PURPOSE

Staff is requesting that the Council approve the Master Purchase Agreement for the ultra-high frequency (UHF) SmartZone radio communications system between the City and Motorola, Inc (Motorola).

BACKGROUND

At the November 4, 2003 meeting of the City Council (Council), staff requested approval for two items related to the City�s radio system:

• The Joint Exercise of Powers Agreement to establish a Joint Powers Agency (JPA) in order to create the Interagency Communications Interoperability System (ICIS).

• The Master Purchase Agreement for the UHF Smartzone communications system between the City and Motorola, Inc (Motorola).

The Council approved the Joint Exercise of Powers Agreement, thereby continuing the City�s involvement in establishing seamless radio communications for police and other public safety personnel.

The Council did not approve the Master Purchase Agreement and instead directed staff to provide them with a detailed cost breakdown of Motorola�s �System Integration� price item as well as to re-examine Motorola�s proposal overall.

ANALYSIS

Staff addresses Council�s concerns about the Master Purchase Agreement and also reviews the earlier decisions that led to staff�s recommendation to approve the Master Purchase Agreement:

• Reviews why the existing UHF radio system needs to be replaced.

• Reviews why staff�s approach of phasing in the new radio system, and at the same time doing preventative maintenance on the existing system, is the most cost-effective approach.

• Reviews why staff recommends purchasing the new UHF radio system from Motorola

• Reviews how BWP staff had secured a $956,085 reduction (12.25% reduction) on Motorola�s initial price proposal of $7,807,338.

• Presents a detailed cost breakdown of Motorola�s �System Integration� price proposal of $1,774,812.

Staff believes that its radio system replacement strategy and recommendations strike the best balance between minimizing the impact on the General Fund while maximizing the operational benefits to the City.

BWP�s existing radio system is on borrowed time, and cannot offer the operational advantages of newer systems.

Burbank�s radio system has two major parts: a microwave relay system and an ultra-high frequency (UHF) system, both supplied by Motorola. BWP replaced the microwave relay system in FY 2002-03; the new system will have a useful life of at least 15 years.  BWP installed the UHF system 12 years ago and, except for individual radios, has not replaced it. Normally, UHF radio systems this old cannot be adequately maintained:

• Motorola discontinues support of current equipment after seven years, a typical practice in an industry where technological change is fast-paced.

• Maintenance staffs are not always adequately trained to troubleshoot problems in aging systems or to develop effective strategies for dealing with them.

Regulatory changes add to the pressure to change out radio systems sooner rather than later. The Federal Communications Commission wants future radios to operate on a narrower band. Although the FCC would not force the City to change its radios until 2013, spare parts for existing radios will become hard to find after 2006, when manufacturers will no longer produce the current generation of wider band radios.

Aside from addressing the problem of aging equipment, a new UHF radio system would offer positive advantages:

• Changing out the UHF system gives the City the opportunity to take advantage of trunking technology, which provides more efficient use of radio channels, and simulcast technology, which provides stronger signals for better coverage.

• Digital mode capability allows the radio system to handle the communications traffic from several police operations at once without any crosstalk interference.

Upgrading the UHF system would also allow the City to fold in seamless radio communications for police when they serve papers, pursuing suspects and carry out other duties across jurisdictional boundaries. (The Council paved the way for this capability when they approved the ICIS Joint Exercise of Powers Agreement at its November 4, 2003 meeting.)

Through a program of aggressive preventative maintenance and phased replacements, BWP has substantially reduced the General Fund impacts of having to replace the existing radio system.

Fund 535 is an internal service fund for the City�s radios and phones. With minor exceptions, the General Fund is the ultimate funding source for Fund 535. The funding mechanism is having each City department contribute to Fund 535 in proportion to its percentage of the City�s radio and phone systems. Included in these contributions are reserves for capital replacements.

Normally, the City would be facing an immediate expenditure of $16 million. Per our earlier discussion, a UHF radio system from the early nineties would normally have degraded by now past the point of providing acceptable service to police and fire, if not to the City as a whole. Glendale, for example, had been faced with a deteriorating radio system and had to make an immediate expenditure of $16 million in FY 2001-02 to replace it by September 2003.

