immediately
after the Services Contract is signed. This transition,
described later in this proposal, is expected to last one
month.
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California Power Exchange Executive Summary
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4. At the end of the transition time period IT program management
and IT applications development services for CalPX will be
provided by Perot Systems.
5. We will conduct a careful study of the computer operations
starting with month three and completing by month six. At the
same time period we will conduct a series of studies as
indicated in Appendix B ("Additional Projects") of this
proposal. At the end of this time period, either party may
decide not to agree with the transfer of computer operations
to Perot Systems. Failure to reach an agreement by both
parties to transfer computer operations, should it occur, will
have no bearing on the transfer of program management and
applications development services to Perot Systems.
6. Should both parties agree to transfer computer operations
services to Perot Systems, we would transition computer
operations to Perot Systems over a one month time period
during month six.
The details of our proposed IT solution described in the body of this
proposal.
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PRICING
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Our pricing is meant to help CalPX with predictability of its IT
expenditure while greatly improving business systems' reliability and
enhanced service. In short, our pricing is as follows:
1. Starting with the transition period for transfer of program
management and applications development services to Perot
Systems, CalPX will pay Perot Systems one million dollars
($1M) per month for the services of up to 50 Perot Systems'
associates and contractors. This payment will also cover all
travel costs to the Los Angeles area for these 50 associates
and contractors -- but will not cover travel costs outside the
Los Angeles area on CalPX business. Services of additional
Perot Systems associates will be charged on time and material
basis using Perot System's published rates for such resources
at a 25% discount. This will include additional services
rendered for studies enumerated in Appendix B.
2. Starting with the transition period for transfer of computer
operations to Perot Systems, CalPX will pay Perot Systems one
million three hundred and fifty thousand dollars ($1.35M) per
month adjusted annually based on IT Salary Index for the
services of up to 70 Perot Systems associates and
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Perot Systems Confidential August 31, 1999 Page 3
California Power Exchange Executive Summary
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contractors. This payment will cover all travel costs to the
Los Angeles area for these 70 associates and contractors --
but will not cover travel costs outside the Los Angeles area
on CalPX business. Services of additional Perot Systems
associates and contractors will be charged on time and
material basis using Perot System's published rates for such
resources less a 25% discount.
3. If computer operations services are not transferred to Perot
Systems, CalPX will continue to pay Perot Systems one million
dollars ($1M) per month adjusted annually based on IT Salary
Index for the services of up to 50 Perot Systems associates
and contractors. The remaining pricing features will remain
the same as clause 1 above.
We will develop specific baseline staffing numbers for each area of
program management, applications development and maintenance and computer
operations as a part of our contract negotiation
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BENEFITS
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Our proposed solution will enable CalPX to have predictable IT performance
and costs and to have the flexibility to address CalPX business
requirements in California and beyond. In addition, we believe that our
solution will bring substantial savings to CalPX compared to its current
IT expenditure.
The following table compares the cost of our solution with what we have
estimated to be the baseline CalPX IT expenditure under status quo -- we
have conservatively assumed that CalPX baseline IT expenditure will remain
constant over the next three years. The table illustrates a savings of
more than six million dollars ($6M) over the next 3 years for CalPX.
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Perot Systems Confidential August 31, 1999 Page 4
California Power Exchange Executive Summary
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<Table>
<Caption>
YEAR 1 YEAR 2 YEAR 3 TOTAL
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CalPX Current Baseline
IT Expenditure $ 18,742,000 $ 18,742,100 $ 18,742,100 $ 56,226,200
Payments to Perot System $ 14,530,000 $ 16,200,000 $ 16,200,000 $ 46,930,000
CalPX Retained costs $ 2,986,000 $ 117,400 $ 117,400 $ 3,220,800
Total Perot Solution Cost $ 17,516,000 $ 16,317,400 $ 16,317,400 $ 50,150,800
SAVINGS FOR CalPX $ 1,226,000 $ 2,424,700 $ 2,424,700 $ 6,075,400
</Table>
We believe that there are other substantial savings that can be realized
through our solution. These are:
o Saving in the cost of major financial liability for CalPX due to
what we believe to be an inevitable major system crash at CalPX in
the foreseeable future;
o Savings due to potential restructuring of MCI and IBM contracts;
o Saving due to the potential for housing the entire CalPX staff in
Pasadena that could result from streamlining of IT personnel and
equipment; and
o Saving due to potential elimination of backup disaster recovery site
at Folsom; and
o Savings due to total consolidation of all IT services and
elimination of all "phantom IT organisms" throughout the company.
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PEROT SYSTEMS' MAJOR ACHIEVEMENTS AT CalPX
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Some of our major achievements at CalPX are enumerated below. These
achievements underscore our deep knowledge of CalPX business, our strong
commitment to our customers, our wide ranging information systems and
project management expertise, and our complete dedication to our service
qualities. We have delivered on all our commitments at CalPX at record
time and on budget.
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Perot Systems Confidential August 31, 1999 Page 5
California Power Exchange Executive Summary
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BLOCK FORWARDS MARKET (BFM)
Perot Systems played a key role in the development and deployment of the
BFM for CalPX. The Block Forwards Market provides CalPX's participants a
means to trade standardized monthly block electricity contracts on a
forward basis - up to six months ahead. Perot Systems developed the
real-time ticker information system, and the CalPX specific settlement and
credit system for the CalPX BFM. BFM brings significant benefits to CalPX
participants including:
o Block forward contracts serve as a tool to protect market
participants against future price variations for both
purchases and sales in the Day-Ahead Market.
o BFM allows CalPX to expand its energy trading services and
enhance overall market efficiency. The BEM market also
positions the CalPX to provide more innovative trading
services to participants.
o BFM allows California ratepayers to benefit from a more
competitive and dynamic electricity market place.
ISO DATA BRIDGE (BUCKEYE)
We completely designed and developed the ISO Data Bridge (ISODAB, aka
Buckeye) for CalPX. Buckeye provides a seamless data interface between
CalPX and the California Independent System Operator (ISO) scheduling
systems. Based on the ISO schedule data template specifications, the
Buckeye application generates all required input data templates and
uploads the templates to the ISO Intranet Web Server, automatically or
upon request. Buckeye also downloads all output data templates available
in the ISO Web Server and inserts the data into CalPX trading system.
Additionally, Buckeye allows the automatic download of ISO settlements
data files.
The Buckeye application provides ease of use through a user-friendly
graphical user interface. By automatically executing mundane and
repetitive tasks, it allows CalPX traders to focus on more important
business issues. Due to its flexible design, it has provided CalPX the
capability to easily adapt to changes in the Trading CORE applications and
in the ISO interface. It has also simplified IT operations by eliminating
a layer of server hardware and database that was used in a previous
implementation of an ISO gateway. Finally, Buckeye enabled CalPX to retire
very costly hardware and software systems that were used to serve as the
original CalPX data bridge to the ISO.
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California Power Exchange Executive Summary
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ZONAL PRICE CALCULATOR (ZPC)
We designed and developed the Zonal Price Calculator before the launch of
CalPX. ZPC determines Market Clearing Prices (MCP) in different zones of
the California Power Energy market. The proper pricing of energy and
transmission usage charges is essential in establishing a fair and
efficient energy market as well as providing proper economic signals for
future resource and transmission allocation.
BOOKOUT
We designed and developed the Bookout application for CalPX. Bookout
automatically matches the schedules of participating imports and exports
and creates net schedules of matched imports and exports as well as their
equivalent adjustment bids. These net schedules are submitted to the ISO
for use in congestion management and power flow scheduling with
neighboring control areas. The application also translates the final
values of the net schedules determined by the ISO back to the
corresponding values of imports and exports before the matching, so that
participants can schedule their respective resources.
Bookout enables the CalPX participants to save 10% to 20% in ISO Grid
Management Charge and wheeling charge on exports and save varying degrees
of transmission loss obligation for imports. Such savings are expected to
lower the price barrier for trading in the CalPX energy market, thus
contributing to maintaining and expanding the trading volume in CalPX
energy market.
REAL TIME DATA COLLECTION SYSTEM (RTDC)
We designed and developed the RTDC system to handle CalPX's real-time
operational transactions, and to speed up and improve the accuracy of the
real-time transaction process. The RTDC system centralized all transaction
data into one database while providing a user-friendly interface. RTDC
allows the operator to add new and modify previous transactions, track
past transaction information, Cancel incorrectly entered transactions,
generate daily transaction and daily summary report for real time
operators and managers, and generate Powerhouse report for PX data
warehouse system.
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Perot Systems Confidential August 31, 1999 Page 7
California Power Exchange Executive Summary
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INTER-TIE TRANSMISSION OVER SCHEDULING (ITOS - PIT O'BULL)
We designed and developed the ITOS to monitor CalPX participants who
schedule energy beyond the available transmission capacity across various
ISO inter-ties in CalPX Day-Ahead Market. ITOS has been helping PX
Day-Ahead Market operators to identify the over-scheduling situation and
to prevent the possible market gaming activities.
PX SETTLEMENT REPORTER (PXSR/TO DEBIT)
We designed and developed CalPX Settlement Reporter for CalPX settlement
group to handle the following tasks:
o For both PX Day-Ahead and Hour-Ahead markets estimate the
total PX congestion payment to the ISO or credit from ISO for
each operating hour. This estimate helps CalPX settlement
group verify the congestion settlement charge received from
ISO and reduce the possibility of financial dispute regarding
the congestion charge.
o Calculate the TO Debit charge to CalPX due to derating of one
or more inter-zonal interface(s) in the Hour-Ahead Market.
These charges are used to settle with CalPX Participants
according to the PX forward market settlement timelines.
BUSINESS CONSULTING
We have capitalized on our deep understanding and long time experience
with the California energy markets to design and refine business protocols
for CalPX, interact with California ISO on behalf of CalPX and to provide
regulatory supports to Ca1PX. Our business consulting team has played
major roles in the design and development of CalPX zonal pricing
mechanism, TO Debit calculation and distribution, Bookout business
processes, ancillary services redesign and the assessment of almost every
ISO initiated market change. We have also been providing support for CalPX
regulatory filing since Tariff Amendment 5. An area of our efforts has
been to help CalPX initiate critical market changes in order to retain its
market participants, increase market efficiency and expanding services
both in functionality and geography.
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Perot Systems Confidential August 31, 1999 Page 8
California Power Exchange Executive Summary
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OUR APPROACH
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Perot Systems' approach is described in the body of this proposal. We find
it appropriate to broadly describe our solution by referring to the
questions in a recent survey of IT services at CalPX.
