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Monday, December 26, 2011

Holiday cheer, but not where you expect it

Here is the FCC's Christmas gift this year: an appeal decision granting waivers to applicants with no contracts.  It appears that the requirement to have a contract before filing the 471 is actually more like a requirement that you have something like a contract close to the time of filing the 471.

But instead of just celebrating this cheery decision, I'm going to whine.  After all, that is what readers have come to expect.

First of all, I will reiterate that the FCC's requirement that school districts and public libraries sign contracts in March for services that start in July and end the following June is illegal.  When I called an individual who helped write the public purchasing law in NJ, and explained the E-Rate contracting requirement to him, his response was, "But that's illegal!"  Since budgets for the following fiscal year aren't approved, it is illegal to sign contracts for that fiscal year.

Second of all, the FCC waived the rules for 40 appellants, and granted 7 appeals on their merits, without telling us which appeals fall into which category.  OK, so it makes no real difference to the applicants, and there are probably only 2 or 3 people in the world who would actually take the time to go back and look at the appeals that were granted, but consarn it, I am one of those people.  I want to know the 7 appeals where the FCC thought USAC had it wrong, so that I can learn more about the FCC's thinking, and use this decision as a precedent in future appeals to the FCC and USAC.

But here's the record-scratch moment from this decision: "In addition, we grant...petitioners waivers of our filing deadline for appeals because we find...the late-filed appeal would never have been necessary absent an error on the part of USAC."  Wait, did the FCC just say that in cases where USAC makes a mistake, the filing deadline will be waived?!  Let's check that footnote: "Based on the record, USAC erred in its decision to deny funding for these petitioners for not having a signed contract in place when the Form 471 was submitted.  If USAC had not erred, the petitioners would not have had to file an appeal."

So there's no statue of limitations on USAC error?  Even I can't find anything to complain about with that policy.  It seems only fair that if applicants can lose funding for mistakes made up to 5 years ago, we should be able to appeal mistakes made for at least 5 years.

Friday, December 23, 2011

Bah! Humbug!

Call me Ebenezer.  So close to Christmas, I'm going on another rant.  And on a topic I've ranted to death, no less.  So if you don't want me to chip away at your holiday mood, maybe you should skip this one.

I'm going back to competitive bidding.  Something I said in my last post on the subject has got me thinking.

[Finding new ideas in my own writing would seem to indicate at least one of the following:
  1. My ability to form complete thoughts leaves something to be desired.
  2. I spend too much time reveling in my own prose.
  3. I'm tossing crap onto this blog before I've thought it through.
  4. My mind moves so fast, even my own mind can't keep up.
  5. My writing is incredibly  thought-provoking.]
Anyway, the statement that got me thinking was, "the main goal of most competitive bidding rules is to prevent cheating, not lower costs."  Let's face it, the FCC rules are not going to prevent cheating for two reasons:
  1. They can't catch cheaters.
  2. They can't punish cheaters.
The FCC can't catch cheaters because they have no subpoena power and very limited audit resources.  Look at all the major cheaters that have been caught.  They've either been caught by district attorneys or school district audits or both.  With its limited investigatory ability, the FCC is only going to catch people who make stupid mistakes.  And competitive bidding rules don't prevent stupid mistakes.  (Improving the tools available to applicants would prevent stupid mistakes, but that's a different rant.)

So when cheaters do get caught, what is the punishment?  Well, the district attorneys dish out huge fines and jail time.  The FCC does 2 things:
  1. Debar individuals for 3 years.
  2. Take back the funding from the applicant.
I've posted before about the irony of giving a 3-year debarment to someone going to jail for 5 years.  I mean, you could file an appeal with the FCC, get debarred, and be back in the E-Rate business before the appeal was decided.  (Actually, the FCC has handed out at least one 10-year debarment, but the only effective debarments would be against service providers, and there the FCC seems to hand out 6-month debarments, if there is any debarment at all.)  So you catch someone cheating and the punishment is that they can't cheat any more for 3 years?

