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In This Week's Issue
» Funding Status Update
» E-Rate 2.0 NPRM – Maximizing Cost-Effectiveness
» E-Rate Updates and Reminders
» Schools and Libraries News Brief for August 9 – Consultant Registration Numbers (CRNs)

E-Rate Central News for the Week
August 12, 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

Wave 13 for FY 2013 will be released on Wednesday, August 14, 2013, for $35.9 million. Funding is currently being provided for Priority 1 services only. Cumulative funding for FY 2013 will be $374 million.

Wave 55 for FY 2012 will be released on Thursday, August 15, 2013, for $16.3 million. Priority 2 funding is being provided at 90%, and is being denied at 89% and below. Cumulative funding for FY 2012 will be $2.72 billion.

E-Rate 2.0 NPRM – Maximizing Cost-Effectiveness

This is the fourth in a series of articles discussing the FCC’s Notice of Proposed Rulemaking for Modernizing the E-rate Program for Schools and Libraries (FCC 13-100), the “E‑Rate 2.0 NPRM,” which was formally released on July 23rd. This article discusses the second of the FCC’s primary goals, maximizing the cost-effectiveness of E-rate funds. The NPRM focuses largely on encouraging consortium or other bulk buying purchases and on providing more “transparent” pricing for E‑rate services. Note that many of the following topics are clearly interrelated.

Increasing Consortium Purchasing:

According to USAC, consortia represented about 13% of the funding in FY 2011. The FCC clearly expected a greater use of consortia, based on a seemingly reasonable belief that consortium bidding and purchasing would help hold down service costs. The NPRM, therefore, poses a number of questions about barriers to greater consortium use and about what can be done to “adopt additional incentives or mechanisms to facilitate the use of consortium purchasing.”

Encouraging Other Types of Bulk Buying Opportunities:

Even if applicants don’t band together to file consortium applications, the FCC would like to see greater use being made of “regional contracts managed by public, non-profit or private entities that also aggregate demand and manage the procurement process.”  The NPRM even seeks comment on “whether the Commission, working with USAC or some other entity, should create a bulk buying program for E-rate supported services.”  Such an initiative would dramatically expand the federal role in educational services procurement.

Increasing Transparency:

“Transparency,” at least within the context of the FCC’s NPRM, would mean publicizing bids and prices heretofore considered proprietary information — again with the goal of driving down prices. Specifically, the NPRM seeks comments on various aspects of transparency, including:

  1. Transparency of E-rate spending;
  2. Transparency of prices available for E-rate supported services;
  3. Transparency of prices being bid for E-rate supported services; and
  4. Transparency of actual purchase prices.

The NPRM also seeks comment on “whether the Commission, USAC, or other entities should take a more active role in assisting applicants in identifying cost-effective purchasing options” by identifying and publicizing “attractive prices, terms and conditions.”  Again, this envisions an expanded federal role.

Improving the Competitive Bidding Process:

The NPRM is seeking comments on two somewhat opposing objectives. On the one hand, it is seeking to address issues such as insufficient bidding information in Form 470s and situations in which applicants receive only one or no bids. On the other hand, the NPRM asks whether it might do away with the competitive bidding process altogether if purchases fall below some de minimis threshold or if applicants purchase off state master contracts.

This section also requests comments on the extent to which the Lowest Corresponding Price (“LCP”) rule helps ensure cost-effective pricing, and what clarifications (if any) are needed in the LCP rule.

Broadband Planning and Use:

The FCC is seeking comments on the steps applicants should take to ensure that they are “carefully assessing their needs and readiness to use high-capacity bandwidth.”  Noting that technology planning requirements had been cut back to cover only Internal Connections, the FCC seems to be hinting that there may be a need to reestablish a planning requirement for broadband.

Efficient Use of Funding:

Most broadly, the NPRM asks whether the FCC “should adopt bright line tests, benchmarks or formula for determining the most cost-effective means of meeting an applicant’s technology needs.”  Included in this issue are questions on how to determine the cost-effectiveness of multi-year contracts which might involve higher initial costs in the first year, but lower costs in subsequent years.

Innovative Approaches to Encouraging Maximum Efficiency:

In what could be deemed a “what else?” section, the NPRM asks whether it should authorize pilot programs to experiment with consortia, “establish novel bulk buying opportunities,” and/or test streamlined procurement practices.

