E-rate FAQs: Contracts
March 27, 2015
I’ve received several questions lately related to contracts, what must be included, whether one has to be signed, etc. and so I hope the following FAQ is helpful.
1) Are we required to sign a contract for a Category 1 service (telecom and Internet)?
In most cases, except for cellular service, some small voice services, and cable modem/DSL, and other services that are being purchased on a month-to-month basis, you will have a signed contract for Category 1 services. But… what you can’t do is file for MTM services and then sign your contract after the filing window ends. If you’re planning to sign a contract at all during the year, you need to have it signed before you submit the Form 471.
2) Are contracts required for NON-PEPPM Category 2 services/equipment purchases (internal connections and basic maintenance)?
Yes, if you posted a Form 470 for Category 2 equipment or services, you must have a signed contract before the Form 471 is submitted. At a minimum, I suggest you take the winning vendor’s quote and sign/date it, along with a note that the purchase is contingent upon E-rate funding and that the contract is valid April 1, 2015 – September 30, 2016.
2a) Are contracts required for PEPPM Category 2 services/equipment purchases?
No. The PEPPM Contract IS the contract and you should use the PEPPM 470 #, PEPPM contract signing date (for that product line), and PEPPM contract expiration date. All of this information is available at: http://e-ratepa.org/?page_id=6121.
3) Must contracts be signed by both the applicant and the vendor?
No. In March 2007, the FCC clarified that the vendor’s signature is not a program requirement unless state and/or local contract law includes this requirement. The contract must, however, be signed/dated by the applicant before the Form 471 is filed.
4) Are we required to obtain school board approval prior to signing contracts?
E-rate rules require that applicants follow local requirements and local policy when it comes to contract approvals. So if your school board requires their approval on all contracts, then the board must approve those contracts prior to their signing and Form 471 submission. Some school boards have given superintendents or business managers delegated authority to sign certain contracts, and that is permissible under E-rate rules.
5) Are we allowed to negotiate a contract or must we accept the vendor’s standard terms and conditions?
Negotiate! Often a vendor will submit their standard terms and conditions, but you are under no obligation to accept them as-is. Read the fine print; discuss what happens if service isn’t delivered for x period of time, or if service isn’t turn-on by the contracted date.
Important: With so many districts closing school buildings, it’s extremely important to review the service termination terms and negotiate a reduced or waived termination liability should the district have to close school buildings. You don’t want to get stuck in a contract that requires you to pay for service going to a closed school.
6) Should we specify discounts or reimbursements in our contract?
If you care deeply about whether you pay your bill in full and seek reimbursement, or whether the vendor submits to you discounts bills, you should specify these terms in your contract. It is not a requirement, however. Most applicants tell their vendors which funding method they prefer after they receive their Funding Commitment Decision Letter (FCDL).
7) Can/should we include service upgrades in the contract?
Absolutely. The SLD has very strict rules regarding upgrading service or products. If your original Form 470 Request for Services included upgrade language such as, “X service or faster” or “Y component or upgrade” – AND - if your contract included language that permits very specific upgrades in the middle of the contract – AND – the prices for those upgrades, you will be permitted to exercise those upgrades in service without posting a Form 470. For example, if you bid 100, 200 and 300 mb of Internet, and you decided to purchase 100 mb of Internet in 2015, you will be permitted to upgrade to 200 or 300 mb of Internet next year if your contract explicitly states these speeds and the prices.
8) Should we submit a copy of our contract to the SLD?
No. The new Form 471 Funding Request section has 3 components – Key Information, Item 21 and Manage Recipients. The details of your contract will be provided to USAC in those 3 sections. If you are asked for a copy of your contract during PIA review, then you should provide it. But otherwise, do not fax or send it to USAC.
9) Are contingent contracts permitted?
Yes! If you don’t intend to purchase the services or equipment without E-rate funding, be sure to make your contracts contingent up on E-rate funding.
10) What should we list as contract expiration dates for recurring services?
If possible, always make contract effective dates for recurring services begin on July 1 and end on June 30. Similarly, a non-recurring service or equipment purchase should be written to extend at least until September 30th, 2016. (September 30 is the last allowable date to receive a non-recurring service or equipment).
11) Are we permitted to sign contracts that include voluntary extensions?
Yes! A contract including voluntary extensions means that the contract expires at the end of its original term and may be voluntarily extended for a specific number of years. In order to take advantage of the extension years the contract would have to include specific language describing the exact number of years that the contract may be extended. Open-ended contracts or automatic annual renewals cannot be considered voluntary contract extensions. For example: “a 2-year contract with two, one-year renewals” is fine and no new Form 470 would have to be posted during the renewal periods. But “A 2-year contract, that automatically renews until terminated by either party” is not acceptable and the service would have to be rebid at the end of the 2-year contract.
12) If we have a multi-year contract that contains voluntary extensions, what should we list as the contract expiration date on the Form 471 in the Funding Request section?
The contract expiration date should be the end of the initial contract term, not the last possible date that the contract could expire. The system now asks if there are any voluntary contract extensions included in the contract and, if so, the total # of months remaining on the contract. If the total # of months remaining on the contract is 100+, the system will only allow you to list 99, which is fine.
13) If the initial term of our contract has expired, and we are exercising one of our extension years for FY 2015, what should we use as our Form 470 #, contract signing date and service start date?
You would use the original Form 470# from when the contract was competitively bid, the original contract signing date, and July 1, 2015 as the service start date. The contract expiration date, of course, would change to the new expiration date (likely 6/30/2016).
14) Can I sign my contract before my 28-day waiting period is up?
No! Pay careful attention to not sign a contract or select a service provider before the end of the 28 day 470 waiting period. The contract must be signed and the 471 application must be submitted on or after the Allowable Contract Date which is basically the 29th day after the corresponding 470 is posted on the SLD’s Web site.
If you have any questions, please don’t hesitate to contact me at firstname.lastname@example.org.
Julie Tritt Schell
PA E-rate Coordinator