[Federal Register Volume 77, Number 14 (Monday, January 23, 2012)]
[Rules and Regulations]
[Pages 3070-3073]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-1157]
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DEPARTMENT OF AGRICULTURE
Rural Utilities Service
7 CFR Parts 1724 and 1726
RIN 0572-AC20
Electric Engineering, Architectural Services, Design Policies and
Construction Standards
AGENCY: Rural Utilities Service, USDA.
ACTION: Final rule.
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SUMMARY: The Rural Utilities Service (RUS) is amending the contract
threshold amounts that require borrowers to use certain prescribed
agency contract forms and the contract dollar amounts that require RUS
review of contracts prior to the contract being effective. Also, RUS is
raising the threshold amounts requiring RUS borrowers to use certain
required procurement methods for materials, equipment and contract
services that otherwise would require RUS prior approval. The changes
in the threshold amounts will reduce the number of contracts reviewed
by the RUS.
DATES: This rule is effective February 22, 2012.
FOR FURTHER INFORMATION CONTACT: Donald Junta, USDA-Rural Utilities
Service, 1400 Independence Avenue SW., Stop 1569, Washington, DC 20250-
1569. Telephone (202) 720-3720 or email to donald.junta@wdc.usda.gov.
SUPPLEMENTARY INFORMATION:
Executive Order 12866
This rule has been determined to be not significant for purposes of
Executive Order 12866 and, therefore, has not been reviewed by the
Office of Management and Budget.
Executive Order 12988
This final rule has been reviewed under Executive Order 12988,
Civil Justice Reform. RUS has determined that this rule meets the
applicable standards in Sec. 3 of the Executive Order. In addition,
all state and local laws and regulations that conflict with this final
rule will be preempted; no retroactive effect will be given to the
final rule; and in accordance with Sec. 212(e) of the Department of
Agriculture Reorganization Act of 1994 (7 U.S.C. 6912(e)),
administrative appeal procedures, if any, must be exhausted before
litigation against the Department or its agencies may be initiated.
Regulatory Flexibility Act Certification
It has been determined that the Regulatory Flexibility Act is not
applicable to this rule since the Agency is not required by 5 U.S.C.
551 et seq, or any other provision of law to publish a notice of
proposed rulemaking with respect to the subject matter of this rule.
Information Collection and Recordkeeping Requirements
This rule contains no additional reporting or recordkeeping burdens
under Office of Management and Budget (OMB) control numbers 0572-0107
and 0572-0118 that would require approval under the Paperwork Reduction
Act of 1995 (44 U.S.C. Chapter 35).
Executive Order 13132
This rule will not have any substantial direct effect on states, on
the relationship between the national government and the states, or on
the distribution of power and responsibilities among the various levels
of government. Under Executive Order 13132, this rule does not have
sufficient federalism implications requiring the preparation of a
Federalism Assessment.
Catalog of Federal Domestic Assistance
The program described by this rule is listed in the Catalog of
Federal Domestic Assistance Programs under number 10.850, Rural
Electrification Loans and Loan Guarantees. This catalog is available on
the Internet and the General Services Administration's (GSA) free CFDA
Web site at http://www.cfda.gov.
Executive Order 12372
This rule is not subject to the provisions of Executive Order
12372, ``Intergovernmental Review of Federal Programs,'' as implemented
under USDA's regulations at 7 CFR part 3015.
Executive Order 13175, Consultation and Coordination With Indian Tribal
Governments
Over the last year, the Agency has conducted extensive tribal
consultations related to the implementation of the Substantially
Underserved Trust Area (SUTA) provisions of the 2008 Farm Bill. During
those consultations all RUS programs were discussed. A specific
regulation on SUTA is being prepared.
The policies contained in this rule do not impose substantial
unreimbursed compliance costs on Indian Tribal governments or have
tribal implications that preempt tribal law.
