[Erate] E Rate Central News for the Week of April 17, 2006

Tue Apr 18 11:27:33 PDT 2006

E‑Rate Central News for the Week of April 17, 2006

*        Wave 44 Funding for FY 2005

*        New Selective Review Procedures for FY 2006

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 and service providers.  To learn more about our services, please contact us by phone (516-832-2880) or by e-mail <mailto:services at e-ratecentral.com>  (services at e-ratecentral.com).  Additional E-rate information is located on the E‑Rate Central Web site <http://www.e-ratecentral.com/>  (http://www.e‑ratecentral.com <http://www.e%1eratecentral.com/> ).

Wave 44 Funding for FY 2005

Wave 44 for FY 2005 is scheduled to be released on Thursday, April 20th, for an estimated $6 million.  Total FY 2005 funding is now $1.54 billion.

Internal Connections funding in Wave 44 remains at the 88% discount threshold level, but the SLD has proposed to the FCC that this threshold be lowered to 81%.  The FCC, which needs to approve any further reductions, will apparently do so only in more gradual increments (1-2% at a time).  We are hoping to see some downward threshold movement in the next week or two.  Reductions below 81% are still possible, but such a decision appears to be further off.

New Selective Review Procedures for FY 2006

Last week’s newsletter noted that the Selective Review process for FY 2006 began this month, and that the SLD is using a new version of the Selective Review Information Request (“SRIR”) form.  This week we would like to discuss the entire Selective Review process in more detail.

What is a Selective Review?

A Selective Review (“SR”) is special review designed to deal, in depth, with specific applicant issues.  In particular, the basic SR focuses on the applicant’s:

o       Technology plan

o       Competitive bidding process (including bid assessments and contracts)

o       Availability of budgeted funds to pay the non-discounted portion of the funding requests and to support other technology resources (professional development, workstations and application software, maintenance, electrical capacity, etc.)

The SR process begins when the applicant is e-mailed or faxed a Selective Review Information Request (“SRIR”) document.  This year’s SRIR is nine pages long.  It contains SR instructions, requests for additional applicant documentation, and several pages that must be completed and faxed back.  A sample copy of the current form is available at http://www.universalservice.org/_res/documents/sl/pdf/selective-reviews/srir-sample.pdf?WT.mc_id=sl-newsbrief-20060407 <http://www.universalservice.org/_res/documents/sl/pdf/selective-reviews/srir-sample.pdf?WT.mc_id=sl-newsbrief-20060407> .

Unlike a regular Program Integrity Assurance (“PIA”) review, a SR is conducted by a special Selective Review Team.  It spans all applications submitted in the funding year by a Billed Entity.  Because a SR is a time-consuming process, even if an applicant “passes”, FCDL(s) are likely to be delayed.  Also, keep in mind that whether or not applications go through the SR process, they also have to go through the PIA process.

Who Gets a Selective Review?

As with many internal procedures, the SLD does not discuss the criteria for triggering a Selective Review.  Some SRs are apparently random, heavily weighted by application size.  Any large applicant who has not already had at least one SR should assume that they will get one sometime in the future.

Increasingly, however, applicants appear to be targeted for SRs either because of earlier problems of their own making, or more likely because their applications include FRNs associated with certain vendors which have been flagged by the SLD as potentially problematic.  The SLD does not publicly identify vendors which have been flagged, but the probable cause of a SR can sometimes be determined using the SLD Data Retrieval Tool (“DRT”).  The trick is to search by SPIN to determine if other entities using a particular vendor are also having trouble getting their applications approved.  Any applicant associated with a flagged vendor should pay particular attention to the SR’s competitive bidding questions.  Changing vendors or canceling affected FRNs is generally not a successful strategy for avoiding this type of problem.

One certain way to get selected for a SR is to have “failed” a SR the previous year.  We have seen a few applicants who, discouraged by the scope of additional work required by the SR process, canceled their entire applications for that funding year in hopes of avoiding a SR the following year.  This too is normally not a successful strategy.

Critical Issues in Responding to a Selective Review:

The most important aspect of responding to a SR is to realize that it is a serious process.  Although we have seen no official figures, SR failure rates are rumored to be as high as 45%.  We urge Selective Review applicants to read the SR instructions carefully and to answer all questions in a thorough and timely manner.  It is also worth reading the SLD’s recent News Brief discussing Selective Reviews (see http://www.universalservice.org/_res/documents/sl/html/SL-newsbrief-20060407.aspx <http://www.universalservice.org/_res/documents/sl/html/SL-newsbrief-20060407.aspx> ).

Here are some critical issues to consider when responding to a Selective Review — as well as a couple of editorial comments on the process:

1.      Unlike a regular PIA inquiry, which requests a response within seven days, the response period for a SR inquiry is thirty days.  This is not just to be nice; it’s because the more complex nature of a Selective Review requires a lot of work.  As with most SLD inquiries, extensions can be requested and granted, but it is important to show meaningful progress.

