Post-Loan Policies and Procedures Common to Guaranteed and Insured Telephone Loans; Telecommunications System Construction Policies and Procedures

DEPARTMENT OF AGRICULTURE

Rural Electrification Administration

7 CFR Parts 1744 and 1753

RIN 0572-AB08

Post-Loan Policies and Procedures Common to Guaranteed and

Insured Telephone Loans; Telecommunications System Construction

Policies and Procedures

AGENCY: Rural Electrification Administration, USDA.

ACTION: Final rule.

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SUMMARY: The Rural Electrification Administration (REA) hereby amends

its post-loan regulations for telephone borrowers to ease borrower

reporting requirements and further clarify existing REA policy. In

addition, REA amends the telecommunications system construction

regulations to relax requirements for minor facilities construction

procedures, to make technical corrections and clarifications, and to

reflect minor technical changes such as moving the definitions section

from one subpart to another.

EFFECTIVE DATE: This regulation is effective on September 26, 1994.

FOR FURTHER INFORMATION CONTACT: Orren E. Cameron III, Director,

Telecommunication Standards Division, Rural Electrification

Administration, U.S. Department of Agriculture, 14th & Independence

Avenue SW., room 2835-S, Washington, DC 20250-1500, telephone number

(202) 720-8663.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

This final rule has been determined to be not significant for

purposes of Executive Order 12866 and therefore has not been reviewed

by OMB.

Executive Order 12778

This final rule has been reviewed under Executive Order 12778,

Civil Justice Reform. This final rule will not:

(1) Preempt any State or local laws, regulations, or policies,

unless they present an irreconcilable conflict with this rule;

(2) Have any retroactive effect; and

(3) Require administrative proceedings before parties may file suit

challenging the provisions of this rule.

Regulatory Flexibility Act Certification

REA has determined that this final rule will not have a significant

economic impact on a substantial number of small entities, as defined

in the Regulatory Flexibility Act (5 U.S.C. 601 et seq.). The REA

telephone program provides loans to REA borrowers at interest rates and

terms that are more favorable than those generally available from the

private sector. REA borrowers, as a result of obtaining federal

financing, receive economic benefits which exceed any direct economic

costs associated with complying with REA regulations and requirements.

Moreover, this action liberalizes certain contract requirements by

changing contract limits and allowing negotiation of fee schedules

which further offsets economic costs.

Information Collection and Recordkeeping Requirements

In compliance with the Office of Management and Budget (OMB)

regulations (5 CFR Part 1320) which implement the Paperwork Reduction

Act of 1980 (Pub. L. 96-511) and section 3504 of that Act, the

information collection and recordkeeping requirements contained in this

final rule have been submitted to OMB for approval. Comments concerning

these requirements should be directed to the Office of Information and

Regulatory Affairs of OMB, Attention: Desk Officer for USDA, room 3201,

New Executive Office Building, Washington, DC 20503.

National Environmental Policy Act Certification

REA has determined that this final rule will not significantly

affect the quality of the human environment as defined by the National

Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq.). Therefore,

this action does not require an environmental impact statement or

assessment.

Catalog of Federal Domestic Assistance

The program described by this final rule is listed in the Catalog

of Federal Domestic Assistance Programs under 10.851, Rural Telephone

Loans and Loan Guarantees, and 10.852, Rural Telephone Bank Loans. This

catalog is available on a subscription basis from the Superintendent of

Documents, the United States Government Printing Office, Washington, DC

20402-9325.

Executive Order 12372

This final rule is excluded from the scope of Executive Order

12372, Intergovernmental Consultation. A Notice of Final Rule entitled

Department Programs and Activities Excluded from Executive Order 12372

(50 FR 47034) exempts REA and RTB loans and loan guarantees to

governmental and nongovernmental entities from coverage under this

Order.

Background

On March 4, 1994, REA published this action as a proposed rule at

59 FR 10327 to clarify existing policy and ease requirements.

REA received no comment on revisions to 7 CFR part 1744, so the

final rule is unchanged from the proposed rule.

REA received comments on 7 CFR part 1753 from the United States

Telephone Association, TDS Telecom on behalf of 25 TDS-affiliated

telephone companies in the southeast, Design South Professionals, Inc.,

ALLTEL Service Corporation, Coastal Utilities, Inc., Farmers Telephone

Cooperative, Inc. (of South Carolina), Citizens Utilities Rural

Company, Inc., Carnes, Burkett, Wiltsee & Associates, TDS Telecom

(Madison, WI), and Reed Veach Wurdeman & Associates. These comments

were taken into consideration in preparing the final rule.

