Schools & Libraries Division
April 28, 2016
POCATELLO SCHOOL DISTRICT 25
Re:
Notification of USAC’s Intent to Deny FY 2013 through FY 2014 Funding Requests
Dear Jeff K. Jolley:
This letter notifies Pocatello School District 25 of the Universal Service Administrative
Company’s (USAC’s) intent to deny funding for the federal Universal Service Schools
and Libraries Support Mechanism (also known as the E-rate Program) for Funding Years
(FYs) 2013-2014 funding request numbers (FRNs) referenced below. If USAC does not
receive additional information by close of business on May 5, 2016, USAC will issue
funding decisions that deny funding for the subject FRNs.
***
***
***
Funding Year FCC Form 471 FRN
Service Provider
FCC Form 470
2013
927983
2534415 ENA Services, LLC 517380000711547
2014
987165
2693030 ENA Services, LLC 517380000711547
Specifically, USAC intends to deny funding for the FY 2013 – FY 2014 FRNs requesting
services from ENA Services, LLC (ENA) because the State of Idaho, Office of the Chief
Information Officer (State of Idaho), Billed Entity Number 16050658, failed to comply
with Federal Communications Commission (FCC or Commission) rules for the E-rate
Program that require applicants to comply with FCC and any applicable state competitive
bidding requirements.1 As a result of its failure to comply with state competitive bidding
requirements, the Supreme Court of Idaho upheld the determination that the State of
Idaho’s contract with ENA was void and thus, the State of Idaho also did not have a valid
signed contract or legally binding agreement with ENA when it submitted its FCC Form
471 funding applications to USAC as required by FCC rules.2 Further, the Supreme
Court of Idaho upheld the finding that the State of Idaho did not comply with state
1
See 47 C.F.R. § 54.504(a) (2009-10); 47 C.F.R. § 54.503(b) (2011-14) (same).
See Syringa Networks, LLC v. Idaho Dep’t of Admin., No. 43027, 2016 WL 791502 (Idaho Mar. 1, 2016)
(Syringa Final Order); 47 C.F.R. § 54.504(c) (2009-10) (“An eligible school, library, or consortium that
includes an eligible school or library seeking to receive discounts for eligible services under this subpart,
shall, upon signing a contract for eligible services, submit a completed FCC Form 471 to the
Administrator.”); 47 C.F.R. § 54.504(a) (2011-14); FCC Form 471 Instructions 2010, at 4 (“A Form 470
must be posted for at least 28 days and a contract must be in place for all services, except non-contracted
tariffed or month-to-month services, before submitting a completed Form 471.”) (emphasis in original);
FCC Form 471 Instructions 2013, at 4 (same).
2
Pocatello School District 25
April 28, 2016
Page 2 of 6
procurement requirements when it amended the statewide blanket purchase orders with
ENA and Qwest Communications Corporation (Qwest).3
USAC will issue funding commitment decision letters (FDCLs) denying funding for
these funding requests unless the State of Idaho4 is able to provide sufficient
documentation or information on or before May 5, 2016 that demonstrates the State of
Idaho complied with all FCC and state competitive bidding requirements in applying for
and receiving E-rate Program funding.
I.
State of Idaho’s Participation in the E-rate Program and the Syringa Litigation
On December 15, 2008, the State of Idaho, Office of Chief Information Officer (BEN
16050658) submitted FCC Form 470 No. 517380000711547 requesting E-rate funding
for the provision of telecommunications and Internet services, among other things, to
eligible entities located statewide in Idaho. On January 28, 2009, the State of Idaho,
Department of Administration (DOA) issued statewide blanket purchase orders (SBPO)
to ENA and Qwest. The original SBPOs were nearly identical5 and required the
companies to provide services for the Idaho Education Network (IEN) as set forth in
RFP02160.6 On February 12, 2009, the State of Idaho (BEN 16050568) submitted its
application seeking E-rate funding for Internet access services from ENA on behalf of a
consortium of Idaho schools (FCC Form 471, Application No. 673624). On the
application, the State indicated that FCC Form 470 No. 517380000711547 was the
establishing FCC Form 470 and contract “SBPO 1309” was awarded to ENA on January
28, 2009. On February 26, 2009, the DOA amended both the ENA and Qwest SBPOs to
designate Qwest as the general contractor for all IEN technical network services and to
designate ENA as the Service Provider listed on Idaho’s FCC Form 471.7
Syringa Networks, LLC (Syringa) filed suit alleging that the DOA violated state law
when it amended the ENA and Qwest contracts. The state district court dismissed the
claims on the DOA’s motion for summary judgment, and Syringa appealed to the Idaho
Supreme Court. The Idaho Supreme Court affirmed the judgment dismissing all claims
except count three, which sought to set aside the State’s contract with Qwest on the
ground that it was awarded in violation of the applicable statutes.8 Affirming the
district’s court decisions on all other counts, the Idaho Supreme Court found that state
law requires a request for proposals (RFP) to sufficiently describe the requested property
3
Syringa Final Order, 2016 WL 791502 at **14-15, 20 (holding that the division of services between
Qwest and ENA violated state procurement laws).