Editorial comment:  The thirty day response period is a welcome change to this year’s SR process, but we can’t help noting that its benefit was partially neutralized by PIA’s insistence on initiating a number of reviews just prior to many schools’ April vacation week.  This effectively reduced the response period by 25% or more.

2.      Also unlike a regular PIA inquiry, where an incomplete response will often result in a renewed query for more information, the SRIR form contains an explicit first page warning stating in part:

USAC encourages you to provide full and complete responses.  A non-response to any of the questions asked will be interpreted to mean that you had no information to provide on the question.  A partial answer will be viewed as being all of the information that you have on the subject.  When your response is received, USAC will complete the Selective Review based on the information on hand.

Editorial comment:  The anti-applicant bias implicit in this warning stands in striking contrast to a recent presentation made by the State E-Rate Coordinators’ Alliance (“SECA”) to the SLD and FCC management entitled “No Applicant Left Behind” — a presentation arguing that SLD must do more to ensure that funding is awarded for all valid applicant requests.

This SR procedure also appears to conflict with the instructions that the FCC provided in last summer’s Fayetteville decision (see http://www.e-ratecentral.com/FCC/DA-05-2176A1.pdf <http://www.e-ratecentral.com/FCC/DA-05-2176A1.pdf%20or%20DA%2005-2176> ).  This decision made it clear that when an applicant responds in good faith to a specific documentation request, but the SLD deems the response insufficient, it is incumbent on the SLD to provide a more detailed description of the information needed before denying the FRN.

3.      The SRIR requires a copy of the applicant’s technology plan.  It is important to remember the following:

o       At a minimum, the plan should cover the entire 2006-2007 funding year.

o       The plan should have been prepared before the applicant’s Form 470(s) was filed for FY 2006 and it should cover all services included in the applicant’s Form 471(s).

o       If the SR process extends beyond July 1, 2006, it will be important to be able to demonstrate that the plan has been formally approved.

4.      Requested budget information must be closely aligned with the technology plan.  The applicant must be able to show that it has adequate funds to pay for all technology resources, not just to pay the non-discounted portion of its E-rate requests.  It is not enough to simply show that technology expenses have been budgeted; the applicant must show specific revenues to pay these expenses.

5.      As indicated above, documentation of a fair and open competitive procurement process is critical.  It is important to remember the following:

o       If formal requests for proposals (“RFPs”) were used, copies must be provided.  The RFP(s) must have been referenced in the applicant’s Form 470(s) and must have been available for at least 28 days.

o       Copies of all bids — winning and losing — received must be provided.  If more than one bid was received for any service, the applicant must be able to document why a particular vendor was selected and that price was the most important factor.  Ideally, this documentation would include some form of bid assessment matrix (see, for example, http://e-ratecentral.com/applicationTips/bidAssessment/CompetitiveBidResponseDocumentation.asp <http://e-ratecentral.com/applicationTips/bidAssessment/CompetitiveBidResponseDocumentation.asp> ).

o       This year’s SRIR asks the applicant to provide “…a copy of all correspondence between your entity and any service providers or consultants regarding the competitive bidding process and the application process.”

Editorial comment:  The latter request reads like an open-ended subpoena.  It is not yet clear exactly what the SLD means by “all” correspondence.  It could be meant to include e-mails, faxes, RFP drafts, cover letters, etc. — essentially everything in an applicant’s E-rate files for FY 2006.  Remember that any material sent to the SLD will be reviewed and may generate additional questions.

Note also that the SRIR requires copies, properly signed and dated, of any consulting agreements (including Letters of Agency) “…relating to the planning, implementation, and support of your E-rate funding request(s).”  We have recently seen some SLD denials apparently based on an applicant’s failure to have a consultant contract in place prior to the start of the consultant’s work.  Such a requirement appears to be based on an aggressive interpretation of the FCC’s record retention rule illustrations in the Fifth Order, rather than on any real rule requiring consultant contracts.

6.      A final SRIR request is for information on the organizational structural of any entity providing multiple E-rate capacities (e.g., applicant, consultant, and/or service provider).  Most typically, such situations arise with Educational Service Agencies (“ESAs” [or “BOCES” or “RICs” in New York]).  Applicants subject to this request should review the SLD’s special Educational Service Agency Guidelines (see http://www.universalservice.org/sl/applicants/step01/esa-guidelines/default.aspx <http://www.universalservice.org/sl/applicants/step01/esa-guidelines/default.aspx> ) before responding to make sure that their organizational charts clearly reflect the functional separation required.

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Disclaimer: This newsletter may contain unofficial information on prospective E‑rate developments and/or may reflect E‑Rate Central’s own interpretations of E‑rate practices and regulations. Such information is provided for planning and guidance purposes only. It is not meant, in any way, to supplant official announcements and instructions provided by either the SLD or the FCC.

Patricia K. Middelburg, MEd., PMP

Project Management Office Interim Manager

and State E-Rate Coordinator

Department of Administrative Services

Information Resources Management Division

c/o 530 Airport Road SE

Salem, OR 97301

503.373.1365

Fax: 503.378.2736

pat.middelburg at state.or.us

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