FirstNet RFP outlines financial penalties for contractor, if public-safety adoption targets are missed

If at least 70% of the targeted public-safety users do not subscribe to the FirstNet system in a given year upon its operational completion, the FirstNet contractor could pay more than $100 million in financial penalties and risk losing control of certain business functions, according to the FirstNet request for proposal (RFP).

Building and operating a nationwide broadband network to meet the needs of public safety is the primary purpose of FirstNet, but public-safety users are not required to adopt the FirstNet system. Thus, the FirstNet offering needs to be attractive enough from the performance and financial standpoints to convince public safety to subscribe to the network.

In addition, the selected contractor also is allowed to sell wireless services to traditional consumer customers—on a secondary basis, behind public-safety prioritized traffic—while utilizing FirstNet spectrum. To ensure that the contractor does not use the FirstNet spectrum simply to pursue commercial subscribers, FirstNet officials said the RFP would include measures that would penalize a contractor that did not meet public-safety adoption goals.

Those measures were revealed when FirstNet released the RFP on Wednesday. When the FirstNet system reaches the Final Operational Capability (FOC) stage—something that is expected to occur five years after the contract is signed—the contractor will have to demonstrate that it has met the public-safety adoption goals or pay a financial penalty, known as a “disincentive payment.”

If the contractor fails to reach more than 70% of its public-safety adoption goal for a state or territory, it would have to pay 100% of its maximum disincentive payment—nationwide, a figure that ranges from $124.7 million to $178.3 million, increasing annually over a 20-year period—for jurisdiction for that particular year. A 90% public-safety adoption rate would result in the contractor paying FirstNet 15% of the maximum disincentive payment, while an 80% public-safety adoption rate would result in a payment of 44% of the maximum disincentive payment.

In addition, failure to meet the public-safety adoption goals exposes the contractor to a variety of remediation efforts by FirstNet, including FirstNet recommending lower pricing or taking certain business functions from the contractor—with the contractor funding any replacement operations.

However, FirstNet does not dictate what those public-safety adoption goals will be in its RFP. Instead, it will allow bidders to propose what the public-safety adoption rate should be. In selecting the winning contractor, the evaluation team will consider the proposed public-safety adoption targets proposed by each bidder.

Exactly who is a public-safety user is not delineated by FirstNet in the RFP, even though the definition of a “public-safety entity” (PSE) that can be prioritized on the network was a topic of two separate public-notice proceedings. The RFP merely states that public-safety entities are defined in FirstNet’s enabling legislation, but it provides a level of distinction on the matter in association with the disincentive-payment process.

“For the purpose of this disincentive mechanism, FirstNet further delineates PSEs into two user groups: a primary user group and extended primary user group,” the RFP states. “FirstNet prefers device connections from the primary user group, which consists of law enforcement, fire, and emergency medical services users.

“The Contractor is also encouraged to drive customer adoption and use of the [FirstNet system] through the extended primary user group, which consists of all other public safety users, as defined in the Act. The Contractor will be subject to disincentive payments upon failure to achieve 100% of the proposed connection targets for either user group.”