And taking money back from the applicant doesn't hurt the perpetrators.  If the cheaters gave a fig about their employers' well-being, they wouldn't cheat.  (My favorite case is one where a district alerted the FCC to a $5 million fraud by their Tech Director, and now the FCC is after the district for $3 million, even though the district never got any money or equipment.)

Where's the harm?  Well, the restrictions imposed by competitive bidding rules increase the cost of procurement.  Apart from the wasted staff time, the decreased flexibility often prevents applicants from purchasing what would be a more cost-effective solution.

The FCC's toothless competitive bidding rules drive up costs without preventing cheating.

How can we deter cheaters?  In all the cases mentioned, existing laws resulted in prison time.  So let the legal system catch the cheaters.  

So for Xmas this year, I'd like Santa to take the Form 470 back to the North Pole with him.  Then he can stick one in the stockings of bad children.

Wednesday, December 21, 2011

Who's missing the gravy train?

Funds for Learning has posted a short report on the 2009 funding year.  So I thought I'd steal a little of their data, and see what the participation rate is among different categories of applicants.

I got my info on the number of libraries from the American Library Association, and on the number of schools and districts from the U.S. Dept. of Education.  Here are the results:

Category Total Applied Participation
School Districts 13,809 12,833 93%
Schools 33,740 7,142 21%
Libraries 9,225 3,672 40%
Consortia n/a 439 n/a

I'm kind of suspicious of the data, because I think the FFL data is pulled from the selection the applicant makes on the Form 471, and so a school with multiple locations might apply as a district.  Elsewhere, the DoE put  the total number of districts in the country at 16,850.  In the other direction, I have seen single-school districts apply as a school.  Also, consortia contain applicants from the other 3 categories, so participation is higher for all categories.  But let's just take the numbers as roughly correct.

93% is much higher than I expected.  I would have guessed 80%.  I mean, anything that's voluntary, it's hard to get more than 80% participation.  And I see a lot of districts not applying, but I guess that's because I'm looking for those districts.  If we use the DoE's other total number of districts (16,850), the participation drops to 76%, which I find more believable.  Still, that's a good participation rate.

The libraries number is also higher than I expected.  Between the need for a tech plan, the thorny first-amendment infringement inherent in CIPA, and the small telecom/Internet spending for most libraries, I had expected to see a number closer to 20%.

The schools participation is kind of embarassing.  Only 1 in 5 apply, which is lower than I had expected.  And since most of them have some kind of filtering in place, it's really just a matter of tossing together a tech plan and filling out the paperwork.  Now with no tech plan required for Priority One, perhaps we'll see a boom in requests from this sector.

In general, I wonder if we'll be able to see a change in participation now that the tech plan requirement has been relaxed.  

If I were more ambitious, I'd look at the percentage of entities in each category get Priority Two funding.  I'll bet school participation would drop into the single digits.

Friday, December 16, 2011

E-Rate gets dynamic

I just learned that General Dynamics purchased Vangent.  If you know what that has to do with the E-Rate, then you are way too far down the rabbit hole, and you need an E-Rate intervention.

If you've been reading this blog since 2007, you may remember that Vangent purchased Pearson's government services division, and with it the contract to run the Lawrence, KS contact center.  So if you have had the misfortune of mailing any forms, or have had to contact the Client Service Bureau, you have had contact with a Vangent employee.  From now on, it will be a General Dynamics employee.

Just for kicks, I checked to see if General Dynamics is a service provider.  The answer seems to be no, although a couple of divisions have SPINs, and one of them was approved for funding in 1999, but no funding was disbursed.  I guess schools and libraries don't have much use for advanced weapon systems.

Does this mean PIA gets to use F-16s now?