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Perot Systems Confidential August 31, 1999 Page 9
<Table>
<Caption>
BUSINESS PERCEPTION
SURVEY ITEM (QUOTED IN THE IT SURVEY) PROPOSED PEROT SYSTEMS ACTIONS
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IT PERFORMANCE It is our perception that Program Management Methodology
IT locks for reasons to (PMM) is a Perot System standard
delay deadlines vs. program and project delivery
trying to finds ways to mechanism within the customer
meet deadlines. engagement lifecycle. This will
increase the percentage of project
success and help control costs. We
will Use our Project
Definition/Initiation workshops
(PIW/PDW) to establish and
communicate requirements and build
achievable schedules.
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QUALITY- Systems and Applications Our infrastructure has internal
STABILITY AND are functionally sound quality goals of maintaining the
RELIABILITY but not easy to use most current versions of hardware
and software. This ensures
availability and reliability. We
also track system availability to
validate that service targets are
being achieved.
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PROVEN METHODS Sometimes yes, sometimes Perot Systems has developed proved
AND PROCESSES no, but the main issue is methods and tools in all the
IT never gives you what aforementioned areas. Our methods
they say they are going combined with continuous
to give you. improvement allow us to bring you
the industries "Best Practices"
to meet your needs. We are
developing a knowledge store of
the practices and tested
processes.
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ORGANIZATIONAL At the level of "We Treasure Our People" is one of
DEVELOPMENT Application Development our founding principles. To keep
staff roles are well lines of communication open and we
defined. But at the IT hold regular meetings at the team
Director level the roles and supervisor level. We report
are undefined. I don't our progress to the customer and
understand how the IT the team often and hold monthly
works. customer status meetings and
employee "All-Hands Meetings" to
Some group seem to ensure that everyone is constantly
control process. updated on the current program
Therefore, some projects status.
gets slowed by one
person's unwillingness to
share responsibilities.
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ALIGNMENT Does not feel that IT and Our leadership style requires that
business our teams align with the customer
strategies/priorities are vision. Service is the cornerstone
integrated. of our business. To further ensure
that the needs of the business are
Too much time spent on IT being met we will establish a
finger point. Focus service level agreement between IT
should be on resolving and the business units. Service
issues. levels will be tracked and
reported to CIO and other
executives on a frequent basis.
Additionally, we will implement a
Change Review Board and IT
steering committee that will over
time, remove the perceived
barriers between IT and business.
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MEASUREMENT Has never been solicited In addition to establishing
for feedback prior to service levels with the business
this survey. units, we will introduce the
"Customer Satisfaction" surveys
and conduct them on a regular
basis. An outcome of these surveys
will be a concrete action plan
intended to improve performance
and effectiveness.
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SKILLS Some very talented people Perot Systems prides itself on our
but, no organizational "World Class" Recruiting and
skills or cohesiveness. Training programs. These programs
provide us with a constant steam
of technical and business talent
within the IT industry. Our
intensive recruiting process
ensures that we attract and retain
the best people in the industry.
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COSTS Poor accounting systems. Using our PMM methodology we
construct an understandable set of
We are still learning plans, deliverables and cost
what cost of ownership is models. We will provide CalPX a
for many projects. better understanding of costs and
ways to further improve them.
IT never met a $ it did
not want to spend. Has no
known idea what it takes
to make a buck.
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COMMUNICATION Lack of Our Program Office team, rich with
communication/coordination business knowledge, will forge
contributes to the high strong links to the business
costs. units. The implementation of the
Change Review Board and IT
Overall IT does not take Steering Committee will provide
the initiative to do the framework for improving
things and then report communications and developing a
back to stakeholders. strong partnership.
Links exist but often
fail to check with all
parties.
</Table>
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Perot Systems Confidential August 31, 1999 Page 10
California Power Exchange Introduction
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INTRODUCTION
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Information Technology constitutes the foundation of the California Power
Exchange (CalPX) business. To survive and thrive, CalPX must have a robust
information system that is predictable in both performance and cost and
that can be readily expanded in functionality and performance in response
to the needs of a rapidly changing energy marketplace in California and
elsewhere. A recent message from CalPX CEO, in which he enumerated the
major achievements of CalPX since inception(1), clearly emphasizes the
pivotal role of information technology in present and future successes of
CalPX.
A robust, cost effective and flexible information system is no accident.
It requires knowledgeable, experienced and dedicated IT professionals,
proven processes and methodologies and a smooth and constructive working
relationship with business side of the company. Experience has shown that
meeting all these requirements is a major challenge for CalPX today. Lack
of brand recognition in technology area has made it difficult for CalPX to
bring in and retain skilled IT professionals. At the same time, a hasty
start-up made it impossible for CalPX to put all the needed IT processes
and methodologies in place and the haste with which CalPX has had to
respond to marketplace changes made it impractical to introduce such
processes and methodologies later. In the meantime, cooperative
relationship between the business and IT organizations by and large fell
victim to both these factors. The result, to our opinion, is a fragmented
information system that fails
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(1) In his message Mr. George Sladoje said, "As we near the end of our
seventeenth month of successful operation, this is a good time to reflect
on what we've accomplished so far this year:
New Products:
o Launch of Bookout Service
o Launch of Block Forwards Market
o Launch of Green Exchange Service
o Launch of Post Close Quantity Match
We replaced the ABB gateway to the ISO with our own "Buckeye" system --
something we control and own.
From a systems standpoint:
o Stages 4&5
o Refinements to our core software"
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Perot Systems Confidential August 31, 1999 Page 11
California Power Exchange Introduction
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to fully meet CalPX business needs today, particularly as related to cost
and performance predictability, and is becoming exceedingly difficult to
expand tomorrow.
Perot Systems hereby proposes to provide CalPX with an IT solution free of
many impediments faced by CalPX IT organization. Our solution will enable
CalPX to meet all the business challenges that it faces today and in the
future. Implementing our solution will enable the IT organization to be
viewed by the business units as a vital asset, and an enabler of business
solutions in line with its expectations for an IT service that has:
o A predictable performance with agreed upon service levels for
it information system;
o A predictable expenditure for its information systems;
o The ability to quickly respond to the changing business
requirements of the California energy marketplace; and
o The ability to rapidly introduce new products and services
both for the California energy market and other energy markets
worldwide.
Perot Systems has been a key player in both the design and implementation
of California's restructured energy market. To start, we designed many of
the business protocols that form the foundation of today's energy market
in California. We then played a pivotal role in the timely and successful
start of both the California ISO and CalPX. As many CalPX veterans are
aware, we are credited for removing the last major hurdles for the start
of the CalPX market on 4/1/98, by timely deployment of the Zonal Price
Calculator and Overgeneration Management applications at CalPX. We have
also played an ongoing major role in ensuring a successful and smooth
operation of CalPX since its start.
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Perot Systems Confidential August 31, 1999 Page 12
California Power Exchange Introduction
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In fact, an examination of CalPX major accomplishments enumerated by the
CalPX CEO clearly recognizes the magnitude of Perot Systems' contribution
in realizing all such accomplishments. For majority of these contributions
we were the main party responsible for developing and deploying the needed
business protocols and information systems(2).
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(2) In his message Mr. George Sladoje said. "As we near the end of our
seventeenth month of successful operation, this is a good time to reflect
on what we've accomplished so far this year:
New Products:
o Launch of Bookout Service [around 90% of design and
development by Perot systems]
o Launch of Block Forwards Market [around 90% of new development
by Perot systems]
o Launch of Green Exchange Service
o Launch of Post Close Quantity Match
We replaced the ABB gateway to the ISO with our own "Buckeye" system --
something we control and own [around 100 percent of design and development
by Perot systems].
From a systems standpoint:
o Stages 4 & 5 [major design and development work by Perot
systems]
o Refinements to our core software"
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Perot Systems Confidential August 31, 1999 Page 13
California Power Exchange Introduction
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OUR COMPANY
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Perot Systems is a worldwide provider of information technology services
and business solutions to a broad range of clients. Perot Systems delivers
our services primarily through our industry groups, including four target
industries--Financial Services, Energy, Healthcare, and Travel and
Transportation--and other industries in which we have significant clients.
We serve our clients by delivering services and solutions focused on their
needs, with particular emphasis on helping clients more effectively serve
their customers.
To achieve this, Perot Systems provides an "integrated service
offering"--a combination of core disciplines, including business
integration, systems integration and applications development, and
information technology infrastructure services. This offering helps
clients improve their business operations or create new business
offerings.
Using this approach, we are able to create long-term relationships with
clients beginning with an analysis of their business strategies and
continuing through the implementation of information technology solutions
and the realization of the clients' goals.
Several of Perot Systems' characteristics have been key to our success in
building an information technology services company with nearly US$1
billion in revenue in just over eleven years. These characteristics
include:
o Culture of business people grounded in technology.
o Flat and open management structures that drive decision-making
to the field.
o Aggressive and flexible approach to business development
combined with accountability and discipline in execution and
delivery.
o Sense of urgency in our approach to clients' business issues.
o Reward structure that encourages and supports risk-taking and
initiative.
o Focus on dynamic industries in the private sector in numerous
geographies worldwide.
o Values that support and balance serving our clients, people,
and stakeholders.
o Commitment to operate in the center of the field of ethical
behavior--never on the sidelines.
For additional information about Perot Systems' experience, see Appendix A
("Perot Systems Qualifications").
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Perot Systems Confidential August 31, 1999 Page 14
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THE CURRENT ENVIRONMENT AT CalPX
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The following sections concisely illustrate our understanding of the
current IT environment. We also highlight several challenges and issues
facing program management, applications development and computer
operations in this organization.
APPLICATIONS INVENTORY
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CalPX information systems enable the following business functions:
o Establishment of the marketplace for electrical power
o Marketplace access
o Bidding and contract acknowledgement services
o Participant and bid validation
o Trading energy in portfolio blocks
o Scheduling with the ISO at resource level
o Price calculation and setting
o Real-time support services
o Contract settlement services
o Billing, invoicing and clearing services
o Administrative support systems
An inventory of the current applications at CalPX is presented below -
Figure 1. The applications consist of:
o Applications developed/maintained by the CalPX IT
Organization. These applications mainly support the
Settlements Business Unit.
o Applications developed/maintained by Perot Systems under their
current contract/task order. These applications mainly support
the Trading Business Unit.
o Core applications developed/maintained by OM Technologies,
which support both the Trading and Settlements Business units.
Figure 2 illustrates how they interact to support CalPX's business
initiatives.
