[Federal Register Volume 59, Number 164 (Thursday, August 25, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-20783]


[[Page Unknown]]

[Federal Register: August 25, 1994]


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DEPARTMENT OF AGRICULTURE
Rural Electrification Administration

7 CFR Parts 1744 and 1753

RIN 0572-AB08

 

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

AGENCY: Rural Electrification Administration, USDA.

ACTION: Final rule.

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SUMMARY: The Rural Electrification Administration (REA) hereby amends 
its post-loan regulations for telephone borrowers to ease borrower 
reporting requirements and further clarify existing REA policy. In 
addition, REA amends the telecommunications system construction 
regulations to relax requirements for minor facilities construction 
procedures, to make technical corrections and clarifications, and to 
reflect minor technical changes such as moving the definitions section 
from one subpart to another.

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

FOR FURTHER INFORMATION CONTACT: Orren E. Cameron III, Director, 
Telecommunication Standards Division, Rural Electrification 
Administration, U.S. Department of Agriculture, 14th & Independence 
Avenue SW., room 2835-S, Washington, DC 20250-1500, telephone number 
(202) 720-8663.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

    This final rule has been determined to be not significant for 
purposes of Executive Order 12866 and therefore has not been reviewed 
by OMB.

Executive Order 12778

    This final rule has been reviewed under Executive Order 12778, 
Civil Justice Reform. This final rule will not:
    (1) Preempt any State or local laws, regulations, or policies, 
unless they present an irreconcilable conflict with this rule;
    (2) Have any retroactive effect; and
    (3) Require administrative proceedings before parties may file suit 
challenging the provisions of this rule.

Regulatory Flexibility Act Certification

    REA has determined that this final rule will not have a significant 
economic impact on a substantial number of small entities, as defined 
in the Regulatory Flexibility Act (5 U.S.C. 601 et seq.). The REA 
telephone program provides loans to REA borrowers at interest rates and 
terms that are more favorable than those generally available from the 
private sector. REA borrowers, as a result of obtaining federal 
financing, receive economic benefits which exceed any direct economic 
costs associated with complying with REA regulations and requirements. 
Moreover, this action liberalizes certain contract requirements by 
changing contract limits and allowing negotiation of fee schedules 
which further offsets economic costs.

Information Collection and Recordkeeping Requirements

    In compliance with the Office of Management and Budget (OMB) 
regulations (5 CFR Part 1320) which implement the Paperwork Reduction 
Act of 1980 (Pub. L. 96-511) and section 3504 of that Act, the 
information collection and recordkeeping requirements contained in this 
final rule have been submitted to OMB for approval. Comments concerning 
these requirements should be directed to the Office of Information and 
Regulatory Affairs of OMB, Attention: Desk Officer for USDA, room 3201, 
New Executive Office Building, Washington, DC 20503.

National Environmental Policy Act Certification

    REA has determined that this final rule will not significantly 
affect the quality of the human environment as defined by the National 
Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq.). Therefore, 
this action does not require an environmental impact statement or 
assessment.

Catalog of Federal Domestic Assistance

    The program described by this final rule is listed in the Catalog 
of Federal Domestic Assistance Programs under 10.851, Rural Telephone 
Loans and Loan Guarantees, and 10.852, Rural Telephone Bank Loans. This 
catalog is available on a subscription basis from the Superintendent of 
Documents, the United States Government Printing Office, Washington, DC 
20402-9325.

Executive Order 12372

    This final rule is excluded from the scope of Executive Order 
12372, Intergovernmental Consultation. A Notice of Final Rule entitled 
Department Programs and Activities Excluded from Executive Order 12372 
(50 FR 47034) exempts REA and RTB loans and loan guarantees to 
governmental and nongovernmental entities from coverage under this 
Order.