4
USAC Indent to Deny letter to the State of Idaho dated April 28, 2016
5
Syringa Networks, LLC v. Idaho Dep’t of Admin., 305 P.3d 499, 504 (Idaho 2013) (Syringa).
6
See State of Idaho, Statewide Blanket Purchase Order, SBPO1309, Education Networks of America, (Jan.
28, 2009) available at http://purchasing.idaho.gov/pdf/contracts/IdahoEducationNetwork/SBPO130901.pdf.
7
Syringa, 305 P.3d at 503.
8
Id. at 512.
Pocatello School District 25
April 28, 2016
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to reveal its exact nature or functionality.9 The Idaho Supreme Court acknowledged that
an RFP may be changed if it is issued in writing prior to the bid opening date and is made
available to all vendors.10 Further, the DOA may award a contract to more than one
bidder to provide the same or similar property so long as the DOA makes a written
determination that multiple awards are necessary.11
In reviewing the contracts and the amendments, the Idaho Supreme Court noted that the
RFP did not seek bids for one provider to provide E-rate services and another provider to
provide the backbone services, instead it sought a total-to-end solution.12 The Idaho
Supreme Court concluded that, because of the amendments, ENA and Qwest were no
longer providing the same or similar property under their respective contracts.13 The
Idaho Supreme Court found the State had has changed its RFP after the bids were opened
in violation of Idaho state law.14 The Idaho Supreme Court remanded the remaining
claim to determine whether to set aside the State’s contract with Qwest on the ground that
it was awarded in violation of the applicable statutes.15
On November 10, 2014, the district court issued its decision on the remanded claim and
held that the DOA violated state procurement laws when it amended the contracts with
ENA and Qwest. Specifically, the court held that the amendments, which divided the
scope of work between ENA and Qwest, rendered the contract awards void.16 The court
explained that the DOA’s efforts to salvage the void contracts were of no effect and that
an agreement made in violation of state procurement law cannot be fixed or cured.17 The
State of Idaho, ENA and Qwest filed Motions for Reconsideration with the court. The
district court affirmed its order on February 11, 2015, and held that the State of Idaho’s
contracts with ENA and Qwest are void under state law.18
The State of Idaho, ENA, and Qwest appealed the order asserting that the district court
erred in determining that the State of Idaho’s contracts with ENA and Qwest were void.19
On March 1, 2016, the Supreme Court of Idaho ruled that the DOA violated state
procurement laws when it amended the contracts and thereby changed the requirements
of the request for proposal (RFP) after bids were opened in violation of Idaho Code § 675718(2) and Idaho Administrative Code Rule 38.05.01.052.20 The Supreme Court of
Idaho also rejected DOA’s argument that that the original underlying contracts remains
9
Id. at 505-506 (quoting Idaho Code § 67-5718(2) and Idaho Admin. Code § 38.05.01.052); See also Idaho
Code § 67-5718A(1)-(2).
10
Id.
11
Id.
12
Syringa, 305 P.3d at 505.
13
Id. at 504.
14
Id. at 506.
15
Id. at 512.
16
Id. at 10.
17
Id.
18
See Syringa Networks, LLC v. Idaho Dep’t of Admin., No. CV-OC-2009-23757, slip op. (D. Idaho Feb.
11, 2015).
19
See Syringa Final Order, 2016 WL 791502 at *1.
20
Id. at **14-15.
Pocatello School District 25
April 28, 2016
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valid even through the amendments were determined to be illegal. The Supreme Court of
Idaho found that the DOA’s conduct to amend the SBPOs tainted the public procurement
process and permanently invalidated the SBPOs.21 The Supreme Court of Idaho further
found that the DOA’s rescission of the amended SBPOs did not cure the underlying
violation.22
II.
FCC Requirements for Applying and Requesting E-rate Program Funding
The FCC’s rules require applicants to seek competitive bids for all services and
equipment eligible for E-rate discounts.23 Applicants initiate the competitive bidding
process by submitting an FCC Form 470 to USAC for posting on USAC’s website.
Applicants are also required to ensure that the FCC Form 470 “describe[s] the services
that the schools and libraries seek to purchase in sufficient detail to enable potential
providers to formulate bids.”24 The posting of the FCC Form 470 enables prospective
service providers to bid on the equipment and services for which the applicant will
request E-rate funding support.
