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FCC Weighing Proper Role of Vendors in Application Process

The Federal Communications Commission is currently reviewing the Schools and Libraries Division's rejection of more than 265 applications for discounted services in Oklahoma involving a vendor who helped school districts file their Form 470 applications in the E-rate program's second year.

The appeals involve MasterMind Internet Services Inc., also known as Through the first 22 months of the E-rate program, Funds For Learning has determined, the vendor had received close to $2.3 million worth of payments from the Universal Service Administrative Company, in the form of either reimbursement checks or discounts on invoices.

The SLD rejected the applications, finding that "the circumstances surrounding the filing of the Form 470..violated the intent of the bidding process." The FCC recently extended the date by which it had to decide the issue, saying that it involved "a number of new and complex issues regarding the competitive bidding requirements under the schools and libraries support mechanism that require more time to resolve."

In theory, E-rate applicants are supposed to develop their own RFPs, prepare and post a Form 470 application for 28 days to solicit bids, and then choose the best proposal from among the responding bidders. In fact, some applicants turn to vendors with whom they have a relationship for help in preparing their plans and applications, and some companies find that some applicants have already decided what they are going to buy and from whom by the time their application is posted.

In a Nov. 24 letter of appeal, MasterMind contended that the Oklahoma applications were rejected because one of its employees was listed as the contact person on the school districts' Form 470 applications. It argues that while it assisted school districts in the application process, it did not "sign or complete" the applications.

MasterMind contends that no statute or FCC regulation or SLD publication or policy supports denying an application on that basis. It acknowledges that the SLD described the issue at a Sept. 16-17, 1999 training session and said in a draft publication at that time that "forms signed by vendors' representatives will be rejected." Later, in a policy posted on its Web site on Nov. 11, 1999, the SLD said that "forms completed by vendor representatives will be rejected."

In its appeal, MasterMind noted that in a Nov. 19, 1999, meeting at the offices of Sen. James Inhofe, R-OK, the SLD provided additional arguments for its rejection of the applications: That the company supplied the RFP used by many schools, that the company signed some of the Form 470s and that it provided identicial RFPs "which were flawed on their face." MasterMind contends that those arguments are meritless, and in any case, the SLD did not make the policies clear before rejecting the applications on that basis.

The FCC has indicated it will decide the case by April 21.

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