Background

    On March 4, 1994, REA published this action as a proposed rule at 
59 FR 10327 to clarify existing policy and ease requirements.
    REA received no comment on revisions to 7 CFR part 1744, so the 
final rule is unchanged from the proposed rule.
    REA received comments on 7 CFR part 1753 from the United States 
Telephone Association, TDS Telecom on behalf of 25 TDS-affiliated 
telephone companies in the southeast, Design South Professionals, Inc., 
ALLTEL Service Corporation, Coastal Utilities, Inc., Farmers Telephone 
Cooperative, Inc. (of South Carolina), Citizens Utilities Rural 
Company, Inc., Carnes, Burkett, Wiltsee & Associates, TDS Telecom 
(Madison, WI), and Reed Veach Wurdeman & Associates. These comments 
were taken into consideration in preparing the final rule.
    Comment Summary: One commenter suggested that the phrase in 
Sec. 1753.15(b)(3), ``inspection of construction'' be changed to 
``observation of construction'' because the former is considered 
obsolete within the engineering profession.
    Response: The proposed rule did not change this subsection, but REA 
is revising the Form 217 contract, Engineering and Architectural 
Services, in a separate effort, and REA is addressing this comment in 
that revision. The term ``inspection of construction'' is used in part 
1753 in a generic sense, and it clearly describes the engineer's 
responsibility. The term ``observation of construction'', without the 
further definition which would always accompany it in a professional 
services contract, is too vague. The language in Sec. 1753.15(b)(3) is 
unchanged in the final rule.
    Comment Summary: One commenter observed that the proposed rule did 
not incorporate language in Sec. 1753.17(c)(1)(B) clarifying REA's 
policy with regard to state engineering registration laws. This 
clarifying language was previously offered by the Administrator in a 
May 10, 1990 letter.
    Response: The language requested would state that REA does not 
under part 1753 attempt to usurp any state engineering registration 
laws. It has not been REA's intent to usurp state registration laws at 
any time, so the final rule incorporates the suggested language.
    Comment Summary: Most commenters opposed the $400,000 annual 
financing limit placed on Form 773 contracts in Sec. 1753.46(c)(3) and 
Sec. 1753.80(a). Two commenters observed that REA had given no 
rationale for the proposed limit. Several commenters pointed out that 
the proposed limit would make it difficult for large REA borrowers to 
respond quickly to service demands. One commenter argued that since the 
Form 773 contract is used for central office equipment, buildings, and 
special equipment, as well as outside plant, using the Form 773 to its 
$400,000 limit on outside plant construction would deprive a borrower 
of this valuable minor construction resource in those other categories. 
And finally, one commenter argued that restricting use of the Form 773 
contract would force borrowers to resort to the Form 515 contract, 
which the commenter asserted is more complicated and expensive. This 
commenter argued that REA had presented no studies to support any 
contention that construction performed under minor construction 
procedures was more expensive than construction performed under the 
Form 515 contract.
    Response: To understand REA's imposition of the $400,000 limit, it 
is useful to view the entire package of changes in construction 
procedures in the proposed rule.
    REA proposed relaxing the existing $100,000 limit on individual 
Form 773 contracts to help that contract close a gap between minor 
construction procedures and REA's major construction contracts. The 
Form 773 contract is a very brief agreement, covering only the most 
basic responsibilities of the parties. The Form 773 contract, unlike 
REA's major contracts, does not require prior REA approvals of plans 
and specifications, pricing, or the contract itself. To make the 
contract as flexible as possible, REA simply provides a space where the 
borrower fills in the statement of work to be covered by the contract. 
The contractor may charge for work under the contract in any manner 
agreed upon: lump sum, on a unit basis, hourly, or other. No provision 
is made in the contract to require or define a performance bond. The 
contract was designed as a convenient vehicle for formalizing oral 
contracts which are common in the industry, but which had historically 
failed to withstand REA audit scrutiny. The Form 773 was designed by 
REA in this manner because a primary characteristic of its conception 
was that it would never exceed a specified limit: $100,000. Any dispute 
that might occur involving such a small amount could not pose a 
significant risk to a borrower or REA's security interest in a 
borrower. The more sophisticated major contracts, Forms 515, 525, 397 
and 157, provide borrowers and REA with necessary protections, and 
provide borrowers with agreement provisions that have evolved over the 
years to handle construction administration. These major contracts also 
facilitate a very important tenet of the successful public sector-
private sector partnership that has been the key to the success of the 
REA Telephone Program: Competition. Without these contracts, and their 
accompanying forms of specification, competitive bidding would be 
chaotic, or impossible.
    In conjunction with a relaxation of the maximum limit for 
individual Form 773 contracts, REA imposed the $400,000 limit. This was 
intended to limit a borrower's and REA's exposure to risk in the event 
of a dispute involving one or more of the newly-allowed $200,000 
outside plant Form 773 contracts. REA believes the increase in the 
limit for individual outside plant Form 773 contracts is appropriate, 
and believes that some maximum annual limit is needed to protect 
borrowers and REA from the potential risks of using this simple 
contract for complicated projects.
    In response to the comment regarding large borrowers, REA has 
changed the maximum annual limit to allow the limit to exceed $400,000 
under certain circumstances, to permit large borrowers to perform up to 
10% of the prior year's total cost for outside plant construction, 
under the Form 773 contract. It is not REA's intent for the Form 773 
contract to be used in lieu of the Form 515 contract for most major 
projects.
    In response to the concern that the maximum annual limit would be 
consumed by outside plant construction, thereby requiring borrowers to 
forego other valid uses of the Form 773, REA has established separate, 
mutually exclusive annual limits for four categories of construction: 
Outside plant, central office equipment, special equipment, and 
buildings.
    As to the concern that REA's maximum annual limit would cause 
construction to be performed under the Form 515 contract, and that the 
Form 515 is more complicated and expensive, REA responds by agreeing 
that the Form 515 contract is much more complicated that the Form 773 
contract, but disagreeing with the suggestion that construction costs 
are higher under the Form 515. REA intended for the Form 773 contract 
to be used only in situations of limited risk. REA took the idea 
initially for the Form 773 contract from telephone operating companies 
who had developed similar, simple contracts, for use only for small 
projects. The Form 515 is necessarily more complicated, but it has 
enabled the rural telephone industry to build plant of exceptionally 
high quality at costs that over the years have compared favorably with 
plant costs of far larger companies with much more purchasing leverage. 
This is largely because the Form 515 facilitates competitive bidding of 
outside plant construction, which is a fundamentally difficult task.
    In response to the suggestion that construction under the Form 773 
is less expensive than construction under the Form 515, REA's 
experience over the years indicates that the reverse is true. However, 
no specific studies had been performed to compare these costs, so REA 
has performed a comparison. REA randomly selected 30 Form 773 contracts 
that had been performed between 1992 and 1994. This sample included 
only contracts that had been closed and found to meet all REA 
requirements. Very small projects were excluded from the list. REA then 
contacted borrowers to obtain additional information on the work 
included under the contracts, since that information is not routinely 
provided to REA. To make a valid comparison, REA discarded from the 
sample all contracts which did not represent reasonable cross sections 
of construction units, for example, contracts for road boring, or 
splicing. Interestingly, only six of the original 30 Form 773 contracts 
covered general outside plant construction projects which, if 
proportionally enlarged, would be comparable to typical Form 515 
contracts. Costs of these projects were compared to standard mile costs 
for their states, which are based on average competitively-bid contract 
costs. The costs for three of the six projects were near the standard 
mile costs, the cost for one project was approximately 30% over the 
standard mile cost, and the costs for the remaining two projects were 
over twice the standard mile costs. These results illustrate one of 
REA's main concerns with the Form 773 contract. Some projects are 
performed at reasonable cost. Other projects are performed at costs 
which may be reasonable under certain circumstances. But some projects, 
in this small sample one-third of the projects compared, are far above 
the standard mile costs normally experienced. Under the current limits 
for individual Form 773 contracts, REA would not be concerned about 
these higher-than-average costs because such small jobs would not have 
a significant financial impact on a borrower or REA's security 
interests in a borrower. However, under the higher individual contract 
limits proposed by REA, the impact of several higher-than-average cost 
jobs could be significant. REA therefore has set limits in the final 
rule, but those limits have been designed to resolve the concerns of 
most commenters.

