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Timing of Agreements for Eligible E-rate Services

Introduction

Many school districts contract for services on a fiscal school year basis. Typically, they wait until late spring, after budget approval, to sign new or renewed agreements for the next year. Internet access service agreements, in particular, are often handled this way.

Warning: Waiting to sign agreements until the spring is a sure way to lose future E-rate funding. To be eligible for discounts, agreements for the funding period must be in place and listed in a Form 471 filed on or before the end of the window period.

This section discusses a simple approach, albeit one that will probably require board approval, which would permit E-rate agreements for the next fiscal year to be signed before budget approval and in time for incorporation into the E-rate application window. For completeness, the section also summarizes other contract timing issues involving both the current and future funding periods.

Background

There are three key principles that must be adhered to when applying for discounts on eligible E-rate services.

  1. All new requirements for eligible services must be posted on the SLD web site (via Form 470) for at least 28 days before a valid contract can be signed.
  2. All services on which discounts are being requested (via Form 471) must be covered by a valid contract or tariff for the applicable funding period; and
  3. Form 471 must be filed within an application window that normally runs from early November to early February.

When the FCC and SLC changed the E-rate funding period from a calendar to a school year basis, a stated reason was to align the funding cycle with the schools' normal budget cycle. While the funding cycle is now aligned, the application cycle is not.

Unless already covered under a pre-existing contract, agreements for eligible E-rate services, whether they are for one-time equipment purchases or for ongoing monthly service arrangements, must meet the Form 470 posting, the contract signing, and the Form 471 listing criteria. [It is important to note that, for E-rate purposes, an existing contract for the current year cannot be simply extended into the next year unless the extension requirement is posted and a formal extension is signed.]

Assuming that only applications filed within the window period stand a chance of being funded next year, new or extended agreements cannot be signed any later than early February. Without careful planning, many schools and libraries will be unable to sign new (or to-be-extended) agreements in time to meet the E-rate filing window deadline. This could mean the loss of discounts on otherwise eligible service agreements, such as for Internet access, that are typically renewed at the end of each fiscal year.

It is important to determine what new or extended services will be needed next year before the E-rate window opens this fall. After that, it is necessary to: (a) file a list of requirements needed on a Form 470; (b) negotiate with vendors; (c) wait until the Form 470 has been posted for 28 days to sign the necessary agreements; and then (d) file a list of valid agreements on a Form 471 before the end of the window period in early February.

Suggestions

Every attempt should be made to accelerate the execution of potentially eligible agreements into the E-rate application window, after the 28 day Form 470 posting period but before filing Form 471.

To sign agreements for next year's services, E-Rate Central recommends that a clause be included to indicate that purchase orders will not be issued, nor expenditures made, unless and until the next fiscal year's budget is approved. Within reason, other conditions could be included to make price and service levels subject to future review. Conditional clause language should be carefully reviewed by each applicant's attorneys.

The primary objective of this recommendation is to assure the timely signing of real agreements leading to SLD-approved funding requests. Funding requests, once approved, can always be reduced if rates become more competitive or certain component services are not required. In certain cases, SLD rules make it possible to substitute different vendors within the same funding parameters.

Although simple in concept, the use of conditional clauses in agreements may need to be carefully explained to school and library boards (as well, in certain cases, to vendors) in terms of the realities of the E-rate application schedule. If approval is going to be needed, board education must begin now.

Other Contract Timing Issues

The validity of agreements for E-rate purposes is critically dependent on the date on which the agreements were signed or terminate. A number of different timing rules are reviewed below. Contract timing issues are somewhat complex. If there is any question, specific situations should be discussed individually with E-Rate Central.

Existing Contracts:

Multi-year contracts signed on or before July 10, 1997, are fully eligible for E-rate discounts until their normal termination. Renewals or extensions of existing contracts, however, generally will be treated as new contracts for E-rate purposes.

New Contracts:

For purposes of this discussion, a "new" contract will be defined as any contract signed, or to be signed, that was not included in an applicant's previous Form 471. Existing contracts that need to be renewed or extended into the next school year generally will also be treated as "new".

Contracts signed after the previous year's Form 471 filing are not eligible for discounts in the current funding period. However, they would be treated as fully eligible, pre-existing contracts for the next funding period if the applicable new service requirement had been included in the original (or subsequent) Form 470 and had been properly posted for at least 28 days before the contract had been signed.

New contracts to be signed for the next school year will be eligible for discounts during the 2001-2002 funding period if, and only if, the signings take place after filing the Form 470 (which can occur at any time) and before filing the Form 471.

More precisely, eligible new contracts can be signed only after the Form 470 has been posted for 28 days. A request for a discount on that contract must then be included on the Form 471 that should be filed no later than the last day of the application window period. Note that the longer an applicant delays in filing a Form 470, the less time will be left in which to sign a contract and to submit the qualifying Form 471.