Instead, the City is able to get by with an expenditure of less than $7.0 million over the next two years, and an expenditure of $2.5 million or less over the following three years. With a radio system of similar vintage to Glendale�s, the City faced the same potential problem of having to make a similar $16 million up-front expenditure. The first-blush alternatives discussed in early 2002 were grim:

• Collect an extra $1.5 million per year from the General Fund for five years and then replace the system all at once on a cash basis.

• Replace the system sooner through debt financing, but collect an extra $1.3 million from the General Fund for ten years to service the debt.

The first alternative would have delayed upgrading the system for police and fire by five years; the second alternative would have nearly doubled the impact on the General Fund.

BWP�s radio communications staff proposed a third alternative that would take full advantage of its high-level of expertise and also phase in the system replacement beginning with the most critical elements:

• Schedule the most critical UHF system replacements, the system backbone and radio equipment for Police and Fire, for completion by the end of FY 2004-05.

• Schedule replacing the remainder of the UHF system, which is mainly end user equipment for the non-safety departments, over the following several years.

Staff�s expertise allows it to extend the reliability of the existing radio system through aggressive preventative maintenance, even when BWP no longer receives support from the manufacturer. This also enables staff to phase in the replacement system, thereby allowing BWP to draw its spare equipment from existing stocks.

With the support of Council, BWP staff put into place in 2002 a five-year plan that phased in radio system replacements over a five-year-plus period.  Instead of having to contribute an additional $1.5 million per year, the General Fund only had to contribute an additional $0.4 million per year.

It may turn out to be the case that the non-safety services would not need radios, but instead could more appropriately use radio phones (Nextel-type devices). The Police and Fire replacements would enable the City to delay having to make this decision, as the existing radio equipment for the safety services could be used as spares for the non-safety departments. Delay works to the City�s advantage because technological advances in radio systems are continually lowering the cost curve, and reserves continue to grow.

BWP continues to recommend using Motorola, Inc. radio equipment for its backbone and safety radio upgrades.

Motorola continues to be the pre-eminent source for the backbone of municipal radio systems as well as for the high-end radios needed by police, fire and other safety personnel. Motorola�s SmartZone radio system offers the upgrades mentioned earlier:

• Availability of both digital and analog operation.

• Ability to have simultaneous talk group for police operations.

• Trunking for efficient use of channels that may otherwise go unused much of the time.

• Simulcast technology with multiple transmitters that allow one transmitter to fill in radio coverage where another cannot reach.

• Design system architecture that can easily incorporate future technologies.

• Expansion to meet future needs, such as seamless radio communications for police.

SmartZone/digital technology is being used extensively throughout Southern California. Agencies include the Los Angeles police Department, the cities participating in ICIS (including Glendale, Pasadena, Culver City, Montebello, and Beverly Hills), Orange County, San Bernardino County, San Diego County and Imperial County.

The Master Purchase Agreement with Motorola is for the backbone for the City�s new radio system, as well as for radios for police and fire. By including the backbone of the system at this time, it becomes much easier and less expensive to integrate the non-safety departments into the system.

BWP staff secured a $956,085 reduction (12.25% reduction) on Motorola�s initial price proposal of $7,807,338.

The initial price proposal was actually $8,922,763 to allow for the possibility that Burbank would not choose to join ICIS. (In that case, the City would have needed to purchase its own SmartZone Master Site at a cost of $1,115,425.) However, the Council did decide to join ICIS, and so the relevant cost comparison is the $7,807,338 ($8,922,763 less $1,115,425).

