SUBJECT: RESOLUTION NO. - AGREEMENT WITH PACIFIC BELL TELEPHONE COMPANY DBA AT&T DATACOMM FOR VOICE OVER INTERNET PROTOCOL (VOIP) TELEPHONE SYSTEM

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1 11\ THE PORT OF LOS ANGELES Executive Director's Report to the Board of Harbor Commissioners DATE: MARCH 25, 2010 FROM: INFORMATION TECHNOLOGY DIVISION SUMMARY: The City of Los Angeles Harbor Department (Harbor Department) is requesting approval to enter into an agreement with Pacific Bell Telephone Company dba AT&T Datacomm (AT&T) to implement a Voice Over Internet Protocol (VOIP) telephone system with lower operational costs and modern features. The recommendation to select AT&T is based on a competitive Request for Proposals (RFP) process. The proposed agreement requires a 25% small business participation level. The term of the proposed agreement is three (3) years at a not-to-exceed amount of $705,000. The Harbor Department estimates to realize cost savings between $260,000 and $360,000 per year with the VOIP telephone system, when compared to the cost of the existing telephone services. AT&T is based in Dallas, Texas, with offices in Los Angeles, California. RECOMMENDATION: It is recommended that the Board of Harbor Commissioners: 1. Find that in accordance with the Los Angeles City Charter Section 1022, it is more feasible for outside contractors to perform this work than City employees; 2. Approve the agreement with AT&T at an amount not-to-exceed $705,000 and a term of three (3) years and authorize said expenditures (Transmittal 1); 3. Authorize the Executive Director to execute the agreement and authorize the Board Secretary to attest to said agreement; and 4. Adopt Resolution No.

2 DATE: MARCH 25, 2010 PAGE2of6 DISCUSSION: Background- The Information Technology Strategic Plan (ITSP) recommends the implementation of a new VOIP telephone system to improve and modernize its features and to reduce monthly and operational costs. A VOIP telephone system is used to make telephone calls over the Internet, whereas the existing telephone system requires the local telephone company's network. VOIP is a mature, reliable, and secure technology. Many of the other City Departments have already migrated to VOIP telephone systems, such as the City of Los Angeles Department of Airports (LAWA) and the Department of Water and Power. The VOIP telephone system will replace the existing telephone system, which is a legacy Central Office Exchange Service (centrex) system. A centrex system means that the equipment is owned and managed by the local telephone company, and then customers pay for services ordered. Utilizing a VOIP system, the Harbor Department will own and manage the equipment and services. In addition, the VOIP telephone system is dependent upon the internal network and Internet to make calls. The Harbor Department now has a high-capacity network, with recent upgrades to the internal network, and in the last year, two high-capacity Internet connections - one for primary service and one for back-up - have been implemented. The VOIP telephone system has minimal visible impact to external stakeholders and Harbor Department employees. For external stakeholders, the current telephone numbers will be retained so that stakeholders will continue to dial the same telephone numbers to contact the Harbor Department. For employees and internal users, making VOIP telephone calls will be the same as with the current telephone system. Much of the changes involved in VOIP will be infrastructure items, with the most noticeable difference being the telephone equipment itself. Product use will be enhanced by new capabilities, for which training will be provided to users under this agreement. VOIP Benefits and Savings- The Harbor Department estimates to realize cost savings between $260,000 and $360,000 per year, when compared to the cost of the existing telephone services. A VOIP telephone system typically has a pay-back period of approximately two to three years, primarily from savings in the following areas: Moves, Adds and Changes (MACs) - The VOIP telephone system will reduce the cost that the Harbor Department pays for MACs. MACs include fees paid to the telephone company for telephone line moves (e.g. - when an employee moves offices and requires the telephone line to be moved to the new desk), additions (e.g. - set up charges when a new line is ordered for a new employee), and

3 DATE: MARCH 25, 2010 PAGE 3 of6 changes (e.g. - changes to existing services). With VOIP, MACs will be handled internally, rather than placing an order with the telephone company. The estimated cost savings range from $200,000 to $250,000 per year. Less Costly Telephone Features and Functions - The VOIP telephone system will include premium features and functions, many of which currently cost extra. For example, the Harbor Department will no longer be required to pay additional costs for voic , conference calling, speed dials, and transfers. The estimated cost savings is between $50, 000 and $100, 000 per year. Long Distance Calls - VOIP calls are transmitted via the Internet. Therefore, long distance call expenses will be reduced because the Harbor Department will bypass toll charges, although these calls will still be subject to nominal access charges. The estimated savings from this feature is approximately $10,000 per year, based on current long distance charges. Services from the existing centrex system will be terminated after VOIP is implemented. The savings from the termination of the centrex services are included in the above estimates. A separate Board action is not required to terminate the existing services. Finally, when this proposed agreement is completed, existing staff will be expected to support and maintain the VOl P telephone system. VOIP Features- The VOIP telephone system will provide modern features and functions, including: Unified Communications (UC) - VOIP's UC feature will connect to other messaging technologies, including and cell phones. This UC feature merges the multiple communication technologies into a single user interface. As an example, if someone s a user, the user will be able to receive and reply to the with the voice telephone. This reduces the chance of missed messages and makes users more accessible by eliminating the need to leave messages on multiple systems. Mobility - VOIP offers traveling employees the ability to take their office phone with them, making and receiving phone calls anywhere via the Internet. Employees away from the office will be more accessible with their same telephone number, whether traveling overseas or a few blocks away. Updated Telephone Book - VOIP will include a telephone book that is synchronized with MACs. This telephone book will be up to date and available online to users on the Harbor Department's internal network.

