HomeMy WebLinkAbout2000-11-15 Agenda Packet - Board (8) rr i
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Staff Report
To: Board of Directors
From: Alan Harry, Director of Telecommunications Services
Date: October 26, 2000
Subject: Consideration of the terms of a possible relationship with Vectren
Communications Services
1. INTRODUCTION
Pursuant to Nevada County LAFCo's request, in August of this year the District contracted
with Vectren Communications Services (VCS) for the preparation of a study to validate the
District's Business Case and Telecommunications Customer Survey.
During conversations with VCS staff, Peter Holzmeister and I discussed the breadth of
services offered by VCS. These services include system design, construction management,
and varying levels of operational support. Each service is available separately, or can be
grouped together. As an example, Healdsburg contracted with VCS for the design and
construction project management of their fiber-optic network, while Alameda has entered an
agreement with VCS for the Design, Construction Management and complete Operation of
their Telecommunications Business Unit.
Within the Validation Study VCS included an offer to enter into a relationship with the District
whereby VCS would design the system, manage its construction, and perform some level of
operation of the District's new business unit for a period of 25 years. As part of this package
VCS included the AON Risk Mitigation measure to protect the District's initial financial
investment, and an offer to partner with the District by investing $4 million into the
construction of the Districts broadband infrastructure.
In that a question has been raised as to whether or not VCS's offer to partner constitutes a
conflict of interest, District General Counsel was asked to investigate the matter and provide
an opinion. To date I have been advised that if the District were to partner with VCS,
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accepting their investment of funds, equipment, or possibly the payment of the proposed
Risk Mitigation premium, that no conflict would exist. In fact, public/ private partnerships of
this type are occurring in many locations, including Alameda, California.
The purpose of this report is to provide sufficient information, and recommendations, for
Board action as to the type of relationship, if any, the District wishes to negotiate with VCS.
As such I have provided below a written description of the various relationships that are
available to the District, and the recommended scenario.
Design!Construction Management:
A Design, Construction Management (DCm) approach to telecommunications network
projects, streamlines the initial project development process from project conception through
the close of construction. A DCm is a construction project delivery system wherein VCS is
the system designer, and construction project manager. The project is built faster, with strict
adherence to system design, allowing the utility to enter the telecommunications business
easily, and to secure a quicker revenue stream.
Design/Construction Management/Operate.
Operating the system can be viewed as a logical extension of the Design - Construction
Management phase, streamlining virtually all aspects of the process from project conception
through product launch and operations. A DCmO approach adds the final step to the project
wherein VCS becomes system designer, construction project manager, and operations
manager. This phase provides all the marketing, customer service, and operations aspects
needed for strategy, promotions, customer education, customer service training, billing,
hiring qualified technicians to maintain the system, monitoring the system for continued
quality, and offering new services. The project is built faster, allowing a quicker revenue
stream and more revenue over the life of the network. In addition, many of the difficulties
associated with the start-up of new venture are eliminated.
A DCmO partnership also protects the financial and service integrity of the business
because the partner(VCS) assumes the bulk of the risk and operation responsibility.
2. RECOMMENDED SCENARIO REGARDING SYSTEM DESIGN AND
CONSTRUCTION
Staff concurs that contracting with a single firm for system design and construction
management phases of the Districts Broadband project is logical and necessary to ensure
that system plans and specifications are followed. In addition, it has been common practice
for District construction projects for many years. During the past year 1 have had numerous
conversations with utilities that have not followed this scenario, and in many cases
construction deadlines were not met, and system integrity was not maintained. As such,
contracting with VCS to prepare the District's system design, plans and specifications, and
manage the construction of the system itself is the preferred method.
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3. RECOMMENDATION REGARDING SYSTEM OPERATION
As to the option to have VCS operate the Districts broadband business unit, it is my opinion
that a relationship should occur between the District and VCS, while all management
responsibility stay with District staff.
In order to get the District's broadband business unit running in a timely manner, an
intensive relationship between the District and VCS should take place for a period of up to 5
years. During this time assistance in areas such as licensing, marketing and promotion, and
hiring and training would be beneficial. Long-term assistance may be required in the
provision of local telephone services, an area outside of District expertise. Further,
assistance in areas such as technical advancements in the services provided by the District
may be helpful on an ongoing basis. As such, District and VCS staff should begin
negotiating a detailed operational plan that could have a duration of up to 25 years.
Recommendation:
It is recommended that the Board direct the Director of Telecommunications Services to,
following Nevada LAFCo's approval of the District's application, enter into negotiations with
Vectren Communications Services for.
1)the preparation of a system design;
2) preparation of system plans and specification;
3)the management of project construction; and
4) defined operational services within each of the Districts Broadband business units
telephony offerings, and their duration.
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