Common use of Views of ATCO Clause in Contracts

Views of ATCO. ATCO submitted the only area that had changed from the Original MSA approved in Decision 2002-069 was the treatment of IP ownership. XXXX argued the ownership of IP rights was irrelevant. ATCO submitted that the ATCO Utilities, their CIO and the balance of the ATCO Group have moved away from more costly, custom-built products to reliance upon commercially available third party products. The practical focus of concern, therefore, has shifted from ownership, which was largely irrelevant in that 47 Transcript, page 494 to 495 context, to ensuring the right to use the IP in question. ATCO submitted that right was assured. XXXX suggested that no one appeared to question that fact as it related to third party products. ATCO submitted that, with respect to custom-built IP, the statement of work mechanism under the agreement provided the ATCO Utilities with the right (but not the obligation) to own the IP if they so desired. XXXX suggested that this method of dealing with IP rights was prudent since, as Xx. Xxxxxxxx noted, the FMV of the contract may well be higher if the client required ownership of all IP rights. ATCO argued that if the ATCO Utilities wished to retain ownership to any custom developed IP they could do so through the statement of work procedure. ATCO argued the ATCO Utilities retained access to all IP following contract termination without exception. ATCO suggested the changes made from the Original MSA with respect to IP were made to allow the Renewal MSA to deal more appropriately with the vast majority of projects that involved the implementation and integration of third party commercial software. As Xx. Xxxxxx noted, the ATCO Group of companies licensed the right to use these third party software products for the ATCO Group of companies, including subsidiaries and affiliates.48 This right to use third party software survived termination of the service contract with any service provider. For any other IP created for the ATCO Utilities under the Renewal MSA, ATCO suggested the ATCO Utilities had the right to use that IP at no cost for as long as it is required for utility purposes. XXXX also suggested that the ATCO Utilities could elect to own the IP from any specific custom development by so electing at the time of approving the statement of work. ATCO suggested the ATCO Utilities IT strategy was to “buy not build” wherever possible, and as a result securing the right to use IP was more important than trying to secure the ownership of all IP.

Views of ATCO. The ATCO Utilities submitted that the only area record in this proceeding supported their conclusion that had changed from the changes made were in the nature of clarifications and a streamlining of a successful and cooperative relationship between ATCO I-Tek and its customers. The ATCO Utilities took exception to the continuing characterization by Calgary, of the Renewal MSA as new despite their testimony under oath that the renewal agreement was a mutual modification or “tweaking” of the Original MSA approved for improvement and clarification purposes. 24 XXXX argued that Calgary’s concerns regarding the ‘non-standard’ nature of the Renewal MSA could not be verified due to the inability of the Calgary witnesses to produce a standard contract. ATCO suggested it was not possible to understand the full context of Xx. Xxxxxxxx’ transactions and what balancing of terms and conditions took place in Decision 2002-069 the give and take of negotiation between the arms length parties to those transactions. The mere fact that Xx. Xxxxxxxx provided in each of her Schedules, four separate sets of sample language, which varied depending upon the nature of the businesses conducted by the contracting parties, belied any suggestion that “standard” contract language was used in the outsourcing industry, in ATCO’s view. Further, though allegedly “standardized”, none of Xx. Xxxxxxxx’ clients were prepared to release their agreements. ATCO referenced Xx. Xxxxxxxx’x suggestion that Xx. Xxxxxxxx’ clients provided their agreements with financial and pricing information deleted, and of how he was told that it was the treatment balance of IP ownershipthe “standardized” terms and conditions which were thought to represent the “competitive advantage”.25 In ATCO’s view, it was difficult to consider that such outsourcing agreements represented standardized agreements when they appeared to be customized agreements with competitive value. XXXX argued concluded with respect to the ownership terms and conditions of IP rights the Renewal MSA, that both Calgary and FIRM/NCC had chosen to selectively deal with only portions of the Renewal MSA in an attempt to create issues or concerns. ATCO considered the entire agreement to be prudent and practical. As Xx. Xxxxxxx indicated with respect to potential clarifications and amendments to the Renewal MSA, individually, such clarifications and amendments may not be an issue but cumulatively their effect raised serious questions about the nature and extent of regulatory supervision.26 The ATCO Utilities also disagreed with Calgary’s rationale for interpreting the Renewal MSA