HomeMy WebLinkAboutDTS-07-058 - Direct Detect Business Case~ ~, ~
T~ E
Development &
Technical Services
Report To: Christina Weylie, Chair & Members of the Development and
Technical Services Committee
Date of Meeting: April 2, 2007
Submitted By: T. Beckett
Prepared By: T. Beckett
Ward(s~ Involved: All
Date of Report: March 2007
Report No.: DTS - 07-058
Subject: DIRECT DETECT BUSINESS CASE
RECOMMENDATION:
"That Council receive the Direct Detect Business Case for information purposes only."
BACKGROUND:
The Direct Detect Program was conceived as a result of a structure fire in asemi-detached
home in June 1995 where four children died as a result of the fire. The Fire Chief of the day
tabled a proactive plan with Kitchener Council to start up a Direct to Fire Monitoring Service
operated by the Fire Department. Hence Direct Detect was created and operated in its early
days as a pilot project. The Program has since evolved to be an important service provided to
our community by our Fire Department.
Direct Detect is a state of the art service provided to residents and businesses located within
Kitchener or within the municipalities whose fire departments are dispatched by the Kitchener
Fire Department. The advantage of the system is the fire alarm signal is received directly in the
emergency fire communications centre and fire vehicles are dispatched without delay to the
emergency. In effect, alleviating the need for the home owner to call 911, be transferred to a fire
dispatcher, thus removing the exchange of verbal information and saving precious
seconds/minutes in the notification and dispatching process. The homeowner is still
encouraged to exit the house and call 911.
As identified in the Kitchener Fire Department Master Community Plan, 2005 to 2010, Goal # 5
provides for the continued expansion of the program within the community and the monitoring of
program growth, revenue generation and customer expectations to identify the program needs
and budget requirements.
DTS - 07-058
April 2, 2007
Page2of2
REPORT:
This business plan provides the framework and the financial implications for Direct Detect for
the next 5 years. The plan outlines 19 strategic action plans in the areas of finance, staffing,
equipment, marketing and other miscellaneous.
These action plans include harmonizing the pricing structure and the establishment of a 10-year
Capital forecast for replacement of equipment, minimal increasing of staff and providing for
organizational structure change, acquisition of additional equipment, increased marketing and
the expansion of the program to outside our coverage area.
FINANCIAL IMPLICATIONS:
Any financial implications will be addressed through Council and the budget process in the
appropriate budget years. Items contained in the plan have essentially a cost neutral impact on
the budget. Growth to the program will offset any additional costs
CONCLUSION:
This plan provides a framework for Direct Detect to continue to grow and establish a service to
the public that enhances public safety at no additional costs to the taxpayer. The Direct Detect
plan will be continuously reviewed and updated from time to time as required.
Tim Beckett
Fire Chief
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DIRECT DETECT
KITCHENER FIRE DEPARTMENT
BUSINESS PLAN
April 2, 2007
T. Beckett
Fire Chief
TABLE OF CONTENTS
EXECUTIVE SUMMARY ....................................................................................................3
THE PLAN
DESCRIPTION OF BUSINESS ............................................................................................................... 5
MAJOR DEMOGRAPHIC, ECONOMICAL, SOCIAL AND CULTURAL FACTORS ............................................. 6
MAJOR PLAYERS (SUPPLIERS, DISTRIBUTORS, CLIENTS~ ...................................................................... 6
NATURE OF THE INDUSTRY ................................................................................................................ 7
TRENDS IN THE INDUSTRY .................................................................................................................. 7
GOVERNMENT REGULATION .............................................................................................................. 7
THE MARKET
MARKET SEGMENT ........................................................................................................................... $
PRODUCTS AND SERVICE .................................................................................................................. $
PRICING AND DISTRIBUTION ............................................................................................................... $
MARKET TRENDS ............................................................................................................................. $
IMPLICATIONS OR RISK FACTORS ....................................................................................................... $
THE COMPETITION
COMPETITORS & TYPES OF COMPETITION ........................................................................................... 9
COMPETITORS STRENGTH'S AND WEAKNESSES .................................................................................. 9
COMPETITIVE ADVANTAGE ................................................................................................................ 9
