A.

TASK FORCE ON THE PREVENTION OF WASTE, FRAUD, AND ABUSE

B.

FUNDING COMMITMENTS

C.

ADDITIONAL GUIDANCE ON EXCLUSIVE USE

1.

BRIEF OVERVIEW

The evaluation process for on-premise Priority 1 equipment is described in the SLD web document. (See especially Section 4.) We will evaluate the Item 21 Attachment for a Funding Request, and will request further information from the applicant if necessary. The general process is unchanged, but the evaluation of exclusive use is no longer limited to "contractual" exclusive use, but rather considers whether there is any contractual, technical, or other limitation that would prevent the service provider from using the on-premise data communications equipment in part for other customers. As an example, at this time we are not aware of any on-premise cable modems that are shareable by multiple customers. [Note: SLD is in the process of further dialogue on the last point].

2.

E-MAIL QUESTIONS ON THIS ISSUE

On 5/30/03, SLD posted a Headline article entitled 'Additional Guidance on "Exclusive Use" for On-premise Priority 1 Equipment'. The guidance states that one of the revised Tennessee Test criteria will now read: 'There is no contractual, technical or other limitation that would prevent the Service Provider from using the on-premise data communications equipment in part for other customers.' Stephanie Beavers, Verizon

Q.

What does SLD expect to receive (and from whom) that demonstrates this to be true?

A.

Q.

A.

D.

GENERAL QUESTIONS AND ANSWERS RECEIVED BY E-MAIL

Q.

Temporary School District solicits proposals for electronic network gear that the Temporary School District is going to install itself. Temporary School District selects a vendor and files all the appropriate SLD forms. Vendor A is selected and funding is provided by the SLD. Vendor A sells the equipment to Temporary School District, and is subsequently paid by both the District and SLD. Twelve months later, SLD conducts an audit of Temporary School District and asks where the equipment that Vendor A sold them is. Temporary School District tells the SLD that Vendor A sold the equipment, however Temporary School District never installed the equipment and the equipment is sitting in the warehouse still boxed. Will the SLD seek reimbursement of the funding, and from whom will they seek the reimbursement? Robert Rivera, Spectrum Communications

A.

SLD is generally guided in matters relating to recovery of funds by FCC Order 00-350 (released October 26, 2000). That order directs USAC to recover funds from the service provider although the Order notes: “We also emphasize that the proposed recovery plan is not intended to cover the rare cases in which the Commission has determined that a school or library has engaged in waste, fraud or abuse. The Commission will address those situations on a case-by-case basis.” The situation described is similar to an actual case that resulted from an audit. The service provider met its contractual obligations, but the applicant did not install the equipment. This issue will be submitted to the FCC for guidance under FCC Order 00-350.

Q.

Temporary School District selects Vendor B to sell and install electronic network gear; however Temporary School District does not purchase a maintenance agreement. SLD provides funding to Temporary School District. Vendor B sells and installs the equipment. Eighteen months later the equipment fails. Temporary School District removes the equipment, and either does not replace the equipment, or replaces the equipment with non-similar equipment. The SLD conducts an audit and determines that the equipment is missing, or is not the same equipment previously purchased with e-Rate funds. Will the SLD seek reimbursement of the funding, and from whom will they seek the reimbursement? Robert Rivera, Spectrum Communications.

A.

There is today no FCC rule addressing this question, except that the applicant cannot transfer or sell the equipment for value. The January 2002 NPRM proposed that equipment be kept for three years, so if the equipment were three plus years old, it might not receive an adverse audit decision. If this were to occur, the SLD would seek the FCC’s guidance.

Q.

Temporary School District applies and receives e-Rate funding for either or both Priority One and Two. Post vendor payment, SLD determines that Temporary School District either miscalculated their Free and Reduced lunch numbers, or was not considered an eligible entity. Will the SLD seek reimbursement of the funding, and from whom will they seek the reimbursement? Robert Rivera, Spectrum Communications

A.

FCC Order 00-350 directs us to seek reimbursement from the service provider. In particular cases, it might be appropriate to seek recovery from the applicant, but SLD would seek FCC’s guidance on this.

Q.

Can you tell us when you will be accepting 470 applications for the next funding year? Paula Glogovac, Earthlink

A.

SLD expects that we will be accepting Form 470 applications for FY2004 next week.

Q.

Can you tell us if an applicant can specify a specific manufacturer’s equipment and only purchase that specific equipment, not allowing other manufacturers to bid on the products they are seeking? Paula Glogovac, Earthlink

A.

There may be legitimate reasons for an applicant to specify a particular manufacturer’s equipment, but it would not be permitted if it were being done to limit competition.

Q.

If service providers have new products they believe should be eligible for E-rate, is there any mechanism through the SLD or USAC that would allow them to get that verified prior to suggesting these products to an applicant and how quickly can that happen? What is the process for this? Paula Glogovac, Earthlink

A.

A service provider can submit their question to SERVICE PROVIDER E-MAIL. Upon receipt, the question will be assessed and if further research is required, the question will be forwarded to the Services Team. If a service provider is seeking specific guidance with respect to a product or service issue, then we request that product specs and/or schematics are included in the request. Sometimes responses to inquiries may take longer than several days, because complex issues are raised. Although we do not provide pre-approval for products or services in view of the many ways they can be configured and used by individual applicants, we attempt to be helpful where we can. So we are sometimes able to provide a tentative assessment of eligibility based on existing program rules.

