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E-Rate Central News for the Week
October 10, 2016

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 website.

Funding Status – FY 2015 and FY 2016

FY 2016:

Last Monday’s Wave 15 for FY 2016 totaled $35.6 million.  Cumulative national funding through Wave 15 is $648 million.  Wave 16 was released today, October 10th.

FY 2015:

USAC will release Wave 66 for FY 2015 on Wednesday, October 12th.  Cumulative funding through Wave 65 is $3.31 billion.

Cardinal Changes and USAC Guidance

Once an applicant has begun a procurement cycle for E-rate by filing a Form 470 (with or without associated RFP documents), subsequent changes to the nature or scope of products and services requested is problematic.  Traditionally, any significant or material change has required the applicant to restart the competitive bidding process by filing a new Form 470 (resetting the 28-day clock) and updating any associated RFP.  The boundary between major and minor changes, requiring or not requiring a new Form 470, has been a gray area.

FY 2016 USAC Guidance:

Going into the FY 2016 application cycle, USAC’s language on Form 470 changes began to stress “cardinal” — a word we hadn’t heard much of since 1997.  USAC’s News Brief of July 17, 2015 included the following:

USAC Tip of the Week - Cardinal Changes

Subsequent newsletters continued to refer to the need for a new Form 470 if there was a significant or cardinal change.  When the new Form 470 was implemented in EPC, it included an option to add additional updated RFP material after the original Form 470 had been filed.  Before accepting a newly uploaded file, EPC provided the following warning and required an affirmative action to proceed:

USAC Cardinal Changes Warning

FY 2017 USAC Guidance:

Given this history, we were surprised during USAC’s first fall applicant training session in Washington, DC, two weeks ago when a question was asked about the need to file a new Form 470 in the event of a cardinal change.  The answer, with no hesitation, was:

  1. No.  A cardinal change does not require a new Form 470.
  2. All that is required is to extend the bidding period (and thus the earliest Allowable Contract Date (“ACD”)) to at least 28 days from the date of the cardinal change.

Subsequent discussions with USAC staff and reports from USAC’s training in Florida last week suggest that the FCC may have clarified its competitive bidding requirement to provide additional flexibility.

Pending further written clarification from USAC our advice is to ignore the new guidance — i.e., to continue to file a new Form 470 to restart the competitive bidding process whenever there is a cardinal change.  Filing a new Form 470 is particularly important if the original Form 470 did not include RFP documentation.  Here’s why:

  1. If the original Form 470 did include an RFP, any change in requirements would presumably require the applicant to upload an RFP addendum.  Although the Form 470 itself would continue to show the original 28-day Allowable Contract Date (“ACD”), we would expect (although it is not a requirement) the addendum to show the revised bidding deadline.  This would be critical during application review since the actual contract date would be later than the Form 470’s ACD and might have to be explained to PIA.
  2. If the original Form 470 did not include an RFP, there is no way to notify potential bidders of changes.  With a non-RFP Form 470, it is not possible to edit the original text, upload explanatory documents, or post a bidding deadline extension.  New information can be provided only in a new Form 470.

A clear intent of the E-rate procurement rules is to assure equal access by all potential bidders to applicant requirements. One nice feature of EPC, from the service providers’ perspective, is that each displayed Form 470 includes a “Follow” button.  Service providers using this feature will be alerted to any changes made to existing Form 470s.  This feature will alert interested bidders when subsequent documents are uploaded to RFP-based Form 470s, but it is useless for tracking non-RFP Form 470s (which cannot be supplemented).

USAC FY17 Lit Fiber

Note that any change in the category of type of service requires a new Form 470.  Hint: In the event of any product or service, which might be considered either Category 1 or Category 2, a best practice is to post the request twice, once under each category.

“Cardinal” Defined:

Although USAC is now using the word “cardinal” as a descriptive adjective to describe what might otherwise be deemed a significant and/or material change, the word does little to eliminate the gray area between a major or minor change requiring a rebid.  The word does, however, have an E-rate history tracing back to the FCC’s Fourth Order on Reconsideration (FCC 97-420) in 1997.