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Perot Systems Confidential August 31, 1999 Page 15
California Power Exchange The Current Environment at CalPX
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<Table>
<Caption>
BUSINESS DEV
SYSTEM NAME OR PROJECT AREA/FUNCTION CRITICALITY OR MAINT? DEVELOPED BY
- ---------------------- ------------- ----------- --------- ------------
CALPX APPLICATIONS
PowerBase All Core Maint CalPX
Data Warehouse (Powerhouse) All Core Dev & Maint DWCG
PEP+ Settlements Core Dev & Maint CalPX
POP Settlements Core Maint CalPX
MDAS (Metering & Data Acquisition System) Settlements Core Maint Energy Interactive
SEWeb (Settlements Web System) Settlements Core Maint CalPX
Extranet, phase II All Core Maint CalPX
Intranet All Secondary Dev CalPX
Market Clearing Prices (MCP) Trading Core Maint SBK Technology
PeopleSoft Financials -
GL, AP, AR & Billing Finance & Settlement Core Maint Third-party vendor
WIDGET Marketing Secondary Maint CalPX
PEROT SYSTEMS APPLICATIONS
BFM - Reporting, Ticker Trading Core Dev & Maint Perot Systems
Zonal Pricing Calculator Trading Core Maint Perot Systems
BUCK EYE Trading Core Maint Perot Systems
Real-time data Log Trading Core Dev & Maint Perot Systems
Inter-Tie Over Scheduling (ITOS) Trading Core Maint Perot Systems
PX Settlements Reporter/TO
Debit (PXSR/TO Debit) Settlements Core Dev & Maint Perot Systems
Manta-Ray Trading Core Dev Perot Systems
QF EA (PG&E sponsored) Trading Core Dev Perot Systems
OM APPLICATIONS
Trading Application Trading Core Maint OM
Settlements Application Settlements Core Maint OM
TITAN Project Settlements Core Dev OM
CORE DB Trading Core Maint OM
BFM Backend Trading Core Maint OM
<Caption>
APPLICATION USER OPERATING
SYSTEM NAME OR PROJECT MAINTAINED BY ARCHITECTURE INTERFACE SYSTEM
- ---------------------- ------------- ------------ --------- ---------
CALPX APPLICATIONS
PowerBase CalPX 3-tier Browser NT
Data Warehouse (Powerhouse) DWCG/CalPX 2-tier Client/Server HP-UX
PEP+ CalPX 3-tier Client/Server NT
POP CalPX 2-tier Client/Server NT
MDAS (Metering & Data Acquisition System) Energy Interactive/CalPX 2-tier Client/Server NT
SEWeb (Settlements Web System) CalPX 3-tier Browser NT
Extranet, phase II CalPX 3-tier Browser NT
Intranet CalPX 3-tier Browser NT
Market Clearing Prices (MCP) SBK Technology/CalPX 2-tier Browser NT
PeopleSoft Financials - CalPX (upgrades with
GL, AP, AR & Billing PeopleSoft support) HP-UX
WIDGET CalPX
PEROT SYSTEMS APPLICATIONS
BFM - Reporting, Ticker Perot Systems 2-tier Browser NT
Zonal Pricing Calculator Perot Systems 2-tier Client/Server NT
BUCK EYE Perot Systems 2-tier Client/Server NT
Real-time data Log Perot Systems 2-tier Client/Server NT
Inter-Tie Over Scheduling (ITOS) Perot Systems 2-tier Client/Server NT
PX Settlements Reporter/TO
Debit (PXSR/TO Debit) Perot Systems 2-tier Client/Server NT
Manta-Ray Perot Systems 2-tier Client/Server NT
QF EA (PG&E sponsored) Perot Systems 2-tier Client/Server NT
OM APPLICATIONS
Trading Application OM
Settlements Application OM
TITAN Project OM
CORE DB OM
BFM Backend OM
<Caption>
DATABASE
SYSTEM NAME OR PROJECT DEVELOPMENT TOOLS/LANG PURCHASED COMPONENTS SYSTEM
- ---------------------- ---------------------- -------------------- ------------
CALPX APPLICATIONS
VB, ASP, T-SQL for Stored
PowerBase Proc & triggers in DB ActiveFile 2.0 by Infomentum SQL Server
ERWIN, Sybase stored Informatica PowerMart, CA
Data Warehouse (Powerhouse) procedures, (few C++ programs) AutoSys, Business Objects 4.1 Sybase 11.5
PEP+ VB Sybase
POP PERL Scripts SQL Server
MDAS (Metering & Data Acquisition System) C++ SQL Server
SEWeb (Settlements Web System) VB 6.0, ASP, T-SQL, ActiveX ActiveFile 2.0 by Infomentum SQL Server
Extranet, phase II ASP/HTML SQL Server, IIS
Intranet ASP/HTML/JavaScript SQL Server, IIS
Market Clearing Prices (MCP)
PeopleSoft Financials -
Peoplesoft (C, COBOL, Peopletools,
GL, AP, AR & Billing SQL used in Peopletools?) Crystal Reports, SQR SYBASE
WIDGET
PEROT SYSTEMS APPLICATIONS
BFM - Reporting, Ticker Java, ASP, Business Objects SQL Server
Zonal Pricing Calculator VB, C Sybase
BUCK EYE VB, C++ Sybase
Real-time data Log VB, C++ SQL Server
Inter-Tie Over Scheduling (ITOS) VB, C++ SQL Server
PX Settlements Reporter/TO
Debit (PXSR/TO Debit) VB, C++ SQL Server
Manta-Ray VB, C++ SQL Server
QF EA (PG&E sponsored) VB, C++ SQL Server
OM APPLICATIONS
Trading Application Flat Files
Settlements Application SYBASE
TITAN Project
CORE DB SYBASE
BFM Backend SQL Server
</Table>
FIGURE 1. CalPX SOFTWARE APPLICATIONS INVENTORY
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Perot Systems Confidential August 31, 1999 Page 16
California Power Exchange The Current Environment at CalPX
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FIGURE 2. APPLICATION TOPOLOGY MAP
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Perot Systems Confidential August 31, 1999 Page 17
California Power Exchange The Current Environment at CalPX
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CHALLENGES IN PROGRAM MANAGEMENT AND APPLICATIONS DEVELOPMENT
--------------------------------------------------------------------------
In the process of reviewing both the applications and the
applications-related organizations, several issues and challenges were
identified and discussed. These challenges were identified through
interviews with the IT Directors, a review of the 1999 IT Survey Results,
and discussions with Perot Systems Associates who have been associated
with the CalPX organization for some time. The challenges we identified
include the following:
o Communication between IT and the business areas is not
effective and was identified by the 1999 IT Survey as one of
the two major challenges.
o Due mainly to above project or program planning and tracking
are neither effective nor consistent. The other major
challenge identified by the survey, this issue highlights
three areas of concern:
- No consistent, updated, and communicated IT project plan
is in place.
- No time is recorded and no project accounting is
captured, making it difficult to track actual efforts
against a plan.
- Project funding and expense application is difficult to
control and track, especially as they relate to capital
versus operating funding.
o Roles and responsibilities between applications, operations,
testing, and business areas are unclear.
o There is many levels of IT activity that occurs outside of the
IT organization.
o Application standards are neither implemented nor enforced
across the organization.
o Configuration management, while being addressed, is not
implemented organization-wide.
While these challenges clearly exist, it should be noted that the IT
organization is working hard and doing its best to deliver results to the
business areas.
CHALLENGES IN COMPUTER OPERATIONS
--------------------------------------------------------------------------
The CalPX IT environment is fast-moving and dynamic, driven by business
units requiring quick product development and livery. The CalPX IT
environment
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California Power Exchange The Current Environment at CalPX
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evolved quickly and often without specific process or controls. As a result of
the organization's rapid growth, the current operations environment at CalPX
contains what we believe to be significant risks compared to current IT
industry standards--specifically, components of data security, change and
process management, and systems management. Through improved processes in the
day-to-day management of the operational environment and a more comprehensive
approach to data security, CalPX would maintain a reliable production
environment for the business units.
Your Level I Help Desk manages customer calls, resolves customer technical
problems, monitors critical systems, and interfaces with hardware and software
vendors. Problem management is being implemented using the Remedy system, and a
central change coordinator is managing the application and system changes.
These functions are all essential components for every IT Operations team.
Areas where improvements are definitely needed are:
DATA SECURITY -- Access to production data is marginally controlled from
applications and the software development community. This increases an
opportunity for data corruption and/or production outages.
CONFIGURATION MANAGEMENT -- The current environment lacks the security and
controls to effectively provide a stable environment, and changes are
implemented in an ad hoc fashion. New software releases are not properly
planned or scheduled. This may compromise or regress production software at all
levels.
SERVICE LEVEL REPORTING -- Since service levels are not established and
reported to the business units, CalPX is unable to assess the overall
effectiveness in delivering IT services.
PERFORMANCE MONITORING -- For mission-critical systems and applications,
performance metrics must be tracked and measured constantly to avoid
unnecessary service impacts caused by under-performing business systems.
PROGRAM MANAGEMENT -- Utilizing a predefined methodology in which projects are
managed using a common set of processes will help ensure that projects are
completed on time and within budget.
CAPACITY PLANNING -- By enabling CalPX to measure and benchmark current computer
resources, you will be able to forecast this usage based upon business growth
and expected service levels.
Figure 3, on the next page, illustrate our understanding of the system
configuration supporting the California Power Exchange.
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Perot Systems Confidential August 31, 1999 Page 20
California Power Exchange The Current Environment at CalPX
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[DIAGRAM CALPX'S SYSTEM CONFIGURATION]
Figure 3. CalPX's System Configuration
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Perot Systems Confidential August 31, 1999 Page 21
OUR SOLUTION
- -------------------------------------------------------------------------------
In addition to an overview of our proposed solution, we offer a discussion
about the success-critical employee transition, our program management
approach, and the organization we anticipate implementing. We also present our
plan and schedule, as well as anticipated roles and responsibilities for both
Perot Systems and CalPX.
- -------------------------------------------------------------------------------
OVERVIEW OF SOLUTION
- -------------------------------------------------------------------------------
We propose a full 36 month services agreement to provide program management,
applications development and computer operations services to the California
Power Exchange. We will establish a baseline level of service that includes the
services discussed in this proposal. Additional incentives, to be agreed upon
later, will be included to achieve and exceed service levels. We will offer
discounted rates on all services that CalPX requires and that are not a part of
the baseline services. All application development projects will be evaluated
against the baseline of services. If additional resources are required, they
will be identified through the change control process and approved or rejected
as a part of the change process. Each project will require a business unit
sponsor that will work with the Program Office to establish the requirements,
and IT will jointly take these new projects forward to the IT Change Review
Board.
