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In This Week's Issue
» Funding Status Update
» Anatomy of a Successful FCC Appeal
» E-Rate Updates and Reminders
» Schools and Libraries News Brief dated May 31 – Summer Planning for Vendors

E-Rate Central News for the Week
June 3, 2013

Introduction

The E-Rate Central News for the Week is prepared by E-Rate Central. E-Rate Central specializes in providing consulting, compliance, and forms processing services to E-rate applicants. To learn more about our services, please contact us by phone (516-801-7804), fax (516-801-7814), or through our Contact Us Web form. Additional E-rate information is located on the E-Rate Central Web site.

Funding Status

The good news this week is that there will be waves for four different funding years; the bad news is that “regular” waves are still being released for funding years that ended one–two years ago.

Wave 3 for FY 2013 will be released on Wednesday, June 5, 2013, for over $130 million.  Funding is currently being provided for Priority 1 only.  Cumulative funding for FY 2013 is $138 million.

Wave 46 for FY 2012 will also be released on Wednesday, June 5, 2013, for $48.9 million.  Priority 2 funding is being provided at 90%, and is being denied at 89% and below.  Cumulative funding for FY 2012 is $2.33 billion.

Wave 95 for FY 2011 will be released on Thursday, June 6, 2013, for $19.1 million.  Priority 2 requests are being funded at 88% and above, and denied at 87% and below.  Cumulative funding for FY 2011 is $2.60 billion.

Wave 113 for FY 2010 will be released on Tuesday, June 4, 2013.  Priority 2 funding is being provided at all discount levels.  Cumulative funding for FY 2010 is $3.06 billion.

Anatomy of a Successful FCC Appeal

Over the past few weeks, as the FCC focused on competitive bidding violation appeals, we saw and reviewed three denials (DA 13-885, DA 13-999, and DA 13-1159) of appeals involving bid assessment procedures in which the applicants either failed to weight price as the most important factor or evaluated price on the total cost of both eligible and ineligible products.  In each case, USAC had denied the associated funding request(s) as a violation of the rule requiring applicants to assign the greatest weight to the price of eligible products and services.  In all three cases, the FCC denied a request to waive the rule despite the applicant’s arguments that pro forma corrections of the bid assessment scores would have yielded the same winner(s).  As stated in one decision, the FCC’s position was that the “fact that [an applicant] can, with the benefit of hindsight, find one way to re-engineer its bidding process to reach an identical result using price as the primary factor does not demonstrate compliance with the Commission’s rules.”

Last week, in the case of La Joya ISD (DA 13-1173), involving a combined pricing factor for eligible and ineligible items, the FCC came to the opposite conclusion and granted the district’s appeal for a waiver with respect to 13 separate funding requests.  An analysis of the underlying appeals in these cases is instructive.

In the successful La Joya appeal, the district provided 13 sets of three spreadsheets for each FRN denial.  One spreadsheet broke out the eligible and ineligible costs on a line-by-line component basis; the other two spreadsheets showed the original and revised bid matrices indicating the same winning bidder.  Examples of the original and revised bid matrices are shown below (with the vendor names redacted).

As was the case for the other FRNs, most of the equipment was eligible, so the price changes in the revised analysis were minor.  Interestingly, in this example, the lowest price bidder for eligible equipment was different than the lowest cost bidder for total costs.  Although the difference in this particular case was offset by the other factors, it does indicate the importance of factoring in the price of eligible equipment on its own.

 

The key point to note in this example is that the revised bid matrix shows the original bid winner is still the winner.  The FCC clearly agreed.

The applicants whose appeals were denied had tried to make the same point, but failed — probably because of the following:

  1. Henrico County’s appeal admitted that it had originally assigned 30 points to “Functional Requirements and Implementation Services” and only 20 points for price, but simply stated that had it reversed the weighting on these two factors, the same vendor would have been selected.  The appeal did not include original and revised bid matrices, nor did it attempt to show that the selection would remain unchanged over a wide range of weightings.
  2. Fall River’s appeal addressed a similar problem.  Its original bid matrix assigned 25% to both price and “Knowledge of Infrastructure.”  Its appeal indicated that raising price to 45% and dropping the other factor to 15% would not change the vendor selection.  Although the appeal showed both the original and revised bid matrices, it raised an interesting issue which the FCC found troubling.  The district had assigned exactly the same price score to all four bidders — perhaps implying that all prices were in the same ballpark.  The problem with this, assuming the prices themselves were not exactly the same, is that it meant mathematically that price was not a factor at all.
  3. Spokane’s appeal was more interesting.  Its original bid assessment assigned the greatest weight to a pricing component but, like La Joya, also applied that factor to a combination of eligible and ineligible equipment.  Also like La Joya, Spokane’s appeal provided a number of tables breaking out the eligible and ineligible components, and showed that a revised assessment on the eligible components alone would not have affected the vendor selection.  Unfortunately, Spokane’s methodology had a more serious problem.  Its “price” component included both original capital costs and operating costs (e.g., software licenses, upgrades, and maintenance), used to calculate and compare 5- and 10-year life cycle costs.  Spokane admitted that another vendor’s bid, considering only the capital costs of eligible equipment, was much lower (by 34%) than that of its winning bidder.  But Spokane argued that the only fair way to evaluate bids was to consider total life cycle costs.  Although this is a rational argument, it is — and was — a losing argument under E-rate rules.