4 DATE: MARCH 25, 2010 PAGE 4 of 6 TELEPHONE COMPANY DBA AT&T DAT ACOMM FOR VOICE OVER Selection Process- AT&T was selected from a RFP released on September 4, The Harbor Department received thirteen (13) responses on October 20, Of the thirteen (13) responses, two (2) were deemed nonresponsive - both for failure to meet the minimum requirements. The remaining eleven (11) were allowed to continue in the selection process. The proposed cost of the responsive proposals ranged from $705,000 to $1,112,000 for a three (3) year performance period. The selection committee was comprised of three (3) Harbor Department employees and one (1) LAWA employee. The RFP published the evaluation criteria, which were cost, firm's qualifications, project organization, project approach, and responsiveness. Cost and firm qualifications were weighted the highest. Based on the evaluation criteria, the committee selected three (3) vendors for interviews. After interviews, AT&T was selected because it scored highest against the RFP's evaluation criteria, including submitting the lowest overall cost proposal. (See Transmittal 2 - List of Proposers and Evaluation Matrix) ENVIRONMENTAL ASSESSMENT: The proposed action is an Agreement with AT&T to implement a VOIP telephone system to improve and modernize telephone capabilities and reduce monthly and operational costs. As an administrative action, the Director of Environmental Management has determined that the proposed action is exempt from the requirements of the California Environmental Quality Act (CEQA) under Article II Section 2(f) of the Los Angeles City CEQA Guidelines. ECONOMIC BENEFITS: Spending the amount of $705,000 to implement VOIP telephone system under this agreement will result in approximately 5 one-year equivalent job impacts in the fivecounty region. FINANCIAL IMPACT: Costs and/or Revenue Impact- Approval of the proposed three-year agreement with AT&T authorizes the Information Technology Division to implement the VOIP telephone system for a not-to-exceed amount of $705,000. Funds for Fiscal Year 2009/10 are budgeted. For Fiscal Years 2010/11 and 2011/12, funds will be requested to be budgeted as part of the annual budget adoption process, upon Board approval. Funds are expected to be expended from center 0640, accounts 13240, 54110, 54310, and as follows:

5 MARCH 25, 2010 PAGE 5 of6 RESOLUTION NO. - AGREEMENT WITH PACIFIC BELL TELEPHONE COMPANY DBA AT&T DATACOMM VOICE OVER INTERNET PROTOCOL (VOIP) TELEPHONE I Fisc,al~(ear ~------~ ~--~~~------~ ~ Annual operating and maintenance costs associated with $42,000 and will be borne by Harbor Department. are estimated to be Harbor Department's obligation to pay any amount due thereunder for any City fiscal years after the current fiscal year is contingent upon islative appropriation of funds for the purpose. The City's fiscal year ends on June 30 th of each calendar Accordingly, anything to contrary notwithstanding, may terminate any contract and its future monetary obligations thereunder, as of the end of any an updated and fully telephone system with greatly reduced operational For Fiscal Year 0, the yearly includes the telephone and network equipment, implementation, and all software reie~as,e management. After the VOIP telephone system has been implemented, estimated yearly cost is between $260,000 $360,000 per year. estimate is based on of approximately $200,000 to $250,000 from telephone line moves, adds and savings of approximately $50,000 to $100,000 from costly telephone and functions, and approximately $10,000 in long d savings. The new system will pay for approximately two (2) to (3) years. new telephone system will a business tool that us more effectively communicate and more contact our employees through an telephone On demand changes can done by Harbor Department and will require time and effort. VOl additional applications and will increase end user productivity.

6 DATE: MARCH 25, 2010 PAGE6of6 Financial Impact if not Approved- The Department will continue to spend additional dollars for outdated centrex features and all telephone relocation moves, adds and changes. Source(s) of Funding or Savings- The three (3) year agreement for the VOIP telephone system costs will be funded from Accounts 13240, 54110, 54310, and 59410, Center 640, Program 000. CITY ATTORNEY: The Office of the City Attorney has reviewed and approved the agreement as to form and legality. TRANSMITTALS: 1. Agreement with AT&T 2. List of Proposers and Evaluation Matrix LANCE KANESHIRO Chief Information Officer t1~~ MOLLY CAMPBELL Deputy Executive Director FIS Approval: K-(initials) APPROVED: GERALDINE KNAa Executive Director LK:SA Author: S. Allen

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