E-Rate Updates and Reminders

Online Invoice Forms Update:

As indicated in last week’s SLD News Brief, the SLD’s online invoicing systems were temporarily inoperable while they were being updated to incorporate the new data fields of the revised Form 472 (“BEAR”) and Form 474 (“SPI”). Last Wednesday, the revised online SPI system became operational. Work on the online BEAR is expected to be completed “in a couple of weeks.”  In the meantime, BEAR invoices may be filed on paper. Type-in PDF versions of both forms, as well as a Form 473 (“SPAC”), are available in E-Rate Central’s Forms Rack.

FCC Public Comment Schedule:

The FCC currently has four notices out for public comment as per the following schedule:

Notice of Proposed Rulemaking: Modernizing the E-rate Program for Schools and Libraries (FCC 13-100) — see article above
    Release Date: 07/23/2013
    Comment Date: 09/16/2013
    Reply Comment Date:   10/16/2013
Revisions to FCC Forms 470 and 471 (DA 13-1590)
    Release Date: 07/17/2013
    Comment Date: 08/16/2013
    Reply Comment Date:   08/30/2013
Revisions to FCC Forms 479, 486, and 500 (DA 13-1636)
    Release Date: 07/24/2013
    Comment Date: 08/14/2013
    Reply Comment Date:   08/28/2013
Draft Eligible Services List for FY 2014 (DA 13-1513)
    Release Date: 07/03/2013
    Comment Date (expired): 08/02/2013
    Reply Comment Date:   08/19/2013

FCC Appeal Decisions Watch:

The FCC posted two appeal decisions last week involving multiple applicants, both “consistent with precedent.”  In particular:

  1. Allenstown Public Library et al (DA 13-1701):  Approved 14 appeals (and one petition for reconsideration) for late-filed applications, while denying 29 other appeals on the same issue. Applications associated with the approved appeals had been filed within 14 days of the application window, involved late-filed certifications or Item 21 attachments, or were filed within 30 days of the window as a result of serious medical reasons. The 29 denials were for later filed applications without “special circumstances justifying waivers.”
  2. Bright Star Schools Consortium et al (DA 13-1702):  Approved appeals from eight schools providing them with additional opportunities to “provide evidence to support their eligibility for the discount rate they requested.”

DOJ Settles False Claims Allegation:

The Department of Justice announced a $400,000 settlement of false claims allegations against the former CEO of Acclaim Professional Services in connection with a broader E-rate investigation involving the Houston Independent School District (“HISD”). According to the DOJ’s announcement:

The United States contended that, in violation of E-rate competitive bidding requirements and HISD procurement rules, Lehmann provided gifts and loans to HISD employees, including tickets to sporting events and two loans totaling $66,750 to an HISD employee who was involved in the procurement and administration of HISD’s E-rate projects.

The United States also alleged that Lehmann helped devise a scheme in which HISD outsourced some of its employees to Acclaim, which allowed them to continue to work for HISD while passing the cost on to the E-rate Program. The United States further alleged that, with Lehmann’s approval, Acclaim hid the cost of these employees in its E-rate Program invoices by rolling them into the cost of eligible goods and services.

Schools and Libraries News Brief Dated August 9 – CRNs

The SLD News Brief for August 9, 2013, discusses Consultant Registration Numbers (“CRNs”), briefly covering the following topics:

  1. What is the definition of a consultant?
  2. What is a Consultant Registration Number?
  3. How does a consultant obtain a CRN?
  4. How does an applicant find the CRN for its consultant?
  5. Where is the consultant information located on FCC Forms 470 and 471?

While on the topic, we should note that E-rate applicant use of consultants has become increasingly pervasive. By our calculations, 45% of applicants used consultants during the FY 2013 application cycle. By dollar volume, this accounted for 61% of the funding requests.

There are some who consider the broad use of consultants a condemnation of the E-rate process, arguing that it is a clear sign that the program has grown too complex. Our view — and please remember that we are consultants ourselves — is that consultants serve a valuable role in the process. In particular:

  1. A certain amount of complexity is inherent in any large federal funding program, if only to avoid waste, fraud, and abuse. The FCC is right to seek ways to streamline the program, as it is doing in the E-Rate 2.0 NPRM, but it will never be simple.
  2. On the whole, the E-rate program runs rather smoothly. The vast majority of funding requests are approved and funded as requested.  It is the 5-10% of applications which are delayed, modified, or not approved that cause the biggest problems.
  3. Use of consultants is a strong indication that applicants consider E-rate important. E-rate applicant contacts — be they principals, librarians, business managers, or technology managers — have a hundred or more other responsibilities. Delegating important E-rate work to specialists makes sense. In most cases, dealing with consultants well versed in the E-rate process also facilitates USAC’s own application and invoicing procedures.
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.