[Federal Register Volume 76, Number 78 (Friday, April 22, 2011)]
[Proposed Rules]
[Pages 22631-22633]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-9630]


 ========================================================================
 Proposed Rules
                                                 Federal Register
 ________________________________________________________________________
 
 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
 
 ========================================================================
 

  Federal Register / Vol. 76, No. 78 / Friday, April 22, 2011 / 
Proposed Rules  

[[Page 22631]]



DEPARTMENT OF AGRICULTURE

Rural Housing Service

Rural Business-Cooperative Service

Rural Utilities Service

Farm Services Agency

7 CFR Part 1942

RIN 0575-AC78


Community Facility Loans

AGENCY: Rural Housing Service, Rural Business-Cooperative Service, 
Rural Utilities Service, Farm Services Agency, USDA.

ACTION: Proposed rule.

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

SUMMARY: The U.S. Department of Agriculture proposes to amend its 
regulations to maintain consistency with standard industry contracts 
and to make minor revisions to streamline processing applications. 
These revisions are needed to conform with market and industry changes 
by updating, clarifying, and modifying the regulatory requirements for 
community facility construction and development. The amendments to the 
regulation will streamline current processes and provide for faster 
reviews of alternate construction contract methods (such as Design/
Build and Construction Management) by the Agency's National Office. 
This rule can also apply to applications under the Rural Business-
Cooperative Service Programs.

DATES: Written comments on the proposed rule must be received on or 
before June 21, 2011 to be assured of consideration.

ADDRESSES: You may submit comments on this rule by any of the following 
methods:
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     Mail: Submit written comments via the U.S. Postal Service 
to the Branch Chief, Regulations and Paperwork Management Branch, U.S. 
Department of Agriculture, STOP 0742, 1400 Independence Avenue, SW., 
Washington, DC 20250-0742.
     Hand Delivery/Courier: Submit written comments via Federal 
Express Mail or another mail courier service requiring a street address 
to the Branch Chief, Regulations and Paperwork Management Branch, U.S. 
Department of Agriculture, 300 7th Street, SW., 7th Floor, Suite 701, 
Washington, DC 20024.
    All written comments will be available for public inspection during 
regular work hours at the 300 7th Street, SW., address listed above.

FOR FURTHER INFORMATION CONTACT: William Downs, Technical Support 
Branch, Program Support Staff, Rural Housing Service, U.S. Department 
of Agriculture, STOP 0761, 1400 Independence Avenue, SW., Washington, 
DC 20250-0761; Telephone: 202-720-1499; FAX: 202-690-4335; E-mail: 
[email protected].

SUPPLEMENTARY INFORMATION:

Classification

    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 (OMB).

Civil Justice Reform

    This rule has been reviewed in accordance with Executive Order 
12988, Civil Justice Reform. Except where specified, all State and 
local laws and regulations that are in direct conflict with this rule 
will be preempted. Federal funds carry Federal requirements. No person 
is required to apply for funding under this program, but if they do 
apply and are selected for funding, they must comply with the 
requirements applicable to the Federal program funds. This rule is not 
retroactive. It will not affect agreements entered into prior to the 
effective date of this rule. Before any judicial action may be brought 
regarding the provisions of this rule, the administrative appeal 
provisions of 7 CFR parts 11 and 780 must be exhausted.

Regulatory Flexibility Act

    The Administrator of the Agency has determined that this 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.). New provisions included in this rule will not impact a 
substantial number of small entities to a greater extent than large 
entities. The construction requirements and policies being revised will 
apply equally to all applicants, regardless of size of the applicant 
organization. Further, these changes will give all applicants greater 
flexibility in developing projects. Therefore, a regulatory flexibility 
analysis was not performed.