as a new MSA. ATCO took issue with Calgary’s assertion that since the old agreement had not reached the end of the initial term of five years, the agreement could not be considered a renewal. XXXX suggested Calgary’s interpretation ignored the renewal clause in the Original MSA which clearly stated that “on the third anniversary of the initial term, Client shall have the right to extend the contract for another three year term”.27 [emphasis added] 24 Transcript, page 128 and page 171 25 Transcript, page 330 and pages 379 - 380 26 Transcript, page 249 to page 250‌ 27 Exhibit 501, Clause 12.2 XXXX suggested that a review of Article 15 identified that the term of the Renewal MSA was irrelevantfive years.28 That five years was the last two years under the Original MSA, combined with the three years of the first extension period. The renewal of the MSA was structured to provide the Utilities with a “rolling five-year term” that was re-established every three years. ATCO submitted that this process was the ATCO Utilities, their CIO same as the term and the balance of the ATCO Group have moved away from more costly, custom-built products to reliance upon commercially available third party products. The practical focus of concern, therefore, has shifted from ownership, which was largely irrelevant in that 47 Transcript, page 494 to 495 context, to ensuring the right to use the IP in question. ATCO submitted that right was assured. XXXX suggested that no one appeared to question that fact as it related to third party products. ATCO submitted that, with respect to custom-built IP, the statement of work mechanism renewal process established under the agreement provided the ATCO Utilities with the right (but not the obligation) to own the IP if they so desired. XXXX suggested that this method of dealing with IP rights was prudent since, as Xx. Xxxxxxxx noted, the FMV of the contract may well be higher if the client required ownership of all IP rights. ATCO argued that if the ATCO Utilities wished to retain ownership to any custom developed IP they could do so through the statement of work procedure. ATCO argued the ATCO Utilities retained access to all IP following contract termination without exception. ATCO suggested the changes made from the Original MSA with respect to IP and indicated that there were made to allow the Renewal MSA to deal more appropriately with the vast majority of projects that involved the implementation and integration of third party commercial software. As Xx. Xxxxxx noted, the ATCO Group of companies licensed the right to use these third party software products for the ATCO Group of companies, including subsidiaries and affiliates.48 This right to use third party software survived termination of the service contract with any service provider. For any other IP created for the ATCO Utilities under the Renewal MSA, ATCO suggested the ATCO Utilities had the right to use that IP at no cost for as long as it is required for utility purposes. XXXX also suggested that the ATCO Utilities could elect to own the IP from any specific custom development by so electing at the time of approving the statement of work. ATCO suggested the ATCO Utilities IT strategy was to “buy not build” wherever possible, and as a result securing the right to use IP was more important than trying to secure the ownership of all IPmaterial changes in this respect.

Views of ATCO. ATCO submitted that the ATCO Utilities were happy with their relationship with their technology services provider97, and that there have been none of the serious problems with customer xxxxxxxx that have afflicted other Alberta energy market players. XXXX suggested this successful relationship, which has evolved as a result of their result-oriented approach, should be encouraged. The process of continuous improvement reflected in the Renewal MSA should not now be impeded or distracted by “sewing on” language or requirements borrowed from a more 97 Transcript, page 134 rigid, legalistic approach. XXXX argued that while it was still not clear whether Calgary proposed wording changes to the Renewal MSA, the ATCO Utilities believed that importing other people’s approaches to their relationship with ATCO I-Tek threatened the coherence and success of their entire relationship. The ATCO Utilities’ witnesses explained the balance and rationale underlying, not just the changes reflected in the Renewal MSA, but the entire approach to the Utilities’ particular needs and circumstances. ATCO stated that the Calgary evidence was clear and unmistakable about one point – there was no industry standard or magic way of wording contracts or pricing these services98. These types of contracts were carefully crafted to the particular circumstances of the client and the outsourcer which included, as Xx. Xxxxxxxx highlighted, the existing corporate organization, its technology, management structure and the like. Xx. Xxxxxxxx also indicated that outsourcing agreements were customized to such a degree, that they were viewed as commercially sensitive by outsourcers in the belief that they could represent a competitive advantage in the relevant marketplace.99 ATCO submitted these facts