ADVERTISING AND PROMOTION .......................................................................................................... 9
PRICING AND DISTRIBUTION ............................................................................................................... 9
FUTURE EXPENDITURES/TECHNOLOGY REQUIREMENTS .....................................................................1 O
RESEARCH AND DEVELOPMENT .......................................................................................................1 O
OTHER
KEY EMPLOYEES ............................................................................................................................11
POLICIES AND PROCEDURES ...........................................................................................................11
ACTION PLAN SUMMARY
FINANCIAL ..................................................................................................................................... 12
STAFFING ...................................................................................................................................... 13
EQUIPMENT ................................................................................................................................... 14
MARKETING ................................................................................................................................... 14
OTHER .......................................................................................................................................... 15
FINANCIAL PROJECTIONS ................................................................................................................ 16
EXHIBIT #2 -RESIDENTIAL ............................................................................................... 17
EXHIBIT #3 -COMMERCIAL ............................................................................................... 1$
EXHIBIT #4 -CAPITAL AMORTIZATION ............................................................................... 19
EXHIBIT #5 -LABOUR COST ANALYSIS .............................................................................. 2O
EXHIBIT #6 -REQUIRED AREA OUTSOURCE ....................................................................... 21
EXHIBIT #7 -COMMERCIAL COSTING ANALYSIS ................................................................. 22
EXHIBIT #$ -RESIDENTIAL COSTING ANALYSIS ................................................................... 23
DIRECT DETECT BUSINESS PLAN Page 2 of 23 April 2, 2007
EXECUTIVE SUMMARY
The Direct Detect Program was conceived as a result of a structure fire in a
semi-detached home in June 1995 where four children died as a result of the fire.
The Fire Chief of the day tabled a proactive plan with Kitchener Council to start
up a Direct to Fire Monitoring Service operated by the Fire Department. fence
Direct Detect was created and operated in its early days as a pilot project. The
Program has since evolved to be an important service provided to our community
by our Fire Department.
Direct Detect is a state of the art service provided to residents and businesses
located within Kitchener or within the municipalities whose fire departments are
dispatched by the Kitchener Fire Department. The advantage of the system is the
fire alarm signal is received directly in the emergency fire communications centre
and fire vehicles are dispatched without delay to the emergency. In effect,
alleviating the need for the home owner to call 911, be transferred to a fire
dispatcher, thus removing the exchange of verbal information and saving
precious seconds/minutes in the notification and dispatching process. The
homeowner is still encouraged to exit the house and call 911.
As identified in the Kitchener Fire Department Master Community Plan, 2005 to
2010, Goal # 5 provides for the continued expansion of the program within the
community and the monitoring of program growth, revenue generation and
customer expectations to identify the program needs and budget requirements.
The Action Plan has identified 19 key objectives in the areas of financial, staffing,
equipment, marketing and other.
FINANCIAL
1. Reduction of amortization costs associated to the pilot project.
2. Increase residential alarm monitoring yearly, to inflationary increase as
determined by Council.
3. Maintain a consistent pricing structure for monitoring, rentals and
servicing.
4. Work with Finance Department to harmonize Direct Detect billing with
current financial billing systems used by the City.
5. Establish a capital reserve line in the 2008 10-year Capital Forecast for
replacement and upgrades to the current alarm monitoring hardware.
DIRECT DETECT BUSINESS PLAN Page 3 of 23 April 2, 2007
STAFFING
1. Increased staff by one FTE to conduct the managing, monitoring and
assist with current and project workload associated with the Waterloo
Regional Housing Program.
2. Introduction of a working manager dividing time between installs and
managing of the program.
3. Increase the .5 FTE to 1.0 FTE in the administration side
4. Continue to contract out the installs in the required residential areas. This
provides the best service to the customer and balances our needs with
resources. All costs of the installs are borne by the contractor and KFD
maintains monitoring.
EQUIPMENT
1. Investigate the acquisition of an additional radio frequency for use with the
AES system.