The principal elements of our solution are:
o Transition process
o Establishment Program Management Office
o -- Control Review Board
-- IT Steering Committee
-- Business Consultants
o Realignment of Roles and Responsibilities
o Realignment of Applications Development and Maintenance
o Realignment of Computer Operations
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EMPLOYEE TRANSITION
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Over time, Perot Systems has gained important experience in transitioning
people from one work environment to another. Regardless of the circumstances
surrounding the transfer of employment, we recognize that, by nature people
are resistant and sensitive to change, and considerable care must be taken to
ensure that transitioning employees receive timely, specific communication
throughout the process.
One of our guiding principles at Perot Systems is, "We treasure our people."
Thus, we are committed to achieving a smooth transfer of all employees who are
identified to transition to Perot Systems from a client. Our approach is based
on a flexible three-phase process tailored to fit the specific needs and
logistical requirements of our individual clients.
The actual transition plan is based on a high degree of open communication and
coordination between all parties to minimize any disruption to employees or to
the client's ongoing business operations.
EMPLOYEE UTILIZATION
- --------------------------------------------------------------------------------
Perot Systems' transition methodology has proven successful at blending the
specialized application and business expertise of our team with our culture and
reliable service methodology. To quickly infuse the Perot Systems methodology
and culture into the transitioning team, Perot Systems adds to the team our
most seasoned leadership with direct experience in the industry at hand. Based
on an assessment of team needs, Perot Systems also augments the team with
specific seasoned technical expertise.
Subcontractors are used in isolated roles when a specific expertise is needed
immediately and is readily available. In these cases, Perot Systems will select
a consultant from a business partner for a limited period of time.
One advantage Perot Systems provides is that we will periodically provide new
perspective for the client by using new hires or Associates transferred into
the existing staff. It is important to manage Associates' experience and to
ensure that they continue to grow professionally. By managing Associate career
movements, we ensure vitality in our clients' organization by constantly
exploring ways to
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improve their service, as well as sharing the benefits of experience from
previous settings.
THE TRANSITION PLAN
- --------------------------------------------------------------------------------
We believe that a successful employee transition:
o Creates a strong foundation on which to build our client relationship.
o Assures that the client's employees have a smooth, comfortable
employment transition.
o Assists employees in moving through the various phases of change.
o Provides continuing development, care, and opportunities for the
transitioned employees.
Perot Systems strongly recommends a partnership approach where we work
side-by-side with CalPX to develop a detailed transition plan. We believe a
successful employee transition plan centers around three key elements:
o Communication to the employees
o Care of those employees
o Careful, comprehensive change management
Perot Systems recognizes the importance of addressing the cultural aspects
involved with integrating two companies' principles, philosophies, and
processes. Transitions of any nature will require a major adjustment on the part
of all concerned. Employees may generally resist change and have difficulty
working in new ways. Over time, comfortable work patterns and routines are
established. These patterns become an integral part of employees' daily
professional life, becoming the unwritten "rules of the game" by which they will
conduct their daily work.
When confronted with the prospect of a transition, there is no question that
CalPX's employees will benefit from knowing and understanding the business
rationale behind the decision. However, once informed of this business decision,
each employee will personally internalize the situation and ask the question,
"What happens to me?"
This is a natural and expected response. Perot System's transition process
addresses this question, as well as many others, so that the employees know
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exactly where they stand, understand their importance in the overall success of
the business agreement, and are comfortable with their new employer. To achieve
a successful transition, we encourage transition employees to follow these
steps:
o Think about it.
o Examine their feelings.
o Seek information.
o Take charge.
The actual process of transitioning employees cannot be left to happen over
time. Proper planning and careful attention must be given to the emotional and
cultural aspects of the changes that will be taking place. Detailed planning,
consistency, and superior change management is vital to the success of the
transition and the overall long-term success of the partnership between CalPX
and Perot Systems.
Perot Systems uses a multi-phased approach to employee transitions.
PRE-TRANSITION PHASE
The amount of time allocated for this phase can vary greatly from several weeks
to a few months. During this phase, the key activities center around gathering
and analyzing information, building relationships with our partners, and
planning logistics and communications. In particular, we will look at the
following areas:
o Benefits
o Compensation
o Employee data
o Corporate culture and policy
Benefits and compensation are of particular importance to everyone. Perot
Systems is guided by a commitment to transition employees at their existing
base salary and with a benefits package that -- taken as a whole -- is at least
comparable to that which they were accustomed to receiving. Part of this
process will involve the completion of a side-by-side benefits analysis with
input from CalPX's human resources personnel. By completing this side-by-side
analysis, we can harmonize the benefits and identify and resolve any potential
issues prior to meeting with the employees. The challenge we face is to examine
all corporate practices and establish a fair, consistent compensation and
benefits package that respects all
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local, state, and international legislation and is favorable for the
transitioning employees.
Finally, we must look at corporate culture. Perot Systems is a global
corporation, and as such, employs a workforce that is not restricted by
geographic or corporate lines. This open atmosphere is ideal for transition
situations, as it readily permits the "blending" of two corporate cultures.
Perot Systems' biggest challenge and foundation for growth is the attraction,
retention, re-skilling, and motivation of excellent information technology
professionals. It is Perot Systems' motivation to keep Associates employed and
engaged at Perot Systems, whether at CalPX, or at another client.
LOGISTICAL PLANNING
Transitioning employees from CalPX to Perot Systems requires a great deal of
detailed, logistical planning. The first impression formed by CalPX's employees
will be critical. All Associate-related issues must be resolved prior to the
transition meetings. During the Pre-transition phase, Perot Systems will work
very closely with the management of CalPX to ensure we have the answers your
employees will be seeking. This period of time also allows us to build critical
relationships with our counterparts within your company, which is key to the
overall success of the transition.
COMMUNICATIONS PLANNING
Another component of the Pre-transition phase is communications planning. With
input from CalPX, Perot Systems will customize a communications plan using the
tools and techniques that have traditionally been most effective with your
employees. Current CalPX communication tools may be supplemented with
additional tools as needed.
Examples of supplemental tools and strategies might include:
o Linkage of internal and external communications
o Regular employee roundtable sessions
o Change adaptation workshops
o Employee telephone hotline
o Transition question and answer documents
o Employee orientation sessions
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o Leadership forums
o Current CalPX leadership involvement
LEADERSHIP
Successful change requires the full commitment of the leaders of both companies.
The leadership at CalPX and the leadership at Perot Systems must support the
transition 100 percent for it to succeed. Thus, Perot Systems will rely on any
transitioning CalPX leaders to assist with positive communication of the
transition message.
Throughout the process, the transitioning employees must never feel forgotten,
alone, or lost. The Communications Plan we develop together must be guided by a
commitment to make some form of communication available to every employee each
day during the critical first weeks and moths of the transition.
TRANSITION
The acceptance of this proposal by CalPX marks the beginning of the Transition
Phase. By this point, all employee-related issues will have been identified,
analyzed, and resolved. The Transition Phase is characterized as a series of
meetings designed to bring transitioning employees "into the loop." During this
phase, the Perot Systems delivery manager and team will be onsite. A full-time
Perot Systems' Transition team, consisting of human resources personnel,
transition experts, and recruiters familiar with Perot Systems' current
requirements at other accounts and engagements, will also be on site at CalPX
during this phase to conduct a series of transition meetings.
Employees facing a transition have a strong need and a right to know as much as
possible about this new business relationship, as well as the values and
practices of their new employer. The purpose of the transition meetings is to
provide the employees with facts, address any rumors head-on, and provide
counselling to facilitate the transfer. At a minimum, the following meetings
should occur during the Employee Transition Phase:
o Group meetings
o Individual sessions, including interviews
o Administrative sessions, including weekly updates
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GROUP MEETINGS
Group meetings ensure that all transitioning employees are on the same "playing
field," hearing the same information at the same time. Topics to be discussed in
these meetings should include the following:
o Formal announcement of the CalPX/Perot Systems agreement
o Overview of Perot Systems, including organizational history,
principles, benefits, compensation, and training
o Schedule of transition events
o Question and answer period
o Distribution of informational packets
The group meeting is one step in the communications process and is an excellent
tool to control the rumor mill and to provide employees with a taste of their
new employer.
INDIVIDUAL SESSIONS
Although the transitioning staff will have the opportunity to ask questions
during the group meeting, Perot Systems has found that some employees may feel
too intimidated or uncomfortable to ask questions in a group setting. For this
reason, we also include an individual, private session as the second component
of the Employee Transition Phase. This session is not a formal interview, but
an additional means of clearly communicating with employees in a less formal
and more private setting.
The importance of physically meeting one-on-one with every employee who
transitions to Perot Systems cannot be underestimated. This personalized
attention accomplishes the following goals:
o Provides another opportunity for the employee to ask questions or
voice concerns.
o Provides Perot Systems with the opportunity to formally extend job
offers, collect necessary paperwork, and begin the new-hire process.
o Reinforces to the employees their importance in the overall success of
the new business agreement.
We have found these sessions to be most productive if they are conducted within
two weeks of the group meeting or kick-off. In order to ensure timely processing
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of the CalPX employees, Perot Systems will expand the transition team during
this period.
ADMINISTRATIVE SESSION
The final component of the Employee Transition Phase is an administrative
session. This session provides one last opportunity for Perot Systems' Human
Resources personnel to ensure that all of the employees' forms are correct and
complete. Additionally, this brief session gives the employee another opening
to meet with a Perot Systems Associate and ask questions.
The group meetings, individual sessions, and administrative sessions are the
primary activities that take place during the Employee Transition Phase.
However, these sessions are not all-inclusive. Additional meetings and
communications tools may be used to ensure a constant flow of information
during this critical time.
- --------------------------------------------------------------------------------
PROGRAM MANAGEMENT APPROACH
- --------------------------------------------------------------------------------
In this section we highlight our program management approach. We present our
Program Management Methodology (PMM). We highlight three critical project
control areas: problem management, change management, and configuration
management. We also introduce the concepts of a Change Review Board and an IT
Steering Committee.
OVERVIEW OF OUR PROGRAM MANAGEMENT METHODOLOGY
- --------------------------------------------------------------------------------
Perot Systems has developed a structured approach to managing projects and
programs that we call our Program Management Methodology (PMM). It provides a
standard approach to program and project management based on our best
practices. "Users" maintain the flexibility to adapt to client needs and
practices.
