Use of Consultants Funded by Borrowers

DEPARTMENT OF AGRICULTURE

Rural Utilities Service

7 CFR 1789

RIN 0572-AB17

Use of Consultants Funded by Borrowers

AGENCY: Rural Utilities Service, USDA.

ACTION: Proposed rule.

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SUMMARY: The Rural Utilities Service (RUS) hereby proposes to implement

recent amendments to the Rural Electrification Act of 1936, as amended,

(RE Act) (7 U.S.C. 918(c)) and to amend 7 CFR chapter XVII by adding a

new Part 1789, Use of Consultants Funded by Borrowers. This part would

set forth procedures and policies pursuant to which a borrower under

the RE Act may fund consultants used by the Administrator for

financial, legal, engineering, environmental and other technical advice

and services. The use of the consultants will assist RUS in the

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expeditious review of applications for financial assistance or other

approvals sought by borrowers.

DATES: Written comments concerning the proposed rule and/or its

information collection requirements must be received by RUS or carry a

postmark or equivalent by March 4, 1996.

ADDRESSES: Written comments should be addressed to F. Lamont Heppe,

Jr., Deputy Director, Program Support Staff, U.S. Department of

Agriculture, Rural Utilities Service, AG Box 1522, Washington, DC

20250-1522. RUS requires a signed original and 3 copies of all comments

(7 CFR 1700.30(e)). Comments will be available for public inspection

during regular business hours (7 CFR 1.27(b)).

FOR FURTHER INFORMATION CONTACT: F. Lamont Heppe, Jr., Deputy Director,

Program Support Staff, (address as above). Telephone: (202) 720-0736.

Facsimile: (202) 720-4120.

SUPPLEMENTARY INFORMATION: This proposed rule has been determined to be

not significant for purposes of Executive Order 12866, Regulatory

Planning and Review, and therefore has not been reviewed by the Office

of Management and Budget (OMB). The Administrator of RUS has determined

that the Regulatory Flexibility Act (5 U.S.C. 601 et seq.) does not

apply to this rule. The Administrator of RUS 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. 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 title Department Programs and Activities Excluded from Executive

Order 12372 (50 FR 47034) exempts RUS electric loans and loan

guarantees from coverage under this Order. This rule has been reviewed

under Executive Order 12778, Civil Justice Reform. This proposed rule:

(1) Will not preempt any State or local laws, regulations, or policies,

unless they present an irreconcilable conflict with this rule; (2) will

not have any retroactive effect; and (3) will not require

administrative proceedings before any parties may file suit challenging

the provisions of this rule in accordance with existing law.

The programs covered by this rule are listed in the Catalog of

Federal Domestic Assistance Programs under numbers 10.850, Rural

Electrification Loans and Loan Guarantees, 10.851, Rural Telephone

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

catalog is available on a subscription basis from the Superintendent of

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

20402-9325.

Information Collection and Recordkeeping Requirements

Summary: In accordance with the Paperwork Reduction Act of 1995 (44

U.S.C. Chapter 35, as amended) RUS is requesting comments on the

information collection incorporated in this proposed rule.

Dates: Comment on this information collection must be received by

March 4, 1996.

Comments are invited on: (a) Whether the proposed collection of

information is necessary for the proper performance of the functions of

the agency, including whether the information will have practical

utility; (b) the accuracy of the agency's estimate of the burden of the

proposed collection of information; (c) ways to enhance the quality,

utility and clarity of the information to be collected; and (d) ways to

minimize the burden of the collection of information on respondents,

including through the use of automated collection techniques or other

forms of information technology.

For Further Information Contact: Sue Arnold, Financial Analyst,

Program Support Staff, Rural Utilities Service, U.S. Department of

Agriculture, 14th & Independence Avenue, SW., AG Box 1522, Washington,

DC 20250. Telephone: (202) 690-1078. FAX: (202) 720-4120.

Supplementary Information:

Title: Title 7 Part 1789, Use of Consultants Funded by Borrowers.

Type of Request: New information collection.

Abstract: On November 1, 1993, Public Law 103-129 amended section

18 of the RE Act to provide a mechanism for expediting RUS reviews. As

amended, section 18(c) authorized RUS to use consultants voluntarily

funded by borrowers for financial, legal, engineering, and other

technical services. The consultant may to be used to facilitate timely

action on applications by borrowers for financial assistance and for

approvals required by RUS, pursuant to the terms of outstanding loans,

or otherwise. RUS may not require borrowers to fund consultants. The

provisions of section 18(c) may be utilized only at the borrower's

request.

