# Electric System Construction Policies and Procedures > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/fr%3A95-2843 ## Record - **Collection:** Federal Register - **Document type:** Rule - **Published:** February 23, 1995 - **Citation:** 60 FR 10152 ## Text [[Page 10152]] DEPARTMENT OF AGRICULTURE Rural Utilities Service 7 CFR Part 1726 RIN 0572-AA47 Electric System Construction Policies and Procedures AGENCY: Rural Utilities Service, USDA. ACTION: Final rule. ----------------------------------------------------------------------- SUMMARY: The Rural Utilities Service (RUS), successor to the Rural Electrification Administration (REA), hereby amends its regulation on Electric System Construction Policies and Procedures. This action codifies the policies and the procedures applicable to RUS electric borrowers when purchasing materials and equipment, and when constructing system facilities by contract or force account. These policies and procedures were contained in six REA bulletins. The changes made pertain to RUS approval of contracts, subcontracts and amendments to contracts; documentation of contracting activity by RUS borrowers; procurement procedures to be used by RUS borrowers; and closeout procedures for construction contracts. EFFECTIVE DATE: This rule is effective March 27, 1995. FOR FURTHER INFORMATION CONTACT: Mr. Fred J. Gatchell, Deputy Director, Electric Staff Division, Rural Utilities Service, U.S. Department of Agriculture, Washington, DC 20250-1500, telephone (202) 720-1398. SUPPLEMENTARY INFORMATION: Executive Order 12866 This rule has been determined to be not significant for the purposes of Executive Order 12866 and therefore has not been reviewed by OMB. Regulatory Flexibility Act Certification This action does not fall within the scope of the Regulatory Flexibility Act. 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 the Act, the information collection and recordkeeping requirements contained in this rule have been approved by OMB under control number 0572-0107. Comments concerning these requirements should be directed to the Office of Information and Regulatory Affairs of OMB, Attention: Desk Officer for USDA, room 10102, New Executive Office Building, Washington, DC 20503. National Environmental Policy Act Certification The Administrator has determined that this 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 rule is listed in the Catalog of Federal Domestic Assistance programs under No. 10.850, Rural Electrification Loans and Loan Guarantees. This catalog is available on a subscription basis from the Superintendent of Documents, the United States Government Printing Office, Washington, DC 20402. Telephone (202) 783-3238. Executive Order 12372 This rule is excluded from the scope of Executive Order 12372, Intergovernmental Consultation, which may require consultation with State and local officials. A Notice of Final Rule entitled Department Programs and Activities Excluded from Executive Order 12372 (50 FR 47034) exempts RUS loans and loan guarantees from coverage under this order. Executive Order 12778 This rule has been reviewed under Executive Order 12778, Civil Justice Reform. This rule will not: (1) Preempt any State or local laws, regulations. or policies; (2) Have any retroactive effect; and (3) Require administrative proceedings before parties may file suit challenging the provisions of this rule. Background The Federal Crop Insurance Reform and Department of Agriculture Reorganization Act of 1994 (Pub. L. 103-354, 101 Stat. 3178), signed by President Clinton on October 13, 1994, provides for the establishment of RUS as successor to REA with respect to various programs, including the electric loan program established by the Rural Electrification Act of 1936, as amended, (the RE Act) (7 U.S.C. 901 et seq.). On October 20, 1994, the Secretary of Agriculture issued Secretary's Memorandum 1010-1, establishing RUS and abolishing REA. Therefore, RUS is publishing this final rule that was previously proposed by REA. Pursuant to the RE Act, RUS hereby amends 7 CFR chapter XVII, by revising Part 1726, Electric System Construction Policies and Procedures. This revised part contains the policies and the procedures applicable to RUS borrowers and contractors when purchasing materials and equipment and constructing electric system facilities by contract or force account (the RUS borrower's own construction crews). These policies and the procedures implement certain provisions of the RUS standard form of loan documents regarding the borrower's purchase of materials and equipment and the construction of its electric system by contract or force account. In order to facilitate the programmatic interests of the RE Act, and, in order to assure that loans made or guaranteed by RUS are adequately secured, RUS, as a secured lender, has established certain standards and specifications for materials, equipment, and the construction of electric systems. The use of standard forms and procurement procedures helps assure RUS that: (1) appropriate standards and specifications are maintained; (2) RUS's loan security is not adversely affected; and (3) loan and loan guarantee funds are used effectively and for the intended purposes. The previous policies and procedures were set forth in REA Bulletin 40-6, Construction Methods and Purchase of Materials and Equipment; REA Bulletin 40-8, Construction Specifications, Drawings and Contract Forms for Distribution, Transmission and Generation Facilities; REA Bulletin 81-6, Closeout Procedures and Documents for Contract Construction of Distribution and Transmission Facilities; REA Bulletin 85-1, Closeout Procedures and Documents for the Contract Construction of Generating Facilities and Associated Buildings; REA Bulletin 86-1, Closeout Procedures and Documents for the Construction of Buildings Other than Generating Plants; and REA Bulletin 86-3, Headquarters Facilities for Electric Borrowers. The previous policies and procedures are being changed and updated by this rule. When this rule is effective, Bulletins 40-6, 81-6, 85-1, 86-1, and 86-3 will be superseded in their entirety and rescinded, and Bulletin 40-8 will be superseded with respect to the contract forms listed in this rule. Bulletin 40-8 will be superseded in its entirety and rescinded when all forms referenced therein have been promulgated. Major Changes The major substantive changes are as follows: [[Page 10153]] (a) This rule applies to procurement and construction for all projects which are financed, in whole or in part, with loans made or guaranteed by RUS, including reimbursable projects. REA Bulletin 40-6 contained the requirements for all procurement and construction, regardless of the source of funds. (b) This rule eliminates the previous requirement that RUS approve subcontracts. (Subcontracts for generating projects were already exempt from RUS approval.) (c) This rule changes the dollar thresholds that determine which procurement procedure is to be used for a project. (d) This rule raises the dollar thresholds that determine whether RUS approval of a contract is required and eliminates the requirement of RUS approval of certain contract amendments. (e) This rule eliminates the requirement of RUS approval of borrowers' contracts for headquarters facilities. (f) This rule adds procedures for procurement of communication and control facilities. (g) This rule simplifies the procedures for the closeout of construction contracts by reducing the number of forms to be submitted to RUS. (h) This rule revises the RUS standard contract forms. The major changes in the contract forms are as follows: (1) Change the forms to reflect the changes listed above. (2) Change the insurance and bonding dollar limits as outlined in 7 CFR part 1788. (3) Change the forms to require prequalification of all bidders. (4) Change the interest rate on overdue accounts. (5) Change the ``Buy American'' provision to include Mexico and Canada in accordance with the North American Free Trade Agreement Implementation Act of December 8, 1993, Pub. L. 103-182. (6) Change the indemnification clause (also called ``hold harmless clause'') to reflect RUS's current policy. (7) Incorporate certain technical changes relating to wood treating and right-of-way clearing chemicals. In order to reduce printing cost and volume, the forms included in this part are condensed, especially the tables. Also, several forms refer to guide drawings, which do not contain requirements, and, hence, will not be included. RUS intends to reformat these forms similar to their current configuration (including the tables and drawings) and make them available in that format either from RUS or for purchase from the Government Printing Office. See Sec. 1726.300 for a list of the standard forms of electric contracts and where each may be obtained. This rule was published as a proposed rule at 59 FR 28924, June 3, 1994. In addition, ``Permitted Contract Modifications-- Indemnification,'' dealing with indemnification of the owner by the contractor in RUS's standard contract forms, was published as a proposed rule at 59 FR 4603, February 1, 1994. This rule incorporates the changes and addresses the comments resulting from the proposed rule ``Permitted Contract Modifications--Indemnification.'' Comments A total of 45 organizations submitted comments on the proposed rule, including 27 borrowers, the National Rural Electric Cooperative Association, 6 engineers and engineering organizations, the Power and Communication Contractors Association, two insurance companies, two state borrower associations, and 6 others. RUS considered all comments received. The more significant and most commonly made comments are addressed herein. Applicability Many commenters suggested changes or clarification as to when this rule applies. This rule has been clarified to state that it applies when materials, equipment, and construction are financed, in whole or in part, with loans made or guaranteed by RUS, including reimbursable projects. A statement regarding jointly owned projects has also been added. Competitive bidding for new capacity resources, however, is outside the scope of this rule. Threshold Limits There were many comments suggesting changes in the various dollar limits regarding forms to be used, bidding procedures to be followed, RUS approvals, etc. Several comments also suggested making the dollar limits more consistent. RUS has increased the contract approval limit for transmission construction and for load control, communication, and SCADA systems for power supply borrowers. RUS believes that the limits, as revised, are a reasonable balance that allows the borrower reasonable flexibility while assuring RUS that loan funds are being used properly. A number of clarifications have been added to avoid potential ambiguities. Several commenters expressed concern about using a calendar year limit, since one or two large procurements could consume the entire limit, and very small procurements thereafter would be subject to more stringent requirements. This situation is inherent in any calendar limit, and RUS expects each borrower to manage its procurement program by using the procurement procedure (e.g., formal competitive bidding) or the contract form not subject to the calendar year limit for large procurements and prudently utilizing the flexibility provided by this rule so that the calendar year limits are not exceeded. Bidders Qualifications and Competition Several commenters suggested that a bidder's performance record, safety record, and similar factors should be considered when evaluating bids. RUS strongly disagrees with this. RUS believes that such factors can and should be considered when determining the bidder's qualifications to be invited to bid, but it is inappropriate and unacceptable to evaluate these factors when evaluating a bid from a qualified and invited bidder. Language has been added to the rule clarifying this position. Other comments concerned how to deal with a potential conflict of interest with a bidder. This rule places primary responsibility on the borrower's board of directors to determine if a potential conflict of interest is significant, and RUS believes this is appropriate. A number of commenters suggested that fewer than three bidders could represent adequate competition. RUS believes that, for most procurement, three or more bidders are needed to assure adequate competition. We have, however, eliminated the requirement that RUS concurrence be obtained prior to awarding a contract based on fewer than three bids, providing that the borrower documents that all reasonable measures were taken to assure adequate competition. Engineer Many commenters noted that borrowers often utilize staff engineers, but the language of the rule generally implies that the engineer is an outside consultant. RUS agrees with this position and has revised the language accordingly. One commenter noted that several engineering contract forms were not included in the list of RUS standard contract forms. Such forms are still available and in some cases mandatory, but are outside the scope of this rule and are contained in other RUS rules. [[Page 10154]] Definitions Various commenters recommended clarifications and changes to the definitions as well as the addition of several more definitions. RUS has revised several definitions and added two new definitions. The other proposed definitions appear to be self-explanatory without modification. Several commenters suggested that the contracting committee was not needed or should have a different make-up. RUS believes that this committee, required only under informal competitive bidding and multiparty negotiation, is needed as specified to insure the integrity of these procedures. RUS Approvals Some commenters suggested that RUS approval be automatic after a specified time period (30 or 60 days) without RUS action. Due to numerous factors which may affect RUS approval, including other agency priorities, human resources, and unresolved issues, this change was not made. Other commenters felt that RUS approval should not be required to purchase used equipment and materials. Since most RUS loans are long- term, RUS must be satisfied that the physical security is adequate, so RUS will continue to require new equipment and materials unless specifically approved by RUS. Many commenters objected to RUS reserving the right to require contract construction in lieu of force account construction (Sec. 1726.22). While RUS has rarely exercised this right in the past and does not expect to use it often in the future, there are circumstances where such authority has been and may again be needed, therefore, the language of the rule has not been changed. Many commenters also objected to certain amendments being subject to RUS approval even if the original contract was not. The purpose of this requirement