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Greeley Public School et al.

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Released: May 24, 2013

Federal Communications Commission

DA 13-772

Before the

Federal Communications Commission

Washington, DC 20554

In the Matter of
)
)
Requests for Review of Decisions of the
)
Universal Service Administrator by
)
)
Greeley Public School District
)
File No. SLD-420638
Greeley, NE
)
)
Le Grand Union Elementary School District
)
File No. SLD-259033
Le Grand, CA
)
)
Morrow County School District
)
File Nos. SLD-254806, 247557,
Lexington, OR
)
361855, 366035, 413243
)
Schools and Libraries Universal Service
)
CC Docket No. 02-6
Support Mechanism
)

ORDER

Adopted: May 24, 2013

Released: May 24, 2013

By the Chief, Telecommunications Access Policy Division, Wireline Competition Bureau:
1.
In this order, we address requests for review filed by Greeley Public School District
(Greeley), Le Grand Union Elementary School District (Le Grand Union), and Morrow County School
District (Morrow County) of decisions of the Universal Service Administrative Company (USAC) finding
improper service provider involvement in the competitive bidding processes under the E-rate program
(more formally known as the schools and libraries universal service support program).1
2.
The Commission’s competitive bidding rules require E-rate applicants to submit to
USAC for posting to USAC’s website an FCC Form 470, which describes the applicant’s planned service


1 See Appendices A and B. Morrow County filed two requests for review, one on August 24, 2007 (Morrow County
2007 Request for Review) and the other on February 11, 2009 (Morrow County 2009 Request for Review). We
grant in part and deny in part the Morrow County 2007 Request for Review, and have listed the application number
that we deny in Appendix A, and that which we grant in Appendix B.

Federal Communications Commission

DA 13-772

requirements and information regarding the applicant’s competitive bidding process.2 The FCC Form 470
must be completed by the entity that will negotiate with prospective service providers and the applicant
must name a person with whom prospective service providers may contact for additional information. 3
The competitive bidding process must be fair and open, not compromised because of improper conduct by
the applicant and/or the service provider, and all potential bidders must have access to the same
information and must be treated the same throughout the bidding procurement process.4 In the
MasterMind Order, the Commission explained that because the contact person exerts great influence over
an applicant’s competitive bidding process by controlling the dissemination of information regarding the
services requested, when an applicant delegates that power to an entity that also participates in the
bidding process as a prospective service provider, the applicant irreparably impairs its ability to hold a
fair and open competitive bidding process.5 Therefore, the Commission found that it is a violation of the
Commission’s competitive bidding rules to list a service provider as the contact person on an FCC Form
470 when that service provider is also bidding to provide the services sought pursuant to that FCC Form
470.6
3.
In each of the instant cases, USAC found that an employee of one of the vendors selected
to provide the requested E-rate products or services also participated in the applicant’s competitive
bidding process, thus tainting the competitive bidding process. USAC, therefore, sought recovery of all