Comment Summary: One commenter suggested that the phrase in

Sec. 1753.15(b)(3), ``inspection of construction'' be changed to

``observation of construction'' because the former is considered

obsolete within the engineering profession.

Response: The proposed rule did not change this subsection, but REA

is revising the Form 217 contract, Engineering and Architectural

Services, in a separate effort, and REA is addressing this comment in

that revision. The term ``inspection of construction'' is used in part

1753 in a generic sense, and it clearly describes the engineer's

responsibility. The term ``observation of construction'', without the

further definition which would always accompany it in a professional

services contract, is too vague. The language in Sec. 1753.15(b)(3) is

unchanged in the final rule.

Comment Summary: One commenter observed that the proposed rule did

not incorporate language in Sec. 1753.17(c)(1)(B) clarifying REA's

policy with regard to state engineering registration laws. This

clarifying language was previously offered by the Administrator in a

May 10, 1990 letter.

Response: The language requested would state that REA does not

under part 1753 attempt to usurp any state engineering registration

laws. It has not been REA's intent to usurp state registration laws at

any time, so the final rule incorporates the suggested language.

Comment Summary: Most commenters opposed the $400,000 annual

financing limit placed on Form 773 contracts in Sec. 1753.46(c)(3) and

Sec. 1753.80(a). Two commenters observed that REA had given no

rationale for the proposed limit. Several commenters pointed out that

the proposed limit would make it difficult for large REA borrowers to

respond quickly to service demands. One commenter argued that since the

Form 773 contract is used for central office equipment, buildings, and

special equipment, as well as outside plant, using the Form 773 to its

$400,000 limit on outside plant construction would deprive a borrower

of this valuable minor construction resource in those other categories.

And finally, one commenter argued that restricting use of the Form 773

contract would force borrowers to resort to the Form 515 contract,

which the commenter asserted is more complicated and expensive. This

commenter argued that REA had presented no studies to support any

contention that construction performed under minor construction

procedures was more expensive than construction performed under the

Form 515 contract.

Response: To understand REA's imposition of the $400,000 limit, it

is useful to view the entire package of changes in construction

procedures in the proposed rule.

REA proposed relaxing the existing $100,000 limit on individual

Form 773 contracts to help that contract close a gap between minor

construction procedures and REA's major construction contracts. The

Form 773 contract is a very brief agreement, covering only the most

basic responsibilities of the parties. The Form 773 contract, unlike

REA's major contracts, does not require prior REA approvals of plans

and specifications, pricing, or the contract itself. To make the

contract as flexible as possible, REA simply provides a space where the

borrower fills in the statement of work to be covered by the contract.

The contractor may charge for work under the contract in any manner

agreed upon: lump sum, on a unit basis, hourly, or other. No provision

is made in the contract to require or define a performance bond. The

contract was designed as a convenient vehicle for formalizing oral

contracts which are common in the industry, but which had historically

failed to withstand REA audit scrutiny. The Form 773 was designed by

REA in this manner because a primary characteristic of its conception

was that it would never exceed a specified limit: $100,000. Any dispute

that might occur involving such a small amount could not pose a

significant risk to a borrower or REA's security interest in a

borrower. The more sophisticated major contracts, Forms 515, 525, 397

and 157, provide borrowers and REA with necessary protections, and

provide borrowers with agreement provisions that have evolved over the

years to handle construction administration. These major contracts also

facilitate a very important tenet of the successful public sector-

private sector partnership that has been the key to the success of the

REA Telephone Program: Competition. Without these contracts, and their

accompanying forms of specification, competitive bidding would be

chaotic, or impossible.

In conjunction with a relaxation of the maximum limit for

individual Form 773 contracts, REA imposed the $400,000 limit. This was

intended to limit a borrower's and REA's exposure to risk in the event

of a dispute involving one or more of the newly-allowed $200,000

outside plant Form 773 contracts. REA believes the increase in the

limit for individual outside plant Form 773 contracts is appropriate,

and believes that some maximum annual limit is needed to protect

borrowers and REA from the potential risks of using this simple

contract for complicated projects.

In response to the comment regarding large borrowers, REA has

changed the maximum annual limit to allow the limit to exceed $400,000

under certain circumstances, to permit large borrowers to perform up to

10% of the prior year's total cost for outside plant construction,

under the Form 773 contract. It is not REA's intent for the Form 773

contract to be used in lieu of the Form 515 contract for most major

projects.