are important for two reasons. First, deference should be accorded management in their attempts to rearrange their affairs to coax maximum efficiency while ensuring reliable service, innovation and cost control. Second, the fact that these outsourcing agreements were customized and that contract language was not standard to the extent some companies actually considered it “a competitive advantage”, corroborated the ATCO Utilities’ position that benchmarkers were experienced at dealing with different approaches to the same types of problems, breaking them down and assessing value. To the extent that certain aspects of an outsourcing agreement may differ from others was not an issue. XXXX noted that Xx. Xxxxxx had directly participated in four price benchmarkings and over 10 cost benchmarkings, in addition to his extensive experience with other CIOs and technology officers.100 ATCO also noted that the ATCO I-Tek MSA itself has been previously benchmarked three times. XXXX noted that Xx. Xxxxxxxx had acknowledged that all the deals she participated in had price benchmarking in them.101 ATCO submitted that benchmarking was a fixture in the world of outsourcing and the provision of IT services generally. XXXX argued the Board should prefer the evidence of Xx. Xxxxxx and the ATCO organization whose achievements in the areas of innovation and cost control and the provision of IT services have been acknowledged.102 ATCO disagreed with Xx. Xxxxxxxx’ claims that the benchmarking result would not be a very accurate answer, specifically using a range of plus or minus five percent which he mistakenly translated into a margin of error of $25 million for the ATCO I-Tek contract.103 Xx. Xxxxxx noted that although benchmarking could be difficult for 10 to 15 percent of the ATCO I-Tek contract, where it is not a straightforward mapping of the service to the comparison database, the 98 ATCO-CAL(ALW).1; ATCO-CAL(ALW).8; Transcript, page 326 and page 328 99 Transcript, page 379‌ 100 Transcript, page 519 101 Transcript, page 488 102 Exhibit 503 103 Transcript, page 360 to page 361 benchmarkers could still arrive at a very good conclusion104. In fact he noted that this agreement has been successfully benchmarked in the past with a conclusion reached on every element105. While Xx. Xxxxxxxx made clear to Board counsel and the Chairman that the sample wording appended to her testimony were the “sorts of things that I would ask for”,106 ATCO argued that was hardly the basis upon which the appropriateness of the present terms and conditions should be judged. XXXX argued that lawyers were supposed to take instructions from their clients in order to serve the objectives identified by the clients; who, after all, were the ones accountable for their success or failure. An approach that might work for one client, would not necessarily work for another. ATCO submitted the Board should accord little weight to Xx. Xxxxxxxx’ testimony with respect to specific wording. XXXX argued that Xx. Xxxxxxxx explicitly recognized that only area the CIO and management would know how the prices of the services they seek to contract for would be affected by the different contract language and service levels. While lawyers may have interesting perspectives on these issues, it was ultimately for the management assisted by the CIO to determine – and to be held accountable for – the most effective mix of contract terms, services and service levels. ATCO maintained that utility customers should not be subjected to the higher prices that would result from contracting for higher service levels than necessary. Nor should utility customers provide financial concessions in order to secure participation in gains that they could secure by ensuring annually that the prices being charged were competitive with what was available in the market. In terms of “benchmarkability”, ATCO submitted that the Board should reflect on Xx. Xxxxxxxx’ testimony that all of the agreements she has worked on had changed from price benchmarking in them.107 Benchmarking was pervasive in the industry and in IT outsourcing. On a daily basis, benchmarkers must deal with differing fact situations and the contractual trade-offs parties negotiated in their many terms and conditions. That was the evidence of Xx. Xxxxxx. Accordingly, the ATCO Utilities asserted that the Renewal MSA was “benchmarkable”, as the Original MSA approved had already been benchmarked several times before. ATCO believed every outsourcer and their clients faced the same dilemma of objectively establishing FMV for the services being provided. This dilemma could arise because contracts may be in place over many years and prices may need to be reviewed over time. However the clients did not get access to the outsourcer’s costs, nor did they have an independent consultant looking over the shoulders of the benchmarker. Rather, the accepted practice was to choose a reputable benchmarker with a good methodology. XXXX suggested that the FIRM/NCC statement that, “as acknowledged by ATCO, many benchmarking studies are executed incorrectly resulting in misleading results”, was precisely why a benchmarking study could not be done by just