List of Subjects

7 CFR Part 1744

    Accounting, Loan programs-communications, Reporting and 
recordkeeping requirements, Rural areas, Telephone.

7 CFR Part 1753

    Loan programs-communications, Telecommunications, Telephone.

    For reasons set forth in the preamble, 7 CFR chapter XVII is 
amended as follows:

PART 1744--POST-LOAN POLICIES AND PROCEDURES COMMON TO GUARANTEED 
AND INSURED TELEPHONE LOANS

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

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

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


Sec. 1744.40  Non-act purposes.

    (a) * * *
    (3) Approval of the request is in the interests of the Government. 
Generally, it would not be in the Government's interest if the 
accommodation or subordination is being requested to enable the 
borrower to avoid complying with such REA policies or procedures, as 
competitive bid procedures or purchasing equipment acceptable to REA, 
under 7 CFR part 1753.
* * * * *


Sec. 1744.21  [Amended]


Sec. 1744.61  [Removed and reserved]

    3. The paragraph designations in Secs. 17744.21 and 1744.61 are 
removed, the definitions in Sec. 1744.21 are put in alphabetical order, 
the definitions in Sec. 1744.61 are transferred to Sec. 1744.21 in 
alphabetical order, and Sec. 1744.61 is removed and reserved.

PART 1753--TELECOMMUNICATIONS SYSTEM CONSTRUCTION POLICIES AND 
PROCEDURES

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

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

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


Sec. 1753.5  Methods of major construction.

* * * * *
    (b) Contract construction. (1) Whether the contractor is selected 
through sealed competitive bidding or negotiation, as approved by REA, 
award of the contract is subject to REA approval.
* * * * *
    3. In Sec. 1753.6, paragraph (b) is revised to read as follows:


Sec. 1753.6  Standards, specifications, and general requirements.

* * * * *
    (b) The borrower may use REA loan funds to finance nonstandard 
construction materials or equipment only if approved by REA in writing 
prior to purchase or commencement of construction.
* * * * *
    4. In Sec. 1753.8, paragraphs (a)(11)(ii), (a)(12)(i), (b)(2), 
(b)(3), and (b)(4) are revised, paragraph (b)(5) is removed to read as 
follows:


Sec. 1753.8  Contract construction procedures.

