Step 2: Reminders When Signing E-rate Contracts
Message Posted January 27, 2009
~ 16 days remaining to submit 471s ~
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 13 most common questions I receive; please excuse the length.
1) Are we required to sign a contract for a priority 1 service?
No, contracts are not required if you are purchasing the service on a month-to-month basis, or through a 1-year tariffed service. Other than that, applicants are required to sign contracts for E-rate eligible telecommunications or internet access services.
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. However, I still suggest trying to get the vendor's signature before you file your Form 471, just as general good practice.
3) Are we required to sign a contract if we are purchasing from PEPPM Contract?
As indicated in the recent PEPPM message, you are not required to sign a contract prior to the submission of the 471 if you are purchasing from the State PEPPM contract. Full PEPPM E-rate filing information can be found at: http://www.e-ratepa.org/Listserve-Archive/2009/01-16-09.htm.
4) Are contracts required for priority 2 services/equipment?
Yes. The SLD requires that all priority 2 services or equipment must be under contract; they cannot be provided on a month-to-month basis.
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; review the contract termination terms and discuss if termination fees can be reduced or waived if a school building closes; and discuss whether it's possible to include language that says that if rates for this service decrease in your service area that you will also receive those lesser rates (as examples).
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.
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 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.
8) Should we submit a copy of your contract with our Item 21 Attachment to the SLD?
NO! You can submit a description 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 isn't a good idea. 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 later.
9) 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 has accepted 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.
10) 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, 2009 - June 30, 2010). Similarly, a non-recurring service or equipment contract should be written to extend at least until September 30th, normally the last allowable date to receive service.
11) Are we permitted to sign multi-year contracts?
Yes, as long as you posted a Form 470, waited at least 28 days, and indicated that you were seeking a multi-year contract under Item 7b of the establishing Form 470.
12) Are we permitted to sign contracts that include voluntary extensions?
In the last 2 years, the SLD has become hawkish over voluntary extensions so please read the following closely.
A contract including voluntary extensions means that the contract expires at the end of its original term and may be voluntarily extended for one or more years. In order to take advantage of the extension years, ALL of the following rules must have been met:
-- the Form 470 and/or RFP must have indicated your intent to enter into a contract which included voluntary extensions. If your 470 was posted for Year 9 (FY 2006), the voluntary extension box in Item 7b would have to have been checked. If your 470 was posted before this year (using the old Form 470), and no RFP was included, the voluntary extension request would have to have been listed in the textbox in Item 13.
-- the contract would have to include language that permits the extension of the contract -- and for how many years. Open-ended contracts are not permitted.
If your contract contains voluntary extensions, but the above conditions were not met, you must post a new 470 indicating that you are seeking to extend your current contract and then consider all proposals before the extension is exercised or a vendor is selected.
13) 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.
If you have any questions, please contact me at jtschell@comcast.net. Next message? Submitting your Form 471.
Julie Tritt Schell
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