CITY OF G LENDALE CALIFORNIA REP 0 R T TO CIT Y C 0 U N C I L

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1 FORMCM 36 May CITY OF G LENDALE CALIFORNIA REP 0 R T TO CIT Y C 0 U N C I L AGENDA ITEM Recommendation to approve a contract with AT&T via a State of California Master Services Agreement (CalNet 2) for telephone services for two years with the option to renew. COUNCIL ACTION certificates. Public Hearing \ 1 Ordinance [ 1 Consenl Calendar [ 1 Approved for fvu,..15 calendar Action Item [ X 1 Report Only [ 1 ADM INISTRATIVE ACTION Submitted Edward A. Fraga, ISD Director tt1:ll.~~'j.4.,j..!/!c1"'4-- Prepared Edward A. Fraga, ISO Director Aplll"oved James E. Starbird. City Manager 'y,. /i:'a-+'rlt-----'~...-o-- Reviewed ~( Scott H. Howard, City Attorney.... t k~~wi,!.'"~~'-jl.- RECOMMENDATION Approve an Agreement with AT&T CALNET 2 for State of California reduced rates for telephone services effective May 24, 2010 for a term of two years. SUMMARY This proposed contract with AT&T CALNET 2 will reduce the cost of various land telephone line services by at least $157,800 with no degradation in services. FISCAL IMPACT Without reducing levels of service, the contract will reduce City land telephone costs annually by at least $157,800 or 20.4% of the current $772,000 cost. Actual savings could reach $190,000 an nually. Agenda Item - Report to City Council Cal Net 2 v-4.doc Pagel 8 A

2 BACKGROUND Introduction In the early 1990's, the City of Glendale purchased a Rate Buy Down program from AT&T. This was a ten-year contract that allowed significa ntly reduced per minute cost of telephone service once an annual "up-front" fee was paid. The ten-year program cost the City $1.2 million onetime and was funded by the Capital Improvement Program (CIP). This allowed telephone services to appear less costly to individual departments. At the conclusion of the original ten-year co ntract an option was provided to the City to enter into another ten-year contract. The City chose to not spend as much in up-front costs and instead opted for a five-year contract with a lower up-front amount. The five-year contract cost the City $818,849 and again significantly reduced all the City's departments' apparent phone costs. As with the ten-year contract, the five-year contract was also funded from the CIP. At the conclusion of the five-year contract (January 2006) the City decided to not "buy-downh any telephone services. As a result of not having a Ubuy-down" contract, every department's telephone bills went up substantially. The Ubuy-down" approach though appealing to departments, was not cost-effective for the City as a whole. ISO is proposing that the City join in a State of California negotiated contract with AT&T whereby the real total cost of certain land telephone services will be substantially reduced from current costs without degradation of services to be received. City departments will see no savings from this in FY10-1 1, but will be direct beneficiaries under the Internal Service Fund model for ISO of the cost reductions in FY CALNET 2 Contract The State of California and AT&T Global Services have entered into a Contract for California Integrated Information Netwo rk 2 (CALNET 2), under Master Services Agreement (MSA) dated January 30, 2007 for a term of five years. The City now has the opportunity to enter into a CALNET 2 contract. The minimum term of the contract is two (2) years from signing but the contract will remain in effect unless canceled up to the end of the master contract term (January 30,2012). Services There are a variety of services possible under the contract. Staff is recommending that the following services be included under the CALNET 2 Contract: 1. Centrex 2. Plain Old Telephone System (POTS), 3. Long Distance Calling Services 4. Network Audio Conferencing (for emergencies) 5. Business Access Lines 6. Data Transmission Services Under the contract the City of Glendale must continue to use AT&T for these services for the term of the contract but no other exclusivity requirement exists meaning that the City can maintain existing and add new trunk lines from other vendors, such as Paetec. The City recently converted many Centrex lines to the less expensive PRI (DID) lines from Paetec. Termination If the City elects to terminate these Services prior to the completion of the two (2) year commitment period, a termination charge will apply. It will be 65% of the City's average monthly Agenda Item - Report to Cily Council CalNet 2 v-4.doc Page 2

