E-Rate Central News for the Week
February 20, 2012
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.
The FY 2012 Form 471 application filing window opened on January 9, 2012, and will close at 11:59 pm EDT on Tuesday, March 20, 2012.
REMINDER: The last possible date to file a valid Form 470 for FY 2012 is February 21, 2012. (Note: The required 28-day posting period for a Form 470 filed on February 21st would end March 20th, the last day of the filing window. Please do not wait this long.)
Wave 35 for FY 2011 will be released on Tuesday, February 21st. Cumulative funding for FY 2011 is $1.79 billion. Priority 2 funding for FY 2011 is currently being provided only at the 90% level.
Wave 86 for FY 2010 will be released on Wednesday, February 22nd. Cumulative funding for FY 2010 is $2.98 billion. Priority 2 funding is being provided at all discount levels.
FCC Competitive Bidding Appeal Decisions
The FCC issued two important appeal orders last week approving a series of appeals by Trillion and 27 associated applicants (DA 12-189) and denying a set of appeals by Trillion and one other applicant (DA 12-196). Both the history of these appeals and the FCC decisions are instructive.
Trillion and many of its customers have been under an E-rate microscope since 2006, and last week's FCC decisions still do not address all the pending appeals. A good overview of the company's E‑rate problems is a Master Appeal Summary that Trillion filled with the FCC in November 2010. Here's the history:
|| USAC conducts Selective Reviews of every Trillion applicant. Funding was effectively "frozen" for almost nine months before FCDLs were released.
||Again, all of Trillion's applications were held for six months before FCDLs were released.
||A third "freeze" was instituted in early 2009 following a Trillion settlement with the Arizona Attorney General related to a 2005-2006 bidding process for Tucson. At USAC's request, Trillion provided a host of information "…that included Trillion's training programs for E-Rate, Trillion's internal systems and controls for E-Rate, all communications available with customers for a five year period, all expense records for our customers over the same timeframe, any communication or relationship with E-Rate consultants, and much more." Although this freeze was lifted in late 2009, almost all of the FCDLs issued denied the Trillion funding requests.
||Following appeal denials by USAC, Trillion and many of its customers filed FCC appeals during the late 2010 – early 2011 time frame covering a variety of funding years from FY 2005 through FY 2010. By the end of this process, Trillion had filed for bankruptcy and its appeals were being filed by its Receiver.
The alleged E-rate program violations that led to the funding denials fell primarily into two categories — gifts and competitive bidding communications issues.
The FCC's gift rules are strict, but were only instituted in 2010 following the release of the Sixth Report and Order (FCC 10-175). USAC funding denials for gifts prior to that time were based on either a finding that the bidding process violated state or local procurement rules, or more broadly that the gifts inherently violated a fair and open competitive bidding process. A number of Trillion FRNs, for example, were denied with the following explanation:
This FRN is denied because the documents provided by you and/or your vendor indicates that there was not a fair and open competitive bid process free from conflicts of interest. The documentation provided by you and/or your service provider indicates that prior to/throughout your contractual relationship with the service provider listed on the FRN, that you were offered and accepted either gifts, meals, gratuities, entertainment from the service provider, WHICH resulted in a competitive process that was no longer fair and open and therefore funding is denied.
Trillion and its customers argued that, in the absence of any violations of state or local procurement rules, USAC should not be applying the 2010 gift rules retroactively. The FCC's decision approving the appeals for 27 applicants effectively accepts the argument that gift rules should not be applied retroactively, simply noting "…that the petitioners complied with the Commission's competitive bidding requirements…"
Competitive Bidding Communications:
The FCC's competitive bidding rules are in part explicit (e.g., a service provider may not complete, sign, act as contact on, or file a Form 470 or RFP). However, other aspects of the competitive bidding rules (e.g., that bidders provide only "neutral" advice or that no vendor be given information not made available to others) are more subjective. The latter restriction is particularly problematic when dealing with an incumbent service provider who, as a practical matter, is likely to have much more information on a customer's needs than an outside vendor.
In the case of Marana Unified School District (AZ), USAC's funding denials included explanations such as:
The FRN will be denied because you did not conduct a fair and open competitive bidding process. The documentation provided by you and/or the service provider indicates that the school district engaged in numerous meetings, e-mail discussions, and/or verbal discussions with Trillion employees prior to the posting of the Form 470 and throughout the competitive bidding process which tainted the competitive bidding process. Trillion was consulted and/or offered details about services and products you were requesting on your FCC Form 470 and/or Request for Proposal (RFP). The competitive bidding process was influenced by Trillion when they assisted you in developing your services specifications for your FCC Form 470/or RFP. You failed to conduct a fair and open competitive bidding process free from conflicts of interest.
