CITY OF FERNDALE REQUEST FOR COUNCIL ACTION. Joseph Gacioch, Project & Grant Coordinator

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1 Agenda No. 7D CITY OF FERNDALE REQUEST FOR COUNCIL ACTION FROM: Joseph Gacioch, Project & Grant Coordinator SUBJECT: Approval of SpyGlass Telecommunications Audit SUMMARY & BACKGROUND: In congruence with Council s approved goals for , staff has begun to implement a management plan for the City of Ferndale s telecommunications. The first phase of this management plan requires that the City develop an inventory of all components involved in our telecommunications services, (internet, phone, cable, wireless, etc ) Telecommunication service audits are typically executed by two types of contractors: 1. Contractors hired by competitor service providers. Their fee is paid by the competitor phone company. The goal is to recover lost expenses for the customer and redirect them toward an alternative service provider. 2. Independent contractors. Their fee is set according to the amount of money they recover against a service fee multiplier. The City retains any long term savings that result from the audit. Staff believes a comprehensive and objective audit of our telecommunications systems is best facilitated by a contractor independent of any service provider. An independent contractor will not limit an audit to the boundaries of interest defined by a service provider competitor. Staff contacted three Midwest based auditing firms: SpyGlass (Cleveland, Ohio) ESPY (Indianapolis, Indiana) Schooley Mitchell Telecom Consultants (Taylor, Michigan) Staff had lengthy discussions with representatives from SpyGlass and ESPY, both highly specialized cost consulting firms that operate in the Telecommunications Expense Management (TEM) industry. SpyGlass and ESPY Management and Account personnel are comprised of individuals with historical detailed knowledge and understanding of carrier billing and telecommunication tax law. Both service and payment plans were nearly identical. Service Plan: Phase 1 Recovery: Contractor conducts an assessment of our billing during the life of our contracts. During this assessment, the contractor seeks to identify any taxes,

2 tariffs, or charges that have been eliminated or altered during the lifetime of our contract. Any money found will be split between the City and the contractor. Phase 2-Elimination: The contractor shall conduct an audit of all telecommunications related services the City currently pays for. The contractor will contact all service carriers to understand the status of all contracts; develop a complete inventory of all components currently billable; and make recommendations on what aspects of telecommunications may be eliminated to realize future savings and mitigate wasteful spending. The contractor will not execute any of their recommendations without authorization from the City Manager s Office. Phase 3- Moving Forward: If desired, the contractor produces a local market report of alternative vendors and makes recommendations based on service history and financial savings. No contractual changes will be executed without the authorization of City Council. Costs: Phase 1: Results in found money. Contractor and the City split 50/50. Phase 2 & 3: All savings that result from moving forward with the contractor s recommendations are aggregated. This figure is multiplied by 12. o The Total amount = Contractor Service Fee This service fee would have otherwise been incorporated into payments made to service providers this year, had we not employed the technical audit. All future savings are retained by the City of Ferndale. Each company recommended that the City adopt a telecommunications audit schedule every three years. This is because tax and tariff laws frequently change, and the average telecom service level agreement expires after three years. Endorsements: SpyGlass allowed me to conduct an independent reference check from a list located on their website. ESPY would not provide me with a list, but would provide me with letters of endorsement from their past partners. SpyGlass Reference Results: City of Auburn Hills: The Finance Director Gary Barnes recalled that SpyGlass saved them $20,000 - $25,000 annually in telecommunications billing. Mr. Barnes spoke highly of their efficiency, time management, and recommendations. Mr. Barnes even provided me with a sample of archived communications between his team and SpyGlass. City of Wayne: The City of Wayne could not recall the actual annual savings that occurred from SpyGlass recommendations. However, the City recommended

3 them based on the inventory report, efficiency, and analysis produced by SpyGlass. City of Saline: The City of Saline received an annual savings of approximately $15,000 in telecom services, as well as better understood the inefficiencies of their current billing due to the comprehensive inventory report. Both companies offer similar services with similar pricing structures. Because SpyGlass enabled staff to conduct an independent reference check, staff recommend the City of Ferndale move forward with initiating contractual services for telecommunications auditing services to be performed by SpyGlass. SpyGlass estimates a timeframe of six weeks for completion of all three phases of their service package. An audit of our telecommunications is necessary for better informed staff recommendations to City Council moving forward. ATTACHMENTS: SpyGlass Snapshot Audit Agreement COUNCIL AGENDA DATE: 05/29/2012 CITY ATTORNEY REVIEW: FINANCE DIRECTOR REVIEW: Yes Yes CITY MANAGER REVIEW: April McGrath, 5/22/12 RECOMMENDED ACTION: Moved by, seconded by, approve the contract with SpyGlass for telecommunications auditing services according to the pricing arrangement stipulated in the attached SpyGlass Snapshot Audit Agreement, and the authorization for the Mayor to sign the contract..