In response to the concern that the maximum annual limit would be

consumed by outside plant construction, thereby requiring borrowers to

forego other valid uses of the Form 773, REA has established separate,

mutually exclusive annual limits for four categories of construction:

Outside plant, central office equipment, special equipment, and

buildings.

As to the concern that REA's maximum annual limit would cause

construction to be performed under the Form 515 contract, and that the

Form 515 is more complicated and expensive, REA responds by agreeing

that the Form 515 contract is much more complicated that the Form 773

contract, but disagreeing with the suggestion that construction costs

are higher under the Form 515. REA intended for the Form 773 contract

to be used only in situations of limited risk. REA took the idea

initially for the Form 773 contract from telephone operating companies

who had developed similar, simple contracts, for use only for small

projects. The Form 515 is necessarily more complicated, but it has

enabled the rural telephone industry to build plant of exceptionally

high quality at costs that over the years have compared favorably with

plant costs of far larger companies with much more purchasing leverage.

This is largely because the Form 515 facilitates competitive bidding of

outside plant construction, which is a fundamentally difficult task.

In response to the suggestion that construction under the Form 773

is less expensive than construction under the Form 515, REA's

experience over the years indicates that the reverse is true. However,

no specific studies had been performed to compare these costs, so REA

has performed a comparison. REA randomly selected 30 Form 773 contracts

that had been performed between 1992 and 1994. This sample included

only contracts that had been closed and found to meet all REA

requirements. Very small projects were excluded from the list. REA then

contacted borrowers to obtain additional information on the work

included under the contracts, since that information is not routinely

provided to REA. To make a valid comparison, REA discarded from the

sample all contracts which did not represent reasonable cross sections

of construction units, for example, contracts for road boring, or

splicing. Interestingly, only six of the original 30 Form 773 contracts

covered general outside plant construction projects which, if

proportionally enlarged, would be comparable to typical Form 515

contracts. Costs of these projects were compared to standard mile costs

for their states, which are based on average competitively-bid contract

costs. The costs for three of the six projects were near the standard

mile costs, the cost for one project was approximately 30% over the

standard mile cost, and the costs for the remaining two projects were

over twice the standard mile costs. These results illustrate one of

REA's main concerns with the Form 773 contract. Some projects are

performed at reasonable cost. Other projects are performed at costs

which may be reasonable under certain circumstances. But some projects,

in this small sample one-third of the projects compared, are far above

the standard mile costs normally experienced. Under the current limits

for individual Form 773 contracts, REA would not be concerned about

these higher-than-average costs because such small jobs would not have

a significant financial impact on a borrower or REA's security

interests in a borrower. However, under the higher individual contract

limits proposed by REA, the impact of several higher-than-average cost

jobs could be significant. REA therefore has set limits in the final

rule, but those limits have been designed to resolve the concerns of

most commenters.

List of Subjects

7 CFR Part 1744

Accounting, Loan programs-communications, Reporting and

recordkeeping requirements, Rural areas, Telephone.

7 CFR Part 1753

Loan programs-communications, Telecommunications, Telephone.

For reasons set forth in the preamble, 7 CFR chapter XVII is

amended as follows:

PART 1744--POST-LOAN POLICIES AND PROCEDURES COMMON TO GUARANTEED

AND INSURED TELEPHONE LOANS

1. The authority citation for part 1744 continues to read as

follows:

Authority: 7 U.S.C. 901 et seq., 1921 et seq.

2. In Sec. 1744.40, paragraph (a)(3) is revised to read as follows:

Sec. 1744.40 Non-act purposes.

(a) * * *

(3) Approval of the request is in the interests of the Government.

Generally, it would not be in the Government's interest if the

accommodation or subordination is being requested to enable the

borrower to avoid complying with such REA policies or procedures, as

competitive bid procedures or purchasing equipment acceptable to REA,

under 7 CFR part 1753.

* * * * *

Sec. 1744.21 [Amended]

Sec. 1744.61 [Removed and reserved]

3. The paragraph designations in Secs. 17744.21 and 1744.61 are

removed, the definitions in Sec. 1744.21 are put in alphabetical order,

the definitions in Sec. 1744.61 are transferred to Sec. 1744.21 in

alphabetical order, and Sec. 1744.61 is removed and reserved.

PART 1753--TELECOMMUNICATIONS SYSTEM CONSTRUCTION POLICIES AND

PROCEDURES

1. The authority citation for part 1753 continues to read as

follows:

Authority: 7 U.S.C. 901 et seq., 1921 et seq.