2. Completion of the multi department business case for Replacement of
Central Alarm Monitoring Software.
3. Completion of a back up alarm monitoring centre in the Cambridge Fire
Headquarters.
MARKETING
1. A marketing strategy playing on the new legislation will continue to assist
in obtaining more of the residential market.
2. t~btain a Direct Detect Web page for easy access by current and potential
customers.
3. Increase residential customer base yearly
4. Promote the use of AES wireless technology versus DVAC lines for
monitoring purposes.
5. Increase the commercial/industrial customer base yearly.
6. Increase the marketing component of both the residential and commercial
alarm monitoring program.
OTHER
1. Conduct the Corporate Facilities alarm monitoring and system monthly
tests and service.
2. Investigate the expansion of Direct Detect into the Cambridge area.
DIRECT DETECT BUSINESS PLAN Page 4 of 23 April 2, 2007
THE PLAN
DESCRIPTION OF THE BUSINESS
The Direct Detect Program was conceived as a result of a structure fire in a
semi-detached home in June 1995 where four children died as a result of the fire.
The Fire Chief of the day tabled a proactive plan with Kitchener Council to start
up a Direct to Fire Monitoring Service operated by the Fire Department. fence
Direct Detect was created and operated in its early days as a pilot project. The
Program has since evolved to be an important service provided to our community
by our Fire Department.
Provincial statistics indicate that greater than 50% of fire deaths occur in
residences that are within a 5 minute response of a fire station. This statistic
supports the need to provide citizens with the tools to help themselves in the
period between fire department notification and the arrival of the first fire
vehicles. There is also a need to provide the earliest fire detection possible to
identify fires in their earliest stages; allowing occupants to exit the building in an
orderly and safe fashion; and to notify the fire department as early as possible so
it can respond and arrive before the fire has an opportunity to grow. Fires can
double with each passing minute of free, uncontrolled burning. After 4 minutes of
free burning, a fire can be 16 times its original size and one minute later it can be
32 times as big.
The implementation of Direct Detect allowed the City to reconfigure the locations
of six existing fire stations and eliminate the need for a seventh station in the
area protected by the original six. This has resulted in significant capital and
operating budget savings to the city which will be quantified later in this plan.
Direct Detect is operating as a successful service. Council incorporated into
current planning policy a requirement for new residential developments that are
greater than a five minute travel time from a fire station and where no fire station
is included in the 10 year capital forecast that each residential unit must be
connected to the fire communications centre via Direct Detect and pay monthly
service fees. ether commercial and residential units within the Cities of Kitchener
and Waterloo and the Townships of Woolwich, Wellesley and Wilmot may also
opt for the service on a fee for service basis.
There are a number of examples of how the service has worked to provide the
early notification to the fire department and helped prevent unnecessary loss of
life or property due to fire. The current customer base has increased to over
2,500 accounts which include both residential and commercial properties. With
the availability of the AES wireless system, new opportunities have been created
in the commercial monitoring field. Currently, the Waterloo Region District School
Board has all of its schools in the region monitored using this technology. There
are future opportunities to bring all of the Waterloo District Catholic School Board
and possibly the local universities onto this technology.
DIRECT DETECT BUSINESS PLAN Page 5 of 23 April 2, 2007
Direct Detect is currently staffed with three full-time technicians and part-time
administrative support.
MAJOR DEMOGRAPHIC, ECONOMICAL, SOCIAL AND CULTURAL FACTORS
Direct Detect is a state of the art service provided to residents and businesses
located within Kitchener or within the municipalities whose fire departments are
dispatched by the Kitchener Fire Depa~ment. The advantage of the system is the
fire alarm signal is received directly in the emergency fire communications centre
and fire vehicles are dispatched without delay to the emergency. This in effect
alleviates the need for the home owner to call 911 to then be transferred to a fire
dispatcher. By removing the exchange of verbal information it saves precious
seconds/minutes in the notification and dispatching process. The homeowner is
still encouraged to exit the house and call 911as a redundant measure.
The implementation of this service has allowed development to occur in fringe
areas without adding fire stations. The time saved in the notification process has
balanced the need for additional stations to this point.
