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.

Wave 26 for FY 2011 will be released on Tuesday, December 13th.  Cumulative funding for FY 2011 is currently $1.34 billion — about 28% behind the FY 2010 funding level at this time last year.  Priority 2 funding is currently being provided only at the 90% level.

Wave 78 for FY 2010 will be released on Wednesday, December 14th.  Cumulative funding for FY 2010 is currently $2.89 billion.  Priority 2 funding is being provided at all discount levels.

FCC Competitive Bidding Appeal Decisions

Last week, the FCC released three decisions approving or denying thirteen appeals related to competitive bidding issues.  These decisions, discussed below, provide several nuances of E-rate bidding requirements not covered in the more general SLD fall training (summarized in our newsletter of November 28, 2011).

Form 470s and RFPs:

The Al-Ihsan Academy, et al, decision (DA 11-1974) deals with issues involving Form 470s and separately issued RFPs.  If an applicant issues an RFP for E-rate products or services, it must be coordinated with the applicant's Form 470.  Strictly stated, the competitive bidding rules require that:

• The Form 470 must explicitly indicate (via a checkmark in the appropriate box) that the applicant has or intends to issue an RFP, and must indicate how a service provider may obtain a copy of the RFP.  (Note: If, within a single category of service, an applicant uses an RFP for some services, and no RFP for other services, the applicant should file two Form 470s, one for RFP services and one for non-RFP services.)
• The Form 470 must be posted for 28 days before an applicant can select a vendor, sign a contract, and/or file a Form 471 application.  The 28th day is known as the Allowable Contract Date ("ACD").  If an RFP is also issued, that RFP must also remain open for 28 days.  If the Form 470 and RFP are not released on the same day, the 28-day requirement is governed by whichever is filed last.  If, for example, the RFP is issued 5 days after the Form 470 is filed, the first day that the applicant can select a vendor is not the ACD shown on the posted Form 470, but five days thereafter (i.e., 28 days from the issuance of the RFP).

In the Al-Ihsan Academy decision, the FCC granted relief to five applicants who did not quite meet these strict rules, but denied the appeals of six others.  A key determinant in the FCC's decisions was whether or not potential bidders were, or could have been, harmed by the violations.  The situations were as follows:

1. Consistent with a previous appeal order, the FCC waived the 28-day requirement in the case of one district whose RFP deadline was three days before the Form 470's ACD.  The FCC found that "the applicant only missed the 28-day deadline by a minimal number of days (i.e., one to three days) and therefore gave all potential vendors adequate time to prepare and submit bids."  Five applicants with deadline violations greater than three days were denied.
2. In another case, a district issued an RFP to comply with state rules after it had filed its Form 470.  The Form 470 did not indicate that there was to be an RFP, but the FCC found that the district notified all Form 470 bidders that an RFP had been issued and provided them copies.  In a similar case involving a non-RFP Form 470, the FCC found that the Form 470 contained sufficient information to permit bids by vendors who did not have the RFP.  In both cases, the FCC essentially ruled:  "no harm, no foul."  Conversely, in a similar case that the FCC denied, the district had only provided RFPs to vendors who found out that there was one, "creating an unfair advantage to bidders relying only on the FCC Form 470."
3. The FCC also approved the appeals of two districts that had received and responded to service provider questions regarding services being sought.  USAC had treated the additional information provided as RFP equivalents, but the FCC ruled that the "communications with the service providers did not constitute an RFP but merely provided guidance directing potential bidders to already-filed FCC Forms 470."

Price as the Primary Factor:

The Katy Independent School District decision (DA 11-1979) deals with the weighting of bid selection factors.  According to FCC rules, the winning bidder need not be the one offering the lowest cost.  An applicant may compare various factors when evaluating competing bids, but the price of eligible services must be the most important (i.e., most heavily weighted) factor.  An example of an acceptable bid matrix is shown in the Competitive Bid Response Documentation section of our Web site.

In the Katy ISD case, USAC had rescinded $23 thousand of funding after a post-commitment finding that price had not been the most important factor in the vendor's selection.  The FCC upheld USAC's decision, but the FCC's stated rationale is unusual.  In the cover letter to its FCC appeal, Katy argued that price was the most heavily weighted factor.  According to Katy, the winning bidder received 80 points on price (16 out of 20 on the cost scale times a weighting factor of five).  As it happened, however, Katy indicated that the vendor also received 80 points on technical merit (20 out of 20 on the technical scale times a weighting factor of four).  Thus, although the final sub-scores were the same on both measures, Katy argued that it had indeed weighted price more heavily than technical.  The FCC, on the other hand, ruled that "Even though Katy weighted the cost category greater than the technical solution category, it assigned fewer points to cost than to technical solution.  As a result, the cost category did not receive the highest number of points in Katy's vendor selection process and Katy's selection process violated the Commission's rules."