    (a) * * *
    (11) * * *
    (ii) If an award is made, the borrower shall award the contract to 
the lowest responsive bidder, subject to REA approval. The borrower may 
award the contract immediately upon determination of the lowest 
responsive bidder if the following conditions are met:
    (A) The project is included in an approved loan and adequate funds 
were budgeted in the loan and are available.
    (B) All applicable REA procedures were followed, including those in 
the Notice and Instructions to Bid in the standard forms of contract.
* * * * *
    (12) Execution of contract: (i) Upon approval by REA of the award 
of contract by the borrower, the borrower shall submit to REA three 
original counterparts of the contract executed by the contractor and 
borrower.
* * * * *
    (b) * * *
    (2) For negotiated purchases, borrowers shall use REA contract 
forms, standards, and specifications.
    (3) For all contract forms except REA Form 773:
    (i) After a satisfactory negotiated proposal has been obtained, the 
borrower shall submit it to REA for approval, along with the engineer's 
recommendation, and evidence of acceptance by the borrower.
    (ii) If REA approves the negotiated proposal, the borrower shall 
submit three copies of the contract, executed by the contractor and 
borrower, to REA for approval.
    (iii) If REA approves the contract, REA shall return one copy of 
the contract to the borrower and one copy to the contractor.
    (4) For REA Form 773, the borrower is responsible for negotiating a 
satisfactory proposal, executing contracts, and closing the contract. 
See subparts F and I of this part for requirements for major and minor 
construction, respectively, on Form 773.
    5. In Sec. 1753.9, paragraphs (a) and (c) are revised to read as 
follows:


Sec. 1753.9  Subcontracts.

    (a) REA construction contract Forms 257, 397, 515, and 525 contain 
provisions for subcontracting. Reference should be made to the 
individual contracts for the amounts and conditions under which a 
contractor may subcontract work under the contract.
* * * * *
    (c) As stated in contract Forms 257, 397, 515, and 525, the 
contractor shall bear full responsibility for the acts and omissions of 
the subcontractor and is not relieved of any obligations to the 
borrower and to the Government under the contract.
* * * * *
    6. In Sec. 1753.16, paragraphs (b)(3), (b)(4) and (b)(5) are 
redesignated as paragraphs (b)(4), (b)(5) and (b)(6), respectively, and 
a new paragraph (b)(3) is added to read as follows:


Sec. 1753.16  Architectural services.

* * * * *
    (b) * * *
    (3) If the fee schedule has to be modified in order for the 
borrower to obtain adequate architectural services, the borrower shall 
obtain written REA approval of the revised fee schedule prior to 
executing contracts.
* * * * *
    7. In Sec. 1753.17, paragraphs (c)(1)(i)(B) and (e) are revised to 
read as follows:


Sec. 1753.17  Engineering services.

* * * * *
    (c)(1) * * *
    (i) * * *
    (B) The name and qualifications of the employee to be in charge. 
REA requires this employee to meet the State experience requirements 
for registered engineers. In the absence of specific State experience 
requirements, the employee must have at least eight years experience in 
the design and construction of telecommunication facilities, with at 
least two years of the work experience at a supervisory level. REA does 
not require professional registration of this employee, but this does 
not relieve the borrower from compliance with applicable State 
registration requirements which may require a licensed individual to 
perform such services.
* * * * *
    (e) The borrower shall obtain status of contract and force account 
proposal reports from the engineer once each month. The report shall 
show for each contract or FAP the approved contract or FAP amount, the 
date of approval, the scheduled date construction was to begin and the 
actual date construction began, the scheduled completion date, the 
estimated or actual completion date, the estimated or actual date of 
submission of closeout documents, and an explanation of delays or other 
pertinent data relative to progress of the project. One copy of this 
report shall be submitted to the GFR.
* * * * *
    8. In Sec. 1753.25, a new paragraph (f)(4) is added to read as 
follows:


Sec. 1753.25  General.

* * * * *
    (f) * * *
    (4) 7 CFR part 1792, subpart C, which requires that the building 
design comply with applicable seismic design criteria. Prior to the 
design of buildings, borrowers shall submit to REA a written 
acknowledgement from the architect or engineer that the design will 
comply.
* * * * *
    9. In Sec. 1753.26, paragraph (b) introductory test is revised, 
paragraph (c) is redesignated as paragraph (d), and new paragraph (c) 
is added to read as follows:


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

* * * * *
    (b) REA Contract Form 257 shall be completed as follows:
* * * * *
    (c) The plans and specifications shall show the identification and 
date of the model code used for seismic safety design considerations, 
and the seismic factor used. See 7 CFR part 1792, subpart C.
* * * * *


Sec. 1753.29  [Amended]

    10. In Sec. 1753.29, paragraph (a) is removed, and paragraphs (b), 
(c), (d), and (e) are redesignated as paragraphs (a), (b), (c), and 
(d).
    11. In Sec. 1753.30, paragraphs (b)(2)(i) and (c)(2) are revised to 
read as follows:


Sec. 1753.30  Closeout procedures.

