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A SPECIAL AUDIT OF THE

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95 pages
A SPECIAL AUDIT OF THE TELECOMMUNICATIONS SERVICES CONTRACT BETWEEN THE GOVERNOR’S OFFICE OF ADMINISTRATION AND ADELPHIA BUSINESS SOLUTIONS OF PENNSYLVANIA, INC. SEPTEMBER 23, 1998 THROUGH OCTOBER 4, 2002 December 20, 2004The Honorable Edward G. RendellGovernorCommonwealth of Pennsylvania225 Main Capitol BuildingHarrisburg, PA 17120Dear Governor Rendell:This report contains the results of our special audit of the Telecommunications ServicesContract (Contract) between the Governor s Office of Admi nistration (OA) and AdelphiaBusiness Solutions of Pennsylvania, Inc. (Adelphia) for the period September 23, 1998, throughOctober 4, 2002. This audit was performed under the authority derived from Section 402 of TheFiscal Code, which states: Speci al audits of the affairs of all departments, boards, commissions,or offices, may be made whenever they may, in the judgment of the Auditor General, appearnecessary. . . . The audit objectives were to determine whether I) the Commonwealth complied withlaws, regulations, and policies in procuring telecommunications services for the Commonwealthand awarding the Contract to Adelphia; II) the numerous amendments and/or change requests to the Contract were justifiable, based on the terms of the Commonwealth s Request forQualified Contractors (RFQC), its amendments, and the Contract itself; III) Adelphia hascomplied with the terms of the Contract, particularly ...
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A SPECIAL AUDIT OF THE


TELECOMMUNICATIONS SERVICES CONTRACT

BETWEEN

THE GOVERNOR’S OFFICE OF ADMINISTRATION

AND

ADELPHIA BUSINESS SOLUTIONS OF
PENNSYLVANIA, INC.


