News of the Week

Funding Status

The FY 2012 Form 471 application filing window will open at noon on Monday, January 9, 2012 and will close at 11:59 pm EDT on Tuesday, March 20, 2012. The filing window will be open for 72 days.

The SLD did not announce funding waves for this week, but we believe it is on schedule to release Wave 24 for FY 2011 on Tuesday, November 29th, and Wave 77 for FY 2010 on Wednesday, November 30th.

SLD Training: The Road to Success – Competitive Bidding

This is the seventh article in a series covering the major topics presented in the SLD's fall applicant training workshops. The SLD's PowerPoint slides for this training are available online.

The SLD's "Road to Success" presentation covers a variety of topics, all designed to keep applicants, service providers, and consultants out of trouble. Not surprisingly, the primary focus is on technology planning and procurement — most importantly, the competitive bidding process.

Fair and open competitive bidding is a cornerstone of the E-rate program. It is the one process which, if not done correctly, is most likely to lead to funding and/or invoicing delays and denials. Worse still, competitive bidding violations found after funding is initially awarded and disbursed can result in retroactive commitment adjustments ("COMADs") and demands for the return of funds.

The SLD stresses that applicants, service providers, and consultants must follow all E-rate rules (including the new gift rules) and state and local procurement rules. This year's SLD training also notes that applicants and service providers have to abide by their own "ethical regulation" policies.

To avoid conflicts of interest, the SLD lists the following Dos and Don'ts:

A service provider cannot:

• Determine the types of service the applicant will seek on an FCC Form 470/RFP (including helping an applicant develop its technology plan)
• Prepare or assist an applicant with filling out the FCC Form 470/RFP
• Sign, certify and/or submit FCC Form 470
• Assist or run the competitive bidding process for the applicant, which includes preparing or conducting the bid evaluation and vendor selection process
• Be privy to information about the bid not shared with other potential bidders
• Violate gifts rules

A service provider can:

• Ask clarifying questions when bids or descriptions are vague or generic

An applicant cannot:

• Have a relationship with service providers that would unfairly influence the outcome of the competition
• Furnish service providers with inside competitive information
• Have ownership interest in a service provider's company competing for services
• Violate applicant's own regulations or policies
• Violate gifts rules (see our newsletter of October 10, 2011)

An applicant can:

• Have pre-bidding discussions with potential bidders as long as that doesn't lead to one bidder having "inside" information (warning: this is obviously a subjective matter)
• Attend product demonstrations (also see the discussion of equipment loans in our newsletter of April 25, 2011)
• Encourage and seek vendors to bid
• Do research to determine what cost-effective solutions are available

Form 470s and, if required, Requests for Proposals ("RFPs") are central to the competitive bidding process. A number of the important points made with regard to Form 470s and RFPs in the SLD training are as follows:

• They should indicate services and categories of service that entities are seeking
• FCC rules refer to RFPs generically but they may have a variety of names (Request for Quotes, Request for Bids, etc.)
• FCC rules do not require an RFP but state and local procurement rules may
• Form 470 must indicate if the applicant has issued or is planning to issue an RFP
• Both must be based on tech plan (if applicable)
• Both must be posted for at least 28 days from the later of the two posted (470 and RFP)
• They must indicate any special requirements and/or disqualification factors
• They must indicate who will be receiving the services
• The applicant must retain a copy of the RFP, including evidence of publication date and any solicitation
• The applicant must provide sufficient detail in FCC Form 470:
  • Cannot provide generic descriptions (e.g., "All eligible telecom services" or "Digital Transmission Services")
  • Cannot provide laundry lists of products and services
• Addendums or changes to the Form 470 and/or RFP may require applicants to re-start the 28-day period when there is a significant change to the original scope of the procurement
• Third-party entities may conduct the competitive bidding:
  • For example, non-state agencies that conduct the competitive bidding and contract negotiations on behalf of schools or libraries (e.g., Joint Power Authorities)
  • Each such third-party must have a Letter of Agency (LOA) from each school and/or library signed on or before the FCC Form 471 certification postmark date
• The Form 470 and/or RFP should list any eligible services requirements:
  • Applicants may require service providers to provide services that are compatible with one kind of system over another (e.g., Cisco compatible)
  • Applicants cannot state make and model on FCC Form 470 or RPF, but may state equivalent make & model (e.g., "IBM router 628 or similar functionality")
• Qualification/disqualification factors must be spelled out up front to all interested parties

While not covered in training, we have recently seen cautionary examples of how losing bidders might react to perceived bidding violations, and how USAC might respond. Two examples, involving a PIA inquiry and an FCC appeal action, are shown below.

1. The PIA review example appears to have stemmed from a whistleblower's complaint to the SLD. The resulting PIA inquiry read as follows:
   
   We are in the process of reviewing Funding Year 2011 FCC Form 471 Applications for schools and libraries discounts to ensure that they are in compliance with the rules of the Universal Service program. To complete our review, we need some additional information. The information needed to complete the review is listed below.
   • Did XXXXXXX or any agent of XXXXXXX, BEN NNNNNN discourage, hinder, or prohibit any prospective bidder from submitting a response?
     1. If yes, please provide an explanation and supporting documentation.
   • Did you respond to all prospective bidders?
     1. If yes, please provide documentation in support of your response.
     2. If no, please provide an explanation and supporting documentation.
   • Did you suggest to any prospective service provider that they not submit a bid?
     1. If yes, please provide an explanation and supporting documentation.
   • Were statements made to any prospective service provider by a representative of the entity that may have dissuaded them from bidding?
     1. If yes, please provide an explanation and supporting documentation.
     • Please provide all correspondence you had with potential bidders, including responses you considered "spam."
     • If all such documentation was already provided during the course of a Selective Review, please state such.
   