* * * * *
    (b) * * *
    (2) * * *
    (i) Arrange with its architect or engineer, contractor, and the GFR 
for final inspection of the project.
* * * * *
    (c) * * *
    (2) Complete, with the assistance of its architect or engineer, the 
documents listed in Appendix A of this part that are required for the 
closeout of force account construction.
* * * * *
    12. In Sec. 1753.39, paragraph (g) is revised to read as follows:


Sec. 1753.39  Closeout documents.

* * * * *
    (g) Final payment shall be made according to the payment terms of 
the contract.
    13. In Sec. 1753.46, paragraph (c) is added to read as follows:


Sec. 1753.46  General.

* * * * *
    (c) The two contract forms which may be used for major outside 
plant construction are Form 515 and Form 773. Limitations on the 
applicability of these forms shall be as follows:
    (1) Form 515 shall be used for major outside plant construction 
projects which will be competitively bid. The contract contains plans 
and specifications and has no dollar limitation. See Secs. 1753.47, 
1753.48 and 1753.49.
    (2) A Form 515 contract which is for less than $200,000, may, at 
the borrower's option, be negotiated. See Sec. 1753.48(b).
    (3) Form 773 shall be used for major outside plant projects which 
may not be competitively bid, and which cannot be designed and staked 
at the time of contract execution. Projects of this nature include 
routine line extensions and placement of subscriber drops. The Form 773 
contract is limited to a maximum of $200,000. In any twelve month 
period, REA will not finance more than $400,000, or ten per cent (10%) 
of the borrower's previous year's outside plant total construction, 
whichever is greater, in Form 773 contracts for a borrower. This 
limitation includes all major and minor outside plant construction 
performed under Form 773 contracts, and is determined by the date the 
Form 773 contract is executed. See 7 CFR Sec. 1753.50.
    14. In Sec. 1753.49, paragraph (c)(3) is revised to read as 
follows:


Sec. 1753.49  Closeout documents.

* * * * *
    (c) * * *
    (3) Final payment shall be made according to the payment provisions 
of Article III of Form 515.
    15. Sec. 1753.50 is added to read as follows:


Sec. 1753.50  Construction by Form 773 contract.

    (a) The borrower shall prepare the contract form and provide such 
details of construction as may be available. Compensation may be based 
upon unit prices, hourly rates, or another mutually agreeable basis.
    (b) Neither the selection of the contractor nor the contract 
requires REA approval.
    (c) Borrowers are urged to obtain quotations from several 
contractors before entering into a contract to be assured of obtaining 
the lowest cost.
    (d) The borrower must ensure that the contractor selected meets all 
Federal and State requirements, and that the contractor maintains the 
insurance coverage required by the contract for the duration of the 
work. See 7 CFR part 1788.
    (e) The borrower shall finance major construction under the Form 
773 contract with general funds and obtain reimbursement with loan 
funds when construction is completed and an executed Form 771 has been 
submitted to REA.
    (f) If the contract exceeds $100,000, a contractor's bond shall be 
required. See 7 CFR part 1788.
    (g) When the construction is completed to the borrower's 
satisfaction, the borrower shall obtain from the contractor a final 
invoice and an executed copy of REA Form 743, Certificate of Contractor 
and Indemnity Agreement.
    (h) The closeout document for the Form 773 contract is REA Form 
771. See Sec. 1753.81 for the requirements for completing Form 771.
    (i) An original and two copies of Form 771 shall be sent to the 
GFR. The GFR may inspect the construction, and will initial and return 
the original and one copy to the borrower.
    (j) The original Form 771 shall be submitted with an FRS to REA 
only in conjunction with a request for an advance of loan funds for the 
work.

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


Sec. 1753.68  Purchasing special equipment.

* * * * *
    (d) * * *
    (3) * * *
    (iii) Final payment shall be made according to the payment terms of 
the contract.

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


Sec. 1753.78  Construction by contract.

    (a) REA Form 773 shall be used for minor construction by contract. 
Compensation may be based upon unit prices, hourly rates, or another 
basis agreed to in advance by the borrower and the contractor. A single 
work project may require more than one contractor.
* * * * *
    18. In Sec. 1753.80, paragraphs (b), (c), (d), (e), (f), and (g) 
are redesignated as paragraphs (c), (d), (e), (f), (g), and (h), 
paragraph (b) is added, and paragraph (a) is revised, to read as 
follows:


Sec. 1753.80  Minor construction procedure.