was to prevent changing the RUS approved form of contract by amendment where the borrower is not permitted to make such changes in the form without RUS approval. The language of the rule has been changed to indicate that the approved form of contract cannot be changed either prior to bidding or by amendment without prior RUS approval, but the actual amendment would not be subject to RUS approval. Other commenters suggested that a RUS approved form of contract should only be required if RUS approval of the contract is required. RUS disagrees with this. RUS has eliminated many of the requirements for RUS approval of contracts based on the requirement that the borrower use certain forms and procedures for other contracts. This also applies to the amendment forms, although RUS has determined that special requirements for amendments for payment for material delivered are not necessary, so Sec. 1726.26, along with RUS Form 800, have been deleted. Documents Submitted to RUS Many commenters suggested that certain of the documents submitted to RUS are unnecessary. With regard to ``Proof of Insurance,'' RUS agrees and has deleted this requirement. RUS believes that the remaining documents to be submitted are needed to assure that loan funds are being used properly. Procurement Procedures Several commenters requested clarification of the applicability of some of the procedures and changes to some of the details of the requirements. Several changes have been made in this area. Other commenters suggested that the informal bidding procedure and the multiparty negotiation procedure be changed to allow clarifying discussions or negotiations, respectively, with only the apparent low evaluated bidder. This change has not been made. RUS believes that meeting with at least the three apparent lowest evaluated bidders will insure adequate competition and fairness without undue burden on the borrower. Forms A number of commenters suggested that computer generated versions of RUS standard contract forms should be acceptable in addition to the preprinted versions. RUS agrees with this only for those forms which are primarily tables (Forms 251 and 254). For the remainder of the contract forms, RUS continues to believe that the most effective means of maintaining accurate and recognizable forms is to continue to use the preprinted version. Commenters suggested that RUS Form 792 be modified to allow multi- year contracting and to allow RUS Form 786 to be modified to be a ``purchase only'' contract form. These changes have been made. One commenter suggested that all contract bonds use RUS Form 168c instead of RUS Form 168b. Form 168c is currently used when the contractor's surety has accepted a Small Business Administration guarantee and the contract is for one million dollars or less. RUS Form 168b has proved to be a satisfactory bond form for other contracts, so RUS has determined that it will require the RUS Form 168b where the Form 168c is not applicable. A number of other suggestions were made regarding changes to the contract forms. Some minor changes have been made, but RUS intends to thoroughly review and revise these forms in the near future, so other comments will be considered at that time. Two commenters suggested that RUS prepare a standard form for ``Engineer-Procure-Construct'' (EPC) or ``Turnkey'' type projects. RUS's experience with such projects indicate that each one tends to be unique and not well suited to a standard contract form, so therefore, no attempt has been made to develop such a standard form at this time. Indemnification RUS requires borrowers to use standard contract forms for certain construction, material supply, equipment supply, architectural services, and engineering services contracts. The construction contract forms contain a standard indemnification clause (also called ``hold harmless'') pursuant to which the contractor agrees to indemnify the owner against certain risks. Some borrowers have requested approval to incorporate an alternative indemnification clause in certain contracts. They believe that it provides them indemnification in addition to that afforded by the currently required clause. Some contractors have expressed concern about the extent of their potential liability under such a modified indemnification provision, particularly for certain actions of the owner. RUS has determined that it is in the Government's and the borrowers' best interest to have a reasonable and balanced indemnification provision: one that provides adequate protection for the borrower while not placing an unreasonable business risk on the contractor. An indemnification provision that does not adequately protect the borrower could expose the borrower to liability for damages which could endanger the Government's loan security. An indemnification provision which places an unreasonable business risk on the contractor could result in qualified, capable contractors declining to bid under such conditions, which could result in reduced competition and higher costs. It could even result in the borrower being exposed to increased liability if only financially weak contractors bid, since the contractor may be financially unable to meet its indemnification obligations. In response to these requests, ``Permitted Contract Modifications--Indemnification,'' was published as a proposed rule at 59 FR 4603, February 1, 1994. This final rule incorporates the changes concerning the [[Page 10155]] indemnification clause in the contract forms proposed by both of these rules. In response to the proposed ``Permitted Contract Modifications-- Indemnification,'' the issue which drew the most comments was whether to extend the indemnification to the borrower's engineer. Nine organizations (generally engineers or engineering organizations) are in favor of including the engineer, while two commenters opposed their inclusion. Since the engineer is independent of the borrower and has no direct contractual relationship with the contractor, RUS has determined that a clear separation should be maintained between the engineer and the contractor. Therefore, the indemnification clause does not extend to the engineer. Many commenters expressed the view that the borrower (owner) should be named as Additional Insured on the contractor's liability insurance policies. Others felt that the engineer should also be named as Additional Insured. It appears that naming the borrower (but not the engineer) as Additional Insured will further RUS'S overall objective without adding significantly to the cost of the contract. RUS has decided, therefore, to add a requirement to name the owner as Additional Insured on the contractor's liability insurance policies. Several commenters suggested minor wording changes under certain circumstances to insure that the language accomplishes its purpose. A section has been added under Section H allowing the borrower to make certain changes in the language if appropriate in its jurisdiction. One commenter found the indemnification language to be ``weak at best,'' while two commenters felt that it placed too much burden on the contractor. RUS believes that the final language included in this rule reasonably balances the interests of the borrower, the engineer, and the contractor. Other Comments A number of comments were received suggesting or requesting clarifications or corrections to the language of the rule. These have generally been made, although certain areas which appeared reasonably clear were not clarified further. List of Subjects in 7 CFR Part 1726 Electric power, Loan programs--energy, Reporting and recordkeeping requirements, Rural areas. In view of the above, RUS hereby amends 7 CFR chapter XVII by revising part 1726 to read as follows: PART 1726--ELECTRIC SYSTEM CONSTRUCTION POLICIES AND PROCEDURES Subpart A--General Sec. 1726.1-1726.9 [Reserved] 1726.10 Introduction. 1726.11 Purpose. 1726.12 Applicability. 1726.13 Waivers. 1726.14 Definitions. 1726.15 ``Buy American''. 1726.16 Debarment and suspension. 1726.17 Restrictions on lobbying. 1726.18 Preloan contracting. 1726.19 Use of competitive procurement. 1726.20 Standards and specifications. 1726.21 New materials. 1726.22 Methods of construction. 1726.23 Qualification of bidders. 1726.24 Written contracts. 1726.25 Subcontracts. 1726.26-1726.34 [Reserved] 1726.35 Submission of documents to RUS. 1726.36 Documents subject to RUS approval. 1726.37 OMB control number. 1726.38-1726.49 [Reserved] Subpart B--Distribution Facilities 1726.50 Distribution line materials and equipment. 1726.51 Distribution line construction. 1726.52-1726.74 [Reserved] Subpart C--Substation and Transmission Facilities 1726.75 General. 1726.76 Substation and transmission line materials and equipment. 1726.77 Substation and transmission line construction. 1726.78-1726.124 [Reserved] Subpart D--Generation Facilities 1726.125 Generating plant facilities. 1726.126-1726.149 [Reserved] Subpart E--Buildings 1726.150 Headquarters buildings. 1726.151-1726.174 [Reserved] Subpart F--General Plant 1726.175 General plant materials. 1726.176 Communications and control facilities. 1726.177-1726.199 [Reserved] Subpart G--Procurement Procedures 1726.200 General requirements. 1726.201 Formal competitive bidding. 1726.202 Informal competitive bidding. 1726.203 Multiparty negotiation. 1726.204 Multiparty unit price quotations. 1726.205 Multiparty lump sum quotations. 1726.206-1726.249 [Reserved] Subpart H--Modifications to RUS Standard Contract Forms 1726.250 General. 1726.251 Prior approved contract modification related to price escalation on transmission equipment, generation equipment, and generation construction contracts. 1726.252 Prior approved contract modification related to liability for special and consequential damages. 1726.253 Prior approved contract modification related to alternative bid provision for payment to contractor for bulk purchase of materials. 1726.254 Prior approved contract modifications related to RUS approval of contracts and amendments and modified bidding requirements. 1726.255 Prior approved contract modifications related to indemnification. 1726.256-1726.299 [Reserved] Subpart I--RUS Standard Forms 1726.300 List of RUS standard contracting forms for electric systems. 1726.301 Use of printed forms. 1726.302 RUS approved forms of contract. 1726.303 Interest on overdue accounts. 1726.304-1726.309 [Reserved] 1726.310 Contractor's bond, RUS Form 168b. 1726.311 Contractor's bond, RUS Form 168c. 1726.312 Construction contract amendment, RUS Form 180. 1726.313 Certificate of completion, contract construction for buildings, RUS Form 181. 1726.314 Certificate of completion, contract construction, RUS Form 187. 1726.315 Equipment contract, RUS Form 198. 1726.316-1726.319 [Reserved] 1726.320 Construction contract, generating, RUS Form 200. 1726.321 Right-of-way clearing contract, RUS Form 201. 1726.322 Transmission system right-of-way clearing contract, RUS Form 203. 1726.323 Certificate (Buy America), RUS Form 213. 1726.324 Waiver and release of lien, RUS Form 224. 1726.325 Certificate of contractor, RUS Form 231. 1726.326 Construction or equipment contract amendment, RUS Form 238. 1726.327 Material receipt, RUS Form 251. 1726.328 Construction inventory (for labor and material contract), RUS Form 254. 1726.329 Contract to construction buildings, RUS Form 257. 1726.330 [Reserved] 1726.331 Bid bond, RUS Form 307. 1726.332-1726.339 [Reserved] 1726.340 Substation and switching station erection contract, RUS Form 764. 1726.341 Electric system communications and control equipment contract, RUS Form 786. 1726.342 Distribution line extension construction contract (labor and materials), RUS Form 790. 1726.343 Distribution line extension construction contract (labor only), RUS Form 792. 1726.344 [Reserved] 1726.345 Certificate of contractor and indemnity agreement (line extensions), RUS Form 792b. 1726.346 Supplemental contract for additional project, RUS Form 792c. 1726.347-1726.350 [Reserved] [[Page 10156]] 1726.351 Electric system construction contract (labor and materials), RUS Form 830. 1726.352 Electric transmission construction contract (labor and materials), RUS Form 831. 1726.353-1726.399 [Reserved] Subpart J--Contract Closeout 1726.400 Final contract amendment. 1726.401 Material contract closeout. 1726.402 Equipment contract closeout. 1726.403 Project construction contract closeout. 1726.404 Non-site specific construction contract closeout. 1726.405 Inventory of work orders (RUS Form 219). Authority: 7 U.S.C. 901 et seq., 1921 et seq.; Pub. L. 103-354, 108 Stat. 3178 (7 U.S.C. 6941 et seq.). Subpart A--General Secs. 1726.1-1726.9 [Reserved] Sec. 1726.10 Introduction. The policies, procedures and requirements included in this part are intended to implement provisions of the standard form of loan documents between the Rural Utilities Service (RUS) and its electric borrowers. Unless prior written approval is received from RUS, borrowers are required to comply with RUS policies and procedures as a condition to RUS providing loans, loan guarantees, or reimbursement of general funds for the construction and improvement of electric facilities. Requirements relating to RUS approval of plans and specifications, duties and responsibilities of the engineer and architect, and engineering and architectural services contracts, are contained in other RUS regulations. The terms ``RUS form'', ``RUS standard form'', ``RUS specification'', ``and RUS bulletin'' have the same meanings as the terms ``REA form'', ``REA standard form'', ``REA specification'', ``and REA bulletin'', respectively, unless otherwise noted. Sec. 1726.11 Purpose. Each borrower is responsible for the planning, design, construction, operation and maintenance of its electric system. RUS, as a secured lender, has a legitimate interest in accomplishing RUS's programmatic objectives, and in assuring that the costs of construction, materials, and equipment are reasonable and economical and that the property securing the loans is constructed adequately to serve the purposes for which it is intended. Sec. 1726.12 Applicability. The requirements of this part apply to the procurement of materials and equipment for use by electric borrowers in their electric systems and to the construction of their electric systems if such materials, equipment, and construction are financed, in whole or in part, with loans made or guaranteed by RUS, including reimbursable projects. In order for general fund expenditures for procurement or construction to be eligible for reimbursement from loan funds, the borrower must comply with the procedures required by this part. In the case of jointly owned projects, RUS will determine on a case by case basis the applicability of the requirements of this part. Sec. 1726.13 Waivers. The Administrator may waive, for good cause on a case by case basis, certain requirements and procedures of this