We have never before interpreted the FCC's competitive bidding rules as requiring that price receive more points than any other factor, but only that price be the primary factor in the bid selection process.  This decision, therefore, may set a new precedent.

Ironically, whether or not the FCC's decision in this case reflects an appropriate new interpretation of its rules, the denial itself appears well-founded.  In an attachment to the Katy appeal, which includes what appears to be the complete and original bid matrix, the multiplier on technical factors is shown as five, not four.  Conversely, the multiplier on cost factors is shown as four, not five.  Under any interpretation, it appears that Katy's vendor selection was more heavily weighted towards technical merit rather than price.

Manufacturer Designations:

The Queen of Peace High School (DA 11-1991) decision essentially endorses — and adopts prospectively — Form 470 guidance provided by USAC in its recent fall training.  In one slide on proper Form 470 usage, USAC stated that:

• 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")
• Applicants should avoid using specific manufacturer's name to request a service (e.g., Don't use Kleenex, use tissue instead)

In this particular case, Queen of Peace had posted a Form 470 for FY 2009 specifying Edline Web hosting services.  USAC treated this as a violation of the competitive bidding rules "because a service provider name appeared on the FCC Form 470 and the referenced provider was subsequently selected as the service provider for the requested services."

The FCC agreed that "When an applicant includes a manufacturer's name or brand for its description of requested services on the FCC Form 470, there is a risk of compromising the competitive bidding process."  Nevertheless, the FCC approved the appeal in this instance "Because the Commission had not provided specific instruction on how to reference manufacturers or brands in an FCC Form 470 or a request for proposal, applicants may have reasonably believed that it was permissible to identify desired services using a vendor's name as part of the description."

Going forward, however, the FCC clarified its rules to indicate "applicants must not include the manufacturer's name or brand on their FCC Form 470 or in their RFPs unless they also use the words ‘or equivalent' to describe the requested product or service."

The following points should be noted:

1. Since many applicants have already posted their Form 470s for FY 2012, the FCC's requirement for use of the phrase "or equivalent" when referring to a particular vendor's product or service takes effect prospectively for FY 2013.
2. Based on USAC guidance, other wording such as "similar functionality" or "compatible" would presumably be acceptable (as would be requests for maintenance on a specific brand of equipment).  Use of the magic "or equivalent" words, however, is recommended.
3. Since many state master contracts are awarded along specific brand lines, with separate contracts for a range of equivalent products, hope to see additional FCC clarification on the need for "or equivalent" language in state RFPs.

E-Rate Updates and Reminders

e-BI Proposes an Extension of the FCC's EDU2011 Wireless Pilot:

e-Bookroom Initiative ("e-BI") filed comments with the FCC last week proposing to extend the EDU2011 wireless Internet pilot program (also known as "Learning On The Go") so as to fully utilize the $10 million in E-rate funding initially set aside for the trial.  The e-BI comments noted that the twenty EDU2011 participants had not been funded, on average, until early in the second quarter of the FY 2011 funding year, and that the awards had totaled only $7.1 million of the available funding.  By extending both the funding and the timeframe for its use, the pilot program should generate more meaningful results as to the educational benefits and implementation issues of 24x7 off-campus access to wireless Internet services.

e-Bookroom Initiative is an educational organization originally formed by a number of the EDU2011 applicants and participants to promote standardized, school-friendly, licensing terms for e-textbooks and other online resources for the K-12 market.

Introduction to New FCC Commissioner Nominees:

The Senate confirmation hearing for FCC Commissioner nominees Jessica Rosenworcel and Ajit Vardara were held November 30th.  The C-SPAN video of the event serves as a nice introduction to the two nominees.  The hearing was clearly non-contentious.  Most interestingly, from an E-rate perspective, Sen. Jay Rockefeller's (D-WA) first question to each nominee, following their prepared remarks, solicited promises that they would not seek to divert E-rate funds to other programs.

Schools and Libraries News Brief dated December 9 – Form 470

Last week's SLD News Brief for December 9, 2011, discusses the Form 470 as a part of the application process.  This is a particularly timely topic given the recent FCC appeal decisions discussed above.  The News Brief covers the following points:

• The basic purpose of the Form 470
• What the Form 470 must and must not do
• The 28-day posting requirement
• Integration with the issuance of an RFP
• Treatment of existing contracts