    (a) If the borrower performs minor construction financed with loan 
funds, the borrower's regular work order procedure shall be used to 
administer construction activities that may be performed entirely by a 
contractor under Form 773 contract, by work order, or jointly by work 
order and one or more contractors under Form 773 contracts.
    (b) REA financing under Form 773 contracts is limited in any twelve 
month period to the following amounts for the following discrete 
categories of minor construction. A borrower could, for example, 
receive financing of Form 773 contracts in a twelve month period in 
amounts up to $400,000 of central office equipment and $200,000 of 
special equipment and $200,000 of buildings. The date of the Form 773 
contract is the date the Form 773 contract is executed.
    (1) For outside plant construction, the limit is $400,000 or ten 
per cent (10%) of the borrower's previous calendar year's outside plant 
total construction, whichever is greater.
    (2) For central office eqiupment, the limit is $400,000.
    (3) For special equipment, the limit is $200,000.
    (4) For buildings, the limit is $200,000.
* * * * *
    19. Appendices A through F of part 1753 are revised to read as 
follows: 

                                                             Appendix A.--Documents Required To Closeout Construction of Buildings                                                              
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                               Use with                          Prepared by                                         Distribution               
     Form                                                           ------------------------------------------------------------------------  Number  ------------------------------------------
 furnished by                      Description                                      Force account                   Architect/                  of     Borrower            Architect  Contractor
     REA                                                               Contract                     Contractor      engineer      Borrower    copies                REA                         
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
238..........  Construction or Equipment Contract Amendment (Submit  x              .............  .............  x              ..........         3  ........         3  .........  ..........
                to REA for approval, as required).                                                                                                                                              
181..........  Certificate of Completion (Contract Construction)     x              .............  .............  x              ..........         3         1         1  .........          1 
                (1).                                                                                                                                                                            
181a.........  Certificate of Completion (Force Account              .............  x              .............  x              ..........         2         1         1  .........  ..........
                Construction).                                                                                                                                                                  
231..........  Certificate or Contractor...........................  x              .............  x              .............  ..........         2         1         1  .........  ..........
224..........  Waiver and Release of Lien (2 copies from each        x              .............  x              .............  ..........         2         1         1  .........  ..........
                supplier).                                                                                                                                                                      
213..........  Certifcate (Buy American)...........................  x              .............  x              .............  ..........         1         1  ........  .........  ..........
284..........  Statement of Architect's Fee........................  x              x              .............  x              ..........         3         1         1          1  ..........
               Inventory-List Materials and Services Furnished by    x              x              .............  .............  ..........         3         1         1          1  ..........
                Borrower Upon Which Architectural Services Were                                                                                                                                 
                Furnished. Show Cost (See Form 284).                                                                                                                                            
               Inventory-List Materials and Services Furnished by    x              x              .............  .............  x                  3         1         1          1  ..........
                Borrower Upon Which Architectural Services Were Not                                                                                                                             
                Performed Show Cost.                                                                                                                                                            
(2)..........  ``As Built'' Plans and Specifications...............  x              x              .............  x              ..........         1         1  ........  .........  ..........
               Guarantees, Warranties, Bonds, Operating or           x              .............  x              .............  ..........         1         1  ........  .........  ..........
                Maintenance Instructions, et cetera.                                                                                                                                            
               Architect/Engineer Seismic Safety Certification.....  x              x              .............  x              ..........         3         1         1  .........         1  
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
(1) Cost of Materials and Services Furnished by Borrower not to be Included in Total Cost on Form 181.                                                                                          
(2) When only Minor Changes Were Made During Construction, Two Copies of a Statement to that Effect from the Architect Will be Accepted in Lieu of the ``As-Built'' Plans and Specifications.   


                                     Appendix B.--Documents Required to Close Out Central Office Equipment Contract                                     
--------------------------------------------------------------------------------------------------------------------------------------------------------
     Form                                                     Use with                     Prepared by            Total            Distribution         
 furnished by              Description             ------------------------------------------------------------  No. of  -------------------------------
     REA                                             REA form 525   REA form 545    Contractor      Engineer     copies   Borrower  Contractor     REA  
--------------------------------------------------------------------------------------------------------------------------------------------------------
238..........  Construction or Equipment Contract   X              X              .............  X                     3  ........  ..........         3
                Amendment (Submit to REA for                                                                                                            
                approval, if required, before                                                                                                           
                following documents).                                                                                                                   
754..........  Certficate of Completion and         X              .............  X              X                     4         2          1          1
                Certificate of Contractor and                                                                                                           
                Indemnity Agreement (If submitted,                                                                                                      
                Form 744 is not required).                                                                                                              
517..........  Results of Acceptance Tests          X              .............  .............  X                     2         1          1   ........
                (Prepare and distribute copies                                                                                                          
                immediately upon completion of the                                                                                                      
                acceptance tests of each central                                                                                                        
                office).                                                                                                                                
752a.........  Certificate of Completion-Not        .............  X              .............  X                     3         1          1          1
                Including Installation.                                                                                                                 
224..........  Waiver and Release of Lien (Two      X              .............  X              .............         2         1  ..........         1
                copies from each supplier).                                                                                                             
231..........  Certificate of Contractor..........  X              .............  X              .............         2         1  ..........         1
213..........  Certificate (Buy American).........  X              X              X              .............         2         1  ..........         1
               Switching Diagram, as installed....  X              X              X              .............         2         2  ..........  ........
               Set of Drawings (Each set to         X              X              X              .............         2         2  ..........  ........
                include all the drawings required                                                                                                       
                under the Specification REA Form                                                                                                        
                522).                                                                                                                                   
--------------------------------------------------------------------------------------------------------------------------------------------------------