Unfunded Mandates
This rule contains no Federal mandates (under the regulatory
provisions of Title II of the Unfunded Mandates Reform Act of 1995) for
State, local, and tribal governments for the private sector. Thus, this
rule is not subject to the requirements of Sec. Sec. 202 and 205 of
the Unfunded Mandates Reform Act of 1995.
National Environmental Policy Act Certification
This rule has been examined under RUS environmental regulations at
7 CFR part 1794. The Administrator has determined that this rule is not
a major Federal action significantly affecting the environment.
Therefore, in accordance with the National Environmental Policy Act of
1969 (42 U.S.C. 4321 et seq.), an Environmental Impact Statement or
Assessment is not required.
E-Government Act Compliance
RUS is committed to complying with the E-Government Act, to promote
the use of the Internet and other information technologies to provide
increased opportunities for citizen access to Government information
and services, and for other purposes.
Background
The Rural Electrification Act of 1936 (7 U.S.C. 901-950b (REAct)),
as amended, establishes the authority for RUS to provide loans and loan
guarantees to eligible entities for furnishing electric service to
rural areas. The standard loan agreement between RUS and its electric
borrowers provides that, in accordance with applicable RUS regulations,
the borrower shall use standard forms of contracts promulgated by RUS
for construction, procurement, engineering services and architectural
services for transactions above the established threshold dollar levels
(``threshold levels'').
Electric borrowers are also expected to obtain RUS approvals for
procuring materials, equipment and contracting services for use in the
electric systems where the contract amount exceeds specified threshold
levels.
Threshold levels that apply to contracts entered into by borrowers
[[Page 3071]]
were initially established to capture significant transactions that
could adversely affect RUS loan security. The threshold levels were
most recently revised in 1995. Cost increases and inflation over time
have greatly increased the need for more approvals than is consistent
with the earlier threshold levels. The result has been increased delay
to the borrowers in receiving RUS approvals and increased workloads at
RUS. Inflation is not the only relevant variable in the RUS proposal to
modify the threshold levels. In this rule RUS has also considered the
level of sophistication in borrowers' operations, RUS staff constraints
and competing priorities within RUS. The need to adjust the threshold
levels is a result of these considerations.
In response to borrowers' requests and mindful of the directives in
Executive Order 13563 of January 18, 2011, to determine if any
regulations should be modified to make agencies' regulations less
burdensome in achieving their objectives, RUS undertook an examination
of certain thresholds used in determining when the use of prescribed
forms and approvals would apply. RUS examined the number of contracts
it reviewed over the last several years. RUS also reviewed the rate of
inflation factors published in the Handy-Whitman Index of Public
Utility Construction Costs in order to adjust for inflation occurring
after the existing requirements were established.
As a result of this review, RUS determined that although it remains
necessary and appropriate to continue these requirements as one means
of oversight of its borrowers' financial and operational activities,
the existing threshold levels should be raised. Raising these threshold
levels will reduce the volume of contracts that borrowers will be
required to submit for RUS approvals. Doing so will reduce the
paperwork burdens on borrowers and the administrative burdens on RUS.
RUS is revising these threshold levels an average of 300 percent.
RUS estimates that the revision will reduce the volume of contracts it
receives pursuant to these requirements by 50 percent.
The Agency published a proposed rule on May 17, 2011, at 76 FR
28333 proposing to amend the contract threshold requirements.
Discussion of Comments and Changes
RUS received two submissions electronically on this proposed rule
by the July 18, 2011, comment deadline. The first submission was
received from the National Rural Electric Cooperative Association
(NRECA). The submission is summarized below with the Agency's responses
as follows:
Issue 1: Commenter proposed that the amounts in the proposed
regulation be established as a ``base case,'' and escalated annually
using the Handy Whitman Index of Public Utility Construction Costs.
Response: The Agency does not concur at this time. The Agency
believes that the threshold limits set forth are appropriate at this
time. The Agency may re-evaluate the threshold limits at a later date.