Estimate of Burden: Public reporting burden for this collection of

information is estimated to average 2 hours per response.

Respondents: Business or other for-profit, small businesses or

organizations.

Estimated Number of Respondents: 6.

Estimated Number of Responses per Respondent: 1.

Estimated Total Annual Burden on Respondents: 12.

Copies of this information collection can be obtained from Dawn

Wolfgang, Program Support Staff, at (202) 720-0812.

Comments: Send comments regarding this information collection

requirement to the Office of Information and Regulatory Affairs, OMB,

ATTN: Desk Officer, USDA, Room 10102, New Executive Office Building,

Washington, DC 20503, and F. Lamont Heppe, Jr., Deputy Director,

Program Support Staff, Rural Utilities Service, AG Box 1522,

Washington, DC 20250-1522.

Comments to OMB are best assured of having full effect if OMB

receives them within 30 days of publication in the Federal Register.

All responses to this information collection requirement will be

summarized and included in the final rule. All comments will become a

matter of public record.

Background

Section 18 of the RE Act was amended effective November 1, 1993,

pursuant to Public Law 103-129, 2(c)(4), 107 Stat. 1364. As amended,

subsection (c) of section 18 authorizes the RUS to use consultants

funded by borrowers for financial, legal, engineering, and other

technical advice and services. The consultants are to be used to

facilitate timely action on applications by borrowers for financial

assistance and for approvals required by RUS pursuant to the terms of

outstanding loan or security instruments or otherwise.

Subsection (c) expressly requires that RUS establish procedures for

the use of consultants to ensure that the consultants have no financial

or other conflicts of interest in the outcome of the application.

Subsection (c) further provides that funding of consultants is strictly

voluntary with the borrowers, that RUS may not require borrowers to

agree to fund consultants. This proposed rule sets forth procedures and

policies implementing the authority under subsection (c).

Policy

RUS believes that both RUS and its borrowers will be well served by

the prudent use of this authority. It will assist RUS in the processing

of certain complex transactions that have placed a

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burden on its staff and resources. For example, financial and legal

consultants may assist in the review of certain transactions involving

complicated financing arrangements between borrowers and third parties

that potentially impact on the feasibility of and security for

outstanding government loans. Such transactions may require the review

and analysis of voluminous documents and the development of an

extensive administrative record. The transactions may involve complex

technical issues regarding which RUS has limited expertise thus slowing

the review process. Such transactions may be very time sensitive; any

delays may jeopardize the transaction or reduce the benefits of the

transaction to the borrower. In some cases, the transactions are very

important to the borrower but cannot be given corresponding priority by

the RUS as it dedicates its resources to matters that have program wide

significance. It is in the interests of both RUS and the borrower to

expedite review of such transactions with borrower funded consultants.

Examples of how RUS might use borrower funded consultants include,

but are not limited to, the use of an engineering firm to review

proposed generation projects for technical or financial feasibility,

e.g., wind or hydroelectric projects utilizing relatively new

technology. RUS could use consultants to make periodic visits to major

construction projects and report to RUS on the status of construction

and whether or not the project is on budget. Financial advisory

consultants may be used to evaluate new financial products which are

the basis for requests to modify the RUS mortgage. Legal support

services will enhance RUS' ability to review and process merger,

consolidation and holding company applications from both telephone and

electric borrowers. RUS would also consider using environmental

consultants to prepare environmental assessments and environmental

impact studies under RUS' direction and supervision.

RUS does not, however, believe that use of subsection (c) authority

is authorized or appropriate for all transactions requiring RUS review.

The authority will not be used unless it is reasonably expected to

facilitate timely action on an application by RUS. Even then, it may

not always be in RUS' interest to rely on consultants. For example,

transactions that involve matters that RUS is particularly qualified to

address or which have program wide implications may not be well suited

for expedited processing facilitated with borrower funded consultants.

Thus, RUS will weigh its use of the authority under subsection (c) on a

case by case basis.

Procedure

Under the proposed rule RUS may enter into contracts on the basis

of case by case procurements or on a retainer basis with a series of

consultants having different areas of expertise, i.e. financial, legal,

engineering, or environmental. In order to assure that sufficient

consultant resources are available and to allow for competition in

terms of both quality and cost, RUS may contract with several different

consultants in a given area of expertise.

RUS will solicit bids for the services of financial, legal,

engineering, and environmental consultants in accordance with the

provisions of the Federal Acquisition Regulations (FAR), 48 CFR Chapter

1. Notwithstanding the use of borrowers' funds, it has been determined

that such funding must be treated as appropriated funds and the

contracts are subject to the provisions of FAR.

The proposed rule provides that RUS will decide when timely

consideration of an application or approval would best be facilitated

by the use of borrower funded consultants. When the RUS has made such a

determination, and the borrower in question is willing to fund

consulting services, the borrower must provide to RUS an appropriate

notice of proposal to fund consulting services. RUS will consider the

borrower's proposal, whether it is consistent with this regulation and

otherwise in the interests of the government. If RUS chooses to proceed

with the borrower's proposal, RUS will require the borrower and the

consultant selected by RUS to execute a funding agreement which

complies with the regulation. The funding agreement will provide for

the borrower to establish and fund an escrow account with a third-party

commercial institution prior to the commencement of work by the

consultant.

The use of a third-party commercial institution will allow for the

escrow account to be interest-bearing and greatly ease the

administrative burden of arranging for any excess funds to be remitted

to the borrower upon the closing out of a task order. With the

exception of an annual retainer fee, if applicable, the consultants

shall not be entitled to any payments from RUS. Rather, all payment

obligations for work performed must be satisfied by amounts available

in the escrow account and RUS shall have sole discretion in directing

that payments be made from the escrow account.

Once the escrow account is funded, RUS will then issue a task order

to the consultant under the applicable contract and the consultant will

commence work for RUS. Periodically, the consultant will submit

invoices to RUS. Upon due authorization by RUS, the escrow agent will

make payments to the consultant. The escrow account will be closed and

any remaining funds remitted to the borrower upon direction from RUS.

The procedure outlined above generally applies to financial, legal,

engineering and environmental consultant services. The proposed rule

reserves the discretion, however, for RUS to contract for any type of

consultant services on a case by case basis after receipt of an

appropriate notice of proposal to fund from the borrower.

Legal and Selected Other Consultants

The procedures and policies applicable to the use of legal

consultants pursuant to subsection 18(c) differs from the use of other

consultants in several key respects. First, pursuant to 7 CFR part

2.47(a)(1), the Administrator may utilize consultants and attorneys for

the provision of legal services with the concurrence of the General

Counsel. The Secretary by regulation (7 CFR 2.31) has designated the

General Counsel as the chief law officer of the Department and legal

advisor to the Secretary with the responsibility for providing legal

services for all activities of the Department; accordingly, any

proposal by RUS to use outside legal counsel will require the approval

of the General Counsel. The approval will include a review of the

nature of the transaction and the scope of legal services to be

provided. Moreover, any contracts for legal consultants will provide

that an attorney from OGC will serve as a technical representative and

adviser to the contracting officer. The technical representative will

be responsible for, among other matters, evaluating the adequacy of

performance.

The conflict of interest provisions in the proposed rule are

different from the FAR in certain respects, particularly in the case of

legal and financial consultants. For all consultants, however, it is

important to protect against the possibility, or the appearance, that

those consultants providing services to RUS might handle particular

assignments in such a way as to encourage their own future employment

with RUS program beneficiaries after fulfilling their government

contract requirements. The electric and telephone borrowers are

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particularly closely tied to RUS since RUS is responsible for a

significant percentage of their annual capital requirements. Because of

the unique position of RUS vis a vis its borrowers, it is in the

government's interest that prospective legal counsel, financial

consultants and other consultants be reasonably indifferent to the

subsequent marketing implications of having RUS as a client.

Additionally, because of the special nature of the attorney/client

relationship, there is a need to provide for maximum discretion on the

part of the RUS Administrator in the determination of conflict criteria

for legal consultants. Accordingly, proposed conflict provisions

specific to borrower funded RUS consultants are as follows:

(1) Disclosure requirements incorporated in procurements under the

proposed rule shall provide that consultants disclose all business

relationships with current or former RUS borrowers at the time

proposals to offer consulting services are made to RUS and in the event

additional business relationships are entered into subsequent to the

original disclosure.