BWP staff was understandably concerned that it receives the best possible price from Motorola, in spite of its predominant position in radio communications for local government. Because the City�s radio system is still in good condition, the City did have some bargaining leverage in the timing of its purchase; that is, the City was not in the position of having to replace its radio system on an emergency basis, merely on a prudential basis. The City had additional bargaining leverage in that it could offer accelerated payments without depleting the reserve fund, and its existing UHF radio system was in good enough condition to make a trade-in credit worth discussing. As a result, BWP staff was able to secure reductions (shown in italic boldface below) from the original price proposal in both equipment and labor:

Backbone Equipment                                         $2,180,760

ICIS Interface                                                             274,384

Portables                                                                1,582,885

Mobiles                                                                      942,155

Control stations and desksets                                 222,150

Subtotal before Trade-In Credit                         $5,202,334

Add: Sales Tax                                                          429,192

Less: Trade-In Credit                                      ($   555,085)

EQUIPMENT TOTAL                                           $5,076,441

System Integration                                                $2,175,812

Less: System Integration Rate Difference   ($    45,000)

Less: Accelerated Payment Terms Adj.        ($  356,000)

SYSTEM INTEGRATION TOTAL                        $1,774,812

GRAND TOTAL                                                     $6,851,253

These prices are identical to those shown to the Council at its November 4 meeting, but are presented in a way that highlights the reductions BWP had secured. Further pricing details can be found in the �Pricing Summary� tab in Motorola�s response to the Council�s request for more information.

The equipment prices are closely tied to the price agreement that Glendale had earlier secured with Motorola when it replaced its radio system in 2002. (Glendale�s price agreement is based on the price agreement that the City of San Diego had secured.) However, there is some variability in the backbone equipment pricing, which tends to be more customer-specific. The Trade-In Credit primarily reduces the price of the backbone equipment.

The other major cost is the labor-intensive system integration activity. Here, staff was able to use to advantage the ability of Fund 535 to pay more of the cost up front, by securing an accelerated payment terms adjustment. Although staff has thereby reduced the System Integration cost from $2,175,812 to $1,774,812, the Council still had concerns about the reasonableness of this cost and directed staff to provide a detailed breakdown of the cost and work to be done.

Motorola�s system integration costs are reasonable.

In judging the reasonableness of Motorola�s system integration costs, staff first examined the nature of the major work elements, and which ones received the most cost emphasis:

Backbone Equipment                                                      $2,180,760

ICIS Interface                                                                          274,384

System Installation                                                               $614,046

Engineering and Design Review                                         442,320

System Optimization                                                             137,732

Acceptance Testing                                                              106,632

Training                                                                                     98,991

Project Management                                                             375,091

Total, System Integration                                                 $1,774,812

Motorola�s system integration activities are primarily site-specific engineering, installation and testing, and not project management, which is only 21% of the system integration cost. It is staff�s opinion that the scope of work is appropriate and does not place undue emphasis on purely project management activities. Staff also reviewed the project timelines and concluded that Motorola could credibly meet the City�s UHF radio replacement schedule. The attached �Details of Motorola�s System Integration Costs� provide detailed work breakdowns, project schedules and training plans.

As just mentioned, staff has concluded that the scope of work, task emphasis and project schedule are all consistent with a cost-effective proposal. Staff also reviewed hourly rates with Motorola and concluded that they were reasonable. Most of the system integration tasks require a team of technicians and engineers; on a cost-per-person basis, the hourly rates are what one would expect for a highly-skilled technician or engineering position.

Motorola�s proposed price of $6,851,253 is their best and final offer.

When staff asked Motorola to further reduce its price, Motorola stated that the price reductions it had already made represented its best and final offer.

The City�s Executive Team endorses getting new radio system. At a recent Executive Team meeting, the City�s Executive Team, which includes those Executive Team members serving on the Fund 535 Executive Committee, endorsed having the Council approve the Master Purchase Agreement with Motorola.

FISCAL IMPACT

Approving the Master Purchase Agreement with Motorola would secure a firm price for backbone and safety radio system upgrades that are well within the planned radio reserve funding. There would be funds remaining to upgrade the rest of the radio system over the three fiscal years immediately following the backbone and safety upgrades. Thereafter, the reserves continue to build to enable a future radio system replacement.

RECOMMENDATION

Staff recommends that the Council approve the Master Purchase Agreement for the ultra-high frequency (UHF) Smartzone radio communications system between the City and Motorola, Inc.

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L:\City Council\Staff Reports\Establish an Interim Joint Powers Agency.doc

Attachments:   Details of Motorola�s System Integration Costs                 

c:          Fund 35 Executive Committee

            Terry Stevenson

            Jack Wildermuth

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