2. In Sec. 1753.5, paragraph (b)(1) is revised to read as follows:

Sec. 1753.5 Methods of major construction.

* * * * *

(b) Contract construction. (1) Whether the contractor is selected

through sealed competitive bidding or negotiation, as approved by REA,

award of the contract is subject to REA approval.

* * * * *

3. In Sec. 1753.6, paragraph (b) is revised to read as follows:

Sec. 1753.6 Standards, specifications, and general requirements.

* * * * *

(b) The borrower may use REA loan funds to finance nonstandard

construction materials or equipment only if approved by REA in writing

prior to purchase or commencement of construction.

* * * * *

4. In Sec. 1753.8, paragraphs (a)(11)(ii), (a)(12)(i), (b)(2),

(b)(3), and (b)(4) are revised, paragraph (b)(5) is removed to read as

follows:

Sec. 1753.8 Contract construction procedures.

(a) * * *

(11) * * *

(ii) If an award is made, the borrower shall award the contract to

the lowest responsive bidder, subject to REA approval. The borrower may

award the contract immediately upon determination of the lowest

responsive bidder if the following conditions are met:

(A) The project is included in an approved loan and adequate funds

were budgeted in the loan and are available.

(B) All applicable REA procedures were followed, including those in

the Notice and Instructions to Bid in the standard forms of contract.

* * * * *

(12) Execution of contract: (i) Upon approval by REA of the award

of contract by the borrower, the borrower shall submit to REA three

original counterparts of the contract executed by the contractor and

borrower.

* * * * *

(b) * * *

(2) For negotiated purchases, borrowers shall use REA contract

forms, standards, and specifications.

(3) For all contract forms except REA Form 773:

(i) After a satisfactory negotiated proposal has been obtained, the

borrower shall submit it to REA for approval, along with the engineer's

recommendation, and evidence of acceptance by the borrower.

(ii) If REA approves the negotiated proposal, the borrower shall

submit three copies of the contract, executed by the contractor and

borrower, to REA for approval.

(iii) If REA approves the contract, REA shall return one copy of

the contract to the borrower and one copy to the contractor.

(4) For REA Form 773, the borrower is responsible for negotiating a

satisfactory proposal, executing contracts, and closing the contract.

See subparts F and I of this part for requirements for major and minor

construction, respectively, on Form 773.

5. In Sec. 1753.9, paragraphs (a) and (c) are revised to read as

follows:

Sec. 1753.9 Subcontracts.

(a) REA construction contract Forms 257, 397, 515, and 525 contain

provisions for subcontracting. Reference should be made to the

individual contracts for the amounts and conditions under which a

contractor may subcontract work under the contract.

* * * * *

(c) As stated in contract Forms 257, 397, 515, and 525, the

contractor shall bear full responsibility for the acts and omissions of

the subcontractor and is not relieved of any obligations to the

borrower and to the Government under the contract.

* * * * *

6. In Sec. 1753.16, paragraphs (b)(3), (b)(4) and (b)(5) are

redesignated as paragraphs (b)(4), (b)(5) and (b)(6), respectively, and

a new paragraph (b)(3) is added to read as follows:

Sec. 1753.16 Architectural services.

* * * * *

(b) * * *

(3) If the fee schedule has to be modified in order for the

borrower to obtain adequate architectural services, the borrower shall

obtain written REA approval of the revised fee schedule prior to

executing contracts.

* * * * *

7. In Sec. 1753.17, paragraphs (c)(1)(i)(B) and (e) are revised to

read as follows:

Sec. 1753.17 Engineering services.

* * * * *

(c)(1) * * *

(i) * * *

(B) The name and qualifications of the employee to be in charge.

REA requires this employee to meet the State experience requirements

for registered engineers. In the absence of specific State experience

requirements, the employee must have at least eight years experience in

the design and construction of telecommunication facilities, with at

least two years of the work experience at a supervisory level. REA does

not require professional registration of this employee, but this does

not relieve the borrower from compliance with applicable State

registration requirements which may require a licensed individual to

perform such services.

* * * * *

(e) The borrower shall obtain status of contract and force account

proposal reports from the engineer once each month. The report shall

show for each contract or FAP the approved contract or FAP amount, the

date of approval, the scheduled date construction was to begin and the

actual date construction began, the scheduled completion date, the

estimated or actual completion date, the estimated or actual date of

submission of closeout documents, and an explanation of delays or other

pertinent data relative to progress of the project. One copy of this

report shall be submitted to the GFR.

* * * * *

8. In Sec. 1753.25, a new paragraph (f)(4) is added to read as

follows:

Sec. 1753.25 General.