(2) Certification requirements incorporated in procurements under

the proposed rule shall provide that consultants certify, at the time a

proposal is made to provide consulting services to RUS, to the best of

their knowledge and belief, that no Organizational Conflict of Interest

exists and there are no relevant facts or circumstances which could

give rise to an Organizational Conflict of Interest, or the consultant

has disclosed all such relevant information. The representations in the

certificate shall be deemed reaffirmed upon the execution of the

Consultant Contract and upon the undertaking of each Task Order by the

contractor.

(3) The determination of whether or not an Organizational Conflict

of Interest exists shall rest with the Administrator in his sole

discretion; RUS shall not award a contract or Task Order, as the case

by be, to a consultant if an Organizational Conflict of Interest

exists.

(4) Authority to waive an Organizational Conflict of Interest vests

with the RUS Administrator; such waivers must be in writing to be

effective.

(5) Consultant contracts with all legal consultants, all financial

consultants and such other consultants as the RUS may determine on a

case by case basis (selected other consultants) shall provide that such

consultants agree not to undertake during the term of the applicable

contract, inclusive of option or renewal periods, to represent any RUS

borrower on the same or other matters without the express written

consent of RUS.

(6) Consultant contracts with all legal consultants, all financial

consultants and selected other consultants shall provide that such

consultants agree not to undertake, for a period of not less than four

years from the contract expiration date, to represent any RUS borrower

or generation and transmission (G&T) affiliate thereof, including a

borrower which may prepay outstanding RUS indebtedness subsequent to

the consultant undertaking to represent RUS, on any matter in which RUS

has a significant interest in the outcome, where such borrower(s) were

the subject of consulting services rendered by that consultant during

the tenure of the applicable contract, without the express written

consent of RUS. G&T affiliate in this context shall refer to all

members of the applicable generation and transmission cooperative and

the cooperative(s) in which the borrower was itself a member.

Representation includes any retainer or advisory contract and is not

limited to representation relating to negotiations with or applications

before RUS.

(7) RUS may waive any of the foregoing requirements or procedures

by determining that its application in a particular situation would not

be in the government's interest.

Key Personnel

Legal service contracts are distinguished from other consulting

services funded by borrowers pursuant to Section 18 of the RE Act with

respect to provisions relating to key personnel. Factors such as trust,

judgment, negotiating style and presence and other intangibles affect

the quality and effectiveness of representation and client

satisfaction. Borrower funded legal service contracts will provide that

no substitution of key personnel may occur without prior approval of

the contracting officer, who may confer with the legal and RUS

technical representatives for the applicable contract.

List of Subjects in 7 CFR Part 1789

Administrative practice and procedure, legal services, Electric

power, Electric utilities, Loan programs--energy, Loan programs--

telecommunications, escrow fund, consulting contracts.

For the reasons stated, RUS proposes to add a new part 1789 to

chapter XVII of title 7 of the Code of Federal Regulations as follows:

PART 1789--USE OF CONSULTANTS FUNDED BY BORROWERS

Subpart A--Policy and Procedures With Respect to Consultant Services

Funded by Borrowers--General

Sec.

1789.150 Purpose.

1789.151 Definitions.

1789.152 Policy.

1789.153 Borrower funding.

1789.154 Eligible borrowers.

1789.155 Approval criteria.

1789.156 Proposal procedure.

1789.157 Consultant contract.

1789.158 Implementation.

1789.159 Contract administration.

1789.160 Access to information.

1789.161 Conflicts of interest.

1789.162 Indemnification agreement.

1789.163 Waiver.

1789.164-1789.165 [Reserved]

Subpart B--Escrow Account Funding and Payments

Sec.

1789.166 Terms and conditions of funding agreement.

1789.167 Terms and conditions of escrow agreement.

1789.168-1789.175 [Reserved]

Authority: 7 U.S.C. 901 et seq.; Pub. L. 103-354, 108 Stat. 3178

(7 U.S.C. 6941 et seq.); [Title I, Subtitle D, Pub. L. 100-203, 101

Stat. 1330].

Subpart A--Policy and Procedures With Respect to Consultant

Services Funded by Borrowers--General

Sec. 1789.150 Purpose.