                                Appendix C.--Documents Required to Closeout Telephone Construction Contract REA Form 515                                
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                    Prepared by                    Distribution         
                                                                    Number        Form     -------------------------------------------------------------
REA Form No.                      Description                         of       available                                  Borrower  Contractor          
                                                                    copies     from REA       Engineer      Contractor                            REA   
--------------------------------------------------------------------------------------------------------------------------------------------------------
724..........  Final Inventory...................................         3  x              x              .............         1          1          1
724a.........  Final Inventory...................................         3  x              x              .............         1          1          1
               Contractor's Board Extension (When required)......         3  .............  .............  x                     1          1          1
281..........  Tabulation of Materials Furnished by Borrower.....         3  .............  .............  x                     1          1          1
213..........  Certificate (``Buy American'')....................         1  x              .............  x                     1  ..........  ........
               Listing of Construction Change Orders.............         1  .............  .............  .............  ........  ..........         1
224..........  Waiver and Release of Lien (Two copies from each           2  x              .............  x                     1  ..........         1
                supplier).                                                                                                                              
231..........  Certificate of Contractor.........................         2  x              .............  x                     1  ..........         1
527..........  Final Statement of Construction...................         3  x              x              .............         1          1          1
               Reports on Results of Acceptance Tests............         2  .............  x              .............         1          1   ........
               Set of Final Staking Sheets.......................         1  .............  x              .............         1  ..........  ........
               Tabulation of Staking Sheets......................         1  .............  x              .............         1  ..........  ........
               Correction Summary (legible copy).................         1  .............  x              .............         1  ..........  ........
               Treated Forest Products Inspection Reports or              1  .............  .............  .............         1  ..........  ........
                Certificates of Compliance (Prepared by                                                                                                 
                inspection company or supplier).                                                                                                        
               Final Key Map (when applicable)...................         1  .............  x              .............         1  ..........         1
               Final Central Office Area and Town Detail Maps....         1  .............  x              .............         1  ..........         1
--------------------------------------------------------------------------------------------------------------------------------------------------------


  Appendix D.--Step-by-Step Procedure for Closing Out Telephone Construction Contract-Labor and Materials, REA  
                                                    Form 515                                                    
----------------------------------------------------------------------------------------------------------------
              Sequence                                                                                          
--------------------------------------            By                                Procedure                   
 Step No.             When                                                                                      
----------------------------------------------------------------------------------------------------------------
1.........  Prior to completion of     Borrower's Engineer......  Receives instructions from the GFR concerning 
             construction.                                         the closeout procedure.                      
2.........  Upon completion of         Borrower's Engineer......  Prepares the following: 1 set of Key Maps,    
             construction.                                         when applicable, which show work done under  
                                                                   the construction contract marked with red    
                                                                   pencil. 1 set of Detail Maps, which show work
                                                                   done under the construction contract marked  
                                                                   with red pencil. 1 copy of Tabulation of     
                                                                   Staking Sheets. 1 copy of tentative Final    
                                                                   Inventory, REA Forms 724, 724a.              
3.........  After construction has     Borrower's Engineer......  Forwards letter to the borrower with copies to
             been completed and                                    the GFR stating that the project is ready for
             acceptance tests made.                                final inspection.                            
4.........  Upon receipt of letter     GFR......................  Promptly arranges with borrower, borrower's   
             from borrower's engineer.                             engineer, and contractor for final inspection
                                                                   of construction. It is contemplated that     
                                                                   final inspections will be made on sections of
                                                                   line as construction is completed, leaving a 
                                                                   minimum amount to be inspected at this time. 
5.........  When requested by the GFR  REA Field Accountant.....  Audits REA Form 281, if borrower supplied part
                                                                   of the materials.                            
6.........  Inspection date scheduled  Borrower's Engineer......  Shall have the following documents available  
                                                                   for the GFR: 1 set of ``as constructed'' Key 
                                                                   Maps (when applicable). 1 set of ``as        
                                                                   constructed'' Detail Maps. 1 copy of the List
                                                                   of Construction Change Orders. 1 set of Final
                                                                   Staking Sheets. 1 copy of Tabulation Staking 
                                                                   Sheets. 1 copy of Treated Forest Products    
                                                                   Inspection Reports or Certificates of        
                                                                   Compliance. 1 copy of tentative Final        
                                                                   Inventory REA Form 724, 724a. 1 copy of      
                                                                   tentative Tabulation, REA Form 231, if       
                                                                   borrower furnished part of material. 1 copy  
                                                                   of Report on Results of Acceptance Tests.    
7.........  During inspection........  Borrower's Engineer......  Issues instructions to contractor covering    
                                                                   corrections in construction found during     
                                                                   inspection by GFR in the company of the      
                                                                   borrower's engineer and the contractor or his/
                                                                   her representative.                          
8.........  During inspection........  Contractor...............  Corrects defects in construction on basis of  
                                                                   instructions from the borrower's engineer.   
                                                                   The corrections should proceed closely behind
                                                                   the inspection in order that the borrower's  
                                                                   engineer can check the corrections before    
                                                                   leaving the system.                          
9.........  During inspection........  Borrower's Engineer......  With GFR inspects and approves corrected      
                                                                   construction.                                
10........  During inspection........  Borrower's Engineer......  Marks inspected areas on the Key Map, if      
                                                                   available, otherwise on the Detail Maps.     
11........  Upon completion of         Borrower's Engineer......  Prepares or obtains all the closeout documents
             inspection.                                           listed in Appendix C. Makes distribution of  
                                                                   the copies of the documents as indicated in  
                                                                   Appendix C. Forwards the documents for REA to
                                                                   the GFR.                                     
12........  After reviewing final      REA GFR..................  Reviews documents and distributes copies as   
             documents.                                            indicated in Appendix C.                     
13........  After signing final        Borrower.................  Prepares and submits Financial Requirement    
             inventory.                                            Statement, REA Form 481, requesting amount   
                                                                   necessary to make final payment due under    
                                                                   contract.                                    
14........  On receipt of final        Borrower.................  Promptly forwards check for final payment to  
             advance.                                              contractor.                                  
15........  During next loan fund      REA Field accountant.....  Makes an examination of borrowers construction
             audit review after final                              records for (1) compliance with the          
             payment to contractor.                                construction contract and Subpart F and (2)  
                                                                   REA Form 281, Tabulation of Materials        
                                                                   Furnished by Borrowers, if any, for          
                                                                   appropriate costs.                           
----------------------------------------------------------------------------------------------------------------