* * * * *

(f) * * *

(4) 7 CFR part 1792, subpart C, which requires that the building

design comply with applicable seismic design criteria. Prior to the

design of buildings, borrowers shall submit to REA a written

acknowledgement from the architect or engineer that the design will

comply.

* * * * *

9. In Sec. 1753.26, paragraph (b) introductory test is revised,

paragraph (c) is redesignated as paragraph (d), and new paragraph (c)

is added to read as follows:

Sec. 1753.26 Plans and specifications (P&S).

* * * * *

(b) REA Contract Form 257 shall be completed as follows:

* * * * *

(c) The plans and specifications shall show the identification and

date of the model code used for seismic safety design considerations,

and the seismic factor used. See 7 CFR part 1792, subpart C.

* * * * *

Sec. 1753.29 [Amended]

10. In Sec. 1753.29, paragraph (a) is removed, and paragraphs (b),

(c), (d), and (e) are redesignated as paragraphs (a), (b), (c), and

(d).

11. In Sec. 1753.30, paragraphs (b)(2)(i) and (c)(2) are revised to

read as follows:

Sec. 1753.30 Closeout procedures.

* * * * *

(b) * * *

(2) * * *

(i) Arrange with its architect or engineer, contractor, and the GFR

for final inspection of the project.

* * * * *

(c) * * *

(2) Complete, with the assistance of its architect or engineer, the

documents listed in Appendix A of this part that are required for the

closeout of force account construction.

* * * * *

12. In Sec. 1753.39, paragraph (g) is revised to read as follows:

Sec. 1753.39 Closeout documents.

* * * * *

(g) Final payment shall be made according to the payment terms of

the contract.

13. In Sec. 1753.46, paragraph (c) is added to read as follows:

Sec. 1753.46 General.

* * * * *

(c) The two contract forms which may be used for major outside

plant construction are Form 515 and Form 773. Limitations on the

applicability of these forms shall be as follows:

(1) Form 515 shall be used for major outside plant construction

projects which will be competitively bid. The contract contains plans

and specifications and has no dollar limitation. See Secs. 1753.47,

1753.48 and 1753.49.

(2) A Form 515 contract which is for less than $200,000, may, at

the borrower's option, be negotiated. See Sec. 1753.48(b).

(3) Form 773 shall be used for major outside plant projects which

may not be competitively bid, and which cannot be designed and staked

at the time of contract execution. Projects of this nature include

routine line extensions and placement of subscriber drops. The Form 773

contract is limited to a maximum of $200,000. In any twelve month

period, REA will not finance more than $400,000, or ten per cent (10%)

of the borrower's previous year's outside plant total construction,

whichever is greater, in Form 773 contracts for a borrower. This

limitation includes all major and minor outside plant construction

performed under Form 773 contracts, and is determined by the date the

Form 773 contract is executed. See 7 CFR Sec. 1753.50.

14. In Sec. 1753.49, paragraph (c)(3) is revised to read as

follows:

Sec. 1753.49 Closeout documents.

* * * * *

(c) * * *

(3) Final payment shall be made according to the payment provisions

of Article III of Form 515.

15. Sec. 1753.50 is added to read as follows:

Sec. 1753.50 Construction by Form 773 contract.

(a) The borrower shall prepare the contract form and provide such

details of construction as may be available. Compensation may be based

upon unit prices, hourly rates, or another mutually agreeable basis.

(b) Neither the selection of the contractor nor the contract

requires REA approval.

(c) Borrowers are urged to obtain quotations from several

contractors before entering into a contract to be assured of obtaining

the lowest cost.

(d) The borrower must ensure that the contractor selected meets all

Federal and State requirements, and that the contractor maintains the

insurance coverage required by the contract for the duration of the

work. See 7 CFR part 1788.

(e) The borrower shall finance major construction under the Form

773 contract with general funds and obtain reimbursement with loan

funds when construction is completed and an executed Form 771 has been

submitted to REA.

(f) If the contract exceeds $100,000, a contractor's bond shall be

required. See 7 CFR part 1788.

(g) When the construction is completed to the borrower's

satisfaction, the borrower shall obtain from the contractor a final

invoice and an executed copy of REA Form 743, Certificate of Contractor

and Indemnity Agreement.

(h) The closeout document for the Form 773 contract is REA Form

771. See Sec. 1753.81 for the requirements for completing Form 771.

(i) An original and two copies of Form 771 shall be sent to the

GFR. The GFR may inspect the construction, and will initial and return

the original and one copy to the borrower.