In fairness to the E-rate program, however, we should note that life cycle and ineligible equipment costs can be taken into account in bid assessments, but it must be done by developing other evaluation factors at somewhat lesser weights than the price of the eligible equipment.

One other factor in this appeal comparison should be noted.  The scoring of many bid assessment factors, such as technical experience, may be somewhat subjective.  But price scoring can and should be more objective.  As an example of a proper approach to price scoring — as opposed to the Fall River example — consider the scoring calculations implicit in the La Joya bid matrices.

In La Joya’s original bid matrix, for example, vendor #2’s price of $949,677 was 73.6% of Vendor #3’s price of $1,291,117.  As the lowest priced vendor, Vendor #2 received the full 75.00 pricing points.  Vendor #3, on the other hand, received only 55.17 points — also 73.6% less.  All the other pricing points in the two matrices are mathematically proportional to the comparative prices.

E-Rate Updates and Reminders

FCC Appeal Decisions Watch:

In addition to the La Joya decision discussed above, the FCC published two other appeal decisions last week — one reversing a previously held position.  In particular:

  1. Greeley PSD et al (DA 13-772):  The FCC addressed the cases of three applicants whose entire applications had been denied because vendors had been listed as the contacts on their related Form 470s.  In the past, the FCC had treated such a condition as a strict violation of its competitive bidding rules, regardless of whether or not the vendor involved was bidding on the requested services.  In this decision, “upon further consideration,” the FCC decided that there would be no violations of competitive bidding rules if the vendor contact was not bidding on the service.  As a result, the FCC granted the requests for review by two applicants.  In the third case, it granted the review with respect to FRNs for which the vendor was not involved, and denied the request for the FRNs on which it did bid.
  2. Amphitheater USD 10 et al (DA 13-1208):  The FCC approved appeals by eleven applicants who technically did not have signed contracts in place, but did have binding agreements, at the time they filed their Form 471 applications.

SLD Fall Applicant Training Schedule:

The SLD has scheduled eight one-day applicant training sessions this fall from late September through early November.  As of last Friday, registrations are being accepted on a waiting list only basis for Washington DC, Houston, and Los Angeles.  Regular registrations are still being accepted for Newark (10/8), Minneapolis (10/15), St. Louis (10/22), Atlanta (10/24), and Portland (11/7), but less than 130 spaces are available in total.

Filing an Early Form 486:

Applicants receiving funding in the early waves for FY 2013 can now file their associated Form 486s.  Doing so early is particularly important for applicants seeking discounted billing from their service providers as of July.  Although a Form 486 is generally not supposed to be filed until service begins — which, in the case of FY 2013, would typically be July 1, 2013 — a special check-off box (Item 6a) is provided on the Form 486 to permit early filing as long as services will be starting in July (i.e., “on or before July 31 of the Funding Year”).

Note that the Item 6a check-off box should be used only for applicants filing before July 1.

Reply Comment Deadline on the FCC’s Bundled Components Proposal:

As discussed in our newsletter of April 15, 2013, the FCC requested comments (DA 13-592) on the eligibility of otherwise ineligible components bundled, without cost allocation, with other eligible services.  Initial comments were due May 23rd and were summarized in our newsletter of May 27, 2013.  Reply comments are due this Friday, June 7th.

Schools and Libraries News Brief Dated May 31 – Summer Planning for Vendors

The SLD News Brief for May 31, 2013, lists and reviews the things service providers should be doing this summer, including:

  1. Complete activities related to billing customers and invoicing USAC for any remaining FY 2012 recurring services.
  2. Assist applicants with responses to PIA questions (if asked).
  3. Review USAC’s Website for posted Form 470s.
  4. Label and file program-related documents.
  5. Consider attending applicant training in the fall (limited spaces still available).

Disclaimer: This newsletter may contain unofficial information on prospective E-rate developments and/or may reflect our own interpretations of E-rate practices and regulations. Such information is provided for planning and guidance purposes only. It is not meant, in any way, to supplant official announcements and instructions provided by either the SLD or the FCC.