At this stage in the FY 2005 application process, most applicants have filed
their Form 470s, are negotiating with suppliers, and will soon begin to sign
contracts and file their Form 471 applications. This is a good time to review
the Form 471 Item 27 certification in the new Form 471 which states:
certify that I posted my Form 470 and (if applicable) made my RFP available for
at least 28 days before considering all bids received and selecting a service
provider. I certify that all bids submitted were carefully considered and the
most cost-effective service offering was selected, with price being the primary
factor considered, and is the most cost-effective means of meeting educational
needs and technology plan goals.
Despite this, service providers are reporting that they continually encounter
applicants who appear to be treating the competitive bidding requirements of
E-rate as a mere technicality. These applicants know which vendors they want to
use, and view any bids and/or inquires from competing vendors as annoyances
that can be ignored. However, doing so is a violation of the E-rate rules and
is increasingly risky.
Competitive bidding has always been a linchpin of the E-rate program and is
designed to help assure that funding is provided only for cost-effective
services. It has received considerably more attention recently as a result of
the FCC's focus on waste, fraud, and abuse. This has led to procedures to
tighten certifications, as indicated in part above, and to increase Selective
Reviews and audits.
Ignorance and/or violations of the E-rate competitive bidding rules often seem
to be based on two myths.
Myth 1: Applicants purchasing goods and services off state master contracts are
not required to consider competing bids.
In one limited sense, this is true. If the state properly filed a Form 470, and
competitively bid and negotiated a contract itself, applicants are free to cite
that Form 470 and use the contract without re-bidding it themselves.
Many state contracts, however, have not been competitively bid. They are simply
lists of authorized vendors who may have agreed to a set of terms and
conditions, and/or who may have met minimum pricing targets. In many cases,
these state contracts require users to undertake "mini-bids" to select among
competing state vendors. In such cases, E-rate rules require applicants to
consider bids from vendors on or off the state contracts. If state contracts
are ultimately used, applicants must be careful to comply with all state
Myth 2: If state laws permit schools to sign procurement contracts with
Educational Service Agencies ("ESAs") without bids, no competitive bidding is
required for E-rate purposes.
This is never true. The E-rate rules do not include any exemptions for goods and
services obtained without competitive bidding. There may be procedural and/or
financial advantages to using ESA services, but bids from competing vendors
must be considered.
Here are a few suggestions for successfully dealing with the E-rate competitive
Not every service listed in an applicant's Form 470 may generate a bid. E-rate
rules do not require a minimum number of bids (unless required for compliance
with a state contract). If no bids are received for a service, this fact should
be documented in a simple "memo for file." If an applicant is considering the
use a current provider, who may not have bothered to re-bid, the vendor's
existing rates and terms may be considered a "bid."
Many vendors appear to be collecting e-mail addresses from posted Form 470s,
and are adding applicants to their general product advertising e-mailing lists.
Advertisements generated through this process are not necessarily actual bids.
One strategy for identifying real bids or requests for additional bidding
information is to require vendors to reference the Form 470 to which they are
If competing bids are received for a specific service, each must be evaluated
within the context of a rational set of criteria. Price need not be the only
consideration, but it must be the heaviest weighted component. A useful bid
assessment matrix is available on our Web site (see
Bid Assessment Matrix).
Document every bid or request for bidding information received, every response
to each, and every competitive bid assessment. This information will be
required if an applicant is subjected to a Selective review or audit. The
information must be retained for five years after the last day of service.
If, for any specific service, an applicant is unwilling to abide by the E-rate
competitive bidding rules, we strongly encourage the applicant not to apply for
discounts on that service so as not to place the entire application in
We have recently seen several reports of a small, but growing trend, to
substitute plastic bottles of flavored or unflavored milk for the traditional
milk cartons found in most school cafeterias. Although the initial impetus for
the switch has been to increase milk consumption among students for health
purposes, a side benefit for the schools themselves - which could have a direct
impact on E-rate funding - has been to increase participation rates in the
National School Lunch Program.
A year long study conducted by the School Nutrition Association, involving
100,000 students and 146 schools, showed a 1.5% increase in lunch program
participation at the elementary level and - more importantly for E-rate - a
4.4% increase at the secondary level.
Although it may be too late to affect NSLP eligibility and E-rate discount
levels for FY 2005 applications, it is not too late to start planning for FY
2006. The best article we've seen on the subject is from the October 2004 issue
of the American School Board Journal, available online (see