(j) The original Form 771 shall be submitted with an FRS to REA

only in conjunction with a request for an advance of loan funds for the

work.

16. In Sec. 1753.68, paragraph (d)(3)(iii) is revised to read as

follows:

Sec. 1753.68 Purchasing special equipment.

* * * * *

(d) * * *

(3) * * *

(iii) Final payment shall be made according to the payment terms of

the contract.

17. In Sec. 1753.78, paragraph (a) is revised to read as follows:

Sec. 1753.78 Construction by contract.

(a) REA Form 773 shall be used for minor construction by contract.

Compensation may be based upon unit prices, hourly rates, or another

basis agreed to in advance by the borrower and the contractor. A single

work project may require more than one contractor.

* * * * *

18. In Sec. 1753.80, paragraphs (b), (c), (d), (e), (f), and (g)

are redesignated as paragraphs (c), (d), (e), (f), (g), and (h),

paragraph (b) is added, and paragraph (a) is revised, to read as

follows:

Sec. 1753.80 Minor construction procedure.

(a) If the borrower performs minor construction financed with loan

funds, the borrower's regular work order procedure shall be used to

administer construction activities that may be performed entirely by a

contractor under Form 773 contract, by work order, or jointly by work

order and one or more contractors under Form 773 contracts.

(b) REA financing under Form 773 contracts is limited in any twelve

month period to the following amounts for the following discrete

categories of minor construction. A borrower could, for example,

receive financing of Form 773 contracts in a twelve month period in

amounts up to $400,000 of central office equipment and $200,000 of

special equipment and $200,000 of buildings. The date of the Form 773

contract is the date the Form 773 contract is executed.

(1) For outside plant construction, the limit is $400,000 or ten

per cent (10%) of the borrower's previous calendar year's outside plant

total construction, whichever is greater.

(2) For central office eqiupment, the limit is $400,000.

(3) For special equipment, the limit is $200,000.

(4) For buildings, the limit is $200,000.

* * * * *

19. Appendices A through F of part 1753 are revised to read as

follows:

Appendix A.--Documents Required To Closeout Construction of Buildings

------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Use with Prepared by Distribution

Form ------------------------------------------------------------------------ Number ------------------------------------------

furnished by Description Force account Architect/ of Borrower Architect Contractor

REA Contract Contractor engineer Borrower copies REA

------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

238.......... Construction or Equipment Contract Amendment (Submit x ............. ............. x .......... 3 ........ 3 ......... ..........

to REA for approval, as required).

181.......... Certificate of Completion (Contract Construction) x ............. ............. x .......... 3 1 1 ......... 1

(1).

181a......... Certificate of Completion (Force Account ............. x ............. x .......... 2 1 1 ......... ..........

Construction).

231.......... Certificate or Contractor........................... x ............. x ............. .......... 2 1 1 ......... ..........

224.......... Waiver and Release of Lien (2 copies from each x ............. x ............. .......... 2 1 1 ......... ..........

supplier).

213.......... Certifcate (Buy American)........................... x ............. x ............. .......... 1 1 ........ ......... ..........

284.......... Statement of Architect's Fee........................ x x ............. x .......... 3 1 1 1 ..........

Inventory-List Materials and Services Furnished by x x ............. ............. .......... 3 1 1 1 ..........

Borrower Upon Which Architectural Services Were

Furnished. Show Cost (See Form 284).

Inventory-List Materials and Services Furnished by x x ............. ............. x 3 1 1 1 ..........

Borrower Upon Which Architectural Services Were Not

Performed Show Cost.

(2).......... ``As Built'' Plans and Specifications............... x x ............. x .......... 1 1 ........ ......... ..........

Guarantees, Warranties, Bonds, Operating or x ............. x ............. .......... 1 1 ........ ......... ..........

Maintenance Instructions, et cetera.

Architect/Engineer Seismic Safety Certification..... x x ............. x .......... 3 1 1 ......... 1

------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

(1) Cost of Materials and Services Furnished by Borrower not to be Included in Total Cost on Form 181.

(2) When only Minor Changes Were Made During Construction, Two Copies of a Statement to that Effect from the Architect Will be Accepted in Lieu of the ``As-Built'' Plans and Specifications.

Appendix B.--Documents Required to Close Out Central Office Equipment Contract

--------------------------------------------------------------------------------------------------------------------------------------------------------

Form Use with Prepared by Total Distribution

furnished by Description ------------------------------------------------------------ No. of -------------------------------

REA REA form 525 REA form 545 Contractor Engineer copies Borrower Contractor REA

--------------------------------------------------------------------------------------------------------------------------------------------------------

238.......... Construction or Equipment Contract X X ............. X 3 ........ .......... 3

Amendment (Submit to REA for

approval, if required, before

following documents).