In today's world, most families rely on two incomes and therefore both parents
are at work during the day and children are at daycare or school. Direct Detect
can provide a level of fire protection even when no one is home to detect a
problem. Most fire fatalities occur in residences during the night time hours.
Again, Direct Detect provides an automatic notification to the fire depa~ment
should a fire occur. This notification allows occupants additional time to exit the
building safely as well as a quicker dispatch and response by the fire department
thus improving opportunities for rescue and minimizing fire growth and damage.
MAJOR PLAYERS (SUPPLIERS, DISTRIBUTORS, CLIENTS
The residents and businesses of Kitchener are the major clients of Direct Detect.
Agencies such as the Waterloo Region District School Board have taken
advantage of Direct Detect to protect their schools and meet their regulatory
obligations. Waterloo Regional dousing has agreed to have 838 rental units
equipped to be monitored by Direct Detect. It is anticipated other similar
agencies will sign on in the near future. General Electric and AES are key
suppliers of the equipment used by Direct Detect.
DIRECT DETECT BUSINESS PLAN Page 6 of 23 April 2, 2007
NATURE OF THE INDUSTRY
There are very few other fire departments in Noah America which provide this
valuable service to their communities. No other entity within or outside our
geographic region can provide the same level of service as Kitchener Fire
Department provides.
TRENDS IN THE INDUSTRY
For commercial application, the system currently utilized by Direct Detect uses
DVAC lines (dedicated telephone lines} to relay alarm signals from the property
to the fire communications centre. There is information that Bell is exiting from
the DVAC business and is going to increase its pricing. As Direct Detect is
moving to the AES wireless technology, there is an excellent opportunity to
capture a portion of the commercial market.
GOVERNMENT REGULATIONS
Direct Detect offers service using equipment that meets ULC ~~nderwriters'
Laboratories of Canada} listed requirements for Commercial Fire Protection as
required by the Ontario Building Code and the Ontario Fire Code.
DIRECT DETECT BUSINESS PLAN Page 7 of 23 April 2, 2007
THE MARKET
MARKET SEGMENT
The market is comprised of the mandatory areas as established by Council
Policy. These are the areas being developed which are more than 5 minutes
travel time from an existing fire station or from a proposed fire station included in
the 10 year capital forecast. The other components of the market include
residents who opt to purchase the service for their homes and
commercial/institutional property owners who wish to take advantage of this
service.
PRODUCTS AND SERVICE
Direct Detect delivers a unique level of service in that alarm signals go directly to
the fire communications centre without any intermediary link. This cannot be
provided by other service providers.
PRICING AND DISTRIBUTION
Pricing tends to be less than the market as the service is not profit driven but is
intended to provide a higher level of fire protection to our citizens.
MARKET TRENDS
The potential reduction in the use of DVAC lines may cause more demand for
service. This will need to be monitored on a regular basis. There is movement to
Internet Protocol SIP} Technology which is resulting in customers not using a
traditional phone line. Kitchener Fire's current equipment is not compatible with
Internet Protocol. Kitchener Fire department is currently researching the
implementation of this technology and the compatibility with existing alarm
equipment.
IMPLICATIONS OR RISK FACTORS
At this time, there are no concerns about a changing market. The demand for
service may exceed our ability install systems in a timely manner.
DIRECT DETECT BUSINESS PLAN Page 8 of 23 April 2, 2007
THE COMPETITION
COMPETITORS AND TYPES OF COMPETITION
There is essentially no competition for Direct Detect if the specific services
provided are compared. There are numerous fire alarm system installers and fire
alarm monitoring companies, but none can offer the immediate receipt of signal,
dispatch and response without notification delays like Direct Detect.
COMPETITORS STRENGTH'S AND WEAKNESS
Properties monitored by a third party company have their alarms routed through
the company's alarm monitoring station where they are then routed to the
appropriate fire department. This consumes precious seconds. In Direct Detects
case, the signal is routed directly to the fire communications centre.