After USAC posts the FCC Form 470 on its website, FCC rules require applicants to: (1)
wait at least 28 days before entering into agreements with service providers (to provide
one or more of the services and/or products listed on the FCC Form 470);25 and (2)
comply with all applicable state and local procurement requirements, as well as the
competitive bidding requirements established by the FCC.26 FCC rules also require
applicants to “carefully consider all bids submitted” and select “the most cost-effective
service offering” using the price of eligible goods and services as the primary factor.27
21
Id. at *21.
Id. at *12.
23
See 47 C.F.R. § 54.504(a) (2009 and 2010); 47 C.F.R. § 54.503(a)-(b) (2011-14). See also Fed.-State
Joint Bd. on Universal Service, CC Docket No. 96-45, Report and Order, 12 FCC Rcd 8776, para. 480
(1997) (“1997 Universal Service Order”) (finding that “fiscal responsibility compels us to require that
eligible schools and libraries seek competitive bids for all services eligible for [E-rate] discounts.”).
24
1997 Universal Service Order, 12 FCC Rcd at 9078, para. 575. See also 47 C.F.R. § 54.504(b) (2009
and 2010) (“An eligible school, library…seeking to receive discounts for eligible services under this
subpart shall submit a completed FCC Form 470 to the Administrator.”); 47 C.F.R. § 54.503(c)(1) (201114) (“An eligible school, library … seeking to receive discounts for eligible services under this subpart
shall submit a completed FCC Form 470 to the Administrator to initiate the competitive bidding process.”).
25
See 47 C.F.R. § 54.504(b)(4) (2009 and 2010); 47 C.F.R. § 54.503(c)(4) (2011-14). See also Schools
and Libraries Universal Services Order and Certification Form Instructions, at 3 (OMB 3060-0806) (Oct.
2010) (“Form 471 must be filed AFTER a Form 470, which must be posted on the SLD section of the
USAC web site for at least 28 days before the Form 471 is filed.”) (“FCC Form 471 Instructions 2010”);
Schools and Libraries Universal Services Order and Certification Form Instructions, at 3 (OMB 30600806) (Dec. 2013) (same) (“FCC Form 471 Instructions 2013”).
26
See 47 C.F.R. § 54.504(a) (2009-10); 47 C.F.R. § 54.503(b) (2011-14) (same).
27
47 C.F.R. § 54.511(a) (2009-14). See also 47 C.F.R. §§ 54.503(c)(2)(vii), 54.504(a)(1)(xi) (2011-14)
(requiring applicants to certify on FCC Forms 470 and 471 respectively that the most cost-effective bid will
be or was selected); 47 C.F.R. §§ 54.504(b)(2)(vii), 54.504(c)(1)(xi) (2009 and 2010) (same); Review of
Decisions of the Universal Service Adm’r by Spokane Sch. Dist., CC Docket No. 02-6, Order, 28 FCC Rcd
6026, 6028, para. 4 (2013) (“[A]pplicants must use the price of eligible services as the primary factor when
selecting the winning offer for E-rate supported services.”).
22
Pocatello School District 25
April 28, 2016
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Applicants are also required to file the FCC Form 471 application to request E-rate
program funding with USAC after selecting the service provider.28 FCC rules further
require applicants to have a signed contract or a legally binding agreement with the
selected providers for all services (that are not month-to-month or provided on a tariffed
basis) at the time the FCC Form 471 is submitted to USAC.29 The failure to comply with
this requirement may result in the denial of funding.30
USAC reviews and approves funding requests for the E-rate Program in accordance with
Commission rules and orders.31 USAC will “deny a funding request outright upon
discovering a particular infirmity in the application review process, because the applicant
has failed to meet one or more of the necessary requirements for receipt of support.32
Thus, if USAC determines during the application review process that the applicant was
not compliant with FCC rules and requirements, USAC will deny the funding requests at
issue.
III.
Discussion
Applicants are required to comply with FCC rules, in addition to any applicable state and
local procurement requirements.33 The Idaho State Supreme Court found that because
the amendments to the agreements altered the services to be provided by ENA and Qwest
so that they were no longer providing the same or similar products, the DOA had altered
its RFP after the submission of bids in violation of state law.34 In its decision on remand,
the district court confirmed that “[a]s amended to divide the scope of work, the award
violates state procurement law, and as a result, is void.”35 This determination was upheld
28
See 47 C.F.R. § 54.504(c) (2009-1010); 47 C.F.R. § 54.504(a) (2011-14).