In determining what type of requested contract modification might or might not require a new competitive bid, the FCC deferred first to state and local procurement rules.  But in the absence of such rules — and now in addition to such rules — the FCC adopted the “cardinal change doctrine.”  This phrase also lacked a strict definition, but was discussed with reference to court interpretations of the Competition in Contract Act (“CICA”) for federal acquisition and contracting purposes. Specifically:

The cardinal change doctrine is used in connection with contractors' claims that the Government has breached its contracts by ordering changes that were outside the scope of the changes clause. The cardinal change doctrine looks at whether the modified work is essentially the same as that for which the parties contracted. In determining whether the modified work is essentially the same as that called for under the original contract, factors considered are the extent of any changes in the type of work, performance period, and cost terms as a result of the modification.  Ordinarily a modification falls within the scope of the original contract if potential offerors reasonably could have anticipated it under the changes clause of the contract.

A similar test for E-rate procurement purposes would be to determine whether a given change in the products or services needed would have affected the bidding strategies of potential bidders or which service providers might or might not have bid at all.  Adding two sites to a fifty site network, for example, might be a minor (i.e., non-cardinal) change.  But doubling the number of sites (or doubling the required bandwidth) would not. Incorporating the word “cardinal” effectively gives a stronger legal precedent to the interpretation of E-rate procurement rules.

When in doubt, faced with a question as to the need to rebid, our advice is to take the conservative approach.  File a new Form 470.

E-Rate Updates and Reminders

Upcoming 2016 E-Rate Deadlines:

October 21 FCC deadline to submit nominations for six directors on the USAC Board. (See DA 16-1018 or our newsletter of September 19th.
October 28 Invoicing deadline for recurring service charges for FY 2015. Applicants planning to file for BEAR reimbursements need an active PIN and must have filed (subject to approval) a Form 498. Completion of either of the preceding steps can easily take two or more weeks. (See our newsletter of August 29th.)  Invoice deadline extension requests (“IDERs”) must be made — and are recommended to be made — on or before this date. (See our newsletter of September 12th.)
October 31 Form 486 deadline for FY 2016 funding committed in Waves 1–2. More generally, the Form 486 deadline is 120 days from the FCDL date or the service start date (often July 1st), whichever is later. This means that Form 486 deadlines for funding received in later waves will follow at roughly one week intervals, including the following November deadlines:

Wave 3        11/07/2016
Wave 4        11/14/2016
Wave 5        11/21/2016
Wave 6        11/28/2016

November 3 FCC deadline for submitting comments on the Boulder Valley and Microsoft petitions regarding off-campus use of existing E-rate supported connectivity. (See DA 16-1051 and our newsletter of September 26th).

USAC Fall Training Schedule:

The locations and dates for USAC’s remaining regional trainings are listed below.  For registration information, see Trainings & Outreach.

Houston, TX Friday, October 14, 2016
Philadelphia, PA Tuesday, October 18, 2016
Minneapolis, MN Tuesday, November 1, 2016
St. Louis, MO Thursday, November 10, 2016
Seattle, WA Wednesday, November 16, 2016
Los Angeles, CA       Friday, November 18, 2016 (waiting list only)

Slides for the Houston training have been posted on the USAC website.

USAC News Brief Dated October 7 – Form 486

USAC’s Schools and Libraries News Brief of October 7, 2016, discusses the process for filing a Form 486 in EPC to confirm that services have started and that, if required, the applicant is CIPA-compliant. The following steps are discussed:

  1. Creating the basic Form 486
  2. Selecting the FRNs
  3. Specifying service start dates
  4. Early filing and CIPA waiver
  5. Previewing the completed form
  6. Certifying the completed form

The News Brief also deals with the following three situations, likely to affect only a limited number of filers, but requiring special attention:

  1. Correcting a Form 486 inappropriately filed by a “child” (as opposed to a “parent”) entity
  2. Filing a new Form 486 for FRNs included in a previously canceled Form 486
  3. Dealing with — actually avoiding — multiple Form 486s referencing the same FRNs
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.