anyone, but must be done by a reputable benchmarker. A reputable benchmarker would use a rigorous and disciplined methodology, a 104 Transcript, page 257 to page 258 105 Transcript, page 259 106 Transcript, page 478‌ 107 Transcript, page 488 number of data points for appropriate comparisons and reasonable ways to normalize the data collected so as to arrive at a like-for-like comparison. The ATCO Utilities submitted that the invitation to interveners to meet a number of reputable benchmarkers demonstrated transparency and cooperation. ATCO dismissed any suggestion that the ATCO Utilities somehow would buy off the benchmarker. ATCO argued that if ATCO I-Tek could influence the benchmarker, how could the rest of the industry and the hundreds of clients of IBM and EDS trust the benchmarking utilized in their contracts? As Xx. Xxxxxxxx noted, every one of her agreements has price benchmarking in them.108 ATCO responded to the FIRM/NCC suggestion that, “the price benchmarkings that Xx. Xxxxxx presumably participated in were those for I-Tek that were ultimately determined to be 7.5% too high in Decision 2002-069”. ATCO argued there was no evidence in Decision 2002-069 was that the treatment Board considered the benchmarking of IP ownershipATCO to be 7.5% too high, and in fact Table 12109 indicated how the Board arrived at its calculation of the 7.5% reduction. XXXX argued The Board had considered the ownership options available to it110 and used its own judgement and not on the results of IP rights was irrelevanta benchmark or any “direct evidence as to the discounts that should arise”. ATCO submitted that the ATCO Board itself directed that benchmarking be conducted in the future. In Decision 2002-069, “the Board directs ATCO, prior to any future material engagements of consultants to undertake a price review applicable to I-Tek and the regulated Utilities, their CIO and to file terms of reference applicable to the balance engagements.”111 ATCO suggested a review of the ATCO Group have moved away from more costlyterms of reference beforehand, custom-built products with Board input as necessary, was intended to reliance upon commercially available third party products. The practical focus safeguard the integrity of concern, therefore, has shifted from ownership, which was largely irrelevant in that 47 Transcript, page 494 to 495 context, to ensuring the right to use the IP in questionbenchmarking process. ATCO submitted that right Decision 2002-069 endorsed benchmarking. The ATCO Utilities expressed concern that both Calgary and FIRM/NCC were attempting to declare the MSA as non-industry standard, yet they could not produce the standard contract. ATCO suggested these interveners were attempting to use “roadblocks” to claim the agreement was assured. XXXX suggested that no one appeared not benchmarkable, yet benchmarking was used almost universally in the industry, and the reputable benchmarkers developed extensive and rigorous analytic methodologies to question that fact as it related ensure like- for-like comparisons to third party productsFMV prices. ATCO submitted that, with respect to custom-built IP, the statement of work mechanism under the agreement provided the ATCO Utilities with the right (but not the obligation) to own the IP if they so desired. XXXX suggested that this method of dealing with IP rights there was prudent since, as Xx. Xxxxxxxx noted, the FMV of the contract may well be higher if the client required ownership of all IP rights. ATCO argued that if the ATCO Utilities wished to retain ownership to any custom developed IP they could do so through the statement of work procedure. ATCO argued the ATCO Utilities retained access to all IP following contract termination without exception. ATCO suggested the changes made from the Original MSA with respect to IP were made to allow the Renewal MSA to deal more appropriately with the vast majority of projects that involved the implementation and integration of third party commercial software. As Xx. Xxxxxx noted, the ATCO Group of companies licensed the right to use these third party software products no need for the ATCO Group of companies, including subsidiaries and affiliates.48 This right Board to use third party software survived termination of the service contract with any service provider. For any other IP created for the ATCO Utilities under amend the Renewal MSA, ATCO suggested and that the Board should rely on the ATCO Utilities had the right to use that IP at no cost for as long as it is required for utility purposes. XXXX also suggested Utilities’ view that the ATCO Utilities benchmarker could elect to own adjust for any feature of the IP from any specific custom development by so electing at the time of approving the statement of workRenewal MSA. ATCO suggested the ATCO Utilities IT strategy considered there was to “buy not build” wherever possibleno industry standard contract, and as therefore there was no need to amend the Renewal MSA. Xx. Xxxxxxx also submitted that the Board could rely on a result securing prudence review, the right to use IP was more important than trying to secure results of which could be reflected in the ownership revenue requirement of all IP.the utility.112