The PMM's five phases provide a time-phased approach to managing programs and
projects (see figure 4). Users can begin by identifying the current status of
their projects in relation to the PMM phases. A program is iterative in nature,
with multiple projects in varying stages of progress. Therefore we apply PMM
iteratively.
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FIGURE 4. THE FIVE PHASES IN THE PROGRAM LIFECYCLE
Perot Systems follows the Total Quality Management approach to assure that the
products and services we produce meet our clients' needs and expectations.
Perot Systems uses a three-tiered approach to quality: defect detection and
removal, defect prevention, and continuous process improvement. In addition,
all Perot Systems methodologies contain checkpoints designed to assure that the
engagement is on track at various points in the lifecycle.
An extremely important element of program management at CalPX will be the
presence of highly skilled and seasoned business consultants. These business
consultants will not only play a key role in developing and refining CalPX's
business protocols but also ensure a smooth interface between the business
community and IT community at CalPX.
PROGRAM MANAGEMENT OFFICE
- -------------------------------------------------------------------------------
The Program Management Office (PMO) is the nucleus for managing projects in an
enterprise-wide environment to ensure that projects are aligned with your
strategic business goals. We facilitate the integration of common efforts
across business units and govern projects to meet your increased customer
expectations. We have established a history in the program office arena and
have captured our success using a methodology that produces customized results
based on your business requirements.
However, a methodology alone is not enough to ensure success. Our team approach
combines understanding of CalPX business, methodology with our commitment to
working closely with each client in creative relationships. Together as a
team, we interact to solve business problems--initiatives are driven by our
client's enterprise strategy. We look at where you are now, where you
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want to go, and what is the best way to get there -- and then help you make it
happen.
The Program Management Office is a single point of contact for projects and
represents complete service delivery and offers a scalable project execution
methodology designed to encompass only the components needed to succeed.
Working together as a team, we facilitate the integration of common project
efforts throughout an enterprise to ensure projects are within budget and on
schedule, while also remaining aligned with the enterprise's business vision.
Perot Systems' PMO delivers an enterprise-wide solution that will:
o Interface effectively and continuously with business units to understand
their needs.
o Prioritize projects with strategic business goals.
o Facilitate integration of common efforts across business units.
o Improve the project success track record.
o Minimize risks and control costs.
o Consolidate reporting to monitor progress of critical initiatives.
CHANGE REVIEW BOARD
- -------------------------------------------------------------------------------
We propose to implement a Change Review Board consisting of CalPX Senior
Executive and members from the Program Office. This board will meet monthly to
review submitted requests for changes and either approve or reject these
requests. This board will also prioritize the change orders and existing
project work if necessary to meet the demands of the business. All changes will
be brought to the Change Review Board by a sponsoring business unit and the IT
department. Monthly project status reports will be provided to the Change
Review Board members so they can be kept updated to the most current project
status.
IT STEERING COMMITTEE
- -------------------------------------------------------------------------------
We propose the formation of an IT Steering Committee headed by the CIO. The
members will also include the Program Manager, the Applications Director and
the Operations Director. Also, on this team will be representatives from each
of the major business units. This team will meet weekly to discuss upcoming
events
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such as; major new software releases, hardware implementations and planned
change schedules. This team will also explore technology areas that can bring
business value to the enterprise that are not being currently exploited. These
strategies will be driven by the directions and needs of the business units in
response to operational or market challenges. If this team generates any change
request they will follow the process as defined for changes. These change
requests will be sponsored to the Change Review Board by one of the IT Steering
Committee members.
BUSINESS CONSULTANTS
- --------------------------------------------------------------------------------
We will engage with client at the root of a business problem resolution or
business expansion activity to determine the best possible solution, whether IT
related or not. Our business consultants are completely fluent with the
problems, concerns and aspirations of CalPX and the energy markets in California
and beyond.
PROBLEM MANAGEMENT
- --------------------------------------------------------------------------------
Perot Systems' problem management services include problem triage, logging,
escalation, tracking, and reporting for each problem call, from initiation to
resolution. For many of our clients, the Help Desk has become a focal point for
service level agreements, vendor management, network support, applications
support, and desktop services. Perot Systems owns and is responsible for all
requests and resolutions, from the time of the initial call through completion
and technical follow-up. Whenever possible, requests are addressed directly
during the initial call by the organizations responsible for client support. If
a request cannot be handled directly, it is dispatched to the appropriate
support team.
THE REMEDY ACTION REQUEST SYSTEM
The Remedy action request system is the premier problem-tracking and management
system in the industry. The Remedy system's greatest strengths are its knowledge
database and ease of customization. We will tailor the Remedy system to track
and manage CalPX's specific business processes such as change, asset, and
facilities management, as well as defects and work orders. All trouble calls,
system modifications, system and application outages, and change requests are
entered and tracked through the Remedy system. We will use the action
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request system to generate useful system performance, Help Desk metrics, and
service level reports.
CHANGE MANAGEMENT
- -------------------------------------------------------------------------------
We will track changes, regardless of their origin, through a formal change
management process. The business unit representative, Operations, and the IT
organization will be able to make change requests. Each change request will be
submitted to the Program Office to coordinate initial cost and schedule
estimates. The Program Office staff will complete estimates within 15 business
days and return each estimate to the original requestor. Estimates are then
revised as necessary to achieve concurrence between requestor, sponsor, and the
PMO.
Then, once a month, changes are presented to the Change Review Board for
approval. If approved, the change is assigned a change control number, worked
into the Integrated Master Schedule maintained by the PMO, and added into the
PMO monthly customer reports. The board also may shift priorities and
schedules, including ongoing projects, based upon the business needs of any the
projects under consideration. Should the board reject the change, it will be
returned to the PMO and requestor to determine if a course of re-submittal is
warranted. The PMO shall have sole responsibility for the execution of any and
all changes approved by the Change Review Board. A process flow diagram of this
is illustrated in Figure 5.
FIGURE 5. ILLUSTRATION OF CHANGE MANAGEMENT PROCESS FLOW
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CONFIGURATION MANAGEMENT
- -------------------------------------------------------------------------------
We have the environments, procedures, source control software, and automation
in place to support multiple development environments using the same software
base. The concurrent efforts that exist today include production support and a
single enhancement stream, although we have intentions and are prepared to
accommodate a second enhancement stream.
Each enhancement stream today is a logical branch off of the current production
source (soon to be a physical branch). Production support changes must then be
merged back into each enhancement stream. Once the enhancement stream goes into
production, it then becomes the production support environment and will be
branched to support a new release cycle (we are currently on a quarterly
release cycle).
Regardless of the environment, system components follow the same lifecycle.
System changes or issues start with the customer opening a change or problem
ticket. This ticket is assigned a number, which is then used as a reference
number for any system components modified as a result of that request. An
analysis is done on the request to determine the system components impacted. If
this is a change request, its cost is estimated and presented for customer
approval. If approved, it proceeds to the development teams, along with any
problem tickets, so the appropriate work can be completed.
During the development process, there are reviews and approvals both by peers
and leads. Once the changes pass through unit and integration test, they are
passed to the test team for systems testing. If approved by the test team, the
changes will continue to customer testing. Once again, if the customer
approves, the change will be released. Enhancements and "non-critical bugs"
will be placed into production during a regularly scheduled release. "Critical
bugs" will be implemented as soon as is practical. Any request received as an
emergency request (off-cycle processing) involves a form and must be justified
and approved by the customer, application team lead, and one designee of the
Change Review Board.
The complete development and acceptance process involves separately distinct
source labels in our source control tool. Each of these environments has its
own build schedule. If modules are placed into specific areas without the
required reference number (as described above), the change management team
removes the modules and notifies the teams.
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ORGANIZATION
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In this section, we present the organizational structure that will support
CalPX's IT requirements. Figures 6 and 7 show the transitional and final
organizations. All roles and responsibilities related to these organizational
structures are covered in this Section.
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FIGURE 6. THE PROPOSED CALPX/PEROT SYSTEMS IT ORGANIZATION -- TRANSITION PERIOD
FIGURE 7. THE PROPOSED CALPX/PEROT SYSTEMS IT ORGANIZATION -- FINAL
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APPLICATIONS MANAGEMENT
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Perot Systems proposes to leverage our deep knowledge of the business processes,
credibility and smooth working relationship with the business units, proven
project and applications management experience, as well as our methodologies and
processes, to develop business applications in an effective, predictable, and
cost-effective manner. The IT function will be based on the leadership from the
Change Review Board, discussed earlier, that will direct the use of committed
resources, measure the effectiveness of IT services, and obtain additional
funding, if required.
APPLICATIONS DEVELOPMENT
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Application development will use Perot Systems' proven Application Development
Methodology. The development resource will be baselined, and projects will be
initiated, committed, and managed under guidance and leadership of the IT
Steering Committee and the Change Review Board.
The Perot Systems Program Management Methodology (PMM) is used in the execution
of all projects, including those involving software development. Software
development projects are broken into a series of components that include
requirements gathering, analysis, design, development, testing, release and
operations activities. These are clearly identified in the Perot Systems
Application Development Methodology.
The table below gives a rough mapping of these software development components
to the PMM Lifecycle Phases, along with how they might map to the CalPX business
processes.
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<Table>
<Caption>
Life Cycle
Phase Key Results of Phase Completion IT Application Development Activity
- ------------------------------------------------------------------------------------------------------
Feasibility Initial Scope and Objectives developed None
by Business Units, Program Manager
and IT Steering Committee
- ------------------------------------------------------------------------------------------------------
Initiation Requirements, high-level estimate and High-level requirements, analysis, and
proposal returned to CalPX IT Steering overall estimate
Committee, who authorizes detailed
design and planning A key tool for developing these
requirements is the Project Definition
Workshop (PDW)
- ------------------------------------------------------------------------------------------------------
Planning Approval by the CalPX Change Detailed functional requirements,
Review Board to proceed software development plans (including
defining change management, risk
management, test plan, acceptance
plan, operations planning, etc.),
technical requirements, and
analysis/design
- ------------------------------------------------------------------------------------------------------
Execution Successful completion of project and Detailed analysis/design, development,
customer satisfaction testing, release, operations
- ------------------------------------------------------------------------------------------------------
Shutdown Knowledge and reusable components Shutdown
harvested
- ------------------------------------------------------------------------------------------------------
</Table>
Figure 8. PMM Lifecycle Applied to CalPX
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[APPLICATION DEVELOPMENT APPROACH CHART]
APPLICATION DEVELOPMENT APPROACH
FIGURE 9. APPLICATION DEVELOPMENT APPROACH
APPLICATIONS MAINTENANCE
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Application maintenance will be performed from the maintenance resource in the
baseline plan. Using an appropriate time recording system, we will record the
maintenance, including:
o Application/component
o Type of activity (analysis, coding, debugging, testing, etc.)
o Hours
The IT Steering Committee will track maintenance levels using reporting and
metrics generated from the time recording process and other sources. The
committee can modify the maintenance baseline by adjusting the allocations
between development and maintenance, as required.