754.......... Certficate of Completion and X ............. X X 4 2 1 1

Certificate of Contractor and

Indemnity Agreement (If submitted,

Form 744 is not required).

517.......... Results of Acceptance Tests X ............. ............. X 2 1 1 ........

(Prepare and distribute copies

immediately upon completion of the

acceptance tests of each central

office).

752a......... Certificate of Completion-Not ............. X ............. X 3 1 1 1

Including Installation.

224.......... Waiver and Release of Lien (Two X ............. X ............. 2 1 .......... 1

copies from each supplier).

231.......... Certificate of Contractor.......... X ............. X ............. 2 1 .......... 1

213.......... Certificate (Buy American)......... X X X ............. 2 1 .......... 1

Switching Diagram, as installed.... X X X ............. 2 2 .......... ........

Set of Drawings (Each set to X X X ............. 2 2 .......... ........

include all the drawings required

under the Specification REA Form

522).

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Appendix C.--Documents Required to Closeout Telephone Construction Contract REA Form 515

--------------------------------------------------------------------------------------------------------------------------------------------------------

Prepared by Distribution

Number Form -------------------------------------------------------------

REA Form No. Description of available Borrower Contractor

copies from REA Engineer Contractor REA

--------------------------------------------------------------------------------------------------------------------------------------------------------

724.......... Final Inventory................................... 3 x x ............. 1 1 1

724a......... Final Inventory................................... 3 x x ............. 1 1 1

Contractor's Board Extension (When required)...... 3 ............. ............. x 1 1 1

281.......... Tabulation of Materials Furnished by Borrower..... 3 ............. ............. x 1 1 1

213.......... Certificate (``Buy American'').................... 1 x ............. x 1 .......... ........

Listing of Construction Change Orders............. 1 ............. ............. ............. ........ .......... 1

224.......... Waiver and Release of Lien (Two copies from each 2 x ............. x 1 .......... 1

supplier).

231.......... Certificate of Contractor......................... 2 x ............. x 1 .......... 1

527.......... Final Statement of Construction................... 3 x x ............. 1 1 1

Reports on Results of Acceptance Tests............ 2 ............. x ............. 1 1 ........

Set of Final Staking Sheets....................... 1 ............. x ............. 1 .......... ........

Tabulation of Staking Sheets...................... 1 ............. x ............. 1 .......... ........

Correction Summary (legible copy)................. 1 ............. x ............. 1 .......... ........

Treated Forest Products Inspection Reports or 1 ............. ............. ............. 1 .......... ........

Certificates of Compliance (Prepared by

inspection company or supplier).

Final Key Map (when applicable)................... 1 ............. x ............. 1 .......... 1

Final Central Office Area and Town Detail Maps.... 1 ............. x ............. 1 .......... 1

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Appendix D.--Step-by-Step Procedure for Closing Out Telephone Construction Contract-Labor and Materials, REA

Form 515

----------------------------------------------------------------------------------------------------------------

Sequence

-------------------------------------- By Procedure

Step No. When

----------------------------------------------------------------------------------------------------------------

1......... Prior to completion of Borrower's Engineer...... Receives instructions from the GFR concerning

construction. the closeout procedure.

2......... Upon completion of Borrower's Engineer...... Prepares the following: 1 set of Key Maps,

construction. when applicable, which show work done under

the construction contract marked with red

pencil. 1 set of Detail Maps, which show work

done under the construction contract marked

with red pencil. 1 copy of Tabulation of

Staking Sheets. 1 copy of tentative Final

Inventory, REA Forms 724, 724a.

3......... After construction has Borrower's Engineer...... Forwards letter to the borrower with copies to

been completed and the GFR stating that the project is ready for

acceptance tests made. final inspection.

4......... Upon receipt of letter GFR...................... Promptly arranges with borrower, borrower's

from borrower's engineer. engineer, and contractor for final inspection

of construction. It is contemplated that

final inspections will be made on sections of

line as construction is completed, leaving a

minimum amount to be inspected at this time.

5......... When requested by the GFR REA Field Accountant..... Audits REA Form 281, if borrower supplied part

of the materials.

