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Monday, October 04, 2010

My head is SPINning

Tucked away in the Sixth Report & Order is an offshore earthquake which will provoke a tsunami of lost funding and appeals to the FCC:

“[T]o alleviate uncertainty regarding the types of SPIN changes that are permissible following a competitive bidding process, we clarify that once a contract for products or services is signed by the applicant and service provider, the applicant may not change to a different service provider unless (1) there is a legitimate reason to change providers (e.g., breach of contract or the service provider is unable to perform); and (2) the newly selected service provider received the next highest point value in the original bid evaluation, assuming there was more than one bidder.” (paragraph 92)

That looks reasonable. And it addresses an area of actual abuse: service providers eschewing the competitive bidding process, then swooping in after funding approval and taking the business.

But most SPIN changes are not abuse. They are applicants who got a better deal on, say, long distance and want to switch providers. So now if a school district finds an opportunity to save money on their month-to-month phone service, they have to wait until they can file a Form 470, wait 28 days for no bids to arrive, then make the switch. For a lot of applicants, it won't be worth the hassle, so they'll forego the savings opportunity.

But that's not what worries me. I used to be a federal procurement officer, so I'm used to regulations that tie the hands of ethical employees and raise costs in order to make abuse more difficult for the unethical. The problem I have is when this rule hits the real world.

Because in the real world, the person who decides to switch phone carriers is often not the person who files for the E-rate. When I go to a client at the end of the funding year to collect bills to file a BEAR, I often hear, “Oh, we forgot to tell you: six months ago we found a cheaper phone company and switched service.” In that case, they will simply lose six months of funding. USAC won't be able to help them, so they will file a Request for Waiver with the FCC. It's going to happen a lot.

The only hope is that getting a lower price will be considered a "legitimate reason to change providers." Then it will just be a matter of hoping you only got one bid in response to your 470. However, if you got 2 or more bids, you are now locked in, no matter what kind of savings comes along.

SPIN changes were one tool to help applicants work within the broken E-rate procurement process to get the best deal. Now that tool has been ruined. Opportunities for cost savings will be lost, and innovation will be stifled.

Sorry, but I think the solution is worse than the problem.

1 comment:

  1. For those who don't know, lower price is not considered a "legitimate reason to change":