2 See 47 C.F.R. § 54.504. In the Universal Service First Report and Order, the Commission concluded that schools
and libraries should engage in competitive bidding for all services for which they seek support, finding that
competitive bidding would be the most efficient means for ensuring awareness by schools and libraries of the array
of choices available to them and enabling the schools and libraries to choose the best and most efficient provider of
the requested services. See Federal-State Joint Board on Universal Service, CC Docket No. 96-45, Report and
Order, 12 FCC Rcd 8776, 9029, para. 480 (1997) (subsequent history omitted) (Universal Service First Report and
Order
). See also, e.g., Instructions for Completing the Schools and Libraries Universal Service Description of
Services Requested and Certification Form, OMB 3060-0806 (April 2002) (FCC Form 470 Instructions).
3 See FCC Form 470 Instructions.
4 See, e.g., Schools and Libraries Universal Service Support Mechanism, Third Report and Order and Second
Further Notice of Proposed Rulemaking, CC Docket No. 02-6, 18 FCC Rcd 26912, 26939, para. 66 (stating that a
fair and open competitive bidding process is critical to preventing the waste, fraud, and abuse of program resources);
Request for Review of Decisions of the Universal Service Administrator by MasterMind Internet Services, Inc.;
Federal-State Joint Board on Universal Service,
CC Docket No. 96-45, Order, 16 FCC Rcd 4028, 4033, para. 10
(2000) (MasterMind Order) (finding that the FCC Form 470 contact person influences an applicant’s competitive
bidding process by controlling the dissemination of information regarding the services requested and, when an
applicant delegates that power to an entity that also participates in the bidding process as a prospective service
provider, the applicant impairs its ability to hold a fair competitive bidding process); Requests for Review of the
Decisions of the Universal Service Administrator by Approach Learning and Assessment Center; Schools and
Libraries Universal Service Support Mechanism
, CC Docket No. 02-6, 22 FCC Rcd 5296, 5303, para. 19 (Wireline
Comp. Bur. 2007) (finding that service provider participation may have suppressed fair and open competitive
bidding); Schools and Libraries Universal Service Support Mechanism; A National Broadband Plan for Our Future,
CC Docket No. 02-6, GN Docket No. 09-51, Sixth Report and Order, 25 FCC Rcd 18762, 18798-800, paras. 85-86
(2010) (codifying the existing requirement that the E-rate competitive bidding process be fair and open); 47 C.F.R. §
54.503.
5 See MasterMind Order, 16 FCC Rcd at 4033, para. 10.
6 Id.
2

Federal Communications Commission

DA 13-772

funds paid by USAC associated with the relevant FCC Forms 470. Based upon our review of the record,
we deny in part and grant in part one of the requests for review filed by Morrow County7 and deny its
other request for review, and grant the requests for review filed by Le Grand Union and by Greeley.8
4.
We find that, with respect to application number 254806, the contact person on Morrow
County’s FCC Forms 470 was also the contact person for Arbogast Business Services and Computers
(Arbogast Business), a service provider that participated in Morrow County’s competitive bidding process
as a bidder.9 We also find that, with respect to Morrow County’s subject applications from funding years
2003 and 2004, the same employee of Arbogast Business served as the technology director for the school
and also participated in Morrow County’s competitive bidding process as a bidder.10 Consistent with
precedent, we find that the Arbogast Business employee’s dual involvement in the bidding process -- by
acting on behalf of Morrow County and on behalf of a bidder -- constitutes improper service provider
involvement, in contravention of E-rate program rules.11 We therefore find that the applications listed in
Appendix A were tainted by the service provider’s involvement, and deny the requests for review relating
to those applications.12 We thus direct USAC to continue recovery actions against the party or parties
responsible for the program violations with respect to the applications listed in Appendix A.
5.
However, we grant the requests for review relating to the funding requests listed in
Appendix B, because we find there was no improper service provider involvement with the bidding
processes with respect to the applications identified in Appendix B.13 In each of those instances, while
there was an employee of an E-rate service provider working for the school or school district, that service
provider did not bid on the funding requests that are associated with the E-rate applications identified in
Appendix B.14 We recognize that, in the St. Margaret’s School Order, the Bureau previously interpreted
the MasterMind Order to conclude that, if the competitive bidding process tied to a particular FCC Form
470 was found to be tainted by improper service provider involvement, all funding request numbers


7 See Morrow County 2007 Request for Review; Supplement to Morrow County 2007 Request for Review, filed
July 21, 2011 (regarding FCC Form 471 application numbers 254806 and 247557).
8 See Appendices A and B.
9 See Morrow County 2007 Request for Review; Supplement to Morrow County 2007 Request for Review;
Appendix A.
10 See Morrow County 2009 Request for Review; Supplement to Morrow County 2009 Request for Review, filed
Aug. 13, 2010; Appendix A.
11 See supra n.4.
12 See Appendix A.
13 See Greeley Request for Review, filed Nov. 16, 2005; Le Grand Union Request for Review, filed Jan 23, 2007;
Morrow County 2007 Request for Review; Supplement to Morrow County 2007 Request for Review (regarding
FCC Form 471 application number 247557); Appendix B.
14 See Greeley Request for Review; Le Grand Union Request for Review; Morrow County 2007 Request for
Review; Supplement to Morrow County 2007 Request for Review (regarding FCC Form 471 application number
247557); Appendix B.
3