Views of ATCO. The ATCO Utilities believed that the Collaborative Process could work provided that all parties were committed to a good faith effort to make it work.136 The ATCO Utilities submitted they were committed to finding ways to avoid constantly revisiting the Board to determine these issues. XXXX argued that while this initial effort at benchmarking might involve some trials and tribulations, completing the exercise was important to the future success of such efforts. ATCO submitted benchmarking was a well-accepted practice, pervasive in this industry and relied upon by regulators in many jurisdictions. ATCO suggested that if the Board developed a concern that any party was not exercising all reasonable efforts to cooperate in such a process, it certainly had the tools and the opportunity to make clear what it expected parties to do. ATCO submitted the only area Collaborative Process could restart with the Board’s decision in hand so that had changed from terms of reference could be formulated and a single professional benchmarking group selected. ATCO suggested the Original MSA approved presence of Board staff throughout the Collaborative Process would assist in ensuring that the parties were behaving reasonably in developing the proposed terms of reference. The ATCO Utilities submitted they did not expect that it would be necessary 136 Transcript, page 525 to revisit the Board with respect to the terms of reference, but in an extreme case, should it prove impossible to resolve material disagreements, a quick Board decision would be important. Following completion of the benchmarking exercise, the ATCO Utilities believed that a simple compliance filing should be all that was required to complete the exercise. The ATCO Utilities submitted they were trying to proceed to the benchmarking exercise they were directed to conduct in Decision 2002-069 was the treatment of IP ownership. XXXX argued the ownership of IP rights was irrelevant069. ATCO submitted that suggested everyone would benefit from the ATCO Utilities, their CIO and the balance Board’s reaffirmation of the ATCO Group have moved away from more costly, custom-built products to reliance upon commercially available third party products. The practical focus of concern, therefore, has shifted from ownership, which was largely irrelevant approach adopted in that 47 TranscriptDecision, page 494 to 495 context, to ensuring together with an expression of the right to use Board's satisfaction with the IP in question. ATCO submitted that right was assured. XXXX suggested that no one appeared to question that fact as it related to third party products. ATCO submitted that, with respect to custom-built IP, parameters of the statement of work mechanism under the agreement provided relationship between the ATCO Utilities with and ATCO I-Tek reflected in the right (but not the obligation) to own the IP if they so desired. XXXX suggested that this method of dealing with IP rights was prudent since, as Xx. Xxxxxxxx noted, the FMV of the contract may well be higher if the client required ownership of all IP rights. ATCO argued that if the ATCO Utilities wished to retain ownership to any custom developed IP they could do so through the statement of work procedure. ATCO argued the ATCO Utilities retained access to all IP following contract termination without exceptionRenewal MSA. ATCO suggested the changes made from Board should caution all parties that the Original MSA with respect Collaborative Process and the benchmarking exercise should not be diverted to IP were made to allow a review by interveners of ATCO I-Tek's cost structure, or a review of the Renewal MSA to deal more appropriately with appropriateness of an affiliate transaction, otherwise the vast majority process would not work. In terms of projects that involved the implementation utility management and integration of third party commercial software. As Xx. Xxxxxx notedregulatory oversight, the ATCO Group Utilities believed the Board had struck a workable balance. While the costs of companies licensed implementing such a process might be higher the right first time around, they should radically diminish in subsequent iterations. Indeed, it should not be necessary to use these third party software products incur significant costs for proceedings such as this, provided parties focused upon the ATCO Group of companies, including subsidiaries and affiliates.48 This right to use third party software survived termination actual scope of the service contract with any service provider. For any other IP created for proceeding established by the ATCO Utilities under the Renewal MSA, ATCO suggested the ATCO Utilities had the right to use that IP at no cost for as long as it is required for utility purposes. XXXX also suggested that the ATCO Utilities could elect to own the IP from any specific custom development by so electing at the time of approving the statement of work. ATCO suggested the ATCO Utilities IT strategy was to “buy not build” wherever possible, and as a result securing the right to use IP was more important than trying to secure the ownership of all IPBoard.

