A five-year, $28 million contract awarded to Science Applications International Corp. (SAIC) to manage the information systems used to administer the federal E-rate has some E-rate service providers crying foul. Because SAIC also is a service provider under the program, critics say the deal represents a huge conflict of interest and could give SAIC a competitive advantage in bidding for other E-rate-related business.

The Universal Service Administrative Company (USAC), the independent, not-for-profit corporation that administers the $2.25 billion-a-year E-rate, says it has put safeguards into place to prevent such abuse. But some E-rate service providers say these safeguards are not enough,...

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