This part sets forth policies and the procedures for implementing

subsection (c) of section 18 of the Rural Electrification Act of 1936,

as amended (7 U.S.C. 901 et seq.) (RE Act) which authorizes the Rural

Utilities Service (RUS) to use the services of Consultants funded by

the Borrowers to facilitate timely action on Applications by Borrowers

for financial assistance and other approvals.

Sec. 1789.151 Definitions.

As used in this part:

Administrator means the Administrator of the Rural Utilities

Service (RUS).

Application means a request for financial assistance under the RE

Act or such other approvals as may be required of the RUS pursuant to

the terms of outstanding loan or security instruments or otherwise.

Borrower means any organization which has an outstanding loan(s)

made or guaranteed by RUS or its predecessor agency, the Rural

Electrification Administration (REA) under the RE Act or any

organization which has an Application before RUS.

Consultant means a person or firm which has been retained by RUS

under

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a contract to provide financial, legal, engineering, environmental, or

other technical advice and services.

Consultant Contract means a contract for the performance of

consulting services for RUS, to be paid using funds provided by a

Borrower, which may be in the form of a Retainer Contract, purchase

order, or such other form as RUS may choose.

Escrow Account means an account established pursuant to

Sec. 1789.158 herein.

Escrow Agreement means an agreement, between a Borrower, a

Consultant and a Third-party Commercial Institution, meeting the

requirements of Sec. 1789.167.

Final Invoice means the closing Invoice prepared for a given Task

Order.

Financial Consultant means a Consultant retained pursuant to this

part to provide financial advisory services.

Funding Agreement means an agreement, between a Borrower and a

Consultant providing for the Borrower to fund the costs of a Task Order

and otherwise meeting the requirements of Sec. 1789.166.

Indemnification Agreement means an agreement by a Borrower meeting

the requirements of Sec. 1789.162.

Invoice means an invoice, satisfactory to RUS, prepared by a

Consultant pursuant to the terms of a Consultant Contract.

Legal Consultant means any Consultant retained pursuant to this

part to provide legal services to RUS.

Notice of Proposal to Fund means a notice meeting the requirements

of Sec. 1789.156 provided to RUS by the Borrower.

Organizational Conflict of Interest means that because of other

activities or relationships with other persons, a person is unable or

potentially unable to render impartial assistance or advice to the

Government, or the person's objectivity in performing the contract work

is or might be otherwise impaired, or a person has an unfair

competitive advantage. Organizational conflicts of interest shall

include, but not be limited to, a financial interest in the project

which is the subject of the Application; and providing advice and

services concurrently to RUS and to the Borrower which submitted the

relevant Application, on the same or different matters. Organizational

conflicts of interest may also include activities or relationships

determined by the Administrator pursuant to Sec. 1789.161 to constitute

an organizational conflict of interest.

Retainer Contract means a Consultant Contract providing for a

minimum required payment to a Consultant irrespective of whether

services are utilized by RUS thereunder.

Task Order means a written request for consultant services made by

RUS pursuant to the terms of a Consultant Contract.

Third-party Commercial Institution means a commercial financial

institution mutually acceptable to the Borrower and the Consultant.

Sec. 1789.152 Policy.

(a) As provided in this subpart, RUS may, at its discretion, use

the services of Consultants funded by a Borrower where such services

will facilitate timely action on an Application by such Borrower for

financial assistance or other approvals. Such Consultants may provide

financial, legal, engineering, environmental or other technical advice

and services in connection with the review of an Application.

(b) With the approval of RUS, a Borrower may fund the cost of

consulting services in connection with the review by RUS of an

Application by such Borrower. Such funding shall be provided pursuant

to the terms of a Funding Agreement between the Borrower and the

Consultant designated by RUS.

(c) RUS may not, without the consent of the Borrower, require, as a

condition of processing any Application for approval, that the Borrower

agree to pay the costs of a Consultant hired to provide services to

RUS.

(d) RUS shall retain sole discretion in the selection of

Consultants to provide services to RUS. RUS may use the services of one

or more Consultants retained under Retainer Contracts to provide

services for projects to be identified by RUS. Alternatively, RUS may

elect to retain a Consultant in connection with a specific project. RUS

shall have sole discretion to prescribe terms and conditions of

Consultant Contracts. The Borrower shall be advised of the Consultant

selected only after committing to fund consultant services.

