The FCC is proposing a sweeping change to the E-rate funding program: nationalizing internet procurement for all K-12 schools and libraries who participate. This shift away from local autonomy for procurement would be the most radical change to the program since its inception. While not yet finalized, the FCC’s proposal includes a plethora of potential new federal regulations, including the following:
- Taking management of the bidding process away from local procurement officials
- Forcing applicants to consider non-responsive bids
- Eliminating public bid openings
- Extending the contract award process beyond 28 days (to 42 days or more)
- Requiring a national, one-size-fits-all format for price proposals
- Making applicants submit cost justifications for single-bid purchases
- Stopping applicants from using their current third-party bidding platforms
For reference, in Funding Year 2021, there were tens of thousands of procurement related activities managed by schools and libraries:
- 44,619 contracts submitted for E-rate funding support
- 149,493 proposals on file
- 21,362 applicants who submitted contracts for discounts
- 4,241 service providers who provided goods and services under E-rate contracts
The E-rate program administrator (USAC) is currently empowered to review funding applications and payment paperwork. Under the new national bidding regime, USAC’s role would expand significantly to include management of the procurement of more than 44,500 contracts.
Although the proposed change offers a systemic solution to the E-rate competitive bidding process, it offers no compelling evidence of what systemic problem it is attempting to solve. What nationwide procurement problem needs a nationwide fix? In the United States, public K-12 schools manage $752.3 billion each year. The U.S. Department of Education and other groups scrutinize this spending; and there are thousands of trained procurement officials who carefully manage bidding processes across the country. These individuals have certifications offered by groups like ASBO, the Association of School Business Officials International. There are even associations dedicated to procurement, such as NAEP, the National Association of Educational Procurement.
With so much oversight and management for K-12 spending overall, why should schools not be trusted to manage the procurement of their internet access? At $3 billion, the E-rate program represents roughly one half of one percent of the annual K-12 spending. With so many contracts being successfully bid out, surely schools can effectively manage their internet procurement themselves. In fact, the current record demonstrates that they are: competition is increasing and prices are dropping significantly. The current competitive bidding system is a success and there is no evidence to suggest that it should be overhauled.
The FCC’s proposed revamp of the bidding rules raises many more questions. Here are a few:
- Which current state and local competitive bidding rules does the FCC consider to be inadequate?
- So-called “sunshine laws” require access to public documents, and these rules exist in every state and jurisdiction. Does the FCC consider them all to be insufficient? Or just those in certain states or for certain applicant types?
- Precisely how rampant does the FCC consider bid tampering to be? And, if it is endemic, why is this not reflected in the judicial system?
- There are existing third-party bidding systems already in use by schools, libraries, and municipalities. Why does the FCC not consider these systems secure and reliable for storing documents? Is the FCC aware of specific examples of illegal tampering to existing bidding portals?
- Why not just require that applicants use an existing certified system to manage their procurement? Is it essential that USAC build the system? Is it a cost-effective use of public funds for USAC to reinvent the procurement wheel?
- Schools and libraries will still use their regular procurement system for most of their purchases, but internet will be bid out using a different system. What is the risk that procurement staff will make mistakes using this “once a year” system versus the normal system they use all the time?
- Will the requirement to navigate an additional procurement system have a chilling effect on applicant and service provider participation, particularly amongst smaller entities?