{"id":35303,"date":"2024-02-01T01:54:00","date_gmt":"2024-02-01T01:54:00","guid":{"rendered":"http:\/\/e-ratepaorg.local\/?p=35303"},"modified":"2024-02-03T01:59:42","modified_gmt":"2024-02-03T01:59:42","slug":"contract-guidance-for-e-rate-eligible-servicesequipment-5","status":"publish","type":"post","link":"https:\/\/e-ratepa.org\/?p=35303","title":{"rendered":"Contract Guidance for E-rate Eligible Services\/Equipment"},"content":{"rendered":"<p><span style=\"color: #222222;\">February 1, 2024<\/span><\/p>\n<p>At this point, you should be at the point where you are or have conducted your bid evaluation, are seeking board approval (if required), and are moving to the contract signing stage (unless your service is C1 month-to-month).\u00a0 Often, the path of least resistance is to sign the vendor\u2019s standard contract without seeking modifications.\u00a0 But mid-year or later in the contract, applicants realize that had they included a few key provisions in their contract, they could have avoided costly pitfalls.\u00a0 The following guidance provides items that you may wish to consider including in your vendor contract, broken down into General, Category 1, and Category 2 (be sure to review the items in all three sections).<\/p>\n<p><span style=\"text-decoration: underline;\"><strong>GENERAL:<\/strong><\/span><\/p>\n<ul>\n<li><strong>Specify Discounts or Reimbursements<\/strong><\/li>\n<\/ul>\n<p style=\"padding-left: 30px;\">Applicants are permitted the final choice whether to receive discounts on bills or whether to pay their bills in full and submit the Form 472 BEAR to USAC for reimbursement.\u00a0 Wherever possible, this choice should be established in your Form 470\/RFP and contract to avoid any confusion.<\/p>\n<ul style=\"padding-left: 30px;\">\n<li><strong>Do Not Sign Contract Until Allowable Contract Date (which is at least 29 days after Form 470 posting)<\/strong><\/li>\n<\/ul>\n<p style=\"padding-left: 30px;\">Be sure not to sign a contract or select a service provider before the end of the 28-day 470 waiting period.\u00a0 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\u2019s Web site. The EPC system will automatically send you an e-mail on the 29<sup>th<\/sup>\u00a0day after the 470 was posted but keep in mind that your personal bid due date may be after this date.\u00a0 Note:\u00a0 If you are using the PEPPM mini-bid process, you must simply wait until after the due date you established for receipt of PEPPM mini-bids before you conduct your bid evaluation and sign a contract.<\/p>\n<ul style=\"padding-left: 30px;\">\n<li><strong>Payment Schedule<\/strong><\/li>\n<\/ul>\n<p style=\"padding-left: 30px;\">If you have terms and conditions under which you will make scheduled payments, such arrangements should be included in your contract (for example, if your vendor wishes to be paid on a quarterly basis or if your vendor would like to receive upfront payments for work such as installation of a new network).\u00a0 USAC will reimburse for advanced payments if the terms are included in the contract.<\/p>\n<ul style=\"padding-left: 30px;\">\n<li><strong>Legally Binding Agreements \u2013 Minimum Requirements<\/strong><\/li>\n<\/ul>\n<ul>\n<ul>\n<li>All contracts must be signed\/dated by the applicant before submitting the Form 471.\u00a0 Under E-rate rules, only the\u00a0<em>applicant<\/em>\u00a0must sign the contract prior to submitting the Form 471.<\/li>\n<li>A verbal contract is not considered a legally binding agreement (contract) under E-rate rules.<\/li>\n<li>Month-to-Month (MTM) services, where no contract exists, are eligible, but must be rebid each year.\u00a0 Category 2 purchases must have a contract.<\/li>\n<\/ul>\n<\/ul>\n<p><span style=\"text-decoration: underline;\"><strong>CATEGORY 1 CONTRACTS<\/strong><\/span><\/p>\n<ul>\n<li><strong>Contract Term Dates<\/strong><\/li>\n<\/ul>\n<p style=\"padding-left: 30px;\">Be certain to include both the service start date and the contract expiration date in all contracts.\u00a0 For\u00a0recurring\u00a0services, every attempt should be made to have contracts begin July 1 and expire June 30 of whatever year (not expire in the middle of a funding year). \u00a0Even with multi-year contracts, be certain they end on June 30.<\/p>\n<ul style=\"padding-left: 30px;\">\n<li><strong>Contract Extensions<\/strong><\/li>\n<\/ul>\n<p style=\"padding-left: 30px;\">Applicants are permitted (and strongly encouraged by me) to include optional contract extensions in their contracts.\u00a0 The extensions must be finite, meaning they are for a set number of years.\u00a0 Open-ended automatic renewals do not meet E-rate requirements for voluntary extensions.\u00a0 Unless the options for extension are set forth in the original contract, no extension may be entered into after the expiration of the contract term.\u00a0 If an applicant wishes to utilize an optional renewal, they do not have to post a Form 470 for that service, assuming the terms remain the same. There is no limit to the total number of extensions that can be included in the original contract.<\/p>\n<p style=\"padding-left: 30px;\">For example, an Internet contract that has a 2-year initial term with a one-year extension option is OK while a 2-year contract that automatically renews unless one of the parties cancels the contract is not OK and a new Form 470 would have to be posted at the end of 2 years.<\/p>\n<ul style=\"padding-left: 30px;\">\n<li><strong>Prices During Contract Extension<\/strong><\/li>\n<\/ul>\n<p style=\"padding-left: 30px;\">If possible, avoid language in contract extensions that include price increases or language such as \u201ccurrent market rates\u201d or adjusted for \u201cCPI.\u201d<\/p>\n<ul style=\"padding-left: 30px;\">\n<li><strong>Remember to Cancel Expiring Contracts When Changing Vendors<\/strong><\/li>\n<\/ul>\n<p style=\"padding-left: 30px;\">Many vendor contracts include language that requires the applicant to notify the vendor X number of days prior to the contract automatically renewing or prior to termination of service.\u00a0 If you have signed a contract with a new vendor, be certain to provide your previous vendor with the required notice so you don\u2019t continue receiving invoices after the other vendor\u2019s service has started.<\/p>\n<ul style=\"padding-left: 30px;\">\n<li><strong>Future-Proof Contract Services<\/strong><\/li>\n<\/ul>\n<p style=\"padding-left: 30px;\">Specify in your contract the option to increase bandwidth during the contract period, AND include the exact prices for the expanded service options (these expanded options should have also been included on your establishing Form 470).\u00a0 By doing this, should you wish to increase your bandwidth mid-contract, you may amend the agreement without having to rebid the contract.\u00a0 If the contract does not contain the expanded bandwidth options and prices, applicants can\u2019t adjust their bandwidth levels mid-contract and a new Form 470 would be required.\u00a0 For example, if the initial contract provides for service at 1 Gbps, and also specifies that the customer has the option to amend the agreement to increase service to 10 Gbps at X price, the customer may opt to amend the original contract and purchase the increased bandwidth without rebidding. \u00a0If, however, the contract was open ended and stated that the customer may choose to purchase additional service and the price will be negotiated, this language would not be E-rate compliant and the additional bandwidth would need to be rebid on a new Form 470.<\/p>\n<p style=\"padding-left: 30px;\">Note:\u00a0 If you increase bandwidth and the associated prices during the middle of the E-rate funding year, you cannot receive discounts on the increased costs until the next E-rate application cycle.\u00a0 For example, if you opt to increase bandwidth and incur additional costs on February 1, 2024, you would not be eligible to received E-rate discounts on the new bandwidth and price until July 1, 2024 (assuming it was included on your FY 2024 Form 471).<\/p>\n<ul>\n<li><strong>Taxes\/Fees<\/strong><\/li>\n<\/ul>\n<p style=\"padding-left: 30px;\">Most contracts don\u2019t specify what exact taxes and fees will be included on the invoices. \u00a0Those charges can be steep but luckily, most such charges are E-rate eligible if they\u2019re included on the Form 471 as a separate FRN Line Item (in addition to the MRC on the same FRN).\u00a0 For new contracts, it\u2019s important to have the vendor spell out \u2013 in writing (e-mail is fine) \u2013 exactly what taxes, fees and at what rates, will be included on the monthly invoices.\u00a0 PIA will ask for proof of these taxes\/fees, so you must get it in writing before submitting the 471 \u2013 don\u2019t guess. \u00a0For existing contracts, the current invoices will specify the costs of the taxes\/fees so you know how much to include on the FRN line item.<\/p>\n<ul style=\"padding-left: 30px;\">\n<li><strong>School Closures<\/strong><\/li>\n<\/ul>\n<p style=\"padding-left: 30px;\">Unfortunately, when a school closes, many vendors will not allow the district to discontinue paying for service to that school and will continue to bill the monthly charges, or will charge a lump-sum early termination fee for that building (equal to the remaining months on the contract).\u00a0 To avoid this predicament, it\u2019s a good idea to include language in the contract that states that there will be no early termination charges assessed if any school building is closed by the school board.<\/p>\n<p><span style=\"text-decoration: underline;\"><strong>CATEGORY 2 CONTRACTS<\/strong><\/span><\/p>\n<ul>\n<li><strong>Contract Term Dates<\/strong><\/li>\n<\/ul>\n<p style=\"padding-left: 30px;\">Category 2 contracts for equipment and installation often do not have \u201cterms\u201d but I recommend including them before signing.\u00a0 The term should be April 1 through September 30 of the following year (a full 18 months) to align with the expanded funding year that\u2019s provided for applicants to purchase equipment three months before and three months after the actual E-rate funding year.\u00a0 For example, for FY 2024, the term would be listed as 4\/1\/2024 \u2013 9\/30\/2025.<\/p>\n<p style=\"padding-left: 30px;\">Category 2 contracts for maintenance are considered\u00a0<em>recurring<\/em>\u00a0services, and the term of those contracts must fall within the exact funding year: July 1 \u2013 June 30.<\/p>\n<ul style=\"padding-left: 30px;\">\n<li><strong>Single-Priced Structured Cabling Contracts<\/strong><\/li>\n<\/ul>\n<p style=\"padding-left: 30px;\">When bidding and contracting for projects involving structured cabling contracts, try to have vendors bid a single price by school building instead listing a breakdown of costs for every single jhook, connector, splice tray, etc.\u00a0 This way, the contract can be a single priced contract by building, and will enable you to file a single cabling FRN Line Item for each building.\u00a0 Of course, if the project involves the purchase of other E-rate eligible equipment, such as wireless access points or switches, those costs will have to be broken out into separate wireless or switching FRN Line Items.<\/p>\n<ul style=\"padding-left: 30px;\">\n<li><strong>E-rate Contingency Clauses<\/strong><\/li>\n<\/ul>\n<p style=\"padding-left: 30px;\">If you don\u2019t want to purchase the equipment without E-rate funding, you may wish to include language in your vendor contract that states, \u201cThis contract is contingent upon successful receipt of E-rate funding commitment letter and board budget approval.\u201d\u00a0 Remember, if you purchase the equipment prior to receiving your E-rate FCDL, you are assuming 100% of the risk that funding won\u2019t be approved.<\/p>\n<p>If you have any questions about creating\/signing E-rate eligible contracts, please e-mail me at\u00a0jtschell@comcast.net.\u00a0 What\u2019s next?\u00a0 Creating Contract Records in EPC and Form 471 Filing Guides!<\/p>\n<p>&#8212; Julie<\/p>\n<p>Julie Tritt Schell<br \/>\nPennsylvania E-rate Coordinator<br \/>\n717-730-7133 &#8211; o<br \/>\njtschell@comcast.net<br \/>\nwww.e-ratepa.org<\/p>\n<p><span style=\"text-decoration: underline;\">You are\u00a0<strong>here<\/strong>\u00a0in the FY 2024 E-rate Application Cycle:<\/span><\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-35308\" src=\"https:\/\/e-ratepa.org\/wp-content\/uploads\/2024\/02\/2024-flowchart1.png\" alt=\"2024-flowchart1\" width=\"580\" height=\"361\" \/><\/p>\n<p>&nbsp;<\/p>\n\n<div class=\"twitter-share\"><a href=\"https:\/\/twitter.com\/intent\/tweet?via=eratepenn\" class=\"twitter-share-button\" data-size=\"large\">Tweet<\/a><\/div>\n","protected":false},"excerpt":{"rendered":"<p>February 1, 2024<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[52],"tags":[],"class_list":["post-35303","post","type-post","status-publish","format-standard","hentry","category-listserve_archive"],"_links":{"self":[{"href":"https:\/\/e-ratepa.org\/index.php?rest_route=\/wp\/v2\/posts\/35303","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/e-ratepa.org\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/e-ratepa.org\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/e-ratepa.org\/index.php?rest_route=\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/e-ratepa.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=35303"}],"version-history":[{"count":0,"href":"https:\/\/e-ratepa.org\/index.php?rest_route=\/wp\/v2\/posts\/35303\/revisions"}],"wp:attachment":[{"href":"https:\/\/e-ratepa.org\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=35303"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/e-ratepa.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=35303"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/e-ratepa.org\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=35303"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}