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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.

1 comment:

  1. SP Guy5:33 PM

    The SLD has turned a blind-eye to competitive bidding for a long time. Just look at the 470s that request "Circuit Card, All Sites" (no RFP).
    These are the same applicants that don't return phone calls, don't return email, and then complain on the SLD monthly calls about Service Providers bugging them about details that were on their 470.