4 Ver 1/1/08 SpyGlass Snapshot Audit Agreement This agreement, effective as of the later of the dates of signature below ( Effective Date ), is between City of Ferndale ( City ), and The SpyGlass Group, Inc., an Ohio corporation ( Consultant ). 1. Primary Audit Services. City is engaging Consultant as an independent contractor to analyze its primary telecommunications service accounts (local voice, long distance voice, data, Internet and wireless) to seek cost recovery, service elimination and cost reduction recommendations. Consultant will deliver the recommendations to City, implement recommendations that City elects for Consultant to implement, and deliver a complete telecommunications inventory to City. While Consultant is performing its analysis, City will not make changes or perform internal cost reduction analysis with respect to provider accounts which City has included within the scope of Consultant s review. 2. Fees. City will pay Consultant the applicable fee set forth below ONLY for Consultant recommendations implemented within twelve (12) months of Consultant delivering the recommendation to City: 50% of any Cost Recovery, as defined below 6 times any Service Elimination Savings, as defined below 6 times any Cost Reduction Savings, as defined below Cost Recovery is any refund, credit or compensation received by City relating to past services or charges. Service Elimination Savings is any monthly cost reduction received by City relating to cancellation of any service, including monthly usage cost reduction (calculated as the average of the last 2 months of usage costs associated with the cancelled service). Cost Reduction Savings is any monthly cost reduction received by City relating to the modification, consolidation or negotiation of any service, account or contract, including post discount usage rate improvement (calculated as the (a) decrease in post discount per unit pricing realized by City for any service, times (b) the average of City s last two (2) months usage levels measured in such units for the modified service). 3. Invoicing and Payment. Fees for Cost Recovery are due as a one-time payment within 10 days of verification that City has been issued the refund, credit or compensation resulting in such fees. Fees for Service Elimination Savings and Cost Reduction Savings are due as a one-time payment within 10 days of verification that the cancellation or other activity resulting in the Service Elimination Savings or Cost Reduction Savings has been completed. Consultant may issue separate invoices as different fees are earned. 4. Confidential Information. Consultant shall keep confidential and shall not divulge to any other person or entity who is not a director, officer or employee of City, during the term of this Agreement or thereafter, any of the business secrets or other confidential information regarding City which information has been received or become known to Consultant in the course of its consulting services hereunder and which has not otherwise become public knowledge; provided, however, that nothing in this Agreement shall preclude Consultant from disclosing information (a) to parties retained to perform services for City, or (b) as may be required by law. City shall keep confidential and shall not divulge to any other person or entity who is not a director, officer or employee of Consultant, during the term of this Agreement or thereafter, any of the business secrets or other confidential information regarding Consultant which has not otherwise become public knowledge, including, without limitation, Consultant s consulting services pricing structure, method of performing such consulting services and any of the details of this Agreement; provided, however, that nothing in this Agreement shall preclude City from disclosing information as may be required by law. 5. Insurance. Consultant shall not commence work under this Agreement until it has obtained insurance required by this paragraph. All coverages shall be with insurance carriers authorized to do business in the State of Michigan. A. Workers Compensation Insurance: Consultant shall procure and maintain during the life of this Agreement, workers compensation insurance, in accordance with all applicable statues of the State of Michigan. B. Commercial General Liability Insurance. Consultant shall procure and maintain during the life of this Agreement commercial general liability insurance on an occurrence basis with limits of liability of not less than $1,000,000 per occurrence. C. Motor Vehicle Liability. Consultant shall procure and maintain during the life of this Agreement motor vehicle liability insurance, including Michigan no-fault coverage, with limits of liability of not less than $1,000,000 per occurrence. Coverage shall include all owned, non-owned and hired vehicles. D. Additional Insured. Commercial general liability insurance and motor vehicle liability insurance as described above shall name City as an additional insured including all elected and appointed officials, all employees and volunteers, all boards, commissions and/or authorities and board members, including employees and volunteers.

5 Ver 1/1/08 E. Cancellation Notice. All insurance policies listed above shall include an endorsement stating the following: It is understood and agreed they thirty (30) days advance written notice of cancellation, non-renewal, reduction and/or material change shall be sent to: City Clerk, City of Ferndale, 300 East Nine Mile Road, Ferndale, Michigan F. Proof of Insurance Coverage. Consultant shall provide to City Certificates of Insurance for all policies listed above, or at the request of City, certified copies of all policies. If any of the above coverages expire during the term of this Agreement, Consultant shall deliver renewal Certificates of Insurance and/or policies to the City at least ten (10) days prior to the expiration date. 6. Indemnification. To the fullest extent permitted by Law, Consultant agrees to defend, pay on behalf, indemnify and hold harmless City, its elected and appointed officials, employees and volunteers and others working on behalf of City, against any and all claims, demands, suits, loss, including all costs connected therewith, for any damages which may be asserted, claimed, or recovered against or from City, its elected and appointed officials, employees, volunteers and others working on behalf of City which arises out of the negligence of Consultant. 7. Miscellaneous. This agreement is governed by the laws of the State of Michigan, without regard to principles of conflicts of law, and may be executed by facsimile and simultaneously in multiple counterparts. City agrees that Consultant does not warranty the overall performance, City satisfaction, or data accuracy of any telecommunications related carrier, provider, software manufacturer or vendor at any time whatsoever during or after the term of this agreement. CONSULTANT SHALL NOT BE LIABLE TO THE CITY FOR INCIDENTAL, CONSEQUENTIAL, SPECIAL OR PUNITIVE DAMAGES, INCLUDING, WITHOUT LIMITATION, LOST PROFITS OR BUSINESS INTERRUPTION, WHETHER SUCH LIABILITY IS ASSERTED ON THE BASIS OF CONTRACT, TORT OR OTHERWISE, EVEN IF EITHER PARTY HAS BEEN WARNED OF THE POSSIBILITY OF ANY SUCH LOSS OR DAMAGE IN ADVANCE. IN ADDITION, IN NO EVENT SHALL CONSULTANT S LIABILITY TO CITY EXCEED THE FEES ACTUALLY PAID BY CITY TO CONSULTANT. IN WITNESS WHEREOF, the parties hereto have executed this agreement as of the Effective Date. CITY City of Ferndale By: Date: CONSULTANT The SpyGlass Group, Inc. By: Date: