First Funding Denials Due to Companies Being Debarred

There are a handful of E-rate applicants that were notified this week that their 2003 funding requests would be denied because their service provider has been debarred from participating in the E-rate program. This summer both NEC and Inter-Tel were notified by the FCC that they would be debarred due to the fact they were convicted of fraud relating to participating in the E-rate program. However, because the FCC had found mitigating circumstances for both companies it imposed a six-month debarment period for NEC and a one-year debarment period for Inter-Tel and both will be under heightened scrutiny as well as automatic annual E-rate audits.

To date eleven applicants have been affected directly by these Orders totaling over $6 million. In explaining the denial the SLD stated:

"This service provider has been debarred by the FCC and therefore is ineligible to participate in the program. You cannot change SPINs to resolve this matter. A separate letter is being mailed concurrently that contains a full explanation of what the debarment means to you."

Normally, applicants can change service providers after receiving a commitment under the following circumstances:

(1) the SPIN change is allowed under its state and local procurement rules, (2) the SPIN change is allowable under the terms of any contract between the applicant and its original service provider, and (3) the applicant has notified its original service provider of its intent to change service providers.

In this circumstance, because no funding has been committed, the affected applicants will not have the opportunity to submit a service provider change request; however, as with any funding reduction or denial, the SLD will allow the applicants to appeal their decision.

The following E-rate applicants were affected by the debarment denials released today: