Since the FCC released the Fifth Report & Order in August 2004, the SLD has denied $42.2 million due to unpublished cost effectiveness standards. These denials directly impacted 234 applicants and 182 service providers.

From the FCC Fifth Report and Order:

The Order requires applicants to certify on the Form 470 that the services for which bids are being sought are the most cost effective means for meeting their educational needs and technology plan goals. Therefore, we modify section 54.504(b)(2) to add a new certification, section 54.504(b)(2)(vii), which states the following: “All bids submitted will be carefully considered and the bid selected will be for the most cost-effective service or equipment offering, with price being the primary factor, and will be the most cost-effective means of meeting educational needs and technology plan goals.”

In 2007 the SLD released a Cost Effectiveness Fact Sheet in which they stated that any funding requests that are “significantly higher than the costs generally available in the applicant’s marketplace for the same or similar products or services, USAC will not approve the funding request since it may not be a cost effective choice.” The SLD will review these factors during the application review process:

  • Telecom bandwidth/bit rate per school/library
  • Number and functionality of servers
  • Location and quantity of cable drops
  • Maintenance costs per item of equipment, if for Basic Maintenance
  • Hours of maintenance, cost per hour, and cost per school/library

The challenge for E-rate stakeholders is that even though they follow all E-rate procurement regulations at both the federal and state level they can still get denied for a “cost effectiveness review”. The SLD has not published any cost effectiveness thresholds for stakeholders to follow.

FFL has reviewed several FY2010 cost effectiveness denial explanations which hopefully will act as a reminder and a guide to stakeholders that during the procurement of E-rate eligible goods and services, the SLD will want to ensure that the most cost effective solution has been purchased.

Below is a selection of cost effectiveness denial explanations from the SLD:

DR1: This funding request is denied as a result of a Cost Effectiveness Review, which has determined that your request for INTERNAL CONNECTIONS has not been justified as cost effective as required by FCC rules. Cost per student at $2,058.08 is considered to be high and not cost effective. Ratio of students per switch at 11.6 is considered to be low and not cost effective. Ratio of ports per student at 4.1 is considered to be high and not cost effective.

DR1: This funding request is denied as a result of a Cost Effectiveness Review, which has determined that your request for Internal Connections has not been justified as cost effective as required by FCC rules. Cost per student at $1,587.82 is considered to be high and not cost effective. Cos per cabling drop at $3,374.12 is considered to be high and not cost effective.

Cost per piece of equipment at $1,381.26, Ratio of students per switch at 12, Ratio of ports per student at 4, Individual maintenance cost of Switch is 82.5% as compared to the purchase price of the individual Switch & Individual maintenance cost of Switch is 79.1% as compared to the purchase price of the individual Switch.

DR1: This funding request is denied as a result of a Cost Effectiveness Review, which has determined that your request for Internal Connections has not been justified as cost effective as required by FCC rules. Amount of $33,538.24 for Internal Connections is recommended is deemed as not cost effective. Ratio of students and staff per switch is 8.1 students and staff per switch which is an excessive amount and is not considered cost effective. Ratio of ports per student and staff is 4.8 ports per student and staff which is an excessive amount and is not considered cost effective.

DR1: This funding request is denied as a result of a Cost Effectiveness Review, which has determined that your request for Data Cabling has not been justified as cost effective as required by FCC rules: A 3.8 ratio of cabling drops per student and staff is considered excessive, cost per cabling drop is considered excessive and is not cost effective at $1,104.41 per drop, and a $4,230.47 cost per student and staff is considered excessive and not cost effective.

DR1: This funding request is denied as a result of a Cost Effectiveness Review, which has determined that your request for Cabling has not been justified as cost effective as required by FCC rules. The cost per cabling drop @ $1,403.12 is considered high and not cost effective.

DR1: This funding request is denied as a result of a Cost Effectiveness Review, which has determined that your request for cabling has not been justified as cost effective as required by FCC rules. The amount of $79,587.33 for Internal Connections is recommended is deemed as not cost effective. Ratio of cabling drops per student and staff is 3.6 cabling drops per student and staff which is an excessive amount and is not considered cost effective.

DR1: This funding request is denied as a result of a Cost Effectiveness Review, which has determined that your request for BMIC has not been justified as cost effective as required by FCC rules. Cost per cabling drop is $600.00 ($38,400.00/64 drops) is extremely high and considered not acceptable.

DR1: This funding request is denied as a result of a Cost Effectiveness Review, which has determined that your request for Basic Maintenance of Internal Connections has not been justified as cost effective as required by FCC rules. The area(s) for which this FRN was not cost effective: Hours of maintenance per week is 19.6 hours per week, Cost of maintenance per piece of equipment at $3,120.00 and Cost of maintenance per student and staff at $789.87.

DR1: This funding request is denied as a result of a Cost Effectiveness Review, which has determined that your request for Basic Maintenance of PBX, network equipment, cabling drop have not been justified as cost effective as required by FCC rules. Cost of maintenance per Cable Drop is $75.25 Cost per piece of equipment being maintained is $1,806.13.

DR1: This funding request is denied as a result of a Cost Effectiveness Review, which has determined that your request for BASIC MAINTENANCE of IC has not been justified as cost effective as required by FCC rules. Ratio of cabling drops per student and staff is 2.17 and is not cost effective, Cost per cabling drop is $69.33 and is not cost effective, Ratio of students and staff per switch is 10.5 and is not cost effective, Ratio of ports per student and staff is 2.2 and is not cost effective, Cost of maintenance per piece of equipment is $1,897.21 and is not cost effective & Cost of maintenance per student and staff is $455.47 and is not cost effective.

DR1: This funding request is denied as a result of a Cost Effectiveness Review, which has determined that your request for $56,281.05/year has not been justified as cost effective as required by FCC rules. Cost per student at $1,608.03 is considered high and not cost effective, ratio of students per switch at 8.8 is deemed not cost effective, and ratio of ports per student at 4.8 is deemed not cost effective.

DR1: This funding request is denied as a result of a Cost Effectiveness Review, which has determined that your request for $206,959.92/year has not been justified as cost effective as required by FCC rules. Cost per cabling drop at $135.35 is considered excessive.

Continue to check www.fundsforlearning.com for the latest E-rate news and if you would like information on cost effectiveness standards, please contact us at 405-341-4140, or by email at info@fundsforlearning.com.