Monday, December 12, 2011

Pointless criteria

So I was looking at the eligibility of dormitories for E-Rate support, and I noticed something about the conditions for eligibility of dorms as laid out in the Sixth Report & Order: most of the criteria are irrelevant.  The Order says that dormitories are eligible for:
  1. schools on Tribal lands
  2. schools designed to serve students with medical needs
  3. schools designed to serve students with physical, cognitive or behavioral disabilities
  4. schools where 35 percent or more of their students are eligible for the national school lunch program
  5. juvenile justice facilities
But the Order implies that dormitories are non-instructional facilities (NIFs), and earlier FCC decisions denying funding to dorms were all for internal connections, so dormitories have always been eligible for Priority One service.  The only time a dormitory needs to satisfy one of the criteria above is when applying for Priority Two services.  So criterion #4 makes the others pretty much irrelevant.  Schools with less than 35% NSLP students have at best a 60% discount, which means they aren't getting Priority Two funding, anyway.  (Unless we get another capricious rollover decision.)  And in the real world, most schools which meet any of the other 4 criteria will also meet criteria #4.

Friday, December 09, 2011

FCC wrongs states' rights

The FCC is on a competitive bidding tear.  After Monday's decision on 11 appeals, which I disliked, the Commission fired off two more unpleasant decisions on Wednesday.  Both decisions look reasonable for the individual cases, but are trouble for the big picture.

First, the FCC granted an appeal where the applicant put a service provider's name in the Form 470.  The good news: "We instruct USAC, if otherwise appropriate, to approve all currently pending applications and appeals in which an applicant failed to state “or equivalent” when listing a specific manufacturer’s name, brand, product or service on the FCC Form 470s."  A massive mulligan for all earlier errors.  The bad news: "for Form 470s or RFPs posted for Funding Year 2013 or thereafter, applicants must not include the manufacturer’s name or brand on their FCC Form 470 or in their RFPs unless they also use the words 'or equivalent' to describe the requested product or service."  Oh, dear.

It just bothers me when the FCC mandates poor engineering.  No competent network engineer builds a network with a mishmash of manufacturers.  Training staff to support multiple manufacturers and trying to make the equipment interact correctly just isn't cost-effective.  I think the lawyers at the FCC should go down to the FCC's IT shop and ask the network engineers about mixing manufacturers.  Don't get me started on the interoperability of PBXes from different manufacturers.

And since it has been common practice for applicants to put make and/or model on 470s (I picked 5 manufacturers and found 2,710 mentions in the 470s for FY2010), we have another situation where hundreds of applicants will be denied for doing the same thing they've been doing for years.

But it gets worse.  How are service providers going to bid on maintenance?  Applicants are no longer allowed to tell bidders the make or model of equipment they want supported.  The Commission has just ensured that only the incumbent service provider will be able to bid.

Second, the FCC denied an appeal where they didn't think price was the primary factor in vendor selection.  I couldn't understand the FCC's explanation of the applicant's explanation of the weighting scheme, so I can't complain about that.  And I have no problem with price being the primary factor.  What smacked me in the face were three statements explaining why competitive bidding was so important.  I've probably read them before in other decisions, but today they jumped out today.