Maintenance activity will be initiated by two sources:
o Production problems, referred to the maintenance group via Remedy tickets,
classified in terms of severity.
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o Enhancements requested by the business areas. These requests will be managed
through the change management process.
ROLES AND RESPONSIBILITIES
The table below illustrates the proposed organizational structure and the roles
and responsibilities for each organization.
<Table>
<Caption>
Detail
High Level Functional
Requirements, Reqmts, SW
Development Initial Analysis, Dev Plans, Detail Design,
Project Scope & Overall Effort Technical Develop, Test,
Proposal Objectives Estimate Reqmts, Effort Release, Install Maintenance
----------- ---------- -------------- -------------- ---------------- -----------
Business Initiate Provide Review & Concur Review & Review, Validate, Report
Area or IT Concur Concur Problems
Steering
Committee Initiate
Enhancement
Requests
Program Plan Plan Plan Negotiate Plan Negotiate Plan Negotiate Plan Negotiate
Managers Negotiate Negotiate Track Track Track Track
Track Track
IT Application Evaluate Evaluate Perform Perform Perform Evaluate
Development Impact
Fix Bugs
Implement
Change
Request
Change Approve Approve Monitor Monitor Monitor, adjust
Review resources
Board Allocate Adjust Evaluate Results
Resources Resources (On Maintenance
as a whole)
</Table>
FIGURE 10. ROLES AND RESPONSIBILITIES
ENTERPRISE SYSTEMS ARCHITECT
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An Enterprise Systems Architect would provide the technology direction for CalPX
projects. This Associate would:
o Establish the current and the future system architecture.
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o Define IT standards to avoid multiple platforms, database types, and
development languages.
o Evaluate and select tools and products.
o Review, assist, and approve the technical architecture for all new
applications.
o Suggest consolidation or migration of applications to establish
integrated system architecture.
SYSTEMS PROCESS IMPROVEMENT
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Our systems process improvement activities would enable continuous systems
process improvement within CalPX's IT division. It would establish processes and
ensure that they are implemented within all projects. The three key process
areas on which we would focus are:
o Requirements management
o Project planning
o Project tracking and oversight
Software process improvement responsibilities would include:
o Customize and ensure implementation of the Project Management
Methodology to enable the key process areas.
o Communicate standards under which all projects are to be managed.
o Establish a common language and terminology with common methods across
all projects.
o Determine the process to measure productivity and establish metrics.
QUALITY ASSURANCE
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Quality assurance personnel will perform integration & regression testing on
applications before they are placed into production. This activity would include
new development and maintenance or enhancements to existing systems.
Currently, TestMasters contractors are used to perform a part of this activity,
and they report into Computer Operations organization. We propose to integrate
Quality Assurance as part of Applications Development & Support organization.
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Initially, we would use contractors from TestMasters under Perot Systems'
direction, as part of the existing contractual arrangement with CalPX. This
relationship and the direction of quality assurance in the future represent an
opportunity for additional cost savings.
APPLICATION CHALLENGES ADDRESSED
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In the current environment discussion, several application challenges were
identified. The table below summarizes those challenges and how our proposal
addresses them.
<Table>
<Caption>
CHALLENGE HOW ADDRESSED
- ----------------------------------- ---------------------------------------------
Communications between IT and the Change Review Board, IT Steering Committee,
business areas Program Management, Business Consultants,
Systems Process Improvement
Lack of complete IT project plan Program Management
No time recording, project accounting Implement Project Accounting
Project funding Change Review Board
Roles and responsibilities Program Management, Systems Process
Improvement
IT activity in Business Units Partially addressed; additional future opportunity
Applications standards Enterprise Systems Architect, Systems Process
Improvement
Configuration management Enterprise Systems Architect, Systems Process
Improvement
</Table>
FIGURE 11. APPLICATION CHALLENGES
COMPUTER OPERATIONS
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The Computer Operations team provides CalPX with 24-hour coverage and support
365 days a year to ensure that the established business service levels are met.
Operation teams report daily on service levels key to management. Frequent
meetings are also held in the areas of problem, configuration, and change
management to communicate changes to the appropriate business unit
representatives.
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Perot Systems will remotely operate the CalPX systems located in Alhambra,
California. The Level I Help Desk will remain in Alhambra. The operating system
administration, Sybase and SQL Server database support, performance and tuning,
and capacity planning will all be supported from our nationwide support center
in Dallas, Texas. This technical support team has over 650 technicians that are
available to support CAlPX's needs.
Perot Systems will be responsible for maintaining and enhancing automated
operations processes and procedures for all computing environments, including
system software, online applications, and batch, tape, and print operations.
Perot Systems' Operations team operates in a fully automated operations
environment using adopting an Enterprise System Management approach. This
approach allows for single point-of-control monitors, alerts, and
proactive reactions for the entire enterprise, regardless of the devices and
platforms it contains. From one powerful, centralized workstation, we provide
you with a consolidated, integrated view of all the elements and management
systems in the enterprise (including the Help Desk, data center, and technical
support). This standard view allows for the most efficient use of human
resources across all support groups.
Business and technology rules dictate how system management activities can be
managed in the computing center. Through centralized alert and event
management, we can proactively address activities. Client/server technology and
software allow for the integration of system management activities necessary to
efficiently manage complex centralized and distributed systems.
REMOTE OPERATIONS
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Perot Systems engages several enterprise operations management initiatives by
way of a remote operations model. This model allows us to maintain a
centralized, well-trained support organization in Dallas managing customer
systems located across the geography.
A wide-area network connection between the CalPX computing center in Alhambra
and Perot Systems' Richardson Information Management Facility (RIMF) outside of
Dallas would facilitate a remote operations scenario.
A Level I CalPX operations support staff located in Alhambra would perform
local operations functions associated with systems management of the onsite
processors, such as tape mounts and system reboots. After-hours and off-shift
support -- including system monitoring, troubleshooting, problem management
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and escalation, and performance and capacity management functions -- would be
performed by a remote Level 2 support team in Dallas.
DESKTOP SUPPORT AND HELP DESK SERVICES
Perot Systems designs, deploys, and operates a wide range of Help Desk and
desktop support environments for some of our largest clients, including an
international Car Rental, one of our largest construction companies in the
world, and one of the largest healthcare organization in the U.S. The Help
Desks we operate receive more than 200,000 inbound calls and track over 100,000
trouble tickets each month. These environments are located at Perot Systems and
client facilities around the world.
As Figure 12 illustrates, Perot Systems believes that the Help Desk is
positioned in the middle of service delivery -- that problem ownership should
begin and end there -- and that the Help Desk must be closely coupled with the
desktop service provision.
[FIGURE 12. CENTRALIZED LEVEL 1 HELP DESK SUPPORT]
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Further, we have aided many of our clients in reducing their total cost of
ownership for desktops by employing desktop standardization projects, or
thin-client solutions. We provide application and technical assistance services
to our Help Desk clients' users 24 hours per day, 365 days a year, or as
required.
HELP DESK TRAINING
Perot Systems provides ongoing training in various disciplines. Perot Systems
maintains that the more knowledgeable the Help Desk Associates are, the more
capable they will be in providing immediate resolutions. The knowledge base is
very broad, but a combination of specialization and cross training continually
increases the capabilities of the staff.
HELP DESK AUTOMATION
We meet and exceed customer expectations by combining technology and automation
tools. By using these tools, the Help Desk personnel are empowered to assist the
customer with greater productivity and an increased quality of service. The
tools that Perot Systems has implemented include;
o Enterprise System Management - Tivoli products
o Problem and change management system
o Customer service system (CSS)
o Automatic call distribution (ACD) system
o Voice response capability system
o Automated terminal reset system
o Alpha paging system
o Performance and utilization monitoring system
o Call traffic monitoring system
o Customer notification system
VENDOR MANAGEMENT
CalPX IT is currently working with a number of vendors such as MCI for network
services and IBM for desktop procurement and support. Perot Systems will act as
the primary interface with all CalPX IT vendors, as identified by CalPX, to
ensure contract compliance. The services provided by these vendors
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will be managed, maintained and coordinated for the term of the existing
contract and evaluated for renewal at that time. CalPX will remain responsible
for financial obligations of these contracts.
CUSTOMER DATA ADMINISTRATION (POWERBASE APPLICATION)
Perot System will assume the day-to-day responsibility of maintaining the Market
Participant master file through "Master/Master" database and as part of
PowerBase application maintenance.
TECHNICAL SERVICES
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The technology services that we provide to support CalPX's systems include Unix
system administration, database administration, NT administration and support,
monitoring system performance, projecting future business needs, and developing
capacity plans.
UNIX/VMS/NT SYSTEM ADMINISTRATION
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UNIX, VMS, and NT system administration consists of primarily the same tasks,
regardless of the platform. These tasks include system installation and
configuration; user creation; disk/storage management; patch management; problem
management and resolution; operation system, software, and hardware upgrades;
backup administration; system monitoring; system security; performance
monitoring and tuning; and capacity planning. Some of these tasks are
self-explanatory. A brief description of some of the others follows.
System monitoring is accomplished in several ways. Manual or visual checks of
the systems on a periodic basis can identify events such as a disk in a RAID
array that has failed. Scripts or shell programs can check for a variety of
error or warning conditions that are not necessarily visible. Some of these
conditions may include one fiber channel to a disk RAID going down when there
are multiple paths to that array, or a tape drive that may have downed itself
in a tape library. These scripts can be scheduled to run through, for example,
cron on a UNIX system to give timely notification of a particular event.
A third method to accomplish system monitoring is through the use of
third-party software. Tivoli software products are the Perot Systems' standard
for Enterprise
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System Management (ESM). Tivoli has "out of the box" monitors that allow system
administrators to define certain thresholds for event notification. The scripts
mentioned above can interface with Tivoli as well. Tivoli can also interface
with Remedy software to automatically create problem tickets in the event that a
defined error or warning condition has occurred.