COMPETITIVE ADVANTAGE
As the Kitchener Fire Department directly monitors these alarms, there is
tremendous value to the service purchaser. This is a major competitive
advantage which also provides an increased level of protection due to quicker
response times.
ADVERTISING AND PROMOTION
Currently advertising of the Direct Detect product has been limited to community
events such as fire prevention week open houses, various home shows and the
inclusion of pamphlets in the Home Safety Inspection Program handouts.
t~ccasionally installation and monitoring packages have been provided at various
charitable events. The current structure and the ability to install and service new
customers in a timely fashion, limit the amount of advertising and promotion. As
a result of a recent newspaper article an additional 50 new customers enquired
about product installations within the first week of the article. This was taxing on
scheduling of ourtechnicians.
PRICING AND DISTRIBUTION
Currently there are various pricing structures with some variances and
inconsistencies inpricing that need to be addressed from past years.
The current pricing schedule for new clients is:
AES required Commercial monitoring $40.00/month
AES non required Commercial monitoring $25.00/month
Residential Monitoring $5.60/month
Commercial monitoring with DVAC charges $50.00/month
Rental pricing varies dependant on the complexity of the install and the amount
of equipment required.
DIRECT DETECT BUSINESS PLAN Page 9 of 23 April 2, 2007
Residential Firewatch $10.20/month (control panel, 3 smoke
alarms)
Residential Airwatch $2.11/month (control panel)
$1.00/month (smoke alarm)
Residential Required Area $6.95/month (control panel)
$1.65/month (smoke alarm)
There were various dealer programs in existence in which the authorized dealer
sells and installs the equipment and direct bills the clients for installation only.
These clients are commercial/industrial. These accounts are monitored for the
dealer at a cost. Current practice installs all new commercial accounts and no
new dealer accounts.
Commercial/Industrial $8.00/month*
$12.00/month*
*based on the size of the occupancy
There are a number of multiple or volume account discounts in existence. These
multiple accounts will receive a discount in monitoring charges. These include
the Waterloo Region District School Board, East Forest Homes, Sunnyside
Group homes and Waterloo Regional Housing.
FUTURE EXPENDITURES /TECHNOLOGY REQUIREMENTS
Future expenditures include upgrading the existing Alarm monitoring software.
The current software used is called SIMS. A software which would allow
increased accounts and flexibility for future expansions/technology would be an
asset. There is also an identified need for an increased receiver to handle IP
(Internet Protocol} and addition telephone accounts. IP is a newer concept that is
beginning to become very prevalent in the alarm industry. A Capital
Infrastructure schedule should be established in order to plan and budget for the
required upgrades.
RESEARCH AND DEVELOPMENT
Technology is ever changing. Monitoring software and alarm hardware needs to
be adaptable to a changing environment.
tour technicians are continuously updating skill sets and recommending the use
of updated and technically advanced equipment for the customer.
DIRECT DETECT BUSINESS PLAN Page 10 of 23 April 2, 2007
OTHER
KEY EMPLOYEES
NAME TITLE KEY QUALIFICATIONS
RESPONSIBILITIES
1 Steve Lacey
2 Russell Strickler
3 Steve Salese
4 Martina Daudova
Fire Alarm Technician Install & Service Certified Fire Alarm Technician
Fire Alarm Technician Install & Service
and Electrician
Fire Alarm Technician Install & Service
Certified Fire Alarm Technician
and Journeyman Electrician
Certified Fire Alarm Technician
The Direct Detect program is currently overseen by the Chief Fire Prevention
t~fficer (CFPQ}. The CFPO reports directly to the Deputy Fire Chief of Fire
Prevention and Communications.