part. RUS reserves the right, as a condition of providing loans, loan guarantees, or other assistance, to require any borrower to make any specification, contract, or contract amendment subject to the approval of the Administrator. Sec. 1726.14 Definitions. Terms used in this part have the meanings set forth in 7 CFR 1710.2. References to specific RUS forms and other RUS documents, and to specific sections or lines of such forms and documents, shall include the corresponding forms, documents, sections and lines in any subsequent revisions of these forms and documents. In addition to the terms defined in 7 CFR 1710.2, the following terms have the following meanings for the purposes of this part: Approval of proposed construction means RUS approval of a construction work plan or other appropriate engineering study and RUS approval, for purposes of system financing, of the completion of all appropriate requirements of part 1794 of this chapter. Architect means a registered or licensed person employed by the borrower to provide architectural services for a project and duly authorized assistants and representatives. Bona fide bid means a bid which is submitted by a contractor on the borrower's list of qualified bidders for the specific contract, prior to bid opening. ``Buy American'' certificate means a certification that the contractor has complied with the ``Buy American'' requirement (see Sec. 1726.15). Competitive procurement means procurement of goods or services based on lowest evaluated bid for similar products or services when three or more bids are received. Construction unit means a specifically defined portion of a construction project containing materials, labor, or both, for purposes of bidding and payment. Contracting committee means the committee consisting of three to five members representing the borrower's management and board of directors and the engineer. The contracting committee represents the borrower during contract clarifying discussions or negotiations under informal competitive bidding or multiparty negotiation, respectively. Encumbrance means the process of approval for advance of loans funds by RUS. Engineer means a registered or licensed person, who may be a staff employee or an outside consultant, to provide engineering services and duly authorized assistants and representatives. Equipment means a major component of an electric system, e.g., a substation transformer, heat exchanger or a transmission structure. Force account construction means construction performed by the borrower's employees. Formal competitive bidding means the competitive procurement procedure wherein bidders submit sealed proposals for furnishing the goods or services stipulated in the specification. Bids are publicly opened and read at a predetermined time and place. If a contract is awarded, it must be to the lowest evaluated responsive bidder (see Sec. 1726.201). Goods or services means materials, equipment, or construction, or any combination thereof. Informal competitive bidding means the competitive procurement procedure which provides for private opening of bids and allows clarifying discussions between the contracting committee and the bidders. During the clarifying discussions any exceptions to the bid documents must be eliminated, or the bid rejected, so that the contract is awarded to the lowest evaluated responsive bidder (see Sec. 1726.202). Material means miscellaneous hardware which is combined with equipment to form an electric system, e.g., poles, insulators, or conductors. Minor error or irregularity means a defect or variation in a bid that is a matter of form and not of substance. Errors or irregularities are ``minor'' if they can be corrected or waived without being prejudicial to other bidders and when they do not affect the price, quantity, quality, or timeliness of construction. A minor error or [[Page 10157]] irregularity is not an exception for purposes of determining whether a bid is responsive. Minor modification or improvement means a project where the cost is less than $50,000, exclusive of the cost of owner furnished materials. Multiparty lump sum quotations means the procurement of goods or services on a lump sum basis, based on the lowest evaluated offering, when three or more offers are received. (See Sec. 1726.205). Multiparty negotiation means the procurement procedure where three or more bids are received and provides for negotiations between the contracting committee and each bidder to determine the bid which is in the borrower's best interest (see Sec. 1726.203). Multiparty unit price quotations means the procurement of goods or services on a unit price basis, based on the lowest evaluated offering, when three or more offers are received (See Sec. 1726.204). Net utility plant (NUP) means Part C, Line 5 of RUS Form 7 for distribution borrowers or Section B, Line 5 of RUS Form 12a for power supply borrowers for the immediately preceding calendar year. Procurement method means a procedure, including, but not limited to, those in subpart G of this part, that a borrower uses to obtain goods and services. Owner furnished materials means materials or equipment or both supplied by the borrower for installation by the contractor. Responsive bid means a bid with no exceptions or non-minor errors or irregularities on any technical requirement or in the contract terms and conditions. RUS approval means written approval by the Administrator or a representative with delegated authority. RUS approval must be in writing, except in emergency situations where RUS approval may be given over the telephone followed by a confirming letter. Unit prices means individual prices for specific construction units defined in accordance with RUS approved units specified in RUS standard contract forms. Sec. 1726.15 ``Buy American''. The borrower must ensure that all materials and equipment financed with loans made or guaranteed by RUS complies with the ``Buy American'' provisions of the Rural Electrification Act of 1938 (7 U.S.C. 903 note), as amended by the North American Free Trade Agreement Implementation Act (107 Stat 2129). When a ``Buy American'' certificate is required by this part, this must be on RUS Form 213. Sec. 1726.16 Debarment and suspension. Borrowers are required to comply with certain requirements on debarment and suspension in connection with procurement activities as set forth in part 3017 of this title, particularly with respect to lower tier transactions, e.g., procurement contracts for goods or services. Sec. 1726.17 Restrictions on lobbying. Borrowers are required to comply with certain restrictions and requirements in connection with procurement activities as set forth in part 3018 of this title. Sec. 1726.18 Preloan contracting. Borrowers must consult with RUS prior to entering into any contract for material, equipment, or construction if a construction work plan, general funds, loan or loan guarantee for the proposed work has not been approved. While the RUS staff will work with the borrower in such circumstances, nothing contained in this part is to be construed as authorizing borrowers to enter into any contract before the availability of funds has been ascertained by the borrower and all the requirements of part 1794 of this chapter, Environmental Policies and Procedures for Electric and Telephone Borrowers, have been fulfilled. Sec. 1726.19 Use of competitive procurement. RUS borrowers' procurement is not subject to the provisions of the Federal Acquisition Regulation (48 CFR chapter 1); however, since borrowers receive the benefit of Federal financial assistance borrowers must use competitive procurement to the greatest extent practical. The borrower must use competitive procurement for obtaining all goods or services when a RUS loan or loan guarantee is involved except: (a) As specifically provided for in subparts B through F of this part; or (b) A waiver is granted. Sec. 1726.20 Standards and specifications. All materials, equipment, and construction must meet the minimum requirements of all applicable RUS standards and specifications. (See Part 1728, Electric Standards and Specifications for Materials and Construction, of this chapter, which is applicable regardless of the source of funding.) Sec. 1726.21 New materials. The borrower shall purchase only new materials and equipment unless otherwise approved by RUS, on a case by case basis, prior to the purchase. Sec. 1726.22 Methods of construction. The borrower is generally responsible for determining whether construction will be by contract or force account. If construction is by contract, the borrower must determine whether materials will be supplied by the contractor or will be furnished by the borrower. RUS reserves the right to require contract construction in lieu of force account construction on a case by case basis. Sec. 1726.23 Qualification of bidders. (a) Qualified bidder list (QBL). The borrower shall (acting through its engineer, if applicable) review the qualifications of prospective bidders for contract construction and for material and equipment procurement, and select firms qualified for inclusion on the borrower's list of qualified bidders for each contract. (See also Sec. 1726.16 and Sec. 1726.17.) A bid may not be solicited from a prospective bidder or opened by the borrower unless that bidder has been determined to be a qualified bidder for the contract. When preparing the QBL, in addition to the actual experience of the borrower, if any, in dealing with a prospective bidder, the borrower may solicit information from that bidder or from other parties with firsthand experience regarding the firm's capabilities and experience. It is also important to consider the firm's performance record, safety record, and similar factors in determining whether to include that firm on the QBL, since the borrower may not evaluate these factors when evaluating a bid from a qualified and invited bidder. (b) Conflict of interest. If there is a relationship between the borrower or engineer and a prospective bidder which might cause the borrower or engineer to have or appear to have a conflict of interest, that prospective bidder shall not be included on the QBL unless the engineer discloses the nature of the relationship to the borrower. In the case of the borrower, if its employees or directors have a relationship with a prospective bidder, the prospective bidder shall not be included on the qualified bidders list unless the nature of the relationship is disclosed to the board of directors, and the board of directors specifically approves the inclusion of that bidder in light of the potential for a conflict of interest. Sec. 1726.24 Written contracts. (a) General. Procurement of goods or services must be by written contract or written purchase order. The borrower [[Page 10158]] shall use a RUS Approved Form of Contract for such contracts where required by subparts B through F of this part. (b) Amendments to contracts.--(1) Contract forms. The borrower must use RUS Form 180, Construction Contract Amendment, for any change or addition in a distribution line construction contract. The borrower must use RUS Form 238, Construction or Equipment Contract Amendment, for any change or addition in any other contract for construction, or for materials or equipment. (2) Special considerations. Each time an amendment to a construction contract is executed, the borrower must ensure that contractor's bond is adequate, that all necessary licenses and permits have been obtained, and that any environmental requirements associated with the proposed construction have been met. (3) Amendment approval requirements. (i) If a RUS approved form of contract is required by this part, an amendment must not alter the terms and conditions of the RUS approved form of contract without prior RUS approval. (ii) The borrower must make a contract amendment subject to RUS approval if the underlying contract was made subject to RUS approval and the total amended contract price exceeds 120 percent of the original contract price (excluding any escalation provision contained in the contract). (iii) Contract amendments, except as provided in paragraph (b)(3)(ii) of this section, are not subject to RUS approval and need not be submitted to RUS unless specifically requested by RUS on a case by case basis. Sec. 1726.25 Subcontracts. The contractor or supplier may use RUS Form 282, Subcontract, for subcontracts on construction, material or equipment contracts. Subcontracts are not subject to RUS approval and need not be submitted to RUS unless specifically requested by RUS on a case by case basis. Secs. 1726.26-1726.34 [Reserved] Sec. 1726.35 Submission of documents to RUS. (a) Where to send documents. Documents required to be submitted to RUS under this part are to be sent to the office of the borrower's respective RUS Regional Director, the Power Supply Division Director, or such other office of RUS as designated by RUS (see part 1700 of this chapter.) (b) Borrower certification. When a borrower certification is required by this part, it must be made by the borrower's manager unless the board of directors specifically authorizes another person to make the required certification. In such case, a certified copy of the specific authorizing resolution must accompany the document or be on file with RUS. (c) Contracts requiring RUS approval. The borrower shall submit to RUS three copies of each contract that is subject to RUS approval under subparts B through F of this part. At least one copy of each contract must be an original signed in ink (i.e., no facsimile signature). Each contract submittal must be accompanied by: (1) A bid tabulation and evaluation and, if applicable, a written recommendation of the architect or engineer. (2) For awards made under the informal competitive bidding procedure or the multiparty negotiation procedure, a written recommendation of the contracting committee (See Secs. 1726.202 and 1726.203). (3) Three copies of an executed contractor's bond on RUS approved bond forms as required in the contract form (at least one copy of which must be an original signed in ink) and one copy of the bid bond or facsimile of the certified check. (4) A certification by the borrower or chairperson of the contracting committee, as applicable, that the appropriate bidding procedures were followed as required by this part. (5) A certified copy of the board resolution awarding the contract. (6) Evidence of clear title to the site for substations and headquarters construction contracts, if not previously submitted. (7) Documentation that all reasonable measures were taken to assure competition if fewer than three bids were received. (d) Contract amendments requiring RUS approval. The borrower must submit to RUS three copies of each contract amendment (at least one copy of which must be an original signed in ink) which is subject