System security deals with eliminating unauthorized access to the systems. This
can be accomplished both manually and with security applications. Performing
system security manually includes instituting having standards and procedures
for user account creation and administration, monitoring system logs for
intrusions, performing intrusion recovery in the case of an event, and verifying
the integrity of system configuration files. Security applications can perform
many of the menial security tasks more efficiently, as well as controlling user
access more effectively, and can take specified actions when an intrusion is
detected.
DATABASE ADMINISTRATION
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Database administration consists of three main activities; database maintenance,
enhancements, and design. The purpose of database maintenance is to maintain the
day-to-day operation of production databases within the scope of available
system resources and to provide a rudimentary analysis of impending problems and
corresponding recommendations. Some of the database maintenance activities
include upgrades to the database to fix known bugs, management space, backup and
recovery, database security administration, and database performance monitoring.
Some examples of database enhancements could include the additional effort
arising from inadequate database design by other vendors. Additionally, we would
recommend performance and scalability improvements, defragment poorly designed
databases or incomplete purge/archive strategy, upgrade certain tools to their
latest release to enhance their use, and migrate databases from one platform or
location to another.
Database design falls into two main categories; database and application design.
Database design involves the physical structure and size of the database.
Following the optimal file architecture structure, the physical design is based
on the hardware configuration of the server hosting the database. This involves
laying out the required files (data, index, control, and online redo files) to
maximize performance. By balancing the I/O across the controllers & disks, the
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I/O bottleneck can be reduced. This also involves sizing the files based on the
application requirement.
Application design involves understanding the business requirement and setting
up the schema (tables, indexes, and referential integrity) so that all the
business requirement data are stored and are consistent throughout the database.
It also involves security data management of certain critical business data.
SYSTEM AND PERFORMANCE MONITORING
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Performance monitoring consists of collecting, charting and graphing performance
data gathered through a data collection application, such as SAR or MeasureWare.
Based on specific requirements, specific data can be graphed on a daily or
weekly basis to give a view into how the system and/or database is performing.
Based on this performance data, the system administrator can tune the operating
system, I/O, and network parameters to improve overall system performance and
response.
CAPACITY PLANNING
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Capacity planning takes the performance data collected above and tracks it over
time, typically monthly. Reports and graphs are produced to explain what is
happening on the system and why certain trends or blips may have occurred. An
example of these reports and graphs might show memory utilization relative to
the number of users logged on to the system. By combining several months' worth
of capacity data, long-term trends can be seen that can affect business needs
and decisions.
SERVICE LEVEL AGREEMENTS
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Perot Systems uses service level agreements on all operational services-related
accounts, as well as most project-related accounts. These service level
agreements align the IT needs of our clients' business with the IT service being
provided. Perot Systems follows a basic process for defining these service
levels with the client's business drivers continually guiding the process. The
process can be summarized as follows:
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o Understand and document IT services utilized directly by the customer
and the associated business impacts or criticality of those services.
o Define service requirements in client terms for the top-priority IT
services.
o Translate these service requirements to internal IT specifications.
o Assess the impact of service requirements on cost.
o Agree and document service level agreements.
o Establish reporting and review process.
This relatively simple process helps Perot Systems and our clients to develop
service levels that are meaningful to the performance of the business and not
just meaningful to the performance of individual IT components.
In terms of specific service level measurements in each of the areas described,
it is difficult to establish the most meaningful measurements without
completing the process described above. In the absence of specific proposed
measures, the following sections provide possible measures as well as some
example service level measures we have used within other client environments.
In regard to the question of why a given service level would be used, the
answer is inherently built into our process of service level development. Only
those service levels that translate to a meaningful impact on the client's
business are recommended. See Appendix C for a sample service level agreement.
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PLAN AND SCHEDULE
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We propose to provide IT program management, applications development and
computer operations services to CalPX for a period of 36 months starting with
the execution of the Services Contract, which is expected to be around October
18, 1999. Our proposal calls for a phased transfer of CalPX IT services to
Perot Systems according to the timetable depicted in Figure 13, which provides
our critical milestones and timeline.
According to our schedule:
1. CalPX and Perot Systems will start the Services Contract negotiations
immediately after the acceptance of this proposal by CalPX.
2. We foresee contract negotiations to last for about one month during
which time Perot Systems will conduct a due diligence study under the
existing Task Order 5 between CalPX and Perot Systems. All funds
collected for the due diligence study will be credited to CalPX should
CalPX agree with the Services Contract with Perot Systems. Once
signed, the Services Contract will supercede Task Order 5.
3. We would start the transition of all program management and
applications development services to Perot Systems immediately after
the Services Contract is signed. This transition, described later in
this proposal, is expected to last one month.
4. At the end of the transition time period IT program management and IT
applications development services for CalPX will be provided by Perot
Systems.
5. We would conduct a careful study of the computer operations starting
with month three and completing by month six. At the same time period
we will conduct a series of studies as indicated in Appendix B of this
proposal. At the end of this time period either party may decide not
to agree with the transfer of computer operations to Perot Systems.
Lack of acceptance, if any, will have no bearing on the transfer of
program management and applications development services to Perot
Systems.
6. Should both parties agree to transfer computer operations services to
Perot Systems, we would transition computer operations to Perot
Systems over one month time period during month six.
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FIGURE 13. CALPX IT SERVICE PROVISION IMPLEMENTATION TIMELINE
Figure 14 represents the breakdown of roles and responsibilities between CalPX
and Perot Systems.
<Table>
<Caption>
FUNCTION CALPX PEROT SYSTEMS
- -------- ----- -------------
Business Needs Communicate Propose
Business Growth Forecast Implications
Service Levels Establish Achieve
Information Security Define Enforce
Applications Needs Specify Integrate
Information Issues Identify Resolve
People Transition Select Develop
Industry Knowledge Vertically Horizontally
Competency Consumer Technology
Contingency Plans Specify Execute
Technology Base Defines Supports
New Business Create Enable
</Table>
FIGURE 14. ALLOCATION OF ROLES AND RESPONSIBILITIES
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This table (Figure 14) is meant to emphasize CalPX's role in this partnership.
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FINANCIAL SUMMARY
PRICING
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Our pricing is meant to help CalPX with predictability of its IT expenditure
while greatly improving business systems' reliability and enhanced service. In
short, our pricing is as follows:
1. Starting with the transition period for transfer of program management and
applications development to services Perot Systems, CalPX will pay Perot
Systems one million dollars ($1M) per month for the services of up to 50
Perot Systems' associates and contractors. This payment will also cover all
travel costs to the Los Angeles area for these 50 associates and
contractors - but will not cover travel costs outside the Los Angeles area
on CalPX business. Services of additional Perot Systems associates will be
charged on time and material basis using Perot System's published rates for
such resources at a 25% discount. This will include additional services
rendered for studies enumerated in Appendix B.
2. Starting with the transition period for transfer of computer operations to
Perot Systems, CalPX will pay Perot Systems one million three hundred and
fifty thousand dollars ($1.35M) per month adjusted annually based on IT
Salary Index for the services of up to 70 Perot Systems associates and
contractors. This payment will cover all travel costs to the Los Angeles
area for these 70 associates and contractors - but will not cover travel
costs outside the Los Angeles area on CalPX business. Services of
additional Perot Systems associates and contractors will be charged on time
and material basis using Perot System's published rates for such resources
less a 25% discount.
3. If computer operations services are not transferred to Perot Systems, CalPX
will continue to pay Perot Systems one million dollars ($1M) per month
adjusted annually based on IT Salary Index for the services of up to 50
Perot Systems associates and contractors. The remaining pricing features
will remain the same as clause 1 above.
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BENEFITS
As we indicated earlier our proposed solution will enable CalPX to have
predictable IT performance and cost and to have the flexibility to address
CalPX business requirements in California and beyond. In addition, we believe
that our solution will bring substantial savings to CalPX in its current IT
expenditure.
The following table compares the cost of our solution with what we have
estimated to be the baseline CalPX IT expenditure under status quo -- we have
conservatively assumed that CalPX baseline IT expenditure will remain constant
over the next three years. The table shows a saving of more than six million
dollars ($6M) over the next 3 years for CalPX.
YEAR 1 YEAR 2 YEAR 3 TOTAL
----------- ----------- ----------- -----------
CalPX Current Baseline IT
Expenditure $18,742,000 $18,742,100 $18,742,100 $56,226,200
----------- ----------- ----------- -----------
Payments to Perot System $14,530,000 $16,200,000 $16,200,000 $46,930,000
CalPX Retained costs $ 2,986,000 $ 117,400 $ 117,400 $ 3,220,800
----------- ----------- ----------- -----------
Total Perot Solution Cost $17,516,000 $16,317,400 $16,317,400 $50,150,800
----------- ----------- ----------- -----------
SAVINGS FOR CALPX $ 1,226,000 $ 2,424,700 $ 2,424,700 $ 6,075,400
=========== =========== =========== ===========
FIGURE 15. PRICING BREAKDOWN
We believe that there are other substantial savings that can be realized through
our solution. These are:
o Saving in the cost of major financial liability for CalPX due to what we
believe to be an inevitable major system crash at CalPX in the foreseeable
future;
o Savings due to potential restructuring of MCI and IBM contracts;
o Savings due to the potential for housing the entire CalPX staff in Pasadena
that could result from streamlining if IT personnel and equipment; and
o Saving due to potential elimination of backup disaster recovery site at
Folsom; and
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o Savings due to total consolidation of all IT services and elimination
of all "phantom IT organisms" throughout the company.
CALPX BASELINE IT EXPENDITURE
The CalPX baseline IT costs consist of salaries for employees and contractors
from the following groups;
o Business systems planning
o Data administration
o Computer operations
o Application development (includes Perot Systems' team)
o 75% of the capital budget (IT Labor)
o Specifically identified IT resources at Trading (3 people) and
Settlements (3 people) groups
This baseline expenditure excludes, among other expenses, those related to the
hardware/software purchases and vendor contracts such as MCI and IBM and
Test-Masters. Should CalPX desire, Perot Systems can act as its agent for
purchase of hardware and software products and licenses and pass through its
corporate savings, less 5% administrative fee on purchase value, to CalPX.
The CalPX retained costs are costs not being transferred to Perot Systems as a
result of transition.
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APPENDIX A: PEROT SYSTEMS' QUALIFICATIONS
In the following we describe a few of our business relationships in order to
illustrate our strength, breadth of experience and capabilities. We can expand
the list of our relationships to cover numerous other examples should CalPX
require that.