POLICIES AND PROCEDURES
Hours of Qperation
Monday to Friday 8 am to 6 pm with 2417 emergency service and 24 hour alarm
monitoring
Number of Employ
3.5 FTEs
Vacation Program
As per KPFFA Collective Agreement and City Policy
Performance Assessment
"Let's Talk" and annual performance reviews
Training and Development
Regular training as required
Remuneration and Benefits
As per KPFFA Collective Agreement and City Policy
DIRECT DETECT BUSINESS PLAN Page 11 of 23 April 2, 2007
ACTION PLAN SUMMARY
FINANCIAL
1. Reduction of amo~ization costs associated to the pilot project. From the
onset the pilot project equipment costs were not amortized correctly. With
the assistance of the Finance Department the figures are currently being
adjusted to reflect the appropriate amortization figures. The costs in 2004
through to 2006 saw a large spike in the expenses, however in 2007 and
beyond we begin to recognize a substantial decrease in these costs as
they are paid off. - On oin -
The cost of inventory amo~ization and write downs will be reduced in the
future with the delivery of equipment using the "just in time" principle.
However we will see moderate amortization costs as the program
continues to develop.
2. Increase residential alarm monitoring yearly, to inflationary increase as
determined by Council. For years we have maintained a consistent cost
for our alarm monitoring. In 2006 we introduced an annual inflation cost
as approved by council. We will continue to adjust any new customers or
renewal contracts to reflect an annual inflationary cost. These customers
will be notified yearly as to the cost increase once established and
approved by Council. - On oin -
3. Maintain a consistent pricing structure for monitoring, rentals and
servicing. Currently the pricing of the Direct Detect services has been
inconsistent and with large variances across the board. A consistent
pricing schedule for monitoring, rentals, and service will be established
and maintained. The sales and installation of product would be vary
depending on the install itself. Exhibitis #5,7 & 8 will assist in establishing
the structure. -Establish 20Q7-
Example of a price structure based on a 3% increase yearly.
MONTHLY FEE STRUCTURE
Type of Monitoring 2007 2008 2009
Residential $5.60 $5.75 $5.90
Additional unit $2.95 $3.00 $3.10
Required Commercial
AES $40.00 $40.00 $40.00
DVAC $50.00 $50.00 $50.00
Non Required
AES $25.00 $25.00 $25.00
Wholesale
Lar e buildin $12.00 $12.00 $12.00
Small buildin $8.00 $8.00 $8.00
DIRECT DETECT BUSINESS PLAN Page 12 of 23 April 2, 2007
4. Work with Finance Department to harmonize Direct Detect billing with
current financial billing systems used by the City. This should be included
in the Central Alarm Monitoring Software that is being reviewed by a
Corporate Steering Committee. -200
5. Establish a capital reserve line in the 2008 10-year Capital Forecast for
replacement and upgrades to the current alarm monitoring hardware. This
includes, but is not limited to, receivers, antennas, computers, and
printers. -Establish 2008
STAFFING
6. Increased staff by one FTE to conduct the managing, monitoring and
assist with current and project workload associated with the Waterloo
Regional Housing Program. -Spring 2007
7. After the Waterloo Regional Housing Project is complete in 2007 the
increased workload associated to increasing the residential and
commercial/industrial customer base, the necessary marketing of the
product and the maintenance of the corporate alarm systems will require a
.5 FTE. An additional .5 FTE is required to manage the increased
workload, maintain the budget and supervise the current staff. This
manager/supervisor would report to the Deputy Fire Chief, Fire Prevention
and Communications. This position would be created through utilizing
existing staff of 4 FTE. - 200&
s. Increase the .5 FTE to 1.0 FTE in the administration side to assist with the
tracking of customer accounts, establish technician schedules, track the
budget and assist with the marketing and promotion of the product. This
will assist with the increased customer base and increased administration
requirements and additional .5 FTE is needed. This will equate to 1 FTE
Administrative Assistant. -Spring 2008 -
Deputy Fire Chief
Fire Prevention and Communications
Manageri Supervisor
Direct Detect
Civilian Alarm Technician Administrative Assistant
2 FTE's 1 FTE
9. Continue to contract out the installs in the required residential areas. This
provides the best service to the customer and balances our needs with
resources. All costs of the installs are borne by the contractor and KFD
maintains monitoring.