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA) Public 
Law 104-4 establishes requirements for Federal agencies to assess the 
effects of their regulatory actions on State, local, and tribal 
governments and the private sector. Under section 202 of the UMRA, 
Rural Development must prepare, to the extent practicable, a written 
statement including a cost benefit analysis, for proposed and final 
rules with ``Federal mandates'' that may result in expenditures to 
State, local or tribal governments, in the aggregate, or to the private 
sector, of $100 million or more in any one year. With certain 
exceptions, section 205 of UMRA requires Rural Development to identify 
and consider a reasonable number of regulatory alternatives and adopt 
the least costly, most cost effective or least burdensome alternative 
that achieves the objectives of the rule. This proposed rule contains 
no Federal mandates for State, local, and tribal governments or the 
private sector. Thus, this rule is not subject to the requirements of 
sections 202 and 205 of the Unfunded Mandates Reform Act of 1995.

Environmental Impact Statement

    This document has been reviewed in accordance with 7 CFR part 1940, 
subpart G, ``Environmental Program.'' The Agency has determined that 
this action does not constitute a major Federal action significantly 
affecting the quality of the human environment, and, in accordance with 
the National Environmental Policy Act of 1969 (NEPA), 42 U.S.C. 4321 et 
seq., an Environmental Impact Statement is not required.

Programs Affected

    The programs affected are listed in the Catalog of Federal Domestic 
Assistance under Numbers 10.769 Rural Business

[[Page 22632]]

Enterprise Grants, 10.773 Rural Business Opportunity Grant, 10.766 
Community Facilities Loans and Grants, 10.767 Intermediary Relending 
Program, and 10.854 Rural Economic Development Loan and Grant.

Federalism

    The policies contained in this rule do 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. Nor does this 
rule impose substantial direct compliance costs on State and local 
governments. Therefore, consultation with the States is not required.

Intergovernmental Review

    The Agency conducts intergovernmental consultation in the manner 
delineated in RD Instruction 1940-J, ``Intergovernmental Review of 
Rural Development Programs and Activities,'' and in 7 CFR part 3015, 
subpart V. The changes being considered are not subject to the 
provisions of Executive Order 12372, which requires intergovernmental 
consultation with State and local officials. An intergovernmental 
review for this revision is not required or applicable.

Paperwork Reduction Act

    There are no new reporting and recordkeeping requirements 
associated with this rule.

E-Government Act Compliance

    The Agency 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. For information 
pertinent to E-GOV compliance related to this proposed rule, please 
contact Larry Fleming, 202-720-8547.

Background

    The proposed change will remove restrictive language in 7 CFR part 
1942 that limits projects using alternate construction methods to loans 
only, and will allow grant funds to be used with design/build and other 
alternate construction methods. When the regulation was written in the 
1970's design/build and construction management were unique forms of 
contracting that were not commonly used. It was determined that the 
Agency would not allow grant funds to be used for alternate 
construction methods. Over time, design/build and construction 
management became more common in the construction industry. The success 
or failure rate of such contracting methods has proven to be no greater 
than the traditional design/bid/build method. Therefore, the Agency has 
determined that the funding source--loans or grants--should have no 
determination on the construction method used. Further, these changes 
streamline processing by allowing contracts up to $250,000 to be 
reviewed by the State Office. The present regulation, which went into 
effect in the 1970's, requires all projects over $100,000 be reviewed 
by the National Office. Additional language is added to describe 
alternate construction methods: Design/build, construction management 
constructor, construction management advisor, and fast tracking. 
Presently, only a definition is given. The new language will help field 
staff and applicants understand when a project qualifies as an 
alternate construction method. None of the changes proposed are 
statutory requirements, and the Agency has determined that these 
changes better reflect current conditions within the construction 
industry, and will better streamline processing for applicants.
    This change revises the Agency Guide documents used with American 
Institute of Architects (AIA) contracts for construction to reflect 
their updated contracts. The AIA revises their contract documents every 
10 years. Contracts referenced in the present regulation are replaced 
with the new updated contracts. New Guides are added for AIA contracts 