Q.

If an applicant decides to buy off of a State contract are they allowed to not accept any other responses to their products and services they are seeking? Paula Glogovac, Earthlink

A.

If the state posted the Form 470 and then signed a state contract based upon that posting, the applicants may buy off that state contract and cite the state Form 470 on its Form 471 application.

If the applicant is posting the Form 470, then the applicant must consider all of the bids and comply with the competitive bidding rules. The applicant may consider the state contract as one of the bidding responses.

Q.

Can a service provider write the Statement of Work for an applicant’s E-rate needs and also respond to the 470 application? Paula Glogovac, Earthlink

A.

The fundamental principle on which the E-rate Program is based is that the applicant has conducted a fair and open competitive procurement by which they decided upon the services they are ordering for E-rate discounts. In order to be sure that such a fair and open competition is achieved, it is imperative that Service Providers remember that their marketing discussions with applicants must be neutral, so as not to taint the competitive bidding process. That is, the applicant should not have a relationship with the Service Provider prior to the competitive bidding that would unfairly influence the outcome of a competition nor would furnish the Service Provider with “inside” information or allow them to unfairly compete in any way.

The applicant also must be in a position to accept bids once the Form 470 is posted on the SLD web site. The applicant must take an affirmative role in the evaluation of such bids. The FCC has ruled that the applicant may not delegate this evaluation role to anyone associated with a Service Provider.

Q.

Can an applicant specify they are willing to work with only one service provider, and that the selected service provider will be responsible for managing all other service providers and that the other service providers will be paid through the main service provider for all products and services as part of their RFP?

A.

The applicant may structure the RFP so that only one service provider will be selected even though that service provider will have subcontractors performing part of the work, but the actual products and services sought must be described in the RFP. Bids must quote actual prices for those products and services, and the applicant must select the most cost-effective alternative.

Q.

If so, can you tell me if the service providers that are not the main service provider have to adhere to the E-rate rules, since they are not the service provider spelled out on the 471 form?

A.

The short answer is yes. SLD’s relationship is with the applicant and the service provider. The service provider whose SPIN appears on the FRN is required to adhere to the program rules. If that service provider enters into a subcontract or reseller agreement, or other type of sub vendor agreement, the main service provider is responsible for making it clear in those agreements that all providers must comply with the applicable program rules and procedures, where applicable.

Q.

Can the main service provider selected, increase the price for the products and services offered by the sub-service providers to cover their management costs and would that be acceptable under the program rules? Paula Glogovac, Earthlink

A.

Project management costs are eligible, but they must be reasonable and cost effective.

Q.

Could you clarify the rules regarding applying for "tariffed services," "month-to-month services," and "contracted services?" Couldn't most services fall into any of the three categories? Mary Jo Sagnella, SBC/SNET

A.

Tariffed services,” “Month-to-month services,” and “Services for which a new written contract is sought” are three of the four descriptors in Form 470, Block 2, Item 7. While these descriptors are useful to the SLD, funding requests are not reviewed based on the descriptors that are marked in Item 7. However, the category of service reported in Item 11 of the Form 471 Block 5 Funding Request must be the same category of service as that reported on the associated Form 470 in Items 8, 9 and/or 10.

Q.

Can an applicant under an existing multi-year contract post a F470 each year, and refer to their service as "month to month" or "tariff" when they file a F471? Mary Jo Sagnella, SBC/SNET

A.

No. If an applicant posted a Form 470 indicating that a multi-year contract was sought, and then selected a service provider and signed a multi-year contract pursuant to program rules, that applicant does not need to post a new Form 470 each year that the contract is in effect. However, if a Form 470 was never posted for that contract, the applicant must post a Form 470, and can then consider that existing contract as one of the bid responses to that Form 470 posting.

Q.

Some applicants (below 85%-90% discount levels) did not include IC in their 470 requests, or in the subsequent 471, believing they would never be approved for funding since the threshold for IC funding for FY2001 was only at approx. 85%, so they just didn't bother to apply for it. In light of the recent IC funding denials, and knowing that SLD is able to approve IC requests down to at least the 81% level, some questions have arisen. Stephanie Beavers, Verizon

1. Can an applicant post another FY2002 470 for IC, wait the required 28 days and then file an out-of-window 471?

2. If the answer to #1 is Yes, then would in-window 471s requesting IC be considered before the out-of-window ones?

3. Or, if the applicant did not file an in-window 471 because of the situation explained above, would SLD give special consideration to those applicants who would now like to file an out-of-window 471?

4. If the applicant's previously posted 470 did include IC, but then the applicant never included IC on their in-window 471, can the applicant now file an out-of-window 471 for FY2002?

5. Or - is SLD now able to fund IC down to the 81% level because of funds that will now be available as a result of all the previous funding denials?

6. If the answer to #5 is No, then is SLD retaining a [separate] set amount of funds in case there are appeals made and decisions overturned on the previous IC denials?

A.

Once the SLD has determined the discount level below which Internal Connections cannot be funded for a funding year, that work is done. Out-of-window requests will not be considered, and in-window requests below that threshold will also not be considered.

The SLD reviews the amount of funding that is available for commitments as new waves — which include funding denials — are issued. After a certain number of waves were issued, the SLD was able to determine that funding commitments for Internal Connections in FY2002 could be made down to the 81% discount level.

The SLD does set aside a percentage of funds for meritorious appeals.