3 bill for the disconnected services (approximately $8,546.76). There would be no foreseeable reason why the City would elect to terminate early. Limitations on Deletions CALNET 2 MSA AS allows for additions and deletions of services during the contract period. However, the City cannot reduce its service below 85% ($122,942.66) of the Total Billed Revenue (TBR) ($144,638.42). At the end of each 12 month period, AT&T shall calculate the revenue for the period and, if a short fall exists, AT&T will bill the City the shortfall amount. ISO staff has done extensive analysis of the lines and circuits to be included under this contract and is confident that the City will continue to need to use them at a level well above 85% over the next two years. Lines and Services Inventory In preparation for the CALNET 2 co ntract it was important for ISO to identify all the lines and services eligible such as Centrex, and POTS (Plain Old Telephone System) telephone lines that were to be moved to Paetec, as well as those that cou ld be deleted for lack of use. In identifying lines to be moved prior to CALNET 2 ISO was ensuring the City's ability to remain above the Total Billed Revenue to avoid year-end penalties. This necessitated identification of all private lines, all departmental main lines, and, fax lines in some locations, as well as fire alarms, security alarm lines and, Centrex numbers used in the EOC, commonly known as the Red Phones, that are placed in strategic areas within many City buildings. These lines will remain and actually have a special AT&T service provision to be among the first telephones to be restored in the event of a disaster (Essential Services). The effort to identify, eliminate unused, and convert as many as feasible to Paetec PRI lines has required an additional effort by ISO Telephone staff since August That work is now complete and the lines that will continue to be used by the City as eligible under CALNET 2 have been identified and can now be put on the two year contract for substantial on-going savings to the City. Savings The reason for entering into this contract is to reduce the cost the covered services. There are several services and all will be less costly under CALNET 2 than they currently are. It is difficult to determine the exact savings but an idea of its magnitude can be seen by determining the savings for the two largest dollar amount services, namely Centrex and POTS lines. ISO plans to have 592 Centrex lines and 263 plain old telephone system s (POTS) lines covered under the CALNET 2 contract. An analysis of cost saving for these lines indicates that the City cost will be reduced from $188, to $30, per year for a savings of $157,800 annually. Th is is a reduction of 20.4% from the current annual telephone land line cost of $772,000. The actual savings could be as much as $190,000 annually. EXHIBITS Description Qtv Monthlv Annual Current Centrex 592 $17.00 $120, POTS 263 $21.50 $67, Total 855 $188, CALNET 2 Centrex 592 $0.52 $3, POTS 263 $8.60 $27, Total $ Savings $ Agenda Item - Report to City Council CalNet 2 v-4.00c Page 3

4 RESOLUTION NO. _ A RESOLUTION OF THE COUNCIL OF THE CITY OF GLENDALE, CALIFORNIA, DISPENSING WITH COMPETITIVE BIDDING AND APPROVING AN AGREEMENT WITH AT&T WHEREAS, AT&T has contracted with the State of California for telephone services; and WHEREAS, the City finds that it can realize an annual savings of $ without degradation in services by taking advantage of the agreement that the State of California has reached with AT&T; and WHEREAS. AT&T has offered the City of Glendale the opportunity to "piggyback" with AT&T's contract with the State of California for the same full range of telephone services as those offered to and accepted by the State of California; and WHEREAS, Glendale Charter Art. VI, Sec. 9 provides an exemption to competitive bidding for, among other things. contracts with other governmental entities, or their contractors, for labor, materials, supplies or services. NOW THEREFORE BE IT RESOLVED BY THE COUNCIL OF THE CITY OF GLENDALE: 1. That the foregoing facts are deemed to be true and correct and a basis for dispensing with competitive bidding and authorizing the execution of an agreement with a single source. 2. That pursuant to Glendale Charter Art. VI, Sec. 9 provides that competitive bidding shall not be required for contracts with other governmental entities, or their contractors, for labor, materials, supplies or services. 8 A 1

5 3. That, a "piggy-back" agreement with AT&T and the State of Californ ia for the provision of telephone services is hereby approved for a term not to exceed two years, and an option to review upon approval of the City Manager. 4. That the City shall maintain an annual total bi lled revenue commitment of $122, The City Manager is hereby authorized to execute an agreement with AT&T consistent herewith on behalf of th e City. Adopted this day of, ATTEST: Mayor City Clerk City Attorne \0 2 J:\FILI!NcTCOPY\LUCV\RE.SO ISD D1SP COM BID CA1.N1:12 _DOC

6 STATE OF CALIFORNIA ) ) SS COUNTY OF LOS ANGELES ) I, Ardashes Kassakhian, Clerk of the City of Glendale, certify th at th e foregoing Resolution No. was adopted by the Council of the City of Glendale, California, at a regular meeting held on the day of 2010, and that same was adopted by the following vote: Ayes: Noes: Absent: Abstain: City Clerk 3 J:\filcNc l CopyILucy'IReso [SO di,p com bid ca!nei2.doc