DIRECT DETECT BUSINESS PLAN Page 13 of 23 April 2, 2007
EQUIPMENT
10. Investigate the acquisition of an additional radio frequency for use with the
AES system. With the current system having a limit of 450 accounts,
future preparations are required. -Fa1120o7
11. Completion of the multi department business case for Replacement of
Central Alarm Monitoring Software. The business case has been
presented to Council and was approved in the Fall of 2006. This possibly
has a new alarm monitoring software that would be shared between the
Fire Departments' Direct Detect Program and Elmsdale Dispatch. The
next steps include the completion of the tendering, purchasing and
implementation of the new software. -On oin -
12. Completion of a back up alarm monitoring centre in the Cambridge Fire
Headquarters. This is a redundant system in the event of a system failure
in Kitchener Dispatch or the need to evacuate from the KFD dispatch
centre. -Fa112o07-
MARKETING
13. With the recent amendments to the Ontario Fire Code which require 1
smoke alarm on every storey, Direct Detect has an opportunity to assist
residential home owners and landlords in meeting the requirements of the
law. A marketing strategy playing on the new legislation will continue to
assist in obtaining more of the residential market. -On oin -
14. Create a Direct Detect Web page for easy access by current and potential
customers. The current Web page is buried within the City structure and
has been identified as difficult to find. -200
15. Annually Increase residential customer base yearly. Our current
residential customer base is approximately 1,590 customers. (Not
including the Regional Housing Project} To increase our customer base
20% yearly would result in an additional 300 customers per year. The
subsequent increase in alarm monitoring revenue would be approximately
$18,500/year. -start Zoos -
16. Promote the use of AES wireless technology versus DVAC lines for
monitoring purposes. Of the current charge $50 per month for required
alarm monitoring through DVAC phone lines, $25 goes to Bell Canada for
DVAC charges and the remaining $25 is considered the alarm monitoring
fee. By using the AES wireless system in required commercial buildings
has per the Ontario Fire Code}, Direct Detect can reduce the overall
monthly cost to the client to $40 per month while at the same time
increasing alarm monitoring revenues.
-On_goin_q (step up the promotion it DVAC lines increase)-
DIRECT DETECT BUSINESS PLAN Page 14 of 23 April 2, 2007
17. Increase the commercial/industrial customer base yearly. The current
Commercial/Industrial customer base is 400 customers. Increasing the
customer base by 10% will result in approximately 47 new customers
bringing in monitoring revenue of $22,500 per year (based on AES
Installs}. -Start 2007
i8. Increase the marketing component of both the residential and commercial
alarm monitoring program. In order to increase both our residential and
commercial/industrial sales an increase in marketing is required. It is a
unique and benefit to life safety. Increasing the marketing will require
marketing dollars and assistance from the Corporate Communications
Department. Part of the marketing responsibility would fall on the new
Manager/Supervisor of Direct Detect. A detailed marketing strategy would
need to be created and would include the costs associated to the
marketing of the business. -2008 (with the addition of Mana_ger)-
OTHER
i 9. Conduct the Corporate Facilities alarm monitoring and system monthly
tests and service, allowing cost saving to the Corporation. Direct Detect
has currently accepted the responsibility to conduct required monthly tests
on all Corporate facilities with alarm systems. Qualified Direct Detect staff
conducting these functions, prevents the need to hire an outside
contractor. Costs are maintained in house. Testing and maintaining these
63 systems results in approximately 11/2 hour per building per month
increased workload for Technicians. Direct Detect staff will also maintain
the systems and provide the necessary service to ensure the alarm
systems remain functional. -fin oin -
20.Investigate the expansion of Direct Detect into the Cambridge area, with
alarms directly into the Cambridge Fire Department and all administration
handled through Kitchener Fire Department Direct Detect administration.
