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Contracts, Competitive Bids

• 2004 USAC “E-rate for Beginners”• 2004 USAC “E-rate from the Service Provider

Perspective”• FCC Orders

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Competitive Bidding (1)

• Request for Proposal (RFP)– Not required under FCC Rules, but a good idea– Describes your project scope, location, other

requirements in detail

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Competitive Bidding (2)

• Competition– Goal is to have as many bidders as possible– Promotes better services and lower prices

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Competitive Bidding (3)

• Fair and open process– All bidders treated the same, no advance

knowledge of RFP information– No secrets in the process, all bidders know

what is required of them

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Competitive Bidding Process

• Obligation to Pay Non-discount Share– Applicants are required to pay their share of the cost

(the “non-discount” portion or share) – cannot be donated, forgiven or ignored

– Service providers cannot waive or credit the applicant’s share

• Offers to reduce price must be incorporated into the “total pre-discount amount”

– Service providers must bill the applicant for non-discount share of services

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Ysleta Order (1)

• State and local procurement rules– FCC Rules apply IN ADDITION TO state and local

procurement laws and competitive bidding requirements

– Example: State and local procurement law may permit an applicant to forego competitive bidding for products and services under a certain dollar threshold, but FCC rules require that applicants seek competitive bids on those products and services

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Ysleta Order (2)

• Most cost-effect bid– Applicants must select the most cost-effect

offerings– Price must be the primary factor, but need not

be the exclusive factor– Price must be given more weight than any other

factor

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Third Report and Order

• Applicants will not receive support for contracts that provide only a single price for a package that bundles both eligible and ineligible services together

• Service provider and applicant should work together to create pricing terms in the contract that separate eligible services from ineligible services (see Cost Allocation and Ancillary)

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Contract Signature and Date

• FCC Rules require applicant to sign a contract prior to the filing of a completed Form 471 (47 C.F.R. §54.504(c))

• Fifth Report and Order requires both the applicant and service provider to sign the contract prior to the filing of a Form 471– This rule does not apply to non-contracted tariffed or month-to-

month services– Verbal agreements are not acceptable– Quotes are not acceptable– Purchase orders are acceptable if considered a contract pursuant to

state and local procurement laws and state contract laws

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Contract Dates

• Contracts cannot be signed before 28 days have elapsed for both the 470 and RFP (if applicable)

• The contract expiration date is the end date before contract extensions are executed

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Contract Requirements (1)

• Service provider and applicant must comply with state contract law

• Service provider and applicant must comply with state and local procurement laws

• Legally binding agreement is another term used for contract

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Contract Requirements (2)

• Applicant must provide signed and dated contracts for reviews and audits– Applicant must be prepared to prove its

contract meets the requirements of state contract law

• Applicant certifies that it has signed a contract on its Form 486

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Contract Requirements (3)

• Service provider is required to permit the applicant prior to the submission of the Form 471 to choose the Method of Payment – BEAR v. SPI – for discounted services– FCC Second Report and Order encourages the

applicant and service provider to work together to determine the method of payment

– FCC Second Report and Order encourages including the method of payment in the contract

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Contract Requirements (4)

• Tariffed services provided under contract are contracted services

• Month-to-month and tariffed services do not need contracts

• Internal connections are presumed to be contracted services

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Types of State Master Contracts

• Single winner– Applicants do not need to justify the selection of the

winning bidder• Multiple winners

– Applicants must be able to document why they selected the specific provider off the master contract

• Multiple Award Schedules– Applicants must be able to document why they selected

the specific provider off the multiple award schedule• Only Terms and Conditions, not prices

– These contracts do not meet FCC contract requirements

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State Master Contracts (1)

• If the state filed a Form 470, then the applicant may cite the state’s Form 470 on its Form 471.– The applicant is required to follow the applicable

provisions of the state master contract and local and state procurement laws

– No separate bidding documents or contracts are required by the applicant citing the state’s Form 470, other than what is required by the state master contract and local and state procurement laws

– The signed state master contract between the state and service providers meets the FCC signed contract requirement

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State Master Contracts (2)

• If the applicant files a Form 470 and considers a state master contract as one of the bids:– The applicant is required to comply with all

competitive bidding requirements• Price must be the primary factor and must be weighted more

heavily than any other factor

• If the applicant selects the state master contract:– The applicant is required to follow the applicable

provisions of the state master contract and local and state procurement laws

– The signed state master contract between the state and vendors meets the FCC signed contract requirements

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State Master Contracts (3)

• If the state master contract requires the issuance of purchase orders or contains other requirements for applicants– The applicant must follow the applicable dates

set forth in the state master contract• For example, if a state master contract requires the

applicant to issue a purchase order by July 1, then the applicant is required to meet that deadline

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Memorialize

• If an applicant files its own Form 470 and chooses either a new or a pre-existing state master contract as the most cost effective bid, the applicant should (but is not required)– Memorialize its decision to purchase off the state

master contract after the bidding process is complete and

– Record the date of this memorialization as the relevant Contract Award Date in its submitted Form 471 application

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Contract Amendments (1)

• Contract services may be amended if the contract allows for such an amendment, but if those services were not posted on the original Form 470, the applicant must post a new Form 470

• If the original Form 470 or RFP did not include the newly-eligible services or entities, the applicant will be required to post a new Form 470 for those services

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Contract Amendments (2)

• If the contract allows for service substitutions and there is a change on the Item 21 attachment, then the applicant or service provider should submit a service substitution, as applicable to SLD rules

• Contract dates may be amended if the contract allows for such amendments– If applicants and service providers extend the contract

date, the applicant is required to file a Form 500

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Contract With Voluntary Extensions

• A contract featuring voluntary extensions means that the contract expires at the end of its original term and may be voluntarily extended for one or more years pursuant to the provisions in the contract– The applicant should indicate in Item 7b on the Form

470 whether it is seeking a multi-year contract and/or voluntary extensions

– The applicant may provide more detail in its RFP and/or Item 13 on the Form 470 about the length of the multi-year contract and/or voluntary extensions

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References

• FCC Orders (Second, Ysleta, Third, Fifth)

• SLD Reference Area: Contract Guidance

• 2004 USAC “E-rate for Beginners” PowerPoint

• 2004 USAC “E-rate from the Service Provider Perspective” PowerPoint