Although that sounds somewhat subjective, the problems apparently ran far deeper. In denying the Trillion/Marana appeals, the FCC not only concurred with USAC's assessment, but provided further details on the communications that led to the denial, including:
- Prior to the posting of the FY 2006 Form 470 and RFP, the district's technology director "…provided Trillion with information about the current needs of the school district and advised Trillion on what Trillion should include in its bid response. The record also demonstrates that Marana and Trillion discussed other E-rate applicants' RFPs before Marana released its RFP, and that Trillion was working to obtain an RFP to give to Marana."
- Three months before posting the FY 2006 Form 470 and RFP, the technology director "…provided information about the sites Trillion should include in Trillion's preliminary WAN design. The record also shows that Marana and Trillion scheduled a conference call to discuss Trillion's final WAN design, which was to take place one day before Marana released its RFP."
- In 2008, "…when Marana's technology director took a job with Trillion and began working directly with Marana's new technology director on crafting Marana's 2009 technology plan."
We draw the following three conclusions from these two FCC appeal orders:
- The FCC will not support funding denials for relatively minor gifts provided they are not in violation of state and local procurement rules, and they occurred prior to the enactment of specific E-rate gift rules in the Sixth Report and Order.
- While the rules on competitive bidding communications between applicant and vendor may be subjective, egregious violations will not be tolerated. The Marana decision provides one example of egregious actions. Future appeal decisions — including others involving Trillion — may sharpen the focus.
- Once questions are raised concerning the competitive bidding practices of one supplier, even with regard to one applicant, funding for all its customers may be frozen for years until the full extent of such actions are investigated and adjudicated. Both applicants and service providers would be well advised to err on the side of caution.
E-Rate Updates and Reminders
FCC Waives Certain EDU2011 Deadlines:
Recognizing that many of the participants in the EDU2011 (also called "Learning On-The-Go") wireless Internet pilot program had not been funded until October/November 2011, and therefore may not have begun their trials at the beginning of FY 2011, the FCC issued an order (DA 12-200) waiving the June 30, 2012, deadline for using awarded funds. The waiver was in response to a petition filed in December by the e-Bookroom Initiative ("e-BI") representing an association of schools (including many EDU2011 participants) and educational organizations promoting the adoption of standardized, school-friendly, e-textbook licensing terms for the K-12 market.
The key terms of the waiver are as follows:
- EDU2011 participants who did not begin their pilot projects before October 1, 2011, will be permitted to utilize up to twelve months of recurring service funding (terminating no later than February 28, 2013).
- USAC is authorized to accept invoices for such services through February 2013, and waive any related procedural deadlines and requirements (e.g., the normal invoice deadline — October 29, 2012, for FY 2011 recurring services).
- Participants who began their pilot projects before November 1, 2011, are still required to submit an interim report by February 24, 2012, — this coming Friday! — and a final report by October 31, 2012. For participants who began their projects on or after November 1, 2011, the comparable report submission dates are October 31, 2012 (interim), and April 30, 2013 (final).
While waiving the last day to receive services, the FCC declined to approve another e-BI suggestion that would have proportionally expanded each participant's funding so as to increase total funding to the original $10 million cap established for the EDU2011 program.
Schools and Libraries News Brief Dated February 17 – Form 470 Reminders
Last week's SLD News Brief for February 17, 2012, asks and answers a series of important questions on the use of a Form 470. The questions addressed are:
- What is the purpose of the Form 470?
- Why is Tuesday, February 21, the deadline for posting a FY 2012 Form 470?
- Am I required to issue a request for Proposals ("RFP") or similar bidding document?
- If I issue an RFP, how long must it be available? (Hint: February 21st is the RFP deadline as well.)
- What is an "open and fair" competitive bidding process? (Hint: see article above as well.)
- How much detail should I provide about the services sought?
- Am I required to respond to every e-mail or phone call from a service provider?
- Why is the category of service I choose in Items 8, 9, 10 and/or 11 important?
- How do I evaluate the bids I receive?
- Do I have to sign a contract?
- Can a consultant help me with the competitive bidding process?
- Where can I get more information?