-Start 2006 (with full activation in 2008) -
DIRECT DETECT BUSINESS PLAN Page 15 of 23 April 2, 2007
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Exhibit #7
Commercial Costing Analysis
Pricing Analysis-Commercial (Per Unit Amounts)
Required Area Non-required Area
Model Model
7750 7050
Sales (1 ~ $ 40.00 $ 25.00
Alarm Monitoring Fee $ 2,142.29 $ 1,338.93
Sale of Equipment $ 950.00 $ 550.00
Total Sales $ 3,092.29 $ 1,888.93
Variable Costs
Direct Labour
Cost per Employee (2&3)
Direct Materials (4)
Radio Comm. System
Overhead
Maintenance (5)
Total Variable Costs
Contribution Margin
Cont. Margin as % of Sales
Assumptions:
262.98 262.98
834.00 576.00
117.20 117.20
1,214.18 956.1$
$ 1,878.10 $ 932.75
60.74% 49.38%
1. Sales Sale of equipment- AES 7750 950.00
AES 7050 550.00
Alarm Monitoring AES 7750 480.00 ($40 per month)
AES 7050 300.00 ($25 per month)
2. Cost per employee Based on 52 weeks at 40 hours per week (incl. benefits) $ 46.12
Based on productive hours per week (incl. benefits, etc...) $ 65.75 (amount used above )
(Please refer to this exhibit for further details)
3. Hours to install AES in hours is 4
4. Direct Materials are based on highest cost estimate provided by Direct Detect. $ 576.00 Model 7050
$ 834.00 Mode17750
5. Estimated two hours per visit by a technician every three years based on the average time recalls have taken.
6. Contracts are assumed to last for a period of five years.
7. Discount rate of 5 yr. government bond of 3.91 % per Bank of Canada
DIRECT DETECT BUSINESS PLAN Page 22 of 23 April 2, 2007
Exhibit #8
Residential Cost Analysis
Pricing Analysis-Residential (Per Unit Amounts)
Required Non- Non- Contract
(if done by KFD) Required Required Out
Sales (1) Airwatch Firewatch
Alarm Monitoring Fee (9) $ 299.92 $ 299.92 $ 299.92 $ 299.92
Equipment Rental - 3 Smoke Detectors Avg (9) $ - $ 273.68 $ 546.28 $ -
Equipment Sales -Required Customers $ 800.00 $ - $ - $ -
Total Sales $ 1,099.92 $ 573.60 $ 846.20 $ 299.92
Variable Costs
Direct Labour
Cost per Employee (2&3) 493.10 98.62 65.75 0.00
Direct Materials (4)
Control Panel 120.40 60.95 125.00 0.00
Smoke Detectors (5) 115.17 154.86 195.00 0.00
Battery 11.50 0.00 0.00 0.00
DSL Filter 35.00 23.94 0.00 0.00
Transformer 8.00 0.00 0.00 0.00
290.07 239.75 320.00 0.00
Additional costs (10) 14.50 11.99 16.00 0.00
304.57 251.74 336.00 0.00
Pst 24.37 20.14 26.88 0.00
TOTAL 328.94 271.88 362.88 0.00
Overhead
Maintenance (6) 0.00 117.20 117.20 0.00
Total Variable Costs 822.03 487.70 545.83 0.00
Contribution Margin per Unit $ 277.89 $ 85.90 $ 300.38 $ 299.92
Cont. Margin as % Sales 25.26°l0 14.98% 35.50% 100.00°l0
Assumptions:
1. Sales Alarm monitoring fee 5.60 per month
Equipment rental - 3 ~ 5.11 per month
New Equipment- rent 10.20 per month
Equipment sales 800.00
2. Cost per employee Based on 52 wks at 40 hrs per wk (ir $ 46.12
Based on productive hrs per wk (incl. $ 65.75 (amount used above )
(Please refer to this exhibt for further details)
3. Hours to install Requi 7.5
Non r~ 1.5
4. Direct materials figure is based on amount per 2005-2009 budgeted projections.
5. Cost assumes a setup of 3 smoke detectors at $38.39 each for requried and contracting out
$51.62 each for non required
$65.00 each for non required Firewatch
6. Estimated 2 hours per visit by 1 technician every 3 yrs based on the average time recalls have taken.
7. Contracts are assumed to last for a period of five years.
8. Discount rate of 5 yr. government bond of 3.91 % per Bank of Canada
9. No fee increases are included in the calculations
10. Additional costs assumed to be 5% of direct materials excluding GST & PST
DIRECT DETECT BUSINESS PLAN Page 23 of 23 April 2, 2007