to RUS approval under Sec. 1726.24(b). Each contract amendment submittal to RUS must be accompanied by: (1) A certified copy of the board resolution approving the amendment; and (2) A bond extension, where necessary. (e) Encumbrance of loan or loan guarantee funds. (1) For contracts subject to RUS approval, the submittals required under paragraph (c) of this section will initiate RUS action to encumber loan or loan guarantee funds for such contracts. (2) For contracts not subject to RUS approval (except for generation projects), loan or loan guarantee funds will normally be encumbered using RUS Form 219, Inventory of Work Orders, after closeout of the contracts. In cases where the borrower can show good cause for a need for immediate cash, the borrower may request encumbrance of loan or loan guarantee funds based on submittal of a copy of the executed contract, provided it meets all applicable RUS requirements. (3) For generation project contracts not subject to RUS approval, the borrower must submit to RUS the following documentation: (i) A brief description of the scope of the contract, including contract identification (name, number, etc.); (ii) Contract date; (iii) Contractor's name; (iv) Contract amount; (v) Bidding procedure used; (vi) Borrower certification that: (A) The board of directors approved the contract; (B) The bidding procedures and contract award for each contract were in conformance with the requirements of Part 1726, Electric System Construction Policies and Procedures; (C) If a RUS approved form of contract is required by this part, the terms and conditions of the RUS approved form of contract have not been altered; (D) If RUS has approved plans and specifications for the contract, the contract was awarded on the basis of those plans and specifications; and (E) No restriction has been placed on the borrower's right to assign the contract to RUS or its successors. (4) Contract amendments. (i) For amendments subject to RUS approval, the submittals required under paragraph (c) of this section will initiate RUS action to encumber loan or loan guarantee funds for contract amendments requiring RUS approval. (ii) For amendments not subject to RUS approval (except generation projects), loan or loan guarantee funds will normally be encumbered using RUS Form 219, Inventory of Work Orders, after closeout of the contracts. In cases where the borrower can justify a need for immediate cash, the borrower may request encumbrance of loan or loan guarantee funds based on submittal of a copy of the executed amendment, providing it meets all applicable RUS requirements. (iii) For each generation project contract amendment not subject to RUS approval, the borrower must submit to RUS the following information and documentation: (A) The contract name and number; [[Page 10159]] (B) The amendment number; (C) The amendment date; (D) The dollar amount of the increase or the decrease of the amendment; (E) Borrower certification that: (1) The amendment was approved in accordance with the policy of the board of directors (the borrower must ensure that RUS has a certified copy of the board resolution establishing such policy); (2) If a RUS approved form of contract is required by this part, the terms and conditions of the RUS approved form of contract has not been altered; and (3) No restriction has been placed on the borrower's right to assign the contract to RUS or its successors. Sec. 1726.36 Documents subject to RUS approval. Unless otherwise indicated, the borrower shall make all contracts and amendments that are subject to RUS approval effective only upon RUS approval. Sec. 1726.37 OMB control number. The collection of information requirements in this part have been approved by the Office of Management and Budget and assigned OMB control number 0572-0107. Secs. 1726.38-1726.49 [Reserved] Subpart B--Distribution Facilities Sec. 1726.50 Distribution line materials and equipment. (a) Contract forms. (1) The borrower shall use RUS Form 198, Equipment Contract, for purchases of equipment where the total cost of the contract is $500,000 or more. (2) The borrower may, in its discretion, use RUS Form 173, Materials Contract, RUS Form 198, Equipment Contract, or a written purchase order for purchases of equipment of less than $500,000 and for all materials. (b) Standards and specifications. Distribution line materials and equipment must meet the minimum requirements of RUS standards as determined in accordance with the provisions of part 1728 of this chapter, Electric Standards and Specifications for Materials and Construction. The borrower must obtain RUS approval prior to purchasing any unlisted distribution line material or equipment of the types listed in accordance with the provisions of part 1728 of this chapter. (c) Procurement procedures. It is the responsibility of each borrower to determine the procurement method that best meets its needs for the purchase of material and equipment to be used in distribution line construction. (d) Contract approval. Contracts for purchases of distribution line materials and equipment are not subject to RUS approval and need not be submitted to RUS unless specifically requested by RUS on a case by case basis. Sec. 1726.51 Distribution line construction. (a) Contract forms. The borrower must use RUS Form 201, 790, 792, or 830, as outlined in this paragraph (a), for distribution line construction, except for minor modifications or improvements. (1) The borrower may use RUS Form 790, Distribution Line Extension Construction Contract (Labor and Materials), or RUS Form 792, Distribution Line Extension Construction Contract (Labor only) under the following circumstances: (i) For contracts for which the borrower supplies all materials and equipment; or (ii) For non-site specific construction contracts accounted for under the work order procedure; or (iii) If neither paragraph (a)(1)(i) or (a)(1)(ii) of this section are applicable, the borrower may use RUS Form 790 or 792 for contracts, up to a cumulative total of $250,000 or one percent of NUP, whichever is greater, per calendar year of distribution line construction, exclusive of the cost of owner furnished materials and equipment (2) The borrower must use RUS Form 830, Electric System Construction Contract (Labor and Materials), for all other distribution line construction. Where distribution lines are being constructed incidental to transmission line construction, the borrower must use RUS Form 831, Electric Transmission Construction Contract. (3) The borrower must use RUS Form 201, Right-of-Way Clearing Contract, for new distribution line construction right-of-way clearing when done separately from work performed under RUS Form 830. (b) Procurement procedures. (1) It is the responsibility of each borrower to determine the procurement method that best meets its needs to award contracts in amounts of up to a cumulative total of $250,000 or one percent of NUP, whichever is greater, per calendar year of distribution line construction (including minor modifications or improvements), exclusive of the cost of owner furnished materials and equipment. (2) In addition to the cumulative total stipulated in paragraph (b)(1) of this section, a borrower may use Multiparty Unit Price Quotations to award contracts in amounts of up to a cumulative total of $350,000 or 1.5 percent of NUP, whichever is greater, per calendar year of distribution line construction (including minor modifications or improvements), exclusive of the cost of owner furnished materials and equipment. (3) The borrower shall use formal competitive bidding for all other distribution line contract construction. The amount of contracts bid using the formal competitive bidding procedure do not apply to the cumulative total stipulated in paragraph (b)(1) of this section. (4) An amendment which increases the scope of the contract by adding a project is not considered competitively bid, therefore, the amount of that amendment does apply to the cumulative total stipulated in paragraph (b)(1) of this section. (c) Contract approval. Contracts for distribution line construction are not subject to RUS approval and need not be submitted to RUS unless specifically requested by RUS on a case by case basis. Secs. 1726.52-1726.74 [Reserved] Subpart C--Substation and Transmission Facilities Sec. 1726.75 General. As used in this part, ``substations'' includes substations, switching stations, metering points, and similar facilities. Sec. 1726.76 Substation and transmission line materials and equipment. (a) Contract forms. (1) The borrower must use RUS Form 198, Equipment Contract, for purchases of equipment where the total cost of the contract is $500,000 or more. (2) The borrower may, in its discretion, use RUS Form 173, Materials Contract, RUS Form 198, Equipment Contract, or a written purchase order for purchases of equipment of less than $500,000 and for all materials. (b) Standards and specifications. Substation and transmission line materials and equipment must meet the minimum requirements of RUS standards as determined in accordance with the provisions of part 1728 of this chapter, Electric Standards and Specifications for Materials and Construction. The borrower must obtain RUS approval prior to purchasing of any unlisted substation or transmission line material or equipment of the types listed in accordance with the provisions of part 1728 of this chapter. (c) Procurement procedures. It is the responsibility of each borrower to determine the procurement method that best meets its needs for purchase of material and equipment to be used in [[Page 10160]] substation and transmission line construction. (d) Contract approval. Contracts for purchases of substation and transmission line materials and equipment are not subject to RUS approval and need not be submitted to RUS unless specifically requested by RUS on a case by case basis. Sec. 1726.77 Substation and transmission line construction. (a) Contract forms. (1) The borrower must use RUS Form 764, Substation Erection Contract, for construction of substations, except for minor modifications or improvements. The borrower must use RUS Form 831, Electric Transmission Construction Contract for projects where substations are incidental to transmission line construction and are to be constructed under the same contract. (2) The borrower must use RUS Form 831, Electric Transmission Construction Contract, for construction of transmission lines (except for minor modifications or improvements). (3) The borrower must use RUS Form 203, Transmission System Right- of-Way Clearing Contract, for new transmission line construction right- of-way clearing when right-of-way clearing is performed separately from work performed under RUS Form 831. (b) Procurement procedures. (1) It is the responsibility of each borrower to determine the procurement method that best meets its needs to award contracts not requiring RUS approval in amounts of up to a cumulative total of $250,000 or one percent of NUP (not to exceed $2,000,000), whichever is greater, per calendar year of substation and transmission line construction (including minor modifications or improvements), exclusive of the cost of owner furnished materials and equipment. (2) The borrower shall use formal competitive bidding for all other contract construction, including all contracts requiring RUS approval. The amount of contracts bid using the formal competitive bidding procedure do not apply to the cumulative total stipulated in paragraph (b)(1) of this section. (3) An amendment which increases the scope of the contract by adding a project is not considered competitively bid, therefore, the amount of that amendment does apply to the cumulative total stipulated in paragraph (b)(1) of this section. (c) Contract approval. Individual contracts in amounts of $250,000 or more or one percent of NUP (not to exceed $500,000 for distribution borrowers or $1,500,000 for power supply borrowers), whichever is greater, exclusive of the cost of owner furnished materials and equipment, are subject to RUS approval. Secs. 1726.78-1726.124 [Reserved] Subpart D--Generation Facilities Sec. 1726.125 Generating plant facilities. This section covers the construction of all portions of a generating plant, including plant buildings and the generator step-up transformer. Generally, the transmission switchyard will be covered under this section during initial construction of the plant. Subpart C of this part covers subsequent modifications to transmission switchyards. Warehouses and equipment service type buildings are covered under subpart E of this part. (a) Contract forms. (1) The borrower must use RUS Form 198, Equipment Contract, for the purchase of generating plant equipment in the amount of $1,500,000 or more and for any generating plant equipment contract requiring RUS approval. (2) The borrower must use RUS Form 200, Construction Contract-- Generating, for generating project construction contracts in the amount of $1,500,000 or more and for any generating project construction contract requiring RUS approval. (3) The borrower may, in its discretion, use other contract or written purchase order forms for those contracts in amounts of less than $1,500,000 and that do not require RUS approval. (b) Plans and specifications. The borrower shall obtain RUS approval of the plans and specifications for generating plant equipment prior to issuing invitations to bid for any contract subject to RUS approval as determined under this subpart and for any contract for generating plant equipment or construction which will cost $1,500,000 or more. Plans and specifications for other equipment and construction contracts do not require RUS approval and need not be submitted to RUS unless specifically requested by RUS on a case by case basis. (c) Procurement procedures. (1) It is the responsibility of each borrower to determine the procurement method that best meets its needs to award contracts in amounts of less than $1,500,000 each. (2) If the amount of the contract is $1,500,000 or more or if the contract requires RUS approval, the borrower must use formal or informal competitive bidding to award the contract. (3) Where formal or informal competitive bidding is not applicable, or does not result in a responsive bid, multiparty negotiation may be used only after RUS approval is obtained. (d) Contract approval. During the early stages of generating plant design or project design, RUS will, in consultation with the borrower and its consulting engineer, identify the specific contracts which require RUS approval based on information supplied in the plant design manual. The following are typical contracts for each type of generating project which will require RUS approval. Although engineering services are not covered by this part, they are listed in this paragraph (d) to emphasize that RUS approval is required for all