Three E-rate Appeals Denied for Failures in Competitive Bidding

Earlier this month, the FCC’s Wireline Competition Bureau denied three appeals by school districts seeking funding under the Schools and Libraries Program of the Universal Service Fund. In all three decisions, the Bureau found that the school had failed to follow the Commission’s competitive bidding rules for such requests, and therefore, the USAC had properly denied funding of the request.

The decisions highlight three elements of the competitive bidding rules: (1) that the selection of vendors be based on the bid process itself, (2) that all information be disclosed to all potential bidders and (3) that price be the primary factor in selecting vendors.

Collectively, the cases serve as a reminder to schools and service providers alike that the bid process must be fair and open in order to receive funding from the program. Both school districts and service providers need to be vigilant to avoid inadvertent violations of the e-rate program’s competitive bidding rules.

The three cases involve different violations of competitive bidding requirements.

Pennsauken Township School District (service provider selection). In Pennsauken Township, the school district instituted a funding request (Form 470) for funding year 2009. Only one provider bid for the service, and the school selected the provider. The school district contends that the selected provider was unable to provide requested documentation before the Form 471 deadline, so the school informally requested a quote from another provider and named this new provider in the funding request.

During the funding review process, USAC requested documentation for the selection of the new provider. The school district did not provide any documentation to support its vendor selection process, however, and not surprisingly, USAC rejected the funding request. In the appeal, the school district did not offer any new documentation and the FCC denied the appeal. The Bureau noted that the applicant failed to meet its burden to demonstrate compliance with the rules and also appears to have violated applicable document retention requirements.”

Spokane School District 81 (RFP availability). In the first of two cases dealing with Spokane School District 81, the school district was found to have violated the rules for posting requests for proposals (RFPs). The school district posted a funding request (Form 470) for internal connections (an eligible service). The Form 470 did not indicate that a written RFP was available, even though the school district had prepared such a document. The RFP, moreover, contained a more detailed description of the type of equipment sought, and warned that compliance with the RFP was a required qualification for the award.

The Bureau denied the school district’s appeal for two reasons. First, it concluded that by failing to indicate that an RFP was available, the district artificially constricted the potential pool of applicants that could meet its specific requirements.” Second, the RFP specified a particular vendor’s equipment and warned that no substitutions” would be permitted. The Bureau noted that this no substitutions” policy is contrary to the rules. If a specific service provider’s products or services are mentioned, the applicant must state that this product or equivalents” are acceptable.

Spokane School District 81 (Price as a primary factor). In the second Spokane case (regarding a different funding year), the school district received multiple competitive bids for the requested services. The school’s evaluation criteria weighed price as the primary factor, but evaluated the capital and life cycle costs” of the entire bid, including the cost of ineligible services. Upon appeal, the Bureau determined that, by considering the cost of both eligible and ineligible services together, the school district did not comply with its competitive bidding rules. The Bureau concluded that, when determining whether a particular offering is the most cost-effective, applicants must use the price of eligible services as the primary factor.” (emphasis added).