SEPTEMBER 23, 1998

THROUGH

OCTOBER 4, 2002




December 20, 2004
The Honorable Edward G. Rendell
Governor
Commonwealth of Pennsylvania
225 Main Capitol Building
Harrisburg, PA 17120
Dear Governor Rendell:
This report contains the results of our special audit of the Telecommunications Services
Contract (Contract) between the Governor s Office of Admi nistration (OA) and Adelphia
Business Solutions of Pennsylvania, Inc. (Adelphia) for the period September 23, 1998, through
October 4, 2002. This audit was performed under the authority derived from Section 402 of The
Fiscal Code, which states: Speci al audits of the affairs of all departments, boards, commissions,
or offices, may be made whenever they may, in the judgment of the Auditor General, appear
necessary. . . .
The audit objectives were to determine whether I) the Commonwealth complied with
laws, regulations, and policies in procuring telecommunications services for the Commonwealth
and awarding the Contract to Adelphia; II) the numerous amendments and/or change requests
to the Contract were justifiable, based on the terms of the Commonwealth s Request for
Qualified Contractors (RFQC), its amendments, and the Contract itself; III) Adelphia has
complied with the terms of the Contract, particularly those regarding the services to be provided
and installation deadlines and timeframes; and IV) the Commonwealth has procedures in place to
properly review billings, identify possible billing errors by Adelphia, and receive appropriate
credit for such errors in a timely manner. Our audit approach included inquiries of management
and staff at the Office of Administration, the Bureau of Commonwealth Telecommunications
Services, and the Central Services Comptroller s Office to obtain an understanding of Contract
monitoring procedures, change requests procedures, and billing statement and trouble ticket
processing procedures. We conducted our audit in accordance with Government Auditing
Standards, issued by the Comptroller General of the United States.There are four findings and a number of recommendations presented in this report.
Finding No. 1 discusses OA s and the Office of the Budget s refusal to provide certain
procurement information to the Department of the Auditor General (Department), and OA s
delay in furnishing other key documents that undermined the Department s ability to issue a
timely audit. Finding No. 2 discusses OA s failu re to include provisions in its RFQC for
telecommunications services that resulted in Contract change requests that cost the
Commonwealth more than $5.3 million.
Finding No. 3 describes OA s fa ilure to ensure compliance with Contract requirements,
and Finding No. 4 reports on OA s failure to adequately monitor Commonwealth
telecommunications billing statements.
Sincerely,
Robert P. Casey, Jr.
Auditor GeneralTABLE OF CONTENTS
Page
Executive Summary ....................................................................................................................... 1
Background .................................................................................................................................... 5
Audit Objectives, Scope and Methodology.................................................................................... 7
Finding No. 1 - The Office of Administration’s and the Budget Office’s Refusal to Provide
Certain Procurement Information, and OA’s Delay in Furnishing Other Key Documents,
Undermined the Department’s Ability to Issue a Timely Audit ................................................... 9
Recommendations......................................................................................................................... 15
Office of Administration Response and Auditors Comment ....................................................... 16
Auditors Conclusion .................................................................................................................... 21
Finding No. 2 - OA’s Failure to Include Provisions in its RFQC for Telecommunications
Services Resulted in Contract Change Requests That Cost the Commonwealth at Least $5.3
Million .......................................................................................................................................... 23
Recommendations......................................................................................................................... 31
Office of Administration Response and Auditors Comment ....................................................... 33
Auditors Conclusion 50
Finding No. 3 - OA Failed to Ensure Compliance with Contract Requirements ..................... 51
Recommendations 64ent ....................................................... 65
Auditors Conclusion .................................................................................................................... 78
Finding No. 4 - OA Failed to Adequately Monitor Commonwealth Telecommunications
Billing Statements ........................................................................................................................ 79
Recommendations......................................................................................................................... 82
Office of Administration Response and Auditors Comment ....................................................... 83
Auditors Conclusion 86
OA’s General Response ............................................................................................................... 87
Distribution List ........................................................................................................................... 90ADELPHIA
SEPTEMBER 23, 1998 THROUGH OCTOBER 4, 2002
OFFICE OF ADMINISTRATION
EXECUTIVE SUMMARY
FINDINGS SUMMARY
Finding No. 1 - The Office OA s and the Budget Office s refusa l to provide certain critical
of Administration’s and information to confirm that OA s $228 million Commonwealth
the Budget Office’s telecommunications services Contract was awarded in
Refusal to Provide Certain accordance with Commonwealth procurement laws and
Procurement Information, regulations substantially delayed the issuance of this audit.
and OA’s Delay in After two and a half years of foot-dragging and refusal, and only
Furnishing Other Key after we commenced litigation, did OA provide certain summary
Documents, Undermined scoring information and a copy of Bell Atlantic s losing
the Department’s Ability proposals. In response to our request for evidence to show that
to Issue a Timely Audit the evaluation committee complied with the RFQC Review and
Evaluation Criteria document, OA merely provided a
compliance certificate summarily certifying that the certificate
served as written confirmation that all required steps were taken.
Additionally, numerous meeting cancellations, unreasonably
long response times, and non-responsive, incomplete and
conflicting responses, also dramatically delayed the progress of
this audit. We waited as long as 168 days for a response to these
requests. On one occasion, OA said it had misplaced our request
for information. These delays in providing adequate information
and maintaining unsupportable legal positions erode taxpayers
confidence in state government and resulted in greater financial
cost to the Commonwealth and its taxpayers.
HIGHLIGHTS OF RECOMMENDATIONS
We recommend that OA retain sufficient and adequate documentation of the procurement
process, including scoring sheet information and copies of losing proposals, in accordance
with the Commonwealth s Procurement Code on retention of records. We also recommend
that, upon request, OA timely make available for inspection by the Department of the Auditor
General all procurement records, including scoring sheets and losing proposals.
1ADELPHIA
SEPTEMBER 23, 1998 THROUGH OCTOBER 4, 2002
OFFICE OF ADMINISTRATION
EXECUTIVE SUMMARY
FINDINGS SUMMARY
Finding No. 2 - OA’s Between April 2000 and October 2002, OA and Adelphia
Failure to Include initiated 99 Contract change requests (CRs) for
Provisions in its RFQC for telecommunications services. Of these, 27 had a reported cost