Issue 2: Commenter proposed a clarifying change that a statement be
added to the regulation that a borrower's voluntary use of an RUS form
contract when not required by this proposed regulation does not subject
the contract to RUS review and approval.
Response: Agency concurs. A clarifying statement is not needed if
the RUS form contract is not required.
Issue 3: Commenter proposed allowing a borrower to seek RUS' prior
permission to use negotiated bidding in the case where the formal or
informal competitive bidding required in 7 CFR 1726.125(b)(2) is not
practical.
Response: Agency does not concur. The current rule allows
``multiparty negotiations'' to be used in 7 CFR 1726.125 (b)(3), which
is similar to the comment received to allow ``negotiated bidding.''
The second submission was received from Tri-State Generation and
Transmission Association, Inc. (Tri-State). Tri-State stated in their
submission that ``The proposed rules will increase Tri-State efficiency
and reduce burdens on Tri-State.'' Tri-State also said in their
submission that ``RUS should adopt the Proposed Rules.''
Response: Agency concurs. The proposed regulation will increase
efficiency and reduce burdens on all RUS borrowers.
List of Subjects
7 CFR Part 1724
Electric power, Loan programs-energy, Reporting and recordkeeping
requirements, Rural areas.
7 CFR Part 1726
Electric power, Loan programs-energy, Reporting and recordkeeping
requirements, Rural areas.
For reasons set forth in the preamble, RUS amends chapter XVII of
title 7 of the Code of Federal Regulations as follows:
PART 1724--ELECTRIC ENGINEERING, ARCHITECTURAL SERVICES AND DESIGN
POLICIES AND PROCEDURES
0
1. The authority citation for part 1724 continues to read as follows:
Authority: 7 U.S.C. 901 et seq., 1921 et seq., 6941 et seq.
Subpart E--Electric System Design
0
2. Section 1724.54 is amended by revising paragraph (e)(2) and
paragraph (g)(2) to read as follows:
Sec. 1724.54 Requirements for RUS approval of plans and
specifications.
* * * * *
(e) * *
(2) The borrower shall obtain RUS approval, prior to issuing
invitations to bid, of the terms and conditions for all generating
plant equipment or construction contracts which will cost $5,000,000 or
more. Unless RUS approval is required by paragraph (a) of this section,
plans and specifications for generating plant equipment and
construction do not require RUS approval.
* * * * *
(g) * * *
(2) The borrower shall obtain RUS approval, prior to issuing
invitations to bid, of the terms and conditions for communications and
control facilities contracts which will cost $1,500,000 or more. Unless
RUS approval is required by paragraph (a) of this section, plans and
specifications for communications and control facilities do not require
RUS approval.
* * * * *
PART 1726--ELECTRIC SYSTEM CONSTRUCTION POLICIES AND PROCEDURES
0
3. The authority citation for part 1726 continues to read as follows:
Authority: 7 U.S.C. 901 et seq., 1921 et seq., 6941 et seq.
Subpart A--General
0
4. Section 1726.14 is amended by revising the definition of ``minor
modification or improvement'' to read as follows:
Sec. 1726.14 Definitions.
* * * * *
Minor modification or improvement means a project the cost of which
is $150,000 or less, exclusive of the cost of owner furnished
materials.
* * * * *
[[Page 3072]]
Subpart B--Distribution Facilities
0
5. Section 1726.50 is amended by revising paragraph (a) to read as
follows:
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 more than $1,000,000.
(2) The borrower may, in its discretion, use RUS Form 198,
Equipment Contract, or a written purchase order equal to $1,000,000 or
less for purchases of equipment, and for all materials.
* * * * *
0
6. Section 1726.51 is amended by revising paragraphs (a)(1), (b)(1) and
(b)(2) to read as follows:
Sec. 1726.51 Distribution line construction.
