Could federal-procurement rules result in FirstNet getting ‘snookered’ in deal with partners?

During the past few months, industry interest in FirstNet has grown significantly. That tends to happen when an entity like FirstNet transforms from a vague concept to an organization that has a legitimate staff, a draft request for proposal (RFP) on the street, an assured $7 billion in the bank and spectrum assets with an estimated value of $17 billion to $30 billion.

In short, FirstNet represents a huge opportunity to potential partners that would build out the network, both from a business perspective and from civic-minded/political-capital standpoint. It also could represent a huge amount of risk on these fronts, because nothing like this has ever been done before.

FirstNet certainly has raised eyebrows with the proposed structure of the deal in its draft RFP, which calls for the partner—or partners—to get $6.5 billion and access to the public safety’s 20 MHz of prime 700 MHz spectrum (albeit on a secondary basis, because public safety will have preemptive access to the network), but they will have to deploy the public-safety-grade network and pay FirstNet on a quarterly basis.

Normally, the selected contractor winning a large federal procurement gets an identifiable sum of money. In the FirstNet plan, the contractor would build the network AND pay FirstNet in regular intervals to fund the organization’s operations.

A contractor paying the federal government is not unprecedented—for instance, stores operating on military bases have such arrangements, based on the notion that they are given access to a predictable customer base. But that’s not the case with FirstNet, because no public-safety agency is obligated to subscribe the network when it is built.

So, is the concept completely outlandish? No, because the potential opportunity is so great. For wireless carriers, the costs associated with accessing licensed spectrum are enormous for carriers, and this arrangement with FirstNet could be more palatable than simply trying to outbid everyone else for airwaves in an FCC auction. The opportunity to essentially get an interest-free $6.5 billion loan is nothing to sneeze at, either.

It’s an extremely complicated equation for potential bidders—and it’s an equation that still has some significant variables that need to be decided, including what the “public-safety entity” user base will include and what financial incentives/disincentives FirstNet attaches to the public-safety adoption of the network. Without question, any deal will involve significant complexity for the selected contractor(s).

And that complexity is not a one-way street. FirstNet will have to evaluate these complex proposals, select a partner (or partners) and negotiate the prerequisite contracts to make the network vision a reality.  

On the surface, FirstNet appears to be well-equipped to make a decision on the RFP bid, because the FirstNet board and staff consists of members with varied expertise in public safety, government, finance and technology. Exactly how RFP proposals will be evaluated is still being determined, including what role the FirstNet board will have in the process.

What we know for certain is that Terrie Callahan, who is working for FirstNet as part of an interagency agreement with of the U.S. Department of the Interior, is listed as the project’s contracting officer (CO) and the source selection authority (SSA), as stipulated under the Federal Acquisition Regulations (FAR). However, FAR guidelines allow the SSA to “consider the recommendation of advisory boards or panels,” which would seem to provide the FirstNet board a potential avenue for input into the RFP process.

Of course, if FirstNet officials are part of the decision-making process, there is a potential that conflict-of-interest rules could prevent FirstNet board members and employees with business and technology expertise from participating in the evaluation of proposals to build out the much-anticipated public-safety broadband system. 

It’s certainly a concern voiced by FirstNet Chairwoman Sue Swenson, a veteran of the telecom industry.