Federal Communications Commission

DA 13-772

associated with that FCC Form 470 would be denied funding.15 However, upon further consideration, we
think the better reading of the MasterMind Order is that USAC should determine whether the contact
person’s company actually participated in the bidding for a particular service or not and deny only those
funding requests where the company actually participated in the bidding process. When an applicant
seeks bids on multiple funding requests as part of an application, improper service provider involvement
during the competitive bidding process by one service provider does not indicate a violation on the part of
every vendor selected to provide services arising from the same FCC Form 470.16 We therefore grant
Morrow County’s request for review relating to application number 247557 because we find no evidence
that Arbogast Business participated in the competitive bidding process relating to the funding requests
that were part of that application number.17 We also grant the requests for review filed by Greeley and Le
Grand Union because we find no evidence that the relevant service providers improperly participated in
the applicants’ competitive bidding processes with respect to the funding requests at issue in those
appeals.18 Accordingly, we direct USAC to discontinue recovery actions relating to the funding requests
listed in Appendix B.
6.
ACCORDINGLY, IT IS ORDERED, pursuant to the authority contained in sections 1-4
and 254 of the Communications Act of 1934, as amended, 47 U.S.C. §§ 151-154 and 254, and pursuant to
the authority delegated in sections 0.91, 0.291, and 54.722(a) of the Commission’s rules, 47 C.F.R.
§§ 0.91, 0.291, and 54.722(a), that the requests for review listed in Appendix A ARE DENIED to the
extent provided herein.


15 See Request for Review by St. Margaret’s School; Schools and Libraries Universal Service Support Mechanism,
CC Docket No. 02-6, Order, 20 FCC Rcd 8166, 8167-68, paras. 4, 7 (Wireline Comp. Bur. 2005) (St. Margaret’s
School Order
); see also Requests for Review of Decisions of the Universal Service Administrator by Delano Joint
Union High School District et al.,
CC Docket No. 02-6, Order, 23 FCC Rcd 15399, 15402, para. 5 n.26.
16 We note that USAC’s current procedures are consistent with this interpretation of the MasterMind Order.
17 See Appendix B.
18 See Appendix B; Greeley Request for Review; Le Grand Union Request for Review. We note that Greeley and
Le Grand Union do not contest the rescission of funding for the requests where the listed FCC Form 470 contact
persons were affiliated with companies that participated in the applicants’ competitive bidding processes. See
Greeley Request for Review; Le Grand Union Request for Review.
4

Federal Communications Commission

DA 13-772

7.
IT IS FURTHER ORDERED, pursuant to the authority contained in sections 1-4 and 254
of the Communications Act of 1934, as amended, 47 U.S.C. §§ 151-154 and 254, and pursuant to the
authority delegated in sections 0.91, 0.291, 1.3 and 54.722(a) of the Commission’s rules, 47 C.F.R.
§§ 0.91, 0.291, 1.3 and 54.722(a), that the requests for review listed in Appendix B ARE GRANTED to
the extent provided herein and that the underlying applications ARE REMANDED to USAC for further
action consistent with the terms of this Order.
FEDERAL COMMUNICATIONS COMMISSION
Kimberly A. Scardino




Chief

Telecommunications Access Policy Division

Wireline Competition Bureau
5

Federal Communications Commission

DA 13-772

APPENDIX A

Applications Denied for Improper Vendor Involvement

Petitioners

Application

Funding

Date Appeal Filed

Number

Year(s)

Morrow County School District
254806
2001
Aug. 24, 2007
Lexington, OR
Morrow County School District
361855
2003
Feb. 11, 2009
Lexington, OR
366035
2003
413243
2004

APPENDIX B

Funding Requests Granted

Petitioners

Application

Funding

Funding

Date Appeal

Number

Request

Year

Filed

Number(s)

Greeley Public School District
420638
1159354
2004
Nov. 6, 2005
Greeley, NE
Le Grand Union Elementary School
259033
652202
2001
Jan. 23, 2007
District
652322
Le Grand, CA
652358
652399
Morrow County School District
247557
627104
2001
Aug. 24, 2007
Lexington, OR
628103
628321
628701
628804
629069
6

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