June 25, 1999
To:Works Committee
From:Commissioner of Works and Emergency Services
Subject:Audit of Telecommunications Leased Line Costs for the Traffic Signal Control Systems
Purpose:
The purpose of this report is to advise of the results of the Request for Proposals for a Telecommunications Audit of past
payments made to Bell Canada for leased line services associated with the City of Toronto's traffic signal control systems,
and to request authority to award a contract to the recommended firm.
Funding Sources:
There are no funds required for this agreement. Under the proposed agreement, the recommended firm will be
compensated on a percentage basis of all recovered overpayments previously made by the City of Toronto for the lease of
telecommunications lines. The City will retain all future savings resulting from billing errors identified through the audit. If
no savings are found as a result of the audit, the City will not be charged any fee.
Recommendations:
It is recommended that:
(1)the proposal received from Expense Recovery and Overhead Reduction Services (ERORS) Inc., to audit the past
payments made to Bell Canada for leased telecommunications lines associated with the traffic signal control systems be
accepted; and,
(2)the appropriate City of Toronto officials be authorized to take the necessary action to give effect thereto.
Background:
The City's traffic signal systems include approximately 1,830 traffic control signals. The City currently leases the use of
Bell Canada's communication lines to control and monitor the operation of these signalized intersections via central traffic
control computer systems located in the Integrated Traffic Control Centre at 703 Don Mills Road.
The traffic signal systems communication network configuration consists of:
(a)one hundred and twenty (120) dedicated high speed 4 wire, full duplex S4T4 data circuits;
(b)one thousand five hundred and twenty four (1524) dedicated low speed 4 wire, full display class C data circuits; and,
(c)two hundred and forty (240) 2 wire, full duplex, class C data circuits.
Bell Canada's billing practices for these services are subject to a complex variety of tariffs, as well as Canadian Radio and
Telecommunications Commission (CRTC) rulings and do not follow those which apply to more commonly used Bell
leases, such as for telephone voice lines. Annual telecommunication costs for Toronto's traffic signal control systems total
approximately $1.4 million and include, primarily charges for data transmission over Bell's various classes of lines and
charges for routing data through Bell's Communication Offices.
Discussion:
In recent years a number of municipalities in Ontario have conducted telecommunication cost audits and have recovered
significant funds due to billing errors by their communication provider (Bell Canada). Article 19 of Bell Canada's Terms
of Service provides a limited right of recourse for charges that should not have been billed and for those that were over
billed.
In 1997, staff of the Transportation Services Division began to research the possibility of conducting an audit of
telecommunication costs related to Toronto's traffic signal control systems. In recognition that staff did not have the
expertise in the area of Bell Canada tariffs and CRTC rulings, or the resources to conduct a review of the complex
telecommunication billings, the law firm of McCarthy Tetrault was retained to assist Transportation staff. During 1998,
McCarthy Tetrault prepared a brief on the issues, drafted a request for proposals, recommended candidate
telecommunication auditing firms, reviewed the submissions and made recommendations regarding the award of a
contract.
On October 19, 1998 a detailed request for proposals was issued to the following six firms, ERORS Inc., Kawchuk
Associates, ProbeTel Inc., Pacomm Consulting Inc., Angus Dortman Associates Inc., and Deloitte & Touche Consulting
Group. ERORS Inc., ProbeTel Inc. and Kawchuk Associates submitted proposals.
The proposal received from Kawchuk Associates included a provision for payment based on savings accruing to the City of
Toronto subsequent to the Audit Period. The request for proposals document clearly stated that this would not be
permitted; therefore, the submission of Kawchuk Associates was not given further consideration.
McCarthy Tetrault and Transportation staff using the evaluation criteria attached as Appendix 1 reviewed the remaining
two submissions. The ERORS Inc. submission was determined to be the superior based on a detailed work plan,
comprehensive/relevant references, and demonstrated understanding of the task responsibilities and schedule. ERORS will
receive compensation based on a percentage of the refund received by the City of Toronto from Bell Canada for any billing
errors previously made for the lease of telecommunications lines. The City will retain all future savings resulting from
billing errors identified through the audit. If no savings are found as a result of the audit, the City will not be charged any
fee. The amount of such savings and/or underbilling from Bell cannot be determined before the audit is commenced.
Similar audits of other municipal traffic signal telecommunications costs have found errors varying from zero to fifty per
cent. Since the audit will cover a six-year period, the refund on the approximately $9 million paid to Bell Canada by the
City of Toronto during that period could be a very large amount and the compensation to ERORS Inc. could range from
$0.00 to more than $250,000.00.
Since the major reconfiguration of the telecommunications network completed in 1994 resulted in significantly reduced
annual lease costs, it is expected that the greatest potential refunds will accrue from the period prior to January 1, 1995.
Accordingly because of the six-year limitation period, it is important that the audit commence quickly to maximize the
City's potential refund.
Because this procurement process began more that a year ago, it does not comply with the procedure adopted by Council at
its meeting on March 2, 3 and 4, 1999, requiring the Purchasing Materials Management Division to be involved in the
process and the Director of Purchasing and Materials Management has been advised of this. However the Transportation
Services Division is submitting this report for the consideration of Council in the belief that the process followed was fair
and equitable. It has resulted in a proposed contractual agreement that has no cost obligation to the City of Toronto, could
recover significant funds and reduce current/future operating expenses.
Conclusions:
This report requests authority for the appropriate officials to complete the necessary contract documents for the audit of
past payments made to Bell Canada for leased telecommunications lines for the traffic signal control systems, to the firm of
ERORS Inc. on a percentage of costs recovered basis.
Contact Name:
Bruce Zvaniga
Manager, Traffic Signal Control Systems
Transportation Services Division
Telephone: 392-8826
David C. Kaufman
General Manager, Transportation Services
Barry H. Gutteridge
Commissioner, Works and Emergency Services
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APPENDIX 1
TORONTO TRANSPORTATION
TELECOMMUNICATIONS AUDIT
EVALUATION CRITERIA
1.Any major proposal compliant omissions (clause 55)
2.Depth of qualifications - firm and staff
3.Prior experience and successful claims
4.Comprehensive work plan/approach
a)Compensation formula (scenarios - high; medium, low)
b)Saving potential
c)Minimum municipal cost
d)Firm's motivation
e)Other
5.Any unacceptable limiting conditions
6.Significant reference checks
7.Understanding of the scope of work
8.Demands on city staff efforts
9.Schedule concerns
10.Specific reference of applicable billing errors
11.Is Bell claim follow up process acceptable?
12.Major contract agreement issues (eg., letter of credit)