major generating station engineering service contracts in accordance with applicable RUS rules. For types of projects not shown, such as nuclear and alternate energy projects, RUS will identify the specific contracts which will require RUS approval on a case by case basis. (1) Fossil generating stations. Engineering services, steam generator, turbine generator, flue gas desulfurization system, particulate removal system, electric wiring and control systems, mechanical equipment installation (including turbine installation and plant piping), power plant building (foundation and superstructure), site preparation, coal unloading and handling facilities, main step-up substation, cooling towers, and dams or reservoirs. (2) Diesel and combustion turbine plants. Engineering services, prime mover and generator, building (foundation and superstructure), and electrical control systems. (3) Hydro installations. Engineering services, turbine/generator, civil works and powerhouse construction, electrical control system, and mechanical installation. Secs. 1726.126-1726.149 [Reserved] Subpart E--Buildings Sec. 1726.150 Headquarters buildings. This section includes headquarters buildings such as warehouses and equipment service type buildings. Generating plant buildings are covered under subpart D of this part. (a) Contract forms. The borrower must use RUS Form 257, Contract to Construct Buildings, for all contracts for construction of new headquarters facilities, and additions to, or modifications of existing headquarters facilities (except for minor modifications or improvements). (b) Procurement procedures. A borrower may use Multiparty Lump [[Page 10161]] Sum Quotations to award contracts in amounts of up to a cumulative total of $250,000 or one percent of NUP (not to exceed $1,000,000), whichever is greater, per calendar year of headquarters construction (including minor modifications or improvements.) The borrower must use formal competitive bidding for all other headquarters contract construction. (c) Contract approval. Contracts for headquarters construction are not subject to RUS approval and need not be submitted to RUS unless specifically requested by RUS on a case by case basis. Secs. 1726.151-1726.174 [Reserved] Subpart F--General Plant Sec. 1726.175 General plant materials. This section covers items such as office furniture and equipment; transportation equipment and accessories, including mobile radio systems, stores and shop equipment, laboratory equipment, tools and test equipment. (a) Contract forms. The borrower may, in its discretion, use RUS Form 173, Material Contract, RUS Form 198, Equipment Contract, or a written purchase order. (b) Procurement procedures. It is the responsibility of each borrower to determine the procurement method that best meets its needs for purchase of general plant material and equipment. (c) Contract approval. Contracts for the purchase of general plant items are not subject to RUS approval and need not be submitted to RUS unless specifically requested by RUS on a case by case basis. Sec. 1726.176 Communications and control facilities. This section covers the purchase of microwave and power line carrier communications systems, load control, and supervisory control and data acquisition (SCADA) systems. Mobile radio systems are covered as general plant materials in Sec. 1726.175. (a) Power line carrier systems. Power line carrier equipment will frequently be purchased as part of a substation and will be included in the complete substation plans and specifications. When purchased in this manner, the requirements of subpart C of this part, Substation and Transmission Facilities, will apply. If obtained under a contract for only a power line carrier system, the requirements of paragraph (b) of this section apply. (b) Load control systems, communications systems, and SCADA systems--(1) Contract forms. The borrower must use RUS Form 786, Electric System Communication and Control Equipment Contract. This form may be modified to be a ``purchase only'' contract form. (2) Procurement procedures. (i) It is the responsibility of each borrower to determine the procurement method that best meets its needs to award contracts not requiring RUS approval in amounts of up to a cumulative total of $250,000 or one percent of NUP (not to exceed $2,000,000), whichever is greater, per calendar year of communications and control facilities construction (including minor modifications or improvements.), exclusive of the cost of owner furnished materials and equipment. (ii) The borrower must use multiparty negotiation for all other communications and control facilities contract construction, including all contracts requiring RUS approval. The amount of contracts bid using the multiparty negotiation procedure do not apply to the cumulative total stipulated in paragraph (b)(2)(i) of this section. (iii) An amendment which increases the scope by adding a project is not considered competitively bid, therefore, the amount of that amendment does apply to the cumulative total stipulated in paragraph (b)(2)(i) of this section. (3) Contract approval. Individual contracts in amounts of $250,000 or more or one percent of NUP (not to exceed $500,000 for distribution borrowers or $1,500,000 for power supply borrowers), whichever is greater, exclusive of the cost of owner furnished materials and equipment, are subject to RUS approval. Secs. 1726.177-1726.199 [Reserved] Subpart G--Procurement Procedures Sec. 1726.200 General requirements. The borrower must use the procedures described in this subpart where such procedures are required under subparts B through F of this part. The borrower must ensure that arrangements prior to announcement of the award of the contract are such that all bidders are treated fairly and no bidder is given an unfair advantage over other bidders. Sec. 1726.201 Formal competitive bidding. Formal competitive bidding is used for distribution, transmission, and headquarters facilities, and may be used for generation facilities. The borrower must use the following procedure for formal competitive bidding: (a) Selection of qualified bidders. The borrower (acting through its engineer, if applicable) will compile a list of qualified bidders for each proposed contract. The borrower will send invitations to bid only to persons or organizations on its QBL for the specific project (see Sec. 1726.23). (b) Invitations to bid. The borrower (acting through its engineer, if applicable) is responsible for sending out invitations to prospective bidders, informing them of scheduled bid openings and taking any other action necessary to procure full, free and competitive bidding. The borrower should send out a sufficient number of invitations in order to assure adequate competition and so that at least three bids will be received. Subject to the foregoing criteria, the determination of how many and which bidders will be permitted to bid will be the responsibility of the borrower. (c) Evaluation basis. Any factors, other than lowest dollar amount of the bid, which are to be considered in evaluating the proposals of qualified bidders (e.g., power consumption, losses, etc.) must be stated in the ``Notice and Instructions to Bidders.'' The borrower will not evaluate a bidder's performance record, safety record, and similar factors when evaluating a bid from a qualified and invited bidder. Such factors are to be considered when determining whether to include a particular bidder on the qualified bidders list. (d) Handling of bids received. The borrower or the engineer, as applicable, will indicate, in writing, the date and time of receipt by the borrower or the engineer on the outside envelope of each bid and all letters and other transmittals amending or modifying the bids. Any bid received at the designated location after the time specified must be returned to the bidder unopened. (e) Bid openings. Bid openings are generally conducted by the engineer in the presence of bidders and a representative of the borrower and the borrower's attorney. Each bona fide bid must be opened publicly and reviewed for any irregularities, errors, or exceptions. It must be verified that any addendum or supplement to the specification has been acknowledged by the bidder. The adequacy of bid bonds or certified checks must be verified at this time. (f) Conditions affecting acceptability of bids. The borrower must take the following specified action if any of the following exist: (1) Fewer than three bona fide bids received. If fewer than three bona fide bids are received for the contract project, the borrower must determine that all reasonable measures have been taken to assure competition prior to awarding the contract. This [[Page 10162]] determination must be documented and such documentation submitted to RUS where required by subpart A of this part. The borrower may, however, elect to reject all bids, make changes in the specification or the qualified bidders list or both and invite new bids. (2) Significant error or ambiguity in the specification. If a significant error or ambiguity in the specification is found which could result in the bidders having varying interpretations of the requirements of the bid, the borrower must either issue an addendum to each prospective bidder correcting the error or ambiguity before bids are received, or reject all bids and correct the specification. If a significant error or ambiguity in the specification is discovered after the bids are opened, the borrower must reject all bids, correct the specification and invite new bids. (3) Minor errors or omissions in the specification. If minor errors or omissions in the specification are found, the borrower must issue an addendum to each prospective bidder correcting the error or omission prior to opening any bids. After bid opening, the error or omission must be corrected in the executed contract. (4) Minor errors or irregularities in bid. The borrower may waive minor errors or irregularities in any bid, if the borrower determines that such minor errors or irregularities were made through inadvertence. Any such minor errors or irregularities so waived must be corrected on the bid in which they occur prior to the acceptance thereof by the borrower. (5) Non-minor error or irregularity in bid. If a bid contains a non-minor error or irregularity, the bid must be rejected and the bid price must not be disclosed. (6) Unbalanced bid. If a bid contains disproportionate prices between labor and materials or between various construction units, the borrower may reject the bid. (7) No acceptable price quoted. If none of the bidders quote an acceptable price, the borrower may reject all bids. (g) Evaluating bids. The borrower (acting through the engineer, if applicable) must conduct the evaluation of bids on the basis of the criteria set out in the ``Notice and Instructions to Bidders.'' The contract, if awarded, must be awarded to the bidder with the lowest evaluated responsive bid. (h) Announcement of bids. If possible, the borrower will announce bids at the bid opening. However, where extensive evaluation is required, the borrower may elect to adjourn and make formal written announcement to all bidders at a later time. Any discrepancy in a rejected bid must be indicated in the bid announcement. (i) Award of contract. Upon completion of the bid evaluations and based upon the findings and recommendations of the borrower's management and engineer, the borrower's board of directors will either: (1) Resolve to award the contract to the lowest evaluated responsive bidder; or (2) Reject all bids. (j) Certification by the borrower and its engineer. The borrower shall certify and the engineer shall certify as follows: ``The procedures for formal competitive bidding, as described in 7 CFR 1726.201, were followed in awarding this contract.'' The certification executed by and on behalf of the borrower and its engineer shall be submitted to RUS in writing where required by subpart A of this part. Sec. 1726.202 Informal competitive bidding. Informal competitive bidding may be used for equipment purchases and generation construction. The borrower must use the following procedure for informal competitive bidding: (a) Selection of qualified bidders. The borrower (acting through its engineer, if applicable) will compile a list of qualified bidders for each proposed contract. The borrower will send invitations to bid only to persons or organizations on its qualified bidder list for the specific project (see Sec. 1726.23). (b) Invitations to bid. The borrower (acting through its engineer, if applicable) is responsible for sending out invitations to prospective bidders, informing them of scheduled bid openings and any other action necessary to procure full, free and competitive bidding. In any event, however, sufficient invitations need to be sent out to assure competition and that at least three bids will be received. Subject to the criteria in the preceding sentence, the determination of how many and which bidders will be permitted to bid will be the responsibility of the borrower. (c) Notice and instructions to bidders. The borrower must indicate in the ``Notice and Instructions to Bidders'' section of the bid documents that bids will be opened privately. The borrower may elect to conduct clarifying discussions with the bidders. If such clarifying discussions are held, at least the three apparent low evaluated bidders must be given an equal opportunity to resolve any questions related to the substance of the bidder's proposal and to arrive at a final price for a responsive bid. (d) Evaluation basis. Any factors, other than lowest dollar amount of the bid, which are to be considered in evaluating the proposals of qualified bidders (e.g., power consumption, losses, etc.) must be stated in the ``Notice and Instructions to Bidders.'' The borrower will not evaluate a bidder's performance record, safety record, and similar factors when evaluating a bid from a qualified and invited bidder. Such factors are to be considered when determining whether to include a particular bidder on the qualified bidders list. (e) Handling of bids received. The borrower or the engineer, as applicable, will indicate, in writing, the date and time of receipt by the borrower or the engineer on the outside envelope of each bid and all letters and other transmittals amending or modifying the bids. Any bid received at the designated location after the time specified must be returned to the bidder unopened. (f) Bid opening. The contracting committee will conduct the bid opening in private. The contracting committee will open each bona fide bid which has been received prior to the deadline, and review it for any irregularities, errors, or exceptions. It must be verified that any addendum to the specification has been acknowledged by each bidder. The adequacy of bid bonds or certified