Telecom companies are overcharging Virginia government by $500,000 per month, CIO says

Telecommunications companies are overcharging public sector agencies in Virginia by at least $500,000 each month, according to Robert Osmond, the state’s chief information officer.

But thanks to a mediation service offered by his office, the Virginia Information Technologies Agency, they won’t have to pay those extra fees. Osmond told StateScoop that the brokerage service’s customers — some 800 public universities, K-12 schools, utilities, local governments and county-affiliated rescue teams — will not have to pay these fees because VITA is contesting them on their behalf.

The service, which Osmond said is an unusual offering from a state government, allows customers to receive just one bill for all their telecommunications services, from pagers to satellite internet services. Osmond described the service as a “cost-neutral” way for the state government to save the rest of the state’s money and the hassle of double-checking its many bills.

“They can buy our product, we bundle it, give them one invoice and then we also do anti-fraud where we look for errors in billing,” Osmond said. “A common overage is they send you duplicate invoices, and so we catch that, reject it and dispute it.”

Osmond said the additional cost of roughly $500,000 per month is likely only half of the savings the state can realize. He said Virginia will transition this summer to a new system powered by artificial intelligence, which he predicted will boost the amount of monthly overcharges and inefficiencies discovered by up to $1 million. And beyond finding duplicate costs, Osmond says, the new AI system will help the public sector figure out which services it is paying for but not using.

“Earlier this year we identified several thousand lines that had not called in six months,” Osmond said. “They were just there, that people used just in case, and we just stopped using them. But if we hadn’t asked for it, no one would have taken action, so that saved a lot of money.”

Currently, VITA manually performs data analysis to detect billing errors and unused services. But 18 months ago, VITA, the accounting firm KPMG and an AI company called Claro, began developing a new AI system that Osmond said would make the service more accurate and highly automated. But despite the big cost savings, Osmond said, it wasn’t initially obvious that the state would offer such a brokering and fraud detection service because “it’s a lot of work.”

“We did a lot of research and said, is this the business we want to be in?” said Osmond. “Because most (states) offer contracts, but there’s not really a service behind it.”

Osmond said part of the challenge lies in the size of the service catalog, which collects 5,700 services from more than 30 service providers, from large companies like Comcast to smaller local businesses. Ultimately, he said, his agency committed to providing the service.

“We’ve come to the conclusion that if we don’t do it, no one will do it and the additional costs will just become a cost of doing business,” Osmond said. “Sometimes you pay for accounts you don’t have, and people just accept that. We thought this was an opportunity for the government to do better.”