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Form 470 Wrap-Up Step 2: Signing Contracts

Below is a compilation of some frequently asked questions regarding contracts.

1. Are we required to sign a contract for a Category One service?

Contracts are not required only if you are purchasing the service on a month-to-month basis. Otherwise, applicants are required to sign contracts for all other Category One services.

2. Are contracts required for Category Two services/equipment purchases?

Yes. Contracts are required to be signed for all Category Two services/purchases before the Form 471 is submitted.

3. Must contracts be signed by both the applicant and the vendor?

No. In March 2007, the FCC clarified that the vendor's signature is not a program requirement unless state and/or local contract law includes this requirement.

4. Are we required to obtain school board approval prior to signing contracts?

E-Rate rules require that applicants follow local requirements and local policy when it comes to contract approvals. So if your school board requires their approval on all contracts, then the board must approve those contracts prior to their signing and Form 471 submission. Some school boards have given superintendents or business managers delegated authority to sign certain contracts, and that is permissible under E-Rate rules.

5. Are we allowed to negotiate a contract or must we accept the vendor's standard terms and conditions?

Negotiate! Often a vendor will submit their standard terms and conditions, but you are under no obligation to accept them as-is. Read the fine print; discuss what happens if service isn't delivered for x period of time, or if service isn't turned on by the contracted date.

Important: With so many districts closing school buildings, it is extremely important to review the service termination terms and negotiate a reduced or waived termination liability should the district have to close school buildings. You don't want to get stuck in a contract that requires you to pay for service going to a closed school.

6. Should we specify discounts or reimbursements in our contract?

If you care deeply about whether you pay your bill in full and seek reimbursement, or whether the vendor submits to you discounts bills, you should specify these terms in your contract. It is not a requirement, however. Most applicants tell their vendors which funding method they prefer after they receive their Funding Commitment Decision Letter (FCDL).

7. Can/should we include service upgrades in the contract?

Absolutely. USAC has very strict rules regarding upgrading service or products. If your original Form 470 Request for Services included upgrade language such as, “X service or faster” or “Y component or upgrade”, AND if your contract include language that permits such upgrades in the middle of the contract, upgrading to a faster bandwidth or newer component will be much easier and you likely won't have to repost a new Form 470.

8. Should we submit a copy of the contract with our Form 471?

This is optional. You will have to provide many specific details about your contract in the Contracts Module within EPC prior to submitting your Form 471. You have the option of uploading a contract to EPC at that time. USAC may ask to see a copy of your contract during review if they have questions, and having it already available in EPC may save time, particularly if more than one FRN is filed as a result of that contract.

9. Are contingent contracts permitted?

Yes. Because the E-Rate application cycle requires contracts to be signed months prior to the start of the actual funding year, USAC accepts contingent contracts. The most common contingencies include those for E-Rate funding or formal budget approval. Nevertheless, USAC expects these contracts to be binding if these conditions are met.

10. How long should our contract run?

If possible, effective contract dates for recurring services should cover the entire funding year, from July 1st to June 30th (for example, July 1, 2016 - June 30, 2017). Similarly, a non-recurring service or equipment contract should be written to extend at least until the September 30 following the funding year, normally the last allowable date to receive a non-recurring service or equipment.

11. Are we permitted to sign contracts that include voluntary extensions?

Yes! A contract including voluntary extensions means that the contract expires at the end of its original term and may be voluntarily extended for one or more years. In order to take advantage of the extension years the contract would have to include specific language describing the exact number of years that the contract may be extended. Open-ended contracts or automatic annual renewals cannot be considered voluntary contract extensions. For example: "a 2-year contract with two, one-year renewals" is fine and no new Form 470 would have to be posted during the renewal periods. But "A 2-year contract, with automatic annual renewals" is not acceptable and the service would have to be rebid at the end of the 2-year contract.

12. If we have a multi-year contract that contains voluntary extensions, what should we list as the contract expiration date on the Form 471?

The contract expiration date should be the end of the initial contract, not the last possible date that the contract could expire. For example, if a contract is signed for 3-years, with two 1-year renewal options, the applicant would list the end of the third year of the contract.

If you are exercising one of your renewal options and have signed an extension agreement, you should still list the ORIGINAL Form 470 number that was used to bid the service, and the ORIGINAL contract signing date (not the date of the signed extension agreement).

13. Can I sign my contract before my 28-day waiting period is up?

No! Pay careful attention to not sign a contract or select a service provider before the end of the 28 day Form 470 waiting period. The contract must be signed and the Form 471 application must be submitted on or after the Allowable Contract Date which is basically the 29th day after the corresponding 470 is posted.