If you use a Telecom Expense Management (TEM) provider to audit your telecommunications invoices, you may be in for a surprise. TEM providers claim to catch all supplier billing errors and overcharges. They don’t. In fact, often what they miss is bigger than what they find.
We’ve spent much of the past decade coming in behind the TEMs, finding the overcharges they’ve missed, and turning them into client refunds. We have found something in every post-TEM audit we’ve completed. After creating our master issues list, we were struck by the diverse nature of the errors the three of us have uncovered at one time or another. Here are some of our favorites:
* Duplicate billing for circuits under two separate accounts: We see this issue with international data circuits for companies that have both select in-country local invoicing coupled with select consolidated global invoicing to the US. For one client we identified billing for the same circuits on a local and on a consolidated global invoice, resulting in more than $1,000,000 in recoveries. This situation occurred in an environment where the TEM provider audited both the local invoices and the consolidated global invoices. Lack of consistent and complete supplier invoice details was a factor as the in-country local invoices did not always include circuit ids.
* “Dangling” services: This occurs where all the parts of a service that are needed to actually use the service are not invoiced. We often see access circuits with no associated MPLS port and vice versa. In one situation an access circuit continued to bill even though the client had issued a disconnect order for the entire circuit (access and port), resulting in a $600,000 recovery. We have also found dedicated access (SONET) services with no access channels. That investigation showed the service was no longer in use by the client and resulted in disconnection of the entire service, saving more than $200,000/year.
* Duplicate access billing: This can occur when a client is using its own (i.e., customer provided) access rather than dedicated carrier access. We have found numerous instances in which the client had provisioned MPLS services using its existing rings for access and the carrier mistakenly billed for dedicated access while the client was also paying separately for ring access. As these are separate bills, it was not readily apparent. This issue resulted in a $1,000,000 recovery.
* Failure to implement new rates under existing contracts or recent amendments: This one seems so basic that you would think a TEM provider couldn’t miss it. But we have found entire regions not billing according to new contract rates that were negotiated as a part of heavily competitive RFP process, resulting in a $300,000+ recovery. We also often find that Ethernet circuit ICB pricing is not updated to conform to contract amendments. In another case, a client had a contract that called for a discount off Ethernet access list pricing (which would float with the list price; a structure we don’t recommend). The list price went down, but the carrier kept billing at the price that was in effect when the circuit was provisioned.
Other errors occur where a contract calls for a custom rate or discount for specific speeds and the client provisions a speed that falls just outside of the speeds listed instead. The client did not receive the discount, even though the list prices were the same and the intent of the discount was clear.
* Unusual cost trends and unit rates: Expertise in network and telecom services is critical to an organization’s ability to identify unusual cost trends. We have compared the costs of all MPLS services by address across all carriers to identify unusual cost patterns, resulting in negotiations with a supplier who had costs that were three to four times that of the other carriers at the same locations for the same services. The result was $600,000/year in savings.
In another situation, we found a client’s MPLS list pricing document differentiated between burstable ports and burstable Ethernet ports. The client’s contract only discounted the burstable ports, not the burstable Ethernet ports, so when they ordered Ethernet they did not receive the intended discount.
We have also found excessive class of service charges for a location in Mexico due to an error in the supplier’s list pricing document – the speed the customer was using had a price that was ten times the price of the surrounding speeds. Although the client spotted the high price, they didn’t realize it was just that one speed and could not get the supplier to pay attention until we showed them the source of the problem. It’s not often you get a supplier to admit an error in their list pricing document, but we did in this case, resulting in $175K per year in savings.
In a managed services environment, we found numerous instances where a supplier invoiced its clients at list rates for some of its managed routers and switches even though there were negotiated rates, resulting in a $1,000,000+ credit for our client.
* Complexity leads to confusion: When a supplier’s contract structure is very complex and multiple contract documents are in effect, the possibility of billing errors multiplies. One client had a waiver of access connection charges for services provisioned on a high speed ring written into the ring pricing schedule, but the access connection charge was billed because the supplier’s billing system billed them under a different pricing schedule.
When access pricing is ICB for specific NPA-NXXs (which we try to avoid) you have to be careful how these are written into the contract, because sometimes multiple NPA-NXXs are in use at the same location. If orders are placed under the wrong NPA/NXX, the ICB pricing will not be applied. One client’s engineers routinely ordered using the NPA-NXX of dial access lines to their routers which were not part of the client’s PBX DID range. But the contract only listed the NPA-NXX of the DID range and thus did not cover the NPA-NXX on the orders.
In some situations we found the carrier incorrectly entered the NPA/NXXs. This can happen any time you install or upgrade a circuit. Working with our client we were able to locate the original orders to document that the NPA/NXX had been provided correctly. These issues can be proactively managed by making sure your contract includes all NPA-NXXs in use at your sites or references all available CLLI codes.
Local Services deserve their own special place on the list as they tend to be one of the messiest billing areas we see and are not often reviewed at the level of detail required to identify overbillings. We routinely find that discounts are missing, contract renewals are not implemented, different USOCs are used for ordering than are specified in the contract, etc. The credit process for local services is like a carnival ride that won’t end. Credits are almost always inaccurate and require multiple iterations to complete. We have seen credits issued for 1 b-channel vs the 115 actually overbilled, 1 port vs the 5 actually billing, etc.
Final words of wisdom
TEM providers deliver good frontline services, and they catch a lot (telecom billing is notoriously inaccurate),but they are not the whole solution. Many large companies have come to rely solely on TEM software and firms to identify billing errors and optimization opportunities, and have lost the internal expertise to identify complex billing errors. But sole reliance on a TEM provider to uncover all billing errors is a mistake.
Most TEM services focus on processing multiple supplier invoices swiftly and efficiently, and perform basic checks on the invoiced amounts. These are absolutely basic services that you want and need, but TEM software audits and variance analysis did not pick up any of the billing errors discussed above. It’s not practical for the TEM service regularly to perform the forensic analysis of bills necessary to catch the type of billing errors in the examples above. TEM services need to be combined with periodic deep dive reviews of your telecom bills by experts, whether internal or external. Putting the right expertise in place to do the job is key.
If you haven’t conducted a deep dive review of your telecom spend to audit the performance of your TEM provider, you are likely paying more than you should be every month. In the instances noted above, the recoveries were substantial and illustrate how a single error can quickly become a significant and material issue.
Billing audit best practice is to perform detailed billing audits annually (more regularly if a major supplier limits your ability to recover billing errors to less than one year – another practice we don’t recommend). Use the knowledge gained from these periodic audits to negotiate effectively with your TEM provider -- TEM pricing structures often provide for incremental fees when they discover errors, but rarely penalize the TEM for missing billing errors.
Best practice is to take into account all aspects of the TEM’s performance—both positive and negative -- so you don’t reward your TEM provider if a third party review of their performance identifies missed billing errors.
As W. Edwards Deming famously said, “you can expect what you inspect.” It’s a good motto for Contract Compliance and Optimization.
Theresa Knutson, Julie Gardner and Janis Stephens lead TechCaliber Consulting’s Contract Compliance and Optimization practice and specialize in recovering telecom billing errors for the world’s largest companies. They can be reached at email@example.com, firstname.lastname@example.org and email@example.com.
This story, "Savings that telecom expense management providers miss" was originally published by Network World.