6......... Inspection date scheduled Borrower's Engineer...... Shall have the following documents available

for the GFR: 1 set of ``as constructed'' Key

Maps (when applicable). 1 set of ``as

constructed'' Detail Maps. 1 copy of the List

of Construction Change Orders. 1 set of Final

Staking Sheets. 1 copy of Tabulation Staking

Sheets. 1 copy of Treated Forest Products

Inspection Reports or Certificates of

Compliance. 1 copy of tentative Final

Inventory REA Form 724, 724a. 1 copy of

tentative Tabulation, REA Form 231, if

borrower furnished part of material. 1 copy

of Report on Results of Acceptance Tests.

7......... During inspection........ Borrower's Engineer...... Issues instructions to contractor covering

corrections in construction found during

inspection by GFR in the company of the

borrower's engineer and the contractor or his/

her representative.

8......... During inspection........ Contractor............... Corrects defects in construction on basis of

instructions from the borrower's engineer.

The corrections should proceed closely behind

the inspection in order that the borrower's

engineer can check the corrections before

leaving the system.

9......... During inspection........ Borrower's Engineer...... With GFR inspects and approves corrected

construction.

10........ During inspection........ Borrower's Engineer...... Marks inspected areas on the Key Map, if

available, otherwise on the Detail Maps.

11........ Upon completion of Borrower's Engineer...... Prepares or obtains all the closeout documents

inspection. listed in Appendix C. Makes distribution of

the copies of the documents as indicated in

Appendix C. Forwards the documents for REA to

the GFR.

12........ After reviewing final REA GFR.................. Reviews documents and distributes copies as

documents. indicated in Appendix C.

13........ After signing final Borrower................. Prepares and submits Financial Requirement

inventory. Statement, REA Form 481, requesting amount

necessary to make final payment due under

contract.

14........ On receipt of final Borrower................. Promptly forwards check for final payment to

advance. contractor.

15........ During next loan fund REA Field accountant..... Makes an examination of borrowers construction

audit review after final records for (1) compliance with the

payment to contractor. construction contract and Subpart F and (2)

REA Form 281, Tabulation of Materials

Furnished by Borrowers, if any, for

appropriate costs.

----------------------------------------------------------------------------------------------------------------

Appendix E.--Documents Required to Close Out Force Account Outside Plant Construction

----------------------------------------------------------------------------------------------------------------

No. of copies required and

distribution of documents

Item No. REA form No. Description on title of document --------------------------------------

Total No. Owner REA

----------------------------------------------------------------------------------------------------------------

a. ....... 817, 817a, 817b. Final inventory force account construciton 2 1 1

and certificate of engineer.

b ........ 213 ............ Certificate, ``Buy American'' (as 1 1 0

applicable-one from each supplier).

c ........ ................ Detail maps................................ 1 1 0

d ........ ................ Key map if applicable...................... 1 1 0

e ........ ................ Staking sheets............................. 1 1 0

f ........ ................ Tabulation of staking sheets............... 1 1 0

g ........ ................ Treated forest products inspection reports, 1 1 0

if applicable.

----------------------------------------------------------------------------------------------------------------

Appendix F.--Documents Required to Closeout Equipment Contracts

--------------------------------------------------------------------------------------------------------------------------------------------------------

No. of copies Prepared by Distribution

Form ---------------------------------------------------------------------------------------------------

furnished Description Form 397 Form 398

by REA Form 397 Form 398 ------------------------------------------------ Borrower Contractor REA

Contractor Engineer Contractor Engineer

--------------------------------------------------------------------------------------------------------------------------------------------------------

238 Construction or Equipment Contract 3 3 .......... x .......... x ........ .......... 3

Amendment (If required, submit to REA

for approval before other closeout

documents).

396 Certificate of Completion-Special 3 ........ .......... x .......... x 1 1 1

Equipment Contract (Including

Installation).

396a Certificate of Completion-Special ........ 3 .......... x .......... x 1 1 1

Equipment Contract (Not Including

Installation).

744 Certificate of Contractor and Indemnity 2 ........ x .......... .......... .......... 1 .......... 1

Agreement.

213 Certificate (Buy American).............. 2 2 x .......... x .......... 1 .......... 1

Report in writing, including all 2 2 x .......... .......... x 1 .......... 1

measurements and other information

required under Part II of the

applicable specifications.

Set of maintenance recommendations for 1 1 x .......... x .......... 1 .......... ........

all equipment furnished under the

contract.

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Dated: August 17, 1994.

Bob J. Nash,

Under Secretary, Small Community and Rural Development.

[FR Doc. 94-20783 Filed 8-24-94; 8:45 am]

BILLING CODE 3410-15-P