checks must also be verified. (g) Conditions affecting acceptability of bids. The borrower must take the following specified action if any of the following exist: (1) Fewer than three bona fide bids received. If fewer than three bona fide bids are received for the contract project, the borrower must determine that all reasonable measures have been taken to assure competition prior to awarding the contract. This determination must be documented and such documentation submitted to RUS where required by subpart A of this part. The borrower may, however, elect to reject all bids, make changes in the specification or the qualified bidders list or both and invite new bids. (2) Significant error or ambiguity in the specification. If a significant error or ambiguity in the specification is found which could result in the bidders having varying interpretations of the requirements of the bid, the borrower must either issue an addendum to each prospective bidder correcting the error or ambiguity before bids are received, or reject all bids and correct the specification. If a significant error or ambiguity in the specification is discovered after the bids are opened, the borrower must reject all bids, correct the specification and invite new bids. [[Page 10163]] (h) Clarification of proposals. The contracting committee may elect not to hold any clarifying discussions and recommend awarding the contract to the low responsive bidder. Otherwise, the contracting committee must give at least each of the three apparent lowest evaluated bidders an equal opportunity to participate in discussions for the purpose of resolving questions regarding the specification and contract terms and to arrive at a final price. Neither prices of other bids nor relative ranking of any bidder are to be revealed under any circumstances. Such discussions may be held by telephone or similar means provided at least each of the three apparent lowest evaluated bidders have an equal opportunity to participate. Upon completion of the clarifying discussions, the contracting committee will determine the lowest evaluated responsive bid. If no bids are responsive after the contracting committee has completed clarifying discussions, no contract award can be made under the informal bidding procedure. (i) Award of the contract. Upon completion of the bid evaluations, the contracting committee will promptly report all findings and recommendations to the borrower's board of directors. The board will either: (1) Resolve to award the contract to the lowest evaluated responsive bidder; or (2) Reject all bids. (j) Certifications by the contracting committee. The chairperson of the contracting committee shall certify as follows: ``The procedures for informal competitive bidding as described in 7 CFR 1726.202 were followed in awarding this contract.'' The certification executed by the chairperson of the contracting committee shall be submitted to RUS in writing where required by subpart A of this part. Sec. 1726.203 Multiparty negotiation. Multiparty negotiation may only be used where permitted under subpart F of this part or where prior RUS approval has been obtained. The borrower must use the following procedure for multiparty negotiation: (a) Selection of qualified bidders. The borrower (acting through its engineer, if applicable) will compile a list of qualified bidders for each proposed contract. The borrower will send invitations to bid only to persons or organizations on its qualified bidder list for the specific project (see Sec. 1726.23). (b) Invitations to bid. The borrower (acting through its engineer, if applicable) is responsible for sending out invitations to prospective bidders, informing them of scheduled bid openings and any other action necessary to procure full, free and competitive bidding. In any event, however, sufficient invitations need to be sent out to assure competition and so that at least three bids will be received. Subject to the criteria in the preceding sentence, the determination of how many and which bidders will be permitted to bid will be the responsibility of the borrower. (c) Notice and instructions to bidders. The borrower must indicate in the ``Notice and Instructions to Bidders'' section of the bid documents that bids will be opened privately. The borrower may elect to conduct negotiations with the bidders. If such negotiations are held, at least the three apparent low evaluated bidders must be given an equal opportunity to resolve any questions related to the substance of the bidder's proposal and to arrive at a final price. (d) Evaluation basis. Any factors, other than lowest dollar amount of the bid, which are to be considered in evaluating the proposals of qualified bidders (e.g., power consumption, losses, etc.) must be stated in the ``Notice and Instructions to Bidders.'' The borrower will not evaluate a bidder's performance record, safety record, and similar factors when evaluating a bid from a qualified and invited bidder. Such factors are to be considered when determining whether to include a particular bidder on the qualified bidders list. (e) Handling of bids received. The borrower or the engineer, as applicable, will indicate, in writing, the date and time of receipt by the borrower or the engineer on the outside envelope of each bid and all letters and other transmittals amending or modifying the bids. Any bid received at the designated location after the time specified must be returned to the bidder unopened. (f) Bid opening. The contracting committee will conduct the bid opening in private. The contracting committee will open each bona fide bid which has been received prior to the deadline, and review it for any irregularities, errors, or exceptions. It must be verified that any addendum to the specification has been acknowledged by each bidder. The adequacy of bid bonds or certified checks must also be verified. (g) Conditions affecting acceptability of bids. The borrower must take the following specified action if any of the following exist: (1) Fewer than three bona fide bids received. If fewer than three bona fide bids are received for the contract project, the borrower must determine that all reasonable measures have been taken to assure competition prior to awarding the contract. This determination must be documented and such documentation submitted to RUS where required by subpart A of this part. The borrower may, however, elect to reject all bids, make changes in the specification or the qualified bidders list or both and invite new bids. (2) Significant error or ambiguity in the specification. If a significant error or ambiguity in the specification is found which could result in the bidders having varying interpretations of the requirements of the bid, the borrower must either issue an addendum to each prospective bidder correcting the error or ambiguity before bids are received, or reject all bids and correct the specification. If a significant error or ambiguity in the specification is discovered after the bids are opened, the borrower must reject all bids, correct the specification and invite new bids. (h) Negotiations. The contracting committee may elect not to hold any negotiations and recommend award of the contract. Otherwise, the contracting committee must give at least each of the three apparent lowest evaluated bidders an equal opportunity to participate in negotiations for the purpose of resolving questions regarding the specification and contract terms and to arrive at a final price. Neither prices of other bids nor relative ranking of any bidder are to be revealed under any circumstances. Such discussions may be held by telephone or similar means provided at least each of the three apparent lowest evaluated bidders have an equal opportunity to participate. Upon completion of the negotiations, the contracting committee will determine the bid that is in the borrower's best interest. (i) Award of the contract. Upon completion of the bid evaluations, the contracting committee will promptly report all findings and recommendations to the borrower's board of directors. The board will either: (1) Resolve to award the contract to the selected bidder; or (2) Reject all bids. (j) Certifications by the contracting committee. The chairperson of the contracting committee shall certify as follows: ``The procedures for multiparty negotiation as described in 7 CFR 1726.203 were followed in awarding this contract.'' The certification executed by the chairperson of the contracting committee shall be submitted to RUS in writing where required by subpart A of this part. [[Page 10164]] Sec. 1726.204 Multiparty unit price quotations. The borrower or its engineer must contact a sufficient number of suppliers or contractors to assure competition and so that at least three bids will be received. On the basis of written unit price quotations, the borrower will select the supplier or contractor based on the lowest evaluated cost. Sec. 1726.205 Multiparty lump sum quotations. The borrower or its engineer must contact a sufficient number of suppliers or contractors to assure competition and so that at least three bids will be received. On the basis of written lump sum quotations, the borrower will select the supplier or contractor based on the lowest evaluated cost. Secs. 1726.206-1726.249 [Reserved] Subpart H--Modifications to RUS Standard Contract Forms Sec. 1726.250 General. RUS provides standard contract forms for procurement of materials, equipment, and construction, for contract amendments and subcontracts, and various related forms for use by RUS borrowers. See Sec. 1726.300 for a listing of these forms and how to obtain them. The standard contract forms shall be used by the borrowers in accordance with the provisions of this part. RUS will give prior approval to certain modifications to these forms without changing the applicable requirements for RUS approval. Such approved modifications are set forth in this subpart. These are the only modifications given prior RUS approval. Sec. 1726.251 Prior approved contract modification related to price escalation on transmission equipment, generation equipment, and generation construction contracts. (a) General. Where the borrower encounters reluctance among manufacturers, suppliers, and contractors to bid a firm price on transmission equipment or generation equipment, materials or construction, modifications may be made in the RUS standard form of contracts. These modifications, if applicable, may include, as an alternative to the standard form, provisions for adjusting a base price either upward or downward as determined by changes in specified indexes between the time of the bid and the time the work is performed or materials are procured by the contractor for such work. A large number of labor and materials indexes are published monthly by the Bureau of Labor Statistics (BLS). The borrower (acting through its engineer, if applicable) will select the indexes for the particular item to be used in the price adjustment clause. Suppliers' corporate indexes may not be used. Labor and materials indexes are reported in the BLS's monthly publications entitled ``Employment and Earnings'' and ``Producer Prices and Price Indexes.'' These publications may be ordered through the Superintendent of Documents, U.S. Government Printing Office, Washington, DC 20402, or any of the BLS regional offices. (b) Material and equipment contracts. The approved provisions needed to reflect the modifications to provide for price escalation in the material or equipment contract forms for generation facilities are as follows: (1) Insert new paragraphs in the Notice and Instructions to Bidders as follows: ``Proposals are invited on the basis of firm prices (or prices with a stated maximum percentage escalation) or on the basis of nonfirm prices to be adjusted as provided for below or on both bases. The owner may award the contract on either basis. Nonfirm prices. The prices are subject to adjustment upward or downward based on change in the Bureau of Labor Statistics labor and material indexes. A proportion of ____ percent [the borrower will enter the appropriate percentage amount] of the contract price shall be deemed to represent labor cost and shall be adjusted based on changes in the Bureau of Labor Statistics, Average Hourly Earnings Rate____ [the borrower will enter the appropriate BLS index] from the month in which the bids are opened to the month in which the labor is incorporated in the equipment or materials. The adjustment for labor costs shall be obtained by applying the percentage of increase or decrease in such index, calculated to the nearest one-tenth of one percent, to the percentage of the contract prices deemed to represent labor costs. A portion of ____ percent [the borrower will enter the appropriate percentage amount] of the contract price shall be deemed to represent material costs and shall be adjusted based on changes in the Bureau of Labor Statistics, material index ____ [the borrower will enter the appropriate BLS index] for the period and in a manner similar to the labor cost adjustment.'' (2) Insert the following in the contract documents under the ``Proposal'' section: ``Firm Price $________ Nonfirm Price $________'' (3) For equipment that uses a large quantity of insulating oil, the borrower may insert the following in the contract documents under the ``Proposal'' section: ``The price for insulating oil shall be adjusted upward or downward based on the change in the Bureau of Labor Statistics Refined Petroleum Rate (057) from the month in which the bids are opened to the month in which the oil is purchased by the equipment supplier. Contracts shall be evaluated based on an estimated cost of ____ cents per gallon [the borrower will enter the appropriate cost] for oil. Such adjustment, if any, shall not change the contract amount for purpose of applying any other adjustments to the contract prices.'' (c) Construction contracts. The approved provisions needed to reflect the modifications to provide for price escalation in the construction contract forms for generation facilities are as follows: (1) Insert new paragraphs in the ``Notice and Instructions'' to Bidders as follows: ``Proposals are invited on the basis of firm prices (or prices with a stated maximum percentage escalation) or on the basis of nonfirm prices to be adjusted as provided for below or on both bases. The owner may award the contract on either basis. Nonfirm Prices--The prices are subject to adjustment upward or downward based on changes in the Bureau of Labor Statistics labor and material indexes. A proportion of ____ percent [the borrower will enter the appropriate percentage amount] of the contract price shall be deemed to represent shop labor costs and shall be adjusted based on changes in the Bureau of Labor Statistics, Average Hourly Earnings Rate ____ [the borrower