To: HONORABLE MAYOR AND From: Wandzia Grycz

CITY COUNCIL Jose Obregon

SUBJECT: COOPERATIVE PURCHASE AGREEMENT: WESTERN STATES CONTRACTING ALLIANCE FOR WIRELESS COMMUNICATIONS SERVICE AND EQUIPMENT

RECOMMENDATION

1. Report on RFP for Cellular Phone Service and approval to reject all proposals.

2. Adoption of a resolution authorizing the Director of General Services to:

a) execute any necessary documentation to make purchases under the pricing terms and conditions obtained under the Western States Contracting Alliance (WSCA) Agreement for the purchase of wireless service and equipment from AT&T Wireless, Verizon, Nextel and/or Sprint, in a cumulative amount not to exceed $1,100,000 for the period July 1, 2003 through June 30, 2004; and

b) make further purchases for three additional one-year terms under the same contracting provisions, without further Council action other than the appropriation of funds.

BACKGROUND

The Information Technology Department (ITD) is responsible for selecting cellular telephones and equipment for use by certain City staff for the efficient deployment of City services and for emergency communications. Department Directors or Deputy Directors evaluate the need for such service, and upon approval, forward the request to ITD with documentation of the justification. ITD then reviews the orders for appropriate levels of approval and purchases cellular equipment on behalf of the departments.

This program has been in effect for over ten years and has grown with approximately 1,500 cellular telephones currently in use. In the earliest phase of cellular telephones, the technology was expensive and cumbersome. The City originally chose to use Cellular One as its primary provider, as the choices were limited and this Company was able to provide the type of service required. In November 2001, AT&T acquired Cellular One and is now the City’s provider of wireless phones and service. Until recently, the City of San Jose had never participated in a competitive bidding process for cellular service and/or equipment.

A Request for Proposal (RFP) for wireless phone service was advertised and released on September 17, 2002. Three prospective service providers attended a mandatory pre-proposal conference that was held on September 25, 2002. Two firms, AT&T and Sprint, submitted proposals prior to the October 7, 2002 deadline. Only the proposal that had been submitted by AT&T was deemed responsive.

Due to the minimal response on the RFP, the Purchasing Division of General Services conducted a telephone inquiry of several providers to receive feedback on their decision not to submit a proposal. Two of the larger providers indicated that the most advantageous pricing for the City was through WSCA, and that a separate proposal/pricing agreement for the City was not necessary.

WSCA is a consortium of fifteen states whose primary purpose is to establish the means by which participating states may join together in cooperative multi-state contracting in order to achieve cost effective and efficient acquisition of quality products and services. For the period July 1, 2001 through December 31, 2002, the cumulative dollar volume purchased through WSCA for wireless products and services was $63,658,387. Under WSCA, the City would be able to obtain aggressive discounts based on this aggregate volume.

Currently, four cellular providers have pricing agreements with WSCA that were established through a competitive procurement process: AT&T, Verizon, Nextel and Sprint. Under the WSCA contract signed by the State of California, the City has the ability to use one or any combination of suppliers, which will allow the flexibility to purchase from different providers while still enjoying volume discounts.

ANALYSIS

Utilizing the WSCA agreement will provide the City three primary and immediate advantages:

· The present rate plans available to the City are retail rates, with the exception of one government plan of $9.99 per month plus $.12 per minute. AT&T pricing through WSCA would allow the City to realize a 15% savings on rate plans plus an additional 15% bonus minutes on each plan.

· AT&T currently has the option of charging cancellation fees for any service that is discontinued if the phone or plan has been changed or upgraded within a one-year period. This serves as a disincentive for departments to analyze the distribution and usage of cell phones in order to realize savings to the City. Under the WSCA agreement, there are no cancellation fees, which encourages departments to regularly review and adjust cell phone availability and usage among staff.

· WSCA allows for a $50 discount off cellular phones and a 25% discount off accessories with no charge for shipping.

A rate plan analysis was performed applying WSCA rates and discounts to the City’s current usage and volume. Based on this rate analysis, it is estimated that the annual savings to the City will be approximately $100,000 over its current contract pricing. The Director of General Services is requesting the authority to make purchases from any of the suppliers on the WSCA agreement utilizing service plans and usage rates that maximize savings in comparison to current pricing. City Departments will be able to contact any of the specified vendors to review their rate plans, equipment options and coverage area to be able to determine which vendor’s services will best meet their cell phone needs.

Due to the City’s technology freeze and cost reduction initiatives, we do expect to see a reduction in the purchase and use of cellular equipment. However, the use of cell phone technology will remain an integral part of the City’s business environment and for that reason the City will gain savings from utilizing the WSCA agreement. The WSCA agreement will also be utilized to replace outdated and damaged equipment over time. The replacement of damaged equipment has proven to be less costly than repairing the cell phone.

In addition to the rate plan benefits, the City will see improvements in the area of billing. Currently the City is treated as a retail customer. Therefore, we receive one monthly invoice that is nearly 6,000 double-sided hard copy pages. Analysis of bills in such a format is extremely time-consuming, as is the distribution of the invoices to individual departments for review. Under the WSCA agreement, the Information Technology Department will receive monthly CD-Rom bills that will provide the ability to perform regular rate plan analysis, trending, and end user usage review. Providing this alternate billing format will encourage accountability and greatly facilitate the revision and/or elimination cell phone distribution within departments.

Finally, another benefit of note is the fact that the rates included in the WSCA agreement will be extended to City staff through an Employee Program offered by the cellular phone companies. In short, City employees will be able to procure “personal” cell phone service at the same rates being provided for city business phones.

COORDINATION

This memorandum has been coordinated with the City Attorney’s Office and the City Manager’s Budget Office.

COST IMPLICATIONS

This item is consistent with the Mayor’s Budget Strategy recommendation #6 C: “Maximize reductions to ongoing programs to help solve future deficits to the fullest extent possible.”

BUDGET REFERENCE

Fund: General Fund - 001

Appn: 0432 – Non-personal/Equipment

Amount: $8,582,627

Budget Document: 2002-2003 Adopted Operating Budget, page 356

CEQA

Not a project.

WANDZIA GRYCZ JOSE OBREGON

Chief Information Officer Director of General Services