Sec. 1789.153 Borrower funding.

Borrowers shall use their general funds for the purposes of funding

consultant services hereunder. Borrowers may not use the proceeds of

loans made or guaranteed under the RE Act for costs incurred by

Borrowers pursuant to the funding of consultant services for RUS.

Sec. 1789.154 Eligible borrowers.

All Borrowers are eligible to fund consultant services under this

part.

Sec. 1789.155 Approval criteria.

RUS will consider approving the use of consultant services funded

by a Borrower on a case by case basis taking into account, among other

matters, the following:

(a) Whether such services are required to facilitate timely action

on a Borrower's Application. RUS shall determine what represents timely

action with respect to each Application considering, among other

matters, the review period normally required for such projects by RUS

and other lenders and the consequences to the Borrower of adjusting the

review period.

(b) The availability of staff resources, the priorities of other

projects then before RUS, and the efficiencies to be realized from the

use of consultant services.

(c) Whether it is in the best interest of RUS to use Borrower-

funded Consultants. Certain types of projects, such as those involving

issues of program-wide significance, may not be well suited for the use

of Borrower funded Consultants.

Sec. 1789.156 Proposal procedure.

(a) In the event RUS determines that consideration should be given

to the use of a Borrower-funded consultant in connection with the

review of an Application, the RUS Regional Director or the Director of

the Power Supply Division, as appropriate, will discuss with the

Borrower the nature of the Application and the projected review period

required of RUS. If RUS concludes that the projected review period will

not result in timely action on the Application, and after being so

notified in writing by RUS the Borrower wishes to fund consultant

services to facilitate RUS review, the Borrower shall submit to the

same Director a funding proposal. The proposal shall set forth the

following:

(1) Identification in the heading or caption as a Notice of

Proposal to Fund Consulting Services;

(2) Borrower's REA/RUS designation;

(3) Borrower's legal name and address;

(4) A description of the Application, critical issues and concerns

relating to the Application, time deadlines, and the consequences of

any delays in RUS review;

(5) A description of the consulting service(s) that would

facilitate timely RUS review of the Application; and

(6) Such additional documents and information as RUS may request.

(b) RUS will review the Notice of Proposal to Fund and any

additional information RUS deems relevant in determining whether to

proceed with

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procuring Borrower funded Consultants. If RUS proposes to utilize Legal

Consultants, RUS must obtain the concurrence of the Office of General

Counsel (OGC) of the Department of Agriculture. RUS will notify the

Borrower in writing of its determination.

Sec. 1789.157 Consultant contract.

(a) The Federal Acquisition Regulation (FAR), 48 CFR Ch. 1 and Ch.

4 of the Agriculture Acquisition Regulation (AGAR) shall apply to all

Consultant Contracts entered into pursuant to this part except as

herein provided. Where there is a conflict between FAR and AGAR and the

provisions of this part, the provision of this part shall apply.

Exceptions to FAR and/or AGAR shall be incorporated in Consultant

Contracts under this part as follows:

(1) Contracts for Legal Consultants shall provide for a technical

representative from OGC and that no substitution of key personnel may

occur without the prior approval of the applicable contracting officer.

(2) All Consultant Contracts shall provide for an escrow account

funding mechanism pursuant to this part and for RUS sole discretion in

determining whether payments are to be made from the Escrow Account to

the Consultant.

(3) All Consultant Contracts shall provide that payment of all

obligations for work performed thereunder must be satisfied by amounts

available in the Escrow Account; with the exception of the annual

retainer fee, if any, Consultants shall not be entitled to any payments

from RUS.

(4) Consultant Contracts, as applicable, shall incorporate the

applicable conflict of interest provisions set forth in Sec. 1789.161.

(b) Notice of the provisions herein shall be given by RUS at such

time as requests for proposals are issued under this part.

Sec. 1789.158 Implementation.

(a) Upon making a determination to go forward with Borrower funding

for consulting services, RUS shall select a Consultant to provide the

services. RUS may either contract with a Consultant on a case by case

basis or elect to use a Consultant pursuant to an outstanding Retainer

Contract. The Borrower will not be informed of the Consultant selected

by RUS until such time as RUS provides the information set forth in

subparagraph (c)(3) of this section.