Views of ATCO. ATCO submitted the only area that had changed from the Original MSA approved in Decision 2002-069 was the treatment of IP ownership. XXXX argued the ownership of IP rights was irrelevant. ATCO submitted that the ATCO Utilities, Utilities did not alter their CIO and approach in the balance of Renewal MSA from the ATCO Group have moved away from more costly, custom-built products to reliance upon commercially available third party products. The practical focus of concern, therefore, has shifted from ownership, which was largely irrelevant approach taken in that 47 Transcript, page 494 to 495 context, to ensuring the right to use the IP in question. ATCO submitted that right was assured. XXXX suggested that no one appeared to question that fact as it related to third party products. ATCO submitted that, with respect to custom-built IP, the statement of work mechanism under the agreement provided the ATCO Utilities with the right (but not the obligation) to own the IP if they so desired. XXXX suggested that this method of dealing with IP rights was prudent since, as Xx. Xxxxxxxx noted, the FMV of the contract may well be higher if the client required ownership of all IP rights. ATCO argued that if the ATCO Utilities wished to retain ownership to any custom developed IP they could do so through the statement of work procedure. ATCO argued the ATCO Utilities retained access to all IP following contract termination without exception. ATCO suggested the changes made from the Original MSA with respect to IP gainsharing. The ATCO Utilities maintained that the best interests of their customers were made served by requiring ATCO I-Tek to allow have market competitive pricing for each year of the Renewal MSA contract term. The ATCO Utilities stated that they chose annual price reviews through benchmarking, to deal more appropriately with have certainty around the vast majority price competitiveness of projects the services they received. If ATCO I-Tek was being held to the fair market price annually, any gains that involved were available in the implementation and integration of third party commercial software. As Xx. Xxxxxx noted, market would accrue to the ATCO Group Utilities, even if the outsourcer had not yet attained them. ATCO suggested that typical gainsharing arrangements required some form of companies licensed the right to use these third party software products for the ATCO Group of companiesfinancial concession (like higher unit prices, including subsidiaries and affiliates.48 This right to use third party software survived termination of the service contract with any service provider. For any other IP created for minimum earnings levels, or less frequent benchmarking) that would then entitle the ATCO Utilities under to participate in a share of the Renewal MSA, gains that ATCO I-Tek was actually able to achieve. XXXX suggested the Calgary testimony highlighted that xxxxxxxxxxx could increase the price of the outsourcing agreement. ATCO Utilities had the right to use that IP at no cost for as long as it is required for utility purposes. XXXX also suggested that the ATCO Utilities could elect have secured the efficiency gains that arise in the industry without making any payment concessions. ATCO argued that ATCO I-Tek’s price performance targets were clear and measurable, i.e., the benchmark results must be within 2% of the total charges from ATCO I- Tek or a pricing review was required.62 ATCO submitted that gainsharing arrangements were very difficult to own establish. For example, consideration must be given to measurement of gains, the IP from scope of items to be included, the duration of the sharing, any specific custom development by so electing at investment required to achieve the time gains, appropriate sharing of approving the statement of workgains, variations in the sharing formula, etc. ATCO suggested this diversity of considerations meant that xxxxxxxxxxx introduced tremendous complexity into service arrangements. XXXX stated that while it may be an area of outsourcing that was frequently addressed, there was certainly no standard approach to dealing with gainsharing. The ATCO Utilities noted that in terms of priority, Xx. Xxxxxxxx assigned gainsharing the lowest priority on her list of four issues. ATCO disagreed with the FIRM/NCC submission that “some form of gainsharing may be appropriate to elicit cost savings and as a reasonable alternative to the annual benchmarking exercise…”.63 By this statement ATCO argued FIRM/NCC acknowledged that the ATCO Utilities IT strategy were using the annual benchmarking in lieu of gainsharing provisions. Any savings through the benchmarking accrued 100% to the ATCO Utilities and were not shared with ATCO I-Tek. XXXX suggested that FIRM/NCC then proceeded to contradict the previous statement by saying “At this time, it may be necessary to make adjustments to the I-Tek charges to compensate for the lack of any gainsharing provisions.”64 ATCO submitted that any adjustment done for this purpose would be penalizing ATCO I-Tek unfairly, as the adjustment would be in addition to the annual benchmarking mechanism. ATCO submitted this was to “buy another example of picking on specific aspects of the Renewal MSA and not build” wherever possible, and as a result securing the right to use IP was more important than trying to secure the ownership of all IPconsidering it in its entirety.