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Federal Register / Vol. 86, No. 142 / Wednesday, July 28, 2021 / Rules and Regulations
calling services contracts would be no higher than $0.12 per minute for prisons and $0.14
per minute for larger jails. The Commission refers to this as the critical cost threshold for GTL, as it is the cost that must be exceeded for the provider-related rate caps to no longer be supported by the analysis.
26. To determine GTLs critical cost threshold, the Commission presents a critical cost analysis to support the new interim provider-related rate caps of $0.12 per minute for prisons and $0.14 per minute for larger jails. The analysis calculates GTLs threshold per-minute costs that would bring the overall average cost per minute across all
calling services contracts, plus a buffer, to $0.12 per minute and $0.14 per minute for prisons and larger jails, respectively. The Commission examines a buffer of both one and two standard deviations from the mean.
A buffer of one standard deviation reflects the approach to rate-setting, while a two standard deviation buffer is an even more conservative assumption because it requires per-minute costs to be even lower in order to remain under the interim rate caps. As such, GTLs threshold per-minute cost derived from this analysis will ensure that the rate caps are set at a level that allows the majority of firms to recover their costs.

27. The Commission relies on the perminute cost data from the contract-level dataset described in Appendix A after removing the 25 identified outliers. To determine the critical cost thresholds, the Commission optimizes over the set of GTL
prison and larger jail contracts to find the cost per minute that sets the overall cost per minute plus a buffer across all prison contracts to $0.12 and across all larger jail contracts to $0.14. The Commission performs four constrained optimizations: Two each for prisons and larger jails with two different buffers 1 and 2 standard deviations. The Commission presents the results in Table 8.

TABLE 8GTL CRITICAL COST THRESHOLDS
$ Per-minute rate cap
Facility type Prison
Larger Jail

28. Even with a large buffer of two standard deviations from the mean which would allow the vast majority of firms to recover costs with certainty, GTLs average per-minute costs for prisons and larger jails need only be at or below $0.094 per minute and $0.117 per minute, respectively. These thresholds are still $0.041 per minute and $0.053 per minute higher than the average per-minute costs of all non-GTL prison and larger jail contracts. Furthermore, after applying a conservative k-nearest neighbor matching algorithm that sets GTLs contract costs to the maximum of its three neighbors, GTLs per-minute costs are $0.063 and $0.078
for prisons and larger jails, respectively.
These cost estimates are well below the threshold values necessary to support the interim rate caps. As such, with reasonable high-end estimates of GTLs costs, the analysis indicates that the interim rate caps would allow nearly all firms to recover their costs of providing inmate calling services as reported in response to the Second Mandatory Data Collection.

Appendix D
Analysis of Site Commission Payments 1. The Commission permits a $0.02 per minute interim allowance for reasonable correctional facility costs for prisons and
larger jails where site commission payments are part of a negotiated contract. The Commission bases its decision on two separate and independent grounds. First, this allowance is based on estimates of the portion of site commission payments that are legitimately related to inmate calling services based on the approach set forth in Appendix D of the 2020 ICS FNPRM, which the Commission has updated below with corrected cost data consistent with the record. Second, this allowance is based on record evidence reintroduced by Pay Tel and the National Sheriffs Association supporting a $0.02 allowance.
2. To improve comparability between contracts that do and do not involve payment of a site commission, the Commission removed invalid, incomplete, and anomalous contracts from the cost data submitted by providers in response to the Second Mandatory Data Collection using the process described in Appendix A. The resulting data do not specify the costs, if any, that correctional facilities incur that are directly related to the provision of inmate calling services. In the absence of direct information on the level of those costs, the Commission estimates the costs correctional facilities incur by comparing the relative costs per minute to providers for contracts with and without site commissions, as shown in Table
1 Std. dev.
buffer
0.120
0.140

0.117
0.153

2 Std. dev.
buffer 0.094
0.117

1. As the Commission concluded in the 2020
ICS FNPRM, the Commission continues to find that it is reasonable that the higher costs per minute for contracts without site commissions reflect, at least in part, giveand-take negotiations in which providers agree to incur additional costs related to the provision of inmate calling services in exchange for not having to pay site commissions. In the context of Contractually Prescribed site commission payments, facilities may seek that providers pay a site commission as part of a request for proposal.
In other cases, a correctional facility may not seek a site commission payment but may indicate that offers to make such payments will be a factor in the bid evaluation process.
In either case, bidders choices about whether to offer a site commission payment and at what level are informed by their discretionary business decisions about which strategies are more or less profitable to pursue. Consequently, it is reasonable to conclude that providers and correctional facilities have at least some give-and-take during the negotiation process, which, at least in part, contributes to higher costs for contracts that do not provide for site commission payments compared to similarly situated providers operating under contracts that do provide for such payments.

TABLE 1SITE COMMISSIONS AND PER-MINUTE COSTS
Facility type
Site commission
khammond on DSKJM1Z7X2PROD with RULES2

Larger Jails

All Jails

Prisons

All Facilities

VerDate Sep<11>2014

Mean $

No Commission Paid Commission Paid
All Larger Jails
No Commission Paid Commission Paid
All Jails
No Commission Paid Commission Paid
All Prisons
No Commission Paid
19:16 Jul 27, 2021

Jkt 253001

0.100
0.100
0.100
0.097
0.093
0.093
0.097
0.089
0.092
0.097

PO 00000

Frm 00074

Mean + std.
dev.
$

Std. dev.
$ 0.042
0.121
0.118
0.061
0.056
0.057
0.038
0.042
0.041
0.059

Fmt 4701

Sfmt 4700

Number of contracts Below
0.142
0.221
0.218
0.158
0.150
0.150
0.135
0.131
0.133
0.155

E:FRFM28JYR2.SGM

11
167
179
260
2,325
2,583
38
82
120
298

28JYR2

Above
Total 1
3 3
13
173
188
2 7
9 15

12
170
182
273
2,498
2,771
40
89
129
313