E-rate 471 Step 2: Contract FAQs

March 1, 2014

Step 2: E-rate Contract FAQs

In the previous message, we discussed bid evaluation and selecting your vendors. This message provides information on the next step — signing contracts. Below is a compilation of the 12 most common questions I receive.

1) Are we required to sign a contract for a Priority 1 service (telecom and Internet)?
No, contracts are not required if you are purchasing the service on a month-to-month basis. 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.
1a) Are contracts required for Priority 2 services/equipment purchases (internal connections and basic maintenance)?
Yes. Contracts are required to be signed for all Priority 2 services/purchases 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 July 1, 2014 – September 30, 2016.

2) 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.

3) 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.

4) 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.

5) 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).

6) 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 include language that permits such upgrades in the middle of the contract, upgrading to a faster bandwidth or newer component will be much easier and you likely won’t have to repost a new 470.

7) Should we submit a copy of our contract with our Item 21 Attachment to the SLD?
No. You should submit a description/breakdown of the services contained in your contract and the contract pricing. The SLD may ask to see a copy of your contract if they have questions, but initially submitting a copy of your entire contract to the SLD probably is not advised. Why? Because the SLD is required to review every line of every page that is submitted to them. They prefer not to spend their time doing this if they don’t have to, and applicants probably don’t want the SLD looking for reasons in their contract to deny the application. Sometimes less is better initially and the SLD can request more information later if they need it.

8) Are contingent contracts permitted?
Yes. Because the E-rate application cycle requires contracts to be signed months prior to the start of the actual funding year, the SLD accepts contingent contracts. The most common contingencies include those for E-rate funding or formal budget approval. Nevertheless, the SLD expects these contracts to be binding if these conditions are met.

9) What should we list as contract expiration dates?
If possible, contract effective dates for recurring services should cover the entire funding year, from July 1st to June 30th (for example, July 1, 2014 – June 30, 2015). Similarly, a non-recurring service or equipment contract 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 and if you add an extra year, then you won’t have to bid it again in FY 2015 if you aren’t funded in FY 2014 and need to reapply the next year).

10) 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.

11) If we have a multi-year contract that contains voluntary extensions, what should we list as the contract expiration date on the Form 471, Block 5, Item 20b?
The contract expiration date should be the end of the initial contract, not the last possible date that the contract could expire. For example, if a contract is signed for 3-years, with two 1-year renewal options, in Item 20b, the applicant would list the end of the third year of the contract.
11a) If you are exercising one of your renewal options and have signed an extension agreement, you should still list the ORIGINAL Form 470 # that was used to bid the service, and the ORIGINAL contract signing date (not the date of the signed extension agreement).
12) 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 jtschell@comcast.net. Next message? Submitting your Form 471 and Help with the New Item 24 Questions.

– Julie

Julie Tritt Schell
PA E-rate Coordinator

717-730-7133 – o
717-730-9060 – f

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