             Appendix E.--Documents Required to Close Out Force Account Outside Plant Construction              
----------------------------------------------------------------------------------------------------------------
                                                                                 No. of copies required and     
                                                                                 distribution of documents      
 Item No.     REA form No.         Description on title of document       --------------------------------------
                                                                            Total No.      Owner         REA    
----------------------------------------------------------------------------------------------------------------
a. .......  817, 817a, 817b.  Final inventory force account construciton             2            1            1
                               and certificate of engineer.                                                     
b ........  213 ............  Certificate, ``Buy American'' (as                      1            1            0
                               applicable-one from each supplier).                                              
c ........  ................  Detail maps................................            1            1            0
d ........  ................  Key map if applicable......................            1            1            0
e ........  ................  Staking sheets.............................            1            1            0
f ........  ................  Tabulation of staking sheets...............            1            1            0
g ........  ................  Treated forest products inspection reports,            1            1           0 
                               if applicable.                                                                   
----------------------------------------------------------------------------------------------------------------


                                            Appendix F.--Documents Required to Closeout Equipment Contracts                                             
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                         No. of copies                      Prepared by                            Distribution         
   Form                                              ---------------------------------------------------------------------------------------------------
 furnished                 Description                                           Form 397                Form 398                                       
  by REA                                              Form 397  Form 398 ------------------------------------------------ Borrower  Contractor     REA  
                                                                          Contractor   Engineer   Contractor   Engineer                                 
--------------------------------------------------------------------------------------------------------------------------------------------------------
238         Construction or Equipment Contract               3         3  ..........  x           ..........  x           ........  ..........         3
             Amendment (If required, submit to REA                                                                                                      
             for approval before other closeout                                                                                                         
             documents).                                                                                                                                
396         Certificate of Completion-Special                3  ........  ..........  x           ..........  x                  1          1          1
             Equipment Contract (Including                                                                                                              
             Installation).                                                                                                                             
396a        Certificate of Completion-Special         ........         3  ..........  x           ..........  x                  1          1          1
             Equipment Contract (Not Including                                                                                                          
             Installation).                                                                                                                             
744         Certificate of Contractor and Indemnity          2  ........  x           ..........  ..........  ..........         1  ..........         1
             Agreement.                                                                                                                                 
213         Certificate (Buy American)..............         2         2  x           ..........  x           ..........         1  ..........         1
            Report in writing, including all                 2         2  x           ..........  ..........  x                  1  ..........         1
             measurements and other information                                                                                                         
             required under Part II of the                                                                                                              
             applicable specifications.                                                                                                                 
            Set of maintenance recommendations for           1         1  x           ..........  x           ..........         1  ..........  ........
             all equipment furnished under the                                                                                                          
             contract.                                                                                                                                  
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Dated: August 17, 1994.
Bob J. Nash,
Under Secretary, Small Community and Rural Development.
[FR Doc. 94-20783 Filed 8-24-94; 8:45 am]
BILLING CODE 3410-15-P