   In addition, information provided to USAC indicated when prospective bidders contacted the school, the bidders were told that the school is already working with a Service provider and they were no longer accepting bids. We are providing you with an opportunity to submit further documentation and/or any special circumstances that we should consider during review.

2. The second example involved a post-funding Request for Review to the FCC by a losing service provider asking "Whether the conduct and award of the bid in this matter warrant a reversal of the SLD's Decision to fund the above-referenced applications."  The allegations of improper bidding involved multiple schools and were as follows:

1. 1. The equipment requested was identical to [sic] each bid and awarded to the same vendor at each school suggesting the vendor participated in the construction of the 470 specifications that determined the schools request.
   2. That cost was not the primary determination for the awards and the SLD itself concluded that on several FRNs in bid decisions made by this consultant.
   3. That a pattern has emerged among all of the bids awarded by this consulting firm over a 11 year period that awarded contracts to the same vendors of internal connections, each and every year and for the same equipment.
   4. It appears that a symbiotic relationship exists between the vendors (in support of the consultant's business through trade show meetings etc.) and the consulting firm that causes the continued skewing if bids to the particular vendors in violation of FCC fair and competitive bid rules.
   5. That the consultant did not choose based on cost effectiveness, may have ordered excessive equipment, and requested technologies proffered by vendors rather than required by the schools in a violation of the waste fraud and abuse rules of the FCC.

An applicant's best defense against these types of actions is to maintain a scrupulously fair and open bidding process.

E-Rate Updates and Reminders

Impact of the Growing Demand for Priority 1 Services:

The E-Rate Management Professional Association ("E-mpa"), an E-rate consultant trade association, submitted a white paper to the FCC last week entitled "The Growing Demand for Priority One Services Impacts the Universal Service Program for Schools and Libraries."  The paper examines the recent trend in the demand for Priority 1 E-rate funding, and attempts to quantify when such a trend would exhaust funds for Priority 2 services. The analysis concludes that:

1. Without roll-over funds full Priority 2 funding at even 90% would be unattainable from FY 2012 forward. At best, this would mean that 90% applicants would receive only a prorated share of their Priority 2 requests. After FY 2016, there would be no funding for Priority 2 and funding for Priority 1 would be constrained.
2. With roll-over funding of at least $600 million annually, Priority 2 funding at 90% could be continued until 2015, with partial funding available thereafter through 2022.

Assuming no additional funding for E-rate, other than a small annual inflation adjustment, the E-mpa paper discusses the following three options for maintaining some degree of Priority 2 funding:

1. Capping Priority 1 funds — either as a fixed dollar amount or as a percentage of the total fund.
2. Lowering discount rates — by restructuring the discount rate matrix across both priorities.
3. Reducing the number of eligible Priority 1 services — with the possible elimination of Web hosting packages, basic voice service, and/or on-premise equipment.

E-mpa "urges the FCC to begin a broad proceeding addressing this topic, in order to give all constituents the opportunity to be heard."  Quite realistically, E-mpa expects that such a proceeding would yield varied and passionate responses — to which we couldn't agree more. Yet the alternative is to do nothing, squeezing Priority 2 funding out of existence and eventually requiring allocation of Priority 1 funding.

FCC Cybersecurity Planner:

The FCC announced the release of the Small Biz Cyber Planner, an easy-to-use online tool designed to help small businesses develop and customize their own cybersecurity plans.  By answering a few basic questions, the tool generates a customized plan covering such topics as:

• Privacy and Data Security
• Network Security
• Website Security
• Facility and Operational Security
• E-mail
• Mobile Devices
• Incident Response and Reporting
• Policy Development Management

Although designed for small businesses, many of the planning elements may be equally applicable to small- and medium-sized schools and libraries. A plan can be easily created in minutes and is worth reviewing.

Fall E-Rate Training:

The SLD has completed its fall training schedule. The agenda and slides for the SLD's 2011 training are available online.

USAC training videos are also available online. Two short ones on Form 470 Filing and Dark Fiber are on the USAC Web site. Longer presentations on E-Rate Topics (and other Universal Service Fund programs) are available on YouTube.

Applicants seeking other E-rate training opportunities should check for state-sponsored E-rate workshops.  Contact information for State E-rate Coordinators may be found on the State Information pages of the E-Rate Central Web site.  Other sources of basic E-rate training include the two Webinars conducted by E-Rate Central earlier this year which are available online at http://www.webjunction.org/techplan-erate.  A copy of E-Rate Central’s presentation slides used for the New York training is also available.

Schools and Libraries News Brief dated November 22 – FY 2012 Application Window

An SLD Special Edition News Brief for November 22, 2011, was issued last week to announce the opening and closing dates of the FY 2012 Form 471 application window (as noted above). It included reminders on filing a Form 470 and on the requirement for Form 471 Item 21 attachments.

No regular SLD News Brief was released for the Thanksgiving week.