(b) If RUS determines to contract with a Consultant on a case by

case basis, RUS shall notify the Borrower of the applicable procedures.

(c) If RUS determines to contract with a Consultant under an

outstanding Retainer Contract, the following procedures will normally

apply:

(1) Pursuant to the terms of the contract, RUS will prepare a draft

Task Order requesting consultant services in connection with the review

of the Borrower's Application. The draft Task Order shall set forth for

the Consultant's review and acceptance a description of the services to

be provided and applicable time frames for the provision of such

services.

(2) RUS will request that the Consultant:

(i) notify RUS as to the acceptability of the form and substance of

the draft Task Order;

(ii) notify RUS as to its ability to provide RUS with a

satisfactory conflict of interest certification consistent with the

requirements of Sec. 1789.161; and

(iii) provide a cost estimate for the draft Task Order.

(3) When RUS is satisfied with the response(s) received pursuant to

paragraph (c)(2) of this section, RUS shall promptly provide to the

Borrower:

(i) a copy of the draft Task Order identifying the Consultant;

(ii) the Consultant's cost estimate for the draft Task Order; and

(iii) contract information required to enable the Borrower to

develop a Funding Agreement, an Escrow Agreement and an Indemnification

Agreement (the ``agreements'').

(4) The Borrower shall develop and submit to RUS for approval

executed originals of:

(i) the agreements; and

(ii) a certified copy of a resolution of the board of directors

authorizing the Borrower to enter into the agreements and to take such

other action as is necessary to effect the purposes of the agreements.

(5) Upon receiving written RUS approval of the agreements and the

form and substance of the board resolution, the Borrower shall:

(i) establish and fund the Escrow Account; and

(ii) provide written notice to RUS of the Escrow Account number,

the funding thereof, and such other information as required pursuant to

the agreements.

(6) After the Borrower has funded the Escrow Account, RUS shall

issue Task Order(s) for consultant services in accordance with the

terms and conditions of the applicable Retainer Contract.

Sec. 1789.159 Contract administration.

RUS shall be solely responsible for the administration of a

Consulting Contract and shall have complete control over the scope,

content, timeliness, and quality of the Consultant's work and the

approval of payment Invoices.

Sec. 1789.160 Access to information.

The Borrower shall not have rights in nor right of access to the

work product of the Consultant. All analyses, studies, opinions,

memoranda, and other documents and information provided by the

Consultant pursuant to a Consulting Contract with RUS may be released

and made available to the Borrower only with the approval of RUS. This

section does not restrict release of information by RUS pursuant to the

Freedom of Information Act (5 U.S.C. 552(a)(2)) or other legal process.

Sec. 1789.161 Conflicts of interest.

(a) Disclosure requirements incorporated in procurements under this

part shall provide that Consultants disclose all business relationships

with current or former RUS Borrowers at the time proposals to offer

consulting services are made to RUS and in the event additional

business relationships are entered into subsequent to the original

disclosure.

(b) Certification requirements incorporated in procurements under

this part shall provide that Consultants certify, at the time a

proposal is made to provide consulting services to RUS, to the best of

their knowledge and belief, that no Organizational Conflict of Interest

exists and there are no relevant facts or circumstances which could

give rise to an Organizational Conflict of Interest, or the Consultant

has disclosed all such relevant information. The representations in the

certificate shall be deemed reaffirmed upon the execution of the

Consultant Contract and upon the undertaking of each Task Order by the

Contractor.

(c) The determination of whether or not an Organizational Conflict

of Interest exists shall rest with the Administrator in his sole

discretion; RUS shall not award a contract or task order, as the case

may be, to a Consultant if an Organizational Conflict of Interest

exists.

(d) The Administrator may waive an Organizational Conflict of

Interest pursuant to Sec. 1789.163 hereof; such waivers must be in

writing to be effective.

(e) Consultant Contracts with all Legal Consultants, all Financial

Consultants and such other Consultants as the RUS may determine on a

case by case basis (selected other Consultants) shall provide that such

Consultants agree not to undertake during the term of the

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applicable contract, inclusive of option or renewal periods, to

represent any RUS Borrower on the same or other matters, without the

express written consent of RUS.