NORTH AMERICAN INDEPENDENT SYSTEM OPERATOR (ISO)
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In March of 1997, Perot Systems formed a partnership with a major EMS vendor,
taking on the challenge of implementing the Bidding, Scheduling, Settlement,
Billing, and Administration systems for the first ISO in North America. Perot
Systems was responsible for the overall program management and delivery effort,
including system integration, testing, documentation, and training of the
market participants. This effort resulted in a record-time delivery of the ISO
systems in less than one year.
The ISO successfully started its operation on schedule and has been
successfully managing the use of the transmission grid for more than a year
thanks to the business and technology solutions that we developed for it. The
systems developed by Perot Systems Corporation and its partners has enabled the
ISO to smoothly conduct its business scheduling energy transactions, conducting
ancillary services and real-time energy auctions, and settling electricity
trades.
NORTH AMERICAN RELIABILITY COORDINATOR
- --------------------------------------------------------------------------------
Perot Systems, along with a partner, took on the responsibility to develop an
Interchange Distribution Calculator (IDC) for a North American Reliability
Council. This project included a rigorous acceptance-testing requirement. The
IDC testing including the following steps in accordance with a test plan:
o Functional Test
o Performance Test
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o Fail-Over Test
o Y2K Test
o Customer Test
o Operational Dry Run Test
Given the short time frame available until the target Service Date, the scope of
these tests were contained to fit the available time. All the testing was
conducted using available data provided by the customer.
INTERNATIONAL CAR RENTAL COMPANY
- --------------------------------------------------------------------------------
With a long-term strategy for growth, an international car rental company,
serving clients worldwide with a 250,000-vehicle fleet, realized a need to
upgrade its network infrastructure. This company came to Perot Systems because
they wanted a partner who understands how much a reliable network means to their
business goals.
Companies require networks that work transparently--networks that let their
CIOs sleep at night.
INFRASTRUCTURE TO SUPPORT A CLIENT/SERVER-BASED CAR RENTAL SYSTEM
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Part of the client's long-term growth strategy was to implement a new
client/server-based car rental system, based on technology developed by Perot
Systems, to accommodate the increased business. They needed to get online as
soon as possible--or risk losing some of the opportunities presented by their
growth strategy.
Getting online required a transition from a network based on dumb terminals and
IBM 3270 mainframe controllers to a frame-relay-based client/server environment.
The client needed to install over 6,000 Windows NT workstations. In order to
support these workstations, Perot Systems built a network infrastructure from
the
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ground up to replace the IBM 3270-based network. We worked with them to set up a
backbone for the network to serve their widespread locations through our
Dallas-based data center, with alternate routes to backup data at a Florida
location--because having reliable, continuous access to their data was
mission-critical for the client. A frame-relay network was established, and
Cisco routers were installed in most locations.
FLEXIBILITY, RELIABILITY, AFFORDABILITY, AND TIMELINESS
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We built flexibility into the client's network design, knowing that each of
their locations had unique business needs that might not always fit into a
static architecture design. For example, at some remote car rental stations, it
was impractical to sustain a full-fledged frame-relay connection to the
network. So instead of forcing these stations to operate inefficient network
connections, we installed ISDN lines, which provide less bandwidth but cost
less than half of what a frame-relay connection would cost.
In other locations, especially in remote areas, gaining access to the data
route that would connect to the data center was a concern. We leveraged our
relationships with data carriers to set up network-to-network interfaces across
multiple carriers to gain access at the lowest possible cost. Plus, for some of
the client's mission-critical locations, Perot Systems installed redundant
network service in the event of a carrier outage--providing reliable routes to
data if one of their network providers faced an outage.
By moving to this new frame-relay network, the client increased their bandwidth
by over 400%--and saw their network costs drop by over 25 percent.
Installing a network backbone like this is not an unusual task. But this client
asked Perot Systems to complete this transition as quickly as possible. With
more than 600 locations throughout the United States, a team would typically
take over a year to finish the work. To help the client meet their business
goals and start using its network, the project was completed in three months.
The Client was rapidly able to take advantage of the benefits of a reliable,
consistent network backbone.
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OBJECTIVES
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o Roll out new network architecture to accommodate a new car rental
system--quickly.
o Lower technology costs.
o Create flexible, expandable network architecture to accommodate rapid
growth projections and multiprotocol requirements.
CHALLENGES
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o With locations scattered throughout the United States, meeting the
client's timeframe would require dealing with network issues much more
quickly than usual.
o It was impractical to install a traditional frame-relay network
connection at some remote locations, yet alternate connection methods
are not always stable.
o Interfaces with global distribution systems (Sabre, WorldSpan, Galileo,
and Amadeus) through a client/server-based system are not always stable.
o Network response times for curbside check-in devices, which are used
throughout the network, might decrease with a different network
architecture.
IMPACT
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o Timely United States roll-out of over 6,000 Windows NT workstations, 160
Windows NT servers, 1,400 printers, 700 Cisco routers, and a frame-relay
network across 600 sites in 50 states, all connected to a Texas data
center, 10 regional hub sites, and a second data center in Florida--plus
additional equipment at 70 locations in Canada. Completed in three
months, compared to a typical roll-out time of over a year.
o Bandwidth increased by over four times at 75% of the cost of previous
network access fees.
o Remote locations connected affordably and with reliability above
average.
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o Interconnections to global distribution systems and hand-held devices
performed with reliability above average.
o Redundant backup systems and network connections keep the client's
critical sites up and running no matter what.
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APPENDIX B: ADDITIONAL PROJECTS
The following section describes services that Perot Systems could provide
beyond the scope of this baseline proposal. Perot Systems views this service
offering as a business partnership. Our commitment to go beyond simply meeting
client requirements to exceeding them is evident throughout the document and
our current engagement at CalPX. Perot Systems is committed to not only exceed
the stated requirements, but also to assist its business partners in developing
new opportunities. In this vein, we present the following areas of opportunity
that add value beyond the stated baseline offering.
ESTABLISH A NETWORK SECURITY BASELINE AND PROCEDURES
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CalPX's most valuable asset -- its corporate data -- may be at risk. Perot
Systems recommends a Security Posture Assessment be performed to determine
vulnerabilities in the network infrastructure from the inside and outside.
Perot Systems will perform a comprehensive Security Posture Assessment from
inside (intranet, server platforms, and desktops) and outside (Internet, remote
access, and extranet) the CalPX network. We will use industry-proven network
probes and analysis tools (ISS Scanner and Cicso Netsonar) to non-intrusively
collect data about the network. We will then deliver detailed reports
identifying security weakness and recommendations for improved security
procedures for applications and the infrastructure.
Additionally, Perot Systems industry-certified security engineers can consult
on or help with the development and installation of products recommended from
the results of assessment.
By performing this assessment and following the resultant recommendations,
CalPX will:
o Understand the current "holes" in the existing corporate security
systems.
o Develop a policy-driven security process tailored to CalPX's needs.
o Eliminate the opportunity for unwarranted access into the enterprise
network.
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o Automate the monitoring and control process used for internal security
access.
o Implement best-of-breed industry tools around a standard network
architecture.
ESTABLISH SYSTEM AND DATABASE SECURITY BASELINES AND PROCEDURES
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As CalPX becomes more and more Web-enabled, it becomes essential to address all
levels of security: the communication level, the network level and the
application level. Applying only network security and communication security
safeguards is not enough to fully protect an E-business site. Application level
security must be addressed as well.
After assessing CalPX business, we propose to establish the minimal level of
application security baseline. An application security policy would be devised
that will define the security baseline. We will then, define procedures to
implement the selected level of security. All applications would need to adhere
to the security baseline by following these procedures.
To enable the necessary security level within the existing applications, these
applications would be assessed to identify gaps and validate their conformance
to the security baseline. The effort, cost and timeline to make non-compliant
applications conform to security baseline will be determined and plan presented
to Change Review Board for implementation approval.
CONSOLIDATE APPLICATION TESTING
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By implementing Perot Systems' standardized policies and procedures, including
the implementation of a formal change review process, CalPX will gain
additional opportunities to perform applications testing. Scheduled releases of
existing and new applications will follow standardized test scripts operating
in an independent controlled test environment. Further efficiencies may be
gained by leveraging automated testing.
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Currently, TestMasters contractors are used to perform a part of this activity,
and they report into Computer Operations organization. We propose to integrate
Quality Assurance as part of Applications Development & Support organization.
Initially, we would use contractors from TestMasters under Perot Systems'
direction, as part of the existing contractual arrangement with CalPX. This
relationship and the direction of quality assurance in the future represent an
opportunity for additional cost savings.
DEVELOP APPLICATION SECURITY BASELINES AND PROCEDURES
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We propose to conduct a security assessment which will identify gaps in the
existing security controls used at CalPX. Once these gaps are identified we
will create appropriate plans for corrective action.
CONDUCT A DISASTER RECOVERY ASSESSMENT INCLUDING A REVIEW OF FOLSOM BACK-UP SITE
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Disaster Planning has now expanded from the traditional mainframe arena to
include distributed processing, end-user computing, and local and wide area
networks. This means that much of the critical information -- and the means to
maintain and process this information -- are under the direct control of the
separate business units of the organization. Protecting centralized computer
operations (disaster recovery) remains important but is not sufficient to meet
current needs. Business continuity management and planning requires
corporate-wide emphasis and must address all of the critical business functions
throughout the corporation. Perot Systems will review CalPX's current disaster
recovery architecture plan, including the role of the Folsom backup site, and
suggest additions to improve the current plan, as well as adding new features
for a client/server environment, and implement backup systems and processes as
deemed necessary. It is plausible that a much improved backup feature, in lieu
of facilities at Folsom could be identified as a result of this review.
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CONSOLIDATE OPERATING SYSTEM PLATFORMS AND DATABASES
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Perot Systems will study the physical systems and the utilization of those
systems and databases to assess the need for either consolidation or upgrades
of systems. Additionally, we will use this assessment to determine how to
better utilize the database structures and design.
DEVELOP AND IMPLEMENT AN IT SERVICES CHARGE-BACK PROCESS
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The cost of IT services is typically supported by the business units that
require those services. Today, IT is a competitive to CalPX. One way to fund
these costs is to develop a charge back or allocation system that tracks and
charges each business unit based on their usage/demand of IT services.
REVIEW OF MCI AND IBM CONTRACTS
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Perot Systems will review the existing MCI and IBM contracts to identify all
areas where savings in such contracts could be achieved. We will, to the extent
possible, attempt to leverage our extensive relationship with such vendors to
realize all possible savings in these existing contracts. We could also expand
this review to cover other CalPX vendors.
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APPENDIX C: SAMPLE SERVICE LEVEL AGREEMENT
The following document provides a sample service level agreement (SLA). A final
SLA would be customized for CalPX.
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