Telecommunications impact to the Commonwealth of more than $6.8 million. In the
Services Resulted in 10 CRs we selected for testing, we found that services requested
Contract Change Requests in eight CRs were not included in OA s RFQC. These CRs had
That Cost the a cost impact reported to be at least $5.3 million. The other two
Commonwealth at Least CRs were included in the RFQC but OA failed to recognize that
$5.3 Million the services were not included in Adelphia s Best and Final
RFQC Proposal (BAFO). Our review found that OA did not take
the time and effort to obtain information from Commonwealth
agencies about Business Partner (BP) Service connections to
access the Commonwealth network to conduct business; failed
to adequately plan Commonwealth Technology Center (CTC)
server farm security against intrusion; allowed Adelphia to
review security issues for a system provided by Adelphia; failed
to include provisions in its RFQC to incorporate the
Commonwealth s previous ICS sy stem into the new business
information system; and failed to recognize that international
calling card and operator assistance rates were not included in
Adelphia s BAFO. As a result, Adelphia was permitted to set
pricing in a non-competitive environment increasing the
likelihood that this service was provided to the Commonwealth
at a higher cost. In addition, OA did not ensure information in
CRs was complete and adequately documented and did not
update the master CR tracking log documenting information on
each CR.
HIGHLIGHTS OF RECOMMENDATIONS
We recommend that OA adequately plan for contract services in order to include all necessary
provisions in future RFQCs to allow for competitive pricing and to control unnecessary
contract costs. We also recommended that OA:
• properly review each BAFO to ensure that all services required by the RFQC
are included; and document, review and complete CRs including maintaining
documentation to support contract changes and approvals; and
• secure the services of an independent contractor to perform security consulting
work and negotiate smaller cost increases on extension of contract services.
2ADELPHIA
SEPTEMBER 23, 1998 THROUGH OCTOBER 4, 2002
OFFICE OF ADMINISTRATION
EXECUTIVE SUMMARY
FINDINGS SUMMARY
Finding No. 3 - OA Failed Our test of 35 Contract requirements found noncompliance with
to Ensure Compliance 15 (43 percent). These violations included OA s failure to
with Contract Require- ensure: Adelphia maintained financial security to protect the
Commonwealth against nonperformance of the Contract;ments
adequate planning for the transition of telecommunications
services; timely completion of the transition of
telecommunications services resulting in a loss of at least $17.4
million; and Adelphia s satisfactory performance. We also
found that OA and Adelphia failed to comply with the Contract
to meet to discuss pricing adjustments. Additionally, we found a
lack of monitoring and documentation in the Integrated Support
Services Invoicing System; a lack of documentation evidencing
testing for acceptance of Designated Services (DS); a lack of
testing of the Disaster Recovery Plan; and a lack of compliance
with deadlines and schedules on various other issues.
HIGHLIGHTS OF RECOMMENDATIONS
For the remainder of the Contract period, we recommend that OA maintain compliance with
all Contract requirements by:
• ensuring that Adelphia maintains adequate performance security; meeting with
Adelphia to improve services and cut costs, and performing and adequately
documenting all information, including reconciliation of payments; and
• adequately monitoring acceptance of DS and proper billing for services and
ensuring that Adelphia s disaster recover plan is properly tested, operable, and
certified.
For future telecommunications contracts, we recommend that OA adequately plan for the
transition of telecommunications services and ensure services are completed as scheduled; and
ensure that future contract language adheres to laws.
3ADELPHIA
SEPTEMBER 23, 1998 THROUGH OCTOBER 4, 2002
OFFICE OF ADMINISTRATION
EXECUTIVE SUMMARY
FINDINGS SUMMARY
Finding No. 4 - OA Failed Our review of billing-related trouble tickets found that 13
to Adequately Monitor trouble tickets contained errors that were not accurately
Commonwealth Tele- resolved. The errors found on the 13 trouble tickets amounted to
$90,521 or 99 percent of the value of the 15 trouble ticketscommunications Billing
Statements tested. We found that five billing errors involved charges that
should have resulted in credit adjustments to five agencies
billing statements; three errors involved duplicate charges for
two Commonwealth agencies; and five errors were not properly
resolved because five agencies received excess credits totaling
$6,504, including $6,454 to OA.
HIGHLIGHTS OF RECOMMENDATIONS
We recommend that OA s Bureau of Commonwealth Telecommunications Services (BCTS)
continue to spot check billing statements fo r readily identifiable problems. Additionally, we
recommend that OA:
• review agencies procedures of examining billing statements to ensure
instructions are included to determine that products and services exist and are
in use; amounts charged agree to Contract terms, and trouble tickets are created
promptly upon identification of billing errors;
• monitor trouble tickets to ensure billing errors are resolved accurately and
timely and ensure that the reported billing error is not a systemic error
affecting more than one agency;
• assist agencies with billing problems; and
• ensure that trouble tickets remain open until billing problems are resolved and
billing statements properly adjusted.
4ADELPHIA
SEPTEMBER 23, 1998 THROUGH OCTOBER 4, 2002
OFFICE OF ADMINISTRATION
BACKGROUND
In September 1998, the Department of General Services, on behalf of the Governor s Office of
Administration (OA), issued a Request for Qualified Contractors (RFQC) to provide
Commonwealth telecommunications services (CTS) to Commonwealth agencies. The RFQC
indicated that the CTS were to include basic digital transport, voice, data, video, and Internet
access services, together with appropriate support infrastructures. It was anticipated that local
governments, schools, and the public would benefit from the services provided by the Contract.
In June 1999, the Commonwealth developed the RFQC Review and Evaluation Criteria
document, which was a detailed methodology for reviewing and evaluating the RFQC proposals.
This methodology included the guiding principles by which all RFQC proposals would be
evaluated, such as cost effectiveness, value, and flexibility. Two committees, the Voting
Committee and Technical Subcommittee, were to review and evaluate each RFQC proposal.
The process was to begin with the review of initial RFQC proposals by individual members of
both committees. Each member was to score the proposals and identify strengths, weaknesses,
and items requiring further discussion during the Continuous Negotiation phase of this process.
The Voting Committee was to function as the Continuous Negotiations Team and an outside
consultant was to moderate the meetings with the contractors. The purpose of these meetings
was for the Commonwealth to clarify requirements in the RFQC, answer questions, and provide
feedback to the contractors regarding their initial proposals. The information discussed was
intended to assist contractors with the development of their Best and Final RFQC Proposals
(BAFO).
In December 1999, two consortiums (joint ventures) submitted their BAFOs. One consortium
was the Pennsylvania Advanced Communications Alliance (PACA) with Bell Atlantic
Corporation (Bell Atlantic) as its prime contractor and the other was the PA Team Consortium
with Adelphia Business Solutions of Pennsylvania, Inc. (Adelphia) (now known as TelCove) as
its prime contractor. Adelphia s BAFO was una nimously recommended to receive the contract
award to provide CTS to Commonwealth agencies. OA awarded Adelphia a five-year CTS
Contract (Contract), No. ME981464, dated May 3, 2000, estimated at $228 million.
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