(a) * * *
(1) The borrower may use RUS Form 790, Electric System Construction
Contract--Non-Site Specific Construction, 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 for contracts, up to
a cumulative total of $500,000 or one percent of net utility plant
(NUP), whichever is greater, per calendar year of distribution line
construction, exclusive of the cost of owner furnished materials and
equipment.
* * * * *
(b) * * *
(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 $750,000 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
$1,000,000 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.
* * * * *
Subpart C--Substation And Transmission Facilities
0
7. Section 1726.76 is amended by revising paragraph (a) to read as
follows:
Sec. 1726.76 Substation and transmission 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 $1,000,000 or more.
(2) The borrower may, in its discretion, use RUS Form 198,
Equipment Contract, or a written purchase order for purchases of
equipment of less than $1,000,000 and for all materials.
* * * * *
0
8. Section 1726.77 is amended by revising paragraphs (b)(1) and (c) to
read as follows:
Sec. 1726.77 Substation and transmission line construction.
* * * * *
(b) * * *
(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
$750,000 or one percent of NUP (not to exceed $5,000,000), 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.
* * * * *
(c) Contract approval. Individual contracts in the amount of
$750,000 or more or one percent of NUP (not to exceed $1,500,000 for
distribution borrowers or $4,500,000 for power supply borrowers),
whichever is greater, exclusive of the cost of owner furnished
materials and equipment, are subject to RUS approval.
Subpart D--Generation Facilities
0
9. Section 1726.125 is amended by revising paragraphs (a), (b)(1), and
(b)(2) to read as follows:
Sec. 1726.125 Generating plant facilities.
* * * * *
(a) Contract forms. (1) The borrower shall use RUS Form 198,
Equipment Contract, for the purchase of generating plant equipment in
the amount of $5,000,000 or more and for any generating plant equipment
contract requiring RUS approval.
(2) The borrower shall use RUS Form 200, Construction Contract--
Generating, for generating project construction contracts in the amount
of $5,000,000 or more and for any generating project construction
contract requiring RUS approval.
(3) The borrower may, in its discretion, use other contract forms
or written purchase order forms for those contracts in amounts of less
than $5,000,000 and that do not require RUS approval.
(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 less than $5,000,000 each.
(2) If the amount of the contract is $5,000,000 or more or if the
contract requires RUS approval, the borrower must use formal or
informal competitive bidding to award the contract.
* * * * *
Subpart E--Buildings
0
10. Section 1726.150 is amended by revising paragraph (b) to read as
follows:
Sec. 1726.150 Headquarters buildings.
* * * * *
(b) Procurement procedures. A borrower may use Multiparty Lump Sum
Quotations to award contracts in amounts of up to a cumulative total of
$750,000 or one percent of NUP (not to exceed $5,000,000), whichever is
greater, per calendar year of headquarters construction (including
minor modifications or improvements). The borrower shall use formal
competitive bidding for all other headquarters contract construction.
* * * * *
Subpart F--General Plant
0
11. Section 1726.176 is amended by revising paragraphs (b)(2)(i) and
(b)(3) to read as follows:
Sec. 1726.176 Communications and control facilities.
* * * * *
(b) * * *
(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 $750,000 or one percent of NUP (not to exceed
$5,000,000), whichever is greater, per calendar year of communications
and control facilities construction (including minor modifications or
improvements),
[[Page 3073]]
exclusive of the cost of owner furnished materials and equipment.
* * * * *
(3) Contract approval. Individual contracts in amounts of $750,000
or more or one percent of NUP (not to exceed $1,500,000 for
distribution borrowers or $4,500,000 for power supply borrowers),
whichever is greater, exclusive of the cost of owner furnished
materials and equipment, are subject to RUS approval.
Dated: January 11, 2012.
James R. Newby,
Acting Administrator, Rural Utilities Service.
[FR Doc. 2012-1157 Filed 1-20-12; 8:45 am]
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