will enter the appropriate BLS index] from the month in which bids are opened to the month in which the work is accomplished. The adjustment for shop labor costs shall be obtained by applying the percentage increase or decrease in such index, to the percentage of each partial payment deemed to represent shop labor costs. A portion of ____ percent [the borrower will enter the appropriate percentage amount] of the contract prices shall be deemed to represent material costs and shall be adjusted based on changes in the Bureau of Labor Statistics, Producer Price Index, ____ [the borrower will enter the appropriate BLS index] for the period and in a manner similar to the shop labor costs adjustment. A portion of ____ percent [the borrower will enter the appropriate percentage amount] of the contract price shall be deemed to represent field labor costs and shall be adjusted based on changes in the Bureau of Labor Statistics, Average Hourly Earnings Rate ____ [the borrower will enter the appropriate BLS index], for the period and in a manner similar to the shop labor costs adjustment.'' (2) Insert the following in the contract documents under the ``Proposal'' section: ``Firm Price $________ Nonfirm Price $________'' Sec. 1726.252 Prior approved contract modification related to liability for special and consequential damages. This section applies only to transmission equipment purchases and [[Page 10165]] generation contracts. Where the borrower anticipates difficulty in obtaining responsive bids on RUS standard contract forms due to a lack of limitation with respect to special and consequential damages, and where the borrower believes that such a modification will encourage competition through the receipt of an alternative bid which limits the bidder's liability for special and consequential damages, the borrower may make the following approved phrase modifications in the RUS standard contract form on which the borrower solicits bids: (a) Insert new paragraphs in the ``Notice and Instructions to Bidders'' as follows: ``Proposals are invited on the basis of alternative Liability Clauses Numbers 1 and 2. The Owner will determine on which Liability Clause basis the award will be made. Any other liability clauses in the proposal or any other modifications will be considered not responsive and unacceptable. These Liability Clauses are defined as follows: Liability Clause Number 1. This will include unmodified all of the standard terms and conditions of the form of contract furnished by the Owner and attached hereto. Liability Clause Number 2. This will include the following paragraph, in addition to all of the standard terms and conditions, otherwise unmodified, of the form of contract furnished by the Owner and attached hereto: `Except for the Seller's willful delay or refusal to perform the contract in accordance with its terms, the Seller's liability to the Owner for special or consequential damages on account of breach of this contract shall not exceed in total an amount equal to ____ percent [the borrower will insert an appropriate percentage between 0 and 100 percent, inclusive] of the contract price.''' (b) Insert the following in the contract documents under the ``Proposal'' section: ``Price $(Based on Liability Clause 1)________ Price $(Based on Liability Clause 2)________'' (c) Insert the following in the acceptance section of the standard contract form: ``This contract is based on Liability Clause Number________.'' (d) In RUS Form 200, the word ``Bidder'' would replace the word ``Seller'' in the Liability Clause in paragraph (a) of this section. Sec. 1726.253 Prior approved contract modification related to alternative bid provision for payment to contractor for bulk purchase of materials. When construction is to be performed over an extended period of time, but large quantities of material are to be purchased by the contractor at the beginning of the project (e.g., cable for URD installations), the borrower may allow alternative bids providing for payment to the contractor of 90 percent of the cost of such materials within 30 days of delivery of those materials at the job site. The borrower will retain the right to award the contract with or without the alternative payment provision, however, the contract still must be awarded on the basis of the lowest evaluated responsive bid for the alternative accepted. Sec. 1726.254 Prior approved contract modifications related to RUS approval of contracts and amendments and modified bidding requirements. It will be necessary for borrowers to make certain modifications to various RUS contract forms to implement the provisions of this part. If a RUS approved form of contract is required to be used by this part and private bid opening is permitted by this part, the ``Notice and Instructions to Bidders'' of the contract form may be modified accordingly. Other modifications are needed to indicate that certain provisions related to RUS approval are not applicable under specified circumstances. These modifications are as follows: (a) RUS Form 173 Materials Contract. No modifications. (b) RUS Form 180 Construction Contract Amendment. No modifications. (c) RUS Form 198 Equipment Contract. For contracts NOT requiring approval of the Administrator (in accordance with subparts B through F of this part) the applicable modifications are as follows: (1) Change Section 5(e) of the ``Equipment Contract'' to read as follows: ``(e) Each and all of the covenants and agreements herein contained shall extend to and be binding upon the successors and assigns of the parties hereto provided, however, the Seller shall not assign this contract or any part hereof without approval in writing of the Purchaser, and further the Seller shall not enter into any contract with any person, firm or corporation for the performance of the Seller's obligations hereunder, or any part thereof, without the approval in writing of the Purchaser.'' (2) Delete Section 5(f) of the ``Equipment Contract.'' (d) RUS Form 200 Construction Contract--Generating. For contracts Not requiring approval of the Administrator (in accordance with subparts B through F of this part) the applicable modifications are as follows: (1) Contractor's Proposal, Article II, Section 3(a), Sentence 2. Delete the words ``and the Administrator.'' (2) Contractor's Proposal, Article II, Section 3(d), Sentence 2. Delete the words ``and approved by the Administrator\1\'' and the associated footnote. (3) Contractor's Proposal, Article VI, Section 7. Change to read as follows: ``Nonassignment of Contract. Except as provided in Section 8 of this Article, the Bidder will not assign this Contract, or any interest in any funds that may become due hereunder, or enter into any contract with any person, firm or corporation, for the performance of the Bidder's obligations hereunder, or any part hereof without the approval in writing of the Owner and the Surety or Sureties, if any.'' (4) Contractor's Proposal, Article VI. Delete Section 10. (5) Acceptance. Delete the words ``Subject to the approval of the Administrator.'' (e) RUS Form 201 Right-of-Way Clearing Contract. No modifications. (f) RUS Form 203 Transmission System Right-of-Way Clearing Contract. For contracts Not requiring approval of the Administrator (in accordance with subparts B through F of this part) the applicable modifications are as follows. (1) Notice and Instructions to Bidders, Section 8. Delete the words ``and such acceptance has been approved by the Administrator.'' (2) Contractor's Proposal, Article II, Section 1(a). Replace the word ``Administrator'' with the word ``Owner'' in two places in the referenced section. (3) Contractor's Proposal, Article II, Section 3(d), Sentence 1. Delete the words ``and with the approval of the Administrator\1\'' and the associated footnote. (4) Contractor's Proposal, Article II, Section 3(d), Sentence 3. Delete the words ``and approved by the Administrator\2\'' and the associated footnote. (5) Contractor's Proposal, Article III, Section 1. Delete the words ``and the Administrator'' in five places in the referenced section. (6) Contractor's Proposal, Article III, Section 1(b). Replace the word ``Administrator'' with the word ``Owner.'' (7) Contractor's Proposal, Article III, Section 1(e). Replace the word ``Administrator'' with the word ``Owner.'' (8) Contractor's Proposal, Article VI, Section 1(d). Delete the words ``and the Administrator.'' (9) Contractor's Proposal, Article VI. Delete Section 10. [[Page 10166]] (10) Acceptance. Delete the words ``Subject to the approval of the Administrator.'' (g) RUS Form 238 Construction or Equipment Contract Amendment. If the contract amendment does not require RUS approval, in accordance with Sec. 1726.24(b), the borrower may delete from RUS Form 238 the following sentence: ``(The Administrator of RUS is hereby authorized to approve this amendment either in whole or in part and to delete such items as do not meet his approval.)'' (h) RUS Form 257 Contract to Construct Buildings. No modifications. (i) RUS Form 282 Subcontracts. The applicable modifications are as follows: (1) Section 6, line 3. Delete the words ``and the Administrator of the Rural Utilities Service (hereinafter called the Administrator).'' (2) Section 7, line 2. Change Section 7, line 2 to read as follows: ``approved in writing by the Owner and the Surety, if any; provided, * * *'' (3) Section 7, line 3. Delete the words ``and the Administrator.'' (j) RUS Form 764 Substation and Switching Station Erection Contract. For contracts NOT requiring approval of the Administrator (in accordance with subparts B through F of this part) the applicable modifications are as follows: (1) Notice and Instructions to Bidders, Section 10. Delete the words ``and such acceptance has been approved by the Administrator.'' (2) Contractor's Proposal, Article II, Section 1.a. Replace the word ``Administrator'' with the word ``Owner'' in two places in the referenced section. (3) Contractor's Proposal, Article II, Section 1.d, Sentence 1. Delete the words ``and with the approval of the Administrator\1\'' and the associated footnote. (4) Contractor's Proposal, Article II, Section 1.d, Sentence 2. Delete the words ``and approved by the Administrator\2\'' and the associated footnote. (5) Contractor's Proposal, Article III, Section 1. Delete the words ``and the Administrator'' in five places in the referenced section. (6) Contractor's Proposal, Article III, Section 1.b. Replace the word ``Administrator'' with the word ``Owner.'' (7) Contractor's Proposal, Article III, Section 1.e. Replace the word ``Administrator'' with the word ``Owner.'' (8) Contractor's Proposal, Article VI, Section 1.e. Delete the words ``and the Administrator.'' (9) Contractor's Proposal, Article VI. Delete Section 10. (10) Acceptance. Delete the words ``Subject to the approval of the Administrator.'' (k) RUS Form 786 Electric System Communications and Control Equipment Contract (including installation). For contracts NOT requiring approval of the Administrator (in accordance with subparts B through F of this part) the applicable modifications are as follows: (1) Article I, Section 2. Delete the words ``subject to the approval of the Administrator\1\'' and ``and approved by the Administrator\2\'' and the associated footnotes. (2) Article II, Section 1, Sentence 2. Replace the word ``Administrator'' with ``Purchaser.'' (3) Article II, Section 5. Delete the words ``subject to the approval of the Administrator\3\'' and ``subject to the approval of the Administrator\4\'' and the associated footnotes. (4) Article III, Section 2, Sentence 3. Replace the words ``if the Administrator shall so approve'' with the words ``if the Purchaser shall so approve.'' (5) Article VI. Delete Section 7. (6) Acceptance. Delete the words ``Subject to the approval of the Administrator.'' (l) RUS Form 790 Distribution Line Extension Construction Contract (Labor and Materials). No modifications. (m) RUS Form 792 Distribution Line Extension Construction Contract (Labor Only). No modifications. (n) RUS Form 830 Electric System Construction Contract. No modifications. (o) RUS Form 831 Electric Transmission Construction Contract. For contracts NOT requiring approval of the Administrator (in accordance with subparts B through F of this part) the applicable modifications are as follows: (1) Notice and Instructions to Bidders, Section 10. Delete the words ``and such acceptance has been approved by the Administrator.'' (2) Contractor's Proposal, Article II, Section 1.d. Delete the words ``with the approval of the Administrator\1\'' and ``and approved by the Administrator\2\'' and the associated footnotes. (3) Contractor's Proposal, Article II, Section 4.a. Delete the words ``and approved by the Administrator\3\'' and the associated footnote. (4) Contractor's Proposal, Article III, Section 1.a. Sentence 4. Delete the words ``and the Administrator.'' (5) Contractor's Proposal, Article III, Section 1.b. Replace the word ``Administrator'' with the word ``Owner.'' (6) Contractor's Proposal, Article III, Section 1.c. Delete the words ``and the Administrator'' in four places in the referenced section. (7) Contractor's Proposal, Article III, Section 1.e. Replace the word ``Administrator'' with the word ``Owner.'' (8) Contractor's Proposal, Article VI, Section 1.e. Delete the words ``and the Administrator.'' (9) Contractor's Proposal, Article VI. Delete Section 11. (10) Acceptance. Delete the words ``Subject to the approval of the Administrator.'' Sec. 1726.255 Prior approved contract modifications related to indemnification. (a) As an alternative to the indemnification provision required in RUS standard construction contract forms in those jurisdictions requiring specific language concerning the requirement that the indemnitor indemnify the indemnitee for the indemnitee's own negligence, the borrower may add the words ``otherwise this provision shall apply to any alleged negligence or condition caused by the Owner'' so that the first paragraph reads as follows: ``i. To the maximum extent permitted by law, Bidder shall defend, indemnify, and hold harmless Owner and Owner's directors, officers, and employees from all claims, causes of action, losses, liabilities, and expenses (including reasonable attorney's fees) for personal loss, injury, or death to persons (including but not limited to Bidder's employees) and loss, damage to or destruction of Owner's property or the property of any other person or entity (including but not limited to Bidder's property) in any manner arising out of or connected with the Contract, or the materials or equipment supplied or services performed by Bidder, its subcontractors and suppliers of any tier. But nothing herein shall be construed as making Bidder liable for any injury, death, loss, damage, or destruction caused by the sole negligence of Owner, otherwise this provision shall apply to any negligence or condition caused by the Owner.'' (b) As an alternative to the indemnification provision required in RUS standard construction contract forms in those jurisdictions that have a legal prohibition against one party indemnifying another for the other's negligence, the borrower may replace the words ``defend, indemnify, and hold harmless'' with the words `` shall pay on behalf of'' so that the first paragraph reads as follows: ``i. To the maximum extent permitted by law, Bidder shall pay on behalf of Owner and Owner's directors, officers, and employees from all claims, causes of action, losses, [[Page 10167]] liabilities, and expenses (including reasonable attorney's fees) for personal loss, injury, or death to persons (including but not limited to Bidder's employees) and loss, damage to or destruction of Owner's property or the property of any other person or entity (including but not limited to Bidder's property) in any manner arising out of or connected with the Contract, or the materials or equipment supplied or services performed by Bidder, its subcontractors and suppliers of any tier. But nothing herein shall be construed as making Bidder liable for any injury, death, loss, damage, or destruction caused by the sole negligence of Owner, otherwise this provision shall apply to any negligence or condition caused by the Owner.'' (c) If the alternative indemnification provision in paragraph (a) or (b) of this section is chosen by the borrower, the language of paragraph (a) or (b) of this section would be inserted in lieu of subsection (i) of the section indicated in the RUS standard construction contract forms as follows: ---------------------------------------------------------------------------------------------------------------- RUS form No. Title Desiganted section ---------------------------------------------------------------------------------------------------------------- 200........................... Construction Contract--Generating............ Article IV, Section 1(c). 201........................... Right-of-Way Clearing Contract............... Article IV, Section 1(e). 203........................... Transmission System Right-of-Way Clearing Article IV, Section 1(f). Contract. 257........................... Contract to Construct Buildings.............. Article IV, Section 1(b). 764........................... Substation and Switching Station Erection Article IV, Section 1(f). Contract. 786........................... Electric System Communications and Control Article IV, Section 1(c). Equipment Line. 790........................... Distribution Line Extension Construction Article IV, Section 1(f). Contract (labor & materials). 792........................... Distribution Line Extension Construction Article IV, Section 1(f). Contract (labor only). 830........................... Electric System Construction Contract (labor Article IV, Section 1(f). & material). 831........................... Electric Transmission Construction Contract Article IV, Section 1(f). (labor & material). ---------------------------------------------------------------------------------------------------------------- (d) In RUS Forms 201, 790, and 792, the word ``Contractor'' would replace the word ``Bidder'' in the alternative indemnification clause in paragraph (a) or (b) of this section. (e) In RUS Form 786, the word ``Seller'' would replace the word ``Bidder'' and the word ``Purchaser'' would replace the word ``Owner'' in the alternative indemnification clause in paragraph (a) or (b) of this section. Secs. 1726.256-1726.299 [Reserved] Subpart I--RUS Standard Forms Sec. 1726.300 List of RUS standard contracting forms for electric systems. The following is a list of the current RUS standard contracting forms that RUS has prepared for use by electric borrowers when purchasing materials and equipment and constructing facilities with a RUS loan or loan guarantee. Copies of the contract forms are available from the sources indicated in the listing. A notice of any change in these contract forms will be published in the Federal Register. RUS Electric Program Standard Contract Forms ---------------------------------------------------------------------------------------------------------------- Issue RUS form No. date Title Purpose Source of copies\1\ ---------------------------------------------------------------------------------------------------------------- 168b.............. 2-95 Contractor's bond...... Used in RUS Forms 200, 201, 203, In respective contract 257, 764, 786, 790, 792, 830 & form. 831. 168c.............. 2-95 Contractor's bond (less In lieu of RUS Form 168b, used RUS. than $1 million). when contractor's surety has accepted a Small Business. 172............... 9-58 Certificate of Administration guarantee--Used to RUS. Inspection Contract notify RUS that construction is Construction. ready for inspection. 173............... 3-55 Materials contract..... Used for distribution, RUS. transmission, and general plant material purchases. 180............... 2-95 Construction Contract Used to amend distribution line RUS. Amendment. construction contracts. 181............... 2-95 Certificate of Used for the closeout of RUS Form RUS. Completion Contract 257. Construction for Buildings. 187............... 2-95 Certificate of Used in RUS Forms 200, 203, 764, In respective contract Completion Contract 786, 830, and 831. form. Construction. 198............... 2-95 Equipment Contract Used for equipment purchases..... RUS. Construction Contract-- Generating. 200............... 2-95 Construction Contract Used for generating plant RUS. Generating. construction or for the furnishing and installation of major items of equipment. 201............... 2-95 Right-of-Way Clearing Used for distribution right-of- RUS. Contract. way clearing work which is to be performed separate from line construction. 203............... 2-95 Transmission System Used for transmission line right- RUS. Right-of-Way Clearing of-way clearing work which is to Contract. be performed separate from line construction. 213............... 2-95 Certificate (``Buy Used to document compliance with RUS. American''). the ``Buy American'' requirement. 219............... 10-88 Inventory of Work Used to encumber funds........... RUS. Orders. 224............... 2-95 Waiver and Release of Used in RUS Forms 200, 203, 764, In respective contract Lien. 786, 830, and 831. form. 231............... 2-95 Certificate of Used in RUS Forms 200, 203, 764, In respective contract Contractor. 786, 830, and 831. form. 238............... 2-95 Construction or Used to amend contracts except RUS. Equipment Contract for distribution line Amendment. construction contracts. 251............... 2-95 Material Receipt....... Used in RUS Forms 764, 830, and In respective contract 831. form. [[Page 10168]] 254............... 2-95 Construction Inventory. Used with the closeout of RUS RUS. Forms 203, 764, 830, and 831. 257............... 2-95 Contract to Construct Used to construct headquarters GPO.\2\ Buildings. buildings and other structure construction. 270............... 7-70 Equal Opportunity Addendum to contracts not having RUS Addendum. current equal opportunity provisions. 274............... 6-81 Bidder's Qualifications Used to document Bidder's RUS. Qualifications. 282............... 11-53 Subcontract............ Used for subcontracting.......... RUS. 307............... 2-95 Bid Bond............... Used In RUS Forms 200, 203, 257, In respective contract 764, 830 and 831. form. 458............... 3-55 Material Contract...... Used to obtain generating plant RUS. material and equipment purchases over $10,000, not requiring acceptance tests at the project site. 764............... 2-95 Substation and Used to construct substations and RUS. Switching Station switching stations. Erection Contract. 786............... 2-95 Electric System Used for delivery and RUS. Communications and installation of equipment for Control Equipment system communications. Contract. 790............... 2-95 Distribution Line Used for limited distribution GPO.\2\ Extension Construction construction accounted for under Contract (labor & work order procedure. materials). 792............... 2-95 Distribution Line Used for limited distribution GPO.\2\ Extension Construction construction accounted for under Contract (labor only). work order procedure. 792b.............. 2-95 Certificate of Used in RUS Forms 201, 790, and In respective contract Construction and 792. form. Indemnity Agreement. 792c.............. 2-95 Supplemental Contract Used in RUS Forms 201, 790, and In respective contract for Additional Project. 792. form. 830............... 2-95 Electric System Used for distribution and/or GPO.\2\ Construction Contract transmission project (labor & material). construction. 831............... 2-95 Electric Transmission Used for transmission project GPO.\2\ Construction Contract construction. (labor & material). ---------------------------------------------------------------------------------------------------------------- Notes: \1\A single copy of the form will be furnished by RUS upon request. Additional copies may be duplicated or reproduced. Requests for copies should be sent to: Director, Administrative Services Division, U.S. Department of Agriculture, Rural Utilities Service, Washington, DC 20250. \2\Requests for copies should be submitted to the Superintendent of Documents, U.S. Government Printing Office, Washington, DC 20402. Telephone orders may also be placed, using Mastercard or Visa, by calling (202) 512- 1800. Sec. 1726.301 Use of printed forms. If a RUS contract form is required by this part, the borrower shall use the form in the format available from RUS or GPO (photocopying or other exact reproduction is acceptable.) The contract forms are not to be retyped, changed, modified or altered in any manner not specifically authorized in this part or approved by RUS in writing. Any modifications approved by RUS must be clearly shown so to indicate that such are different from the standard form. Electronic reproduction is acceptable for RUS Forms 251 and 254 only. Sec. 1726.302 RUS approved forms of contract. If a specific RUS contract form is required by a particular section of this part, the borrower shall use that form without changes or modifications or alterations unless, prior to issuing the bid package to bidders, RUS has specifically approved any such changes to that form for that borrower, nor shall any change be made to the form by amendment of an executed contract without prior RUS approval. Any proposed changes shall not relieve the contractor or the borrower of the basic responsibilities required by the standard RUS contract form, and, shall not alter any terms and conditions required by law. Changes permitted or required by subpart H of this part or by part 1788, RUS Fidelity and Insurance Requirements for Electric and Telephone Borrowers, of this chapter are approved by RUS under the circumstances indicated. Sec. 1726.303 Interest on overdue accounts. Certain RUS contract forms contain a provision concerning payment of interest on overdue accounts. Prior to issuing the invitation to bidders, the borrower must insert an interest rate equal to the lowest ``Prime Rate'' listed in the ``Money Rates'' section of the Wall Street Journal on the date such invitation to bid is issued. If no prime rate is published on that date, the last such rate published prior to that date must be used. The rate must not, however, exceed the maximum rate allowed by any applicable state law. Secs. 1726.304-1726.309 [Reserved] Sec. 1726.310 Contractor's bond, RUS Form 168b. The bond form in this section shall be used when a Contractor's Bond is required by RUS Forms 200, 201, 203, 257, 764, 786, 790, 792, 830, or 831 unless the contractor's surety has accepted a Small Business Administration guarantee and the contract is for one million dollars or less. Contractor's Bond 1. Know all men that we, ________, as Principal, and ________, as Surety, are held and firmly bound unto ________ (hereinafter called the ``Owner'') and unto the United States of America (hereinafter called the ``Government'') and unto all persons, firms and corporations who or which may furnish materials for or perform labor on a Rural Utilities Service Project known as Project ________ and to their successors and assigns, in the penal sum of ________ dollars ($________), as hereinafter set forth and for the payment of which sum well and truly to be made we bind ourselves, our executors, administrators, successors and assigns jointly and severally by these presents. Said Project is described in a certain construction contract (hereinafter called the ``Construction [[Page 10169]] Contract'') between the Owner and the Principal, dated ________, 19____, pursuant and subject to a certain loan contract (hereinafter called the ``Loan Contract'') between the Owner and the Government, acting through the Administrator of the Rural Utilities Service (hereinafter called the ``Administrator''). 2. The condition of this obligation is such that if the Principal shall well and truly perform and fulfill all the undertakings, covenants, terms, conditions and agreements of the Construction Contract and any amendments thereto, whether such amendments are for additions, decreases, or changes in materials, their quantity, kind or price, labor costs, mileage, routing or any other purpose whatsoever, and whether such amendments are made with or without notice to the Surety, and shall fully indemnify and save harmless the Owner and the Government from all costs and damages which they, or either of them, shall suffer or incur by reason of any failure so to do, and shall fully reimburse and repay the Owner and the Government for all outlay and expense which they, or either of them shall incur in making good any such failure of performance on the part of the Principal, and shall promptly make payment to all persons working on or supplying labor or materials for use in the construction of the Project contemplated in the Construction Contract and any amendments thereto, in respect of such labor or materials furnished and used therein, to the full extent thereof, and in respect of such labor or materials furnished but not so used, to the extent of the quantities estimated in the Construction Contract and any amendments thereto to be required for the construction of the Project, and shall well and truly reimburse the Owner and the Government, as their respective interests may appear, for any excess in cost of construction of said Project over the cost of such construction as provided in the Construction Contract and any amendments thereto, occasioned by any default of the Principal under the Construction Contract and any amendments thereto, then this [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A95-2843. Public record. Not legal advice.