(f) Consultant Contracts with all Legal Consultants, all Financial

Consultants and selected other Consultants shall provide that such

Consultants agree not to undertake, for a period of not less than four

years from the contract expiration date, to represent any RUS Borrower

or G&T affiliate thereof, including a Borrower which may prepay

outstanding RUS indebtedness subsequent to the Consultant undertaking

to represent RUS, on any matter in which RUS has a significant interest

in the outcome, where such Borrower(s) were the subject of consulting

services rendered by that Consultant during the tenure of the

applicable contract, without the express written consent of RUS. G&T

affiliate in this context shall refer to all members of the applicable

generation and transmission cooperative and the cooperative(s) in which

the Borrower was itself a member. Representation includes any retainer

or advisory contract and is not limited to representation relating to

negotiations with or Applications before RUS.

Sec. 1789.162 Indemnification agreement.

As a condition of approving Borrower funding, RUS will require the

Borrower to enter into an Indemnification Agreement, in form and

substance satisfactory to RUS, providing that the Borrower will

indemnify and hold harmless the government and any officers, agents or

employees of the government from any and all liability, including

costs, fees, and settlements arising out of, or in any way connected

with the administration and supervision of, the contract funded by the

Borrower for consultant services relating to the Borrower's

Application.

Sec. 1789.163 Waiver

RUS may waive any requirement or procedure of this subpart by

determining that its application in a particular situation would not be

in the government's interest.

Secs. 1789.164-1789.165 [Reserved]

Subpart B--Escrow Account Funding and Payments

Sec. 1789.166 Terms and conditions of funding agreement.

Funding Agreements between the Borrower and a Consultant shall be

in form and substance satisfactory to RUS and provide for, among other

matters, the following:

(a) Specific reference by number to the applicable Consulting

Contract entered into between RUS and the Consultant;

(b) Specific reference by number to the applicable Task Order

(where applicable);

(c) A brief description of the Application;

(d) A requirement that Invoices make specific reference to:

(1) The applicable contract and Task Order(s); and

(2) The Escrow Account from which payment is to be made;

(e) A requirement that the Final Invoice for a Task Order be

clearly identified as such;

(f) A description of the services to be provided by the Consultant

to RUS and the applicable time frames for the provision of such

services;

(g) Agreement that the Borrower shall pay for the Consultant

services provided to RUS under the applicable contract through an

Escrow Account established pursuant to an Escrow Agreement, the

Consultant shall not provide services to RUS under the applicable

contract unless there are sufficient funds in the Escrow Account to pay

for such services, the Consultant shall seek compensation for services

provided under the applicable contract from, and only from, funds made

available through the Escrow Account, and the Consultant must submit

all Invoices to RUS for approval.

(h) A form of Escrow Agreement satisfactory to the Borrower,

Consultant and the designated Third-party Commercial Institution;

(i) A schedule setting forth when and in what amounts the Borrower

shall fund the Escrow Account;

(j) Acknowledgment by the Consultant of the Indemnification

Agreement provided by the Borrower to the government; and

(k) The Funding Agreement shall not be effective unless and until

approved in writing by RUS.

Sec. 1789.167 Terms and conditions of escrow agreement.

Escrow Agreements between and among the Borrower, Consultant and

Third-party Commercial Institution shall be in form and substance

satisfactory to RUS and provide for, among other matters, the

following:

(a) Specific reference by number to the applicable contract for

services entered into between RUS and the Consultant;

(b) Specific reference by number to the applicable Task Order;

(c) Specific reference by number to the Escrow Account into which

funds are to be deposited;

(d) Invoices to specifically identify the applicable contract and

Task Order(s);

(e) Funds to be held in the Escrow Account by the escrow agent

until paid to the Consultant pursuant to RUS direction;

(f) The Escrow Account to be closed and all remaining funds

remitted to the Borrower after payment of the Final Invoice, or upon

notice from RUS to the escrow agent that RUS is satisfied no further

payments are required under the Funding Agreement; and

(g) RUS, the Consultant and the Borrower to have the right to be

informed, in a timely manner and in such form as they may reasonably

request, as to the status of and activity in the Escrow Account.

Secs. 1789.168-1789.175 [Reserved]

Dated: December 21, 1995.

Jill Long Thompson,

Under Secretary, Rural Economic and Community Development.

[FR Doc. 95-31452 Filed 12-29-95; 8:45 am]

BILLING CODE 3410-15-P