  1.  "[C]ompetitive bidding is the most efficient means for ensuring that eligible schools and libraries are informed about all of the choices available to them."
  2. "Competitive bidding also helps to achieve the Commission’s goals of full and open competition resulting in the most cost-effective use of limited program funds." 
  3. "Absent competitive bidding, prices charged to schools and libraries for eligible products and services may be needlessly high."
I disagree:
  1. The 470 process prevents applicants from getting informed of what choices are available.  Because in order to post a 470, you often have to choose what you want to ask for. For example, you can't ask for concurrent-call pricing on VoIP if you don't know that exists, so you end up asking for VoIP for 150 phone sets, which costs $4,500/month, when all you really need is 20 concurrent call paths, which costs $1,200/month.  Because the FCC restricts what information service providers can give applicants before the 470 is posted, 470s are necessarily ill-informed.  And getting back to the issue of this appeal, making price the primary factor does not make anyone better informed about available choices.
  2. The 470 process drives up prices by forcing applicants to lock in service provider, model and price a full 18 months before they plan to purchase equipment (and 6 months before they plan to purchase services).  So when it comes time for equipment installation, applicants routinely have to change almost every item on the equipment list, but since they are locked into a single service provider, the service provider can name any price it wants for the updated equipment.
  3. OK, that statement is true, but so is this one: "Because of competitive bidding, prices charged to schools and libraries for eligible products and services may be needlessly high."  Sometimes competitive bidding lowers prices.  Sometimes the FCC's competitive bidding rules, when laid on top of state purchasing law, raise costs.  The implication of the sentence is that competitive bidding prevents needlessly high costs, and that's not usually true.  I can't say whether the process more often results in higher prices for all applicants, but it's certainly true in purchases I'm involved in.  Because I know how to get vendors to lower their prices, through competition, negotiation, etc.  And the 470 process prevents me from doing so.
My gripe comes down to semantics.  "Competition" does all the things the FCC mentioned in the 3 sentences.  "Competitive bidding" is much less effective; the bid process restricts applicant flexibility, and the main goal of most competitive bidding rules is to prevent cheating, not lower costs.  "The FCC's competitive bidding rules" are fantastically ineffective, because they are overlaid over state rules, prevent communication between the parties, and create a perverse timing.

The deeper the FCC dives into competitive bidding rules, the more I'm convinced that they need to get out of the business of regulating competitive bidding.  It is a role more properly left to state and local governments.

Tuesday, December 06, 2011

RFPs on Qo'noS

The latest appeal decision from the FCC further clarifies what "open and fair competition" means, and .  The FCC granted 5 appeals, and upheld 6 denials, confirming that when it comes to competitive bidding, the FCC is more stingy with waivers than it is with other violations.

The most interesting case was Klamath-Trinity, and not just because it sounds like a Klingon Catholic school.  The FCC said that the competition wasn't fair because:

  1. Klamath-Trinity's RFP contained 8 pages of network diagrams, etc., 
  2. The Form 470 didn't say that an RFP was available.
  3. The 470 was general.  (I checked the 470 in question, and the description was pretty brief: "Connecting 7 Schools with 123 rooms with approximately 435 computers.")
  4. "Klamath-Trinity said it only provided the RFP to parties that requested it."
That fourth point is troubling.  I mean, to whom should the Klingons for Christ have sent the RFP?  But later in the decision, Hesperia Unified (which sounds like a benevolent coalition of planets in an Asimov novel) gets a waiver, because it provided copies of the RFP to all bidders.  The implications seems to be that the Klingons didn't send out the RFP unless a potential bidder specifically said, "Show me the RFP."  I doubt that's how the Klingons behaved, but that seems to be the FCC line of reasoning.

Alas, this decision doesn't get down to specifics.  It leaves two vital questions unanswered: 
  1. How much information can applicants give out in response to service provider questions? 
  2. What does "RFP" mean?  
 The FCC said that 2 of the applicants (whose names are not SciFi-ish, so I won't mention them) didn't violate bidding rules, because they "merely provided guidance directing potential bidders to already-filed FCC Forms 470."  Hesperia did violate rules by giving all bidders info that was not on the 470 (but got a waiver).  Apparently, any information given to service providers which goes beyond what is on the 470 constitutes an RFP.

Since this decision also reinforces the requirement that both the 470 and the "RFP" (whatever that is) be available to bidders for 28 days before the contract is signed, and this decision seems to be saying that responses to vendor questions can be considered an RFP, applicants would be wise not to answer any questions from bidders.  Because if you answer a question, you have to restart the 28-day waiting period.

So a fair and open bidding process is one in which applicants do not answer questions from potential bidders.

Things are even uglier when we bring in state rules.  If I check the "I have an RFP" box, but whatever info I give vendors doesn't meet the state requirements for an RFP, the losers can get the bid thrown out under state law.  It seems to me that the FCC has left applicants with two choices: either refuse to give bidders any information beyond what is on the 470, or publish an RFP which complies with state laws, which forces applicants into a very delicate dance of satisfying both state and FCC requirements for competitive bidding.