See, e.g., 47 C.F.R. § 54.504(c) (2009-10) (“An eligible school, library, or consortium that includes an
eligible school or library seeking to receive discounts for eligible services under this subpart, shall, upon
signing a contract for eligible services, submit a completed FCC Form 471 to the Administrator.”); 47
C.F.R. § 54.504(a) (2011-14); FCC Form 471 Instructions 2010, at 4 (“A Form 470 must be posted for at
least 28 days and a contract must be in place for all services, except non-contracted tariffed or month-tomonth services, before submitting a completed Form 471.”) (emphasis in original); FCC Form 471
Instructions 2013, at 4 (same); Requests for Review and/or Requests for Waiver of the Decisions of the
Universal Service Adm’r by Animas Sch. Dist. 6 Animas, et al., CC Docket No. 02-6, Order, 26 FCC Rcd
16903, 16903, para. 1 (2011) (“Animas Order”) (referencing the “Commission’s rule that a contract or
legally binding agreement be in place when the FCC Form 471 application is submitted”).
30
See, e.g., Request for Review of a Decision of the Universal Service Adm’r by Special Education Dist. of
Lake County, CC Docket No. 02-6, Order, 27 FCC Rcd 8905, 8905 para. 2 (2012) (“Lake County Order”)
(upholding USAC’s denial of funding where the applicant did not sign contracts or provide evidence of a
legally binding agreement before submitting the FCC Form 471 for FY 2009).
31
See generally 47 C.F.R. §§ 54.705(a), 54.707 (authorizing USAC to establish procedures for
administering the E-rate program and to verify discounts, offsets, and support amounts provided by the
universal service support programs).
32
In the Matter of Schools and Libraries Universal Service Support Mechanism, CC Docket No. 02-6, Fifth
Rep. and Order and Order, 19 FCC Rcd 15808, 15812, para. 10 (2004) (“Fifth Rep. & Order”).
33
See 47 C.F.R. § 54.504(a) (2009-10); 47 C.F.R. § 54.503(b) (2011-14) (same).
34
Syringa, at 305 P.3d at 504, 506; Syringa Final Order, 2016 WL 791502 at **14-15.
35
Syringa, at 10.
29
Pocatello School District 25
April 28, 2016
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by the Supreme Court of Idaho.36 Based on the findings of the Idaho state courts, the
State of Idaho did not comply with its state procurement laws as required by FCC rules.
FCC rules also require applicants to have a signed contract or legally binding agreement
for requested E-rate eligible services (that are not provided on a month-to-month or
tariffed basis) at the time the FCC Form 471 funding application is submitted to USAC.37
Section 67-5725 of the Idaho Code provides that all contracts or agreements made in
violation of state law shall be void.38 Consistent with state law, the district court found
that the ENA and Qwest contracts violated state procurement law and therefore void.39
The Supreme Court of Idaho upheld the district court’s decision and held that the
contracts were void in their entirety and could not be saved by severing clauses.40
Consistent with the Supreme Court of Idaho’s decision that the contracts at issue never
legally existed, the State of Idaho did not have a valid contract at the time the FY 2013
and FY 2014 FCC Form 471 funding applications were submitted to USAC.
IV.
Conclusion
For the foregoing reasons, USAC has determined that the State of Idaho was not
compliant with FCC rules because it did not comply with its state procurement laws and
did not have a contract or legally binding agreement at the time it filed its FY 2013 and
FY 2014 FCC Form 471 funding applications. For these reasons and consistent with the
Commission’s rules and orders, USAC intends to deny funding for the FY 2013-2014
FRNs for services requested from ENA under the State of Idaho’s competitive bidding
procurement process.
Sincerely,
Alex Majewski
Schools and Libraries Division
Universal Service Administrative Company
Syringa Final Order, 2016 WL 791502 at *21 (“We affirm the district court’s order holding that both the
ENA SBPO and the Qwest SBPO are void.”).
37
See, e.g., 47 C.F.R. § 54.504(c) (2009-10) (“An eligible school, library, or consortium that includes an
eligible school or library seeking to receive discounts for eligible services under this subpart, shall, upon
signing a contract for eligible services, submit a completed FCC Form 471 to the Administrator.”); 47
C.F.R. § 54.504(a) (2011-14); FCC Form 471 Instructions 2010, at 4 (“A Form 470 must be posted for at
least 28 days and a contract must be in place for all services, except non-contracted tariffed or month-tomonth services, before submitting a completed Form 471.”); Lake County Order, 27 FCC Rcd at 8905,
para. 2 (upholding USAC’s denial of funding where the applicant did not sign contracts or provide
evidence of a legally binding agreement before submitting the FCC Form 471).
38
Idaho Code § 67-5725.
39
Id. at 12-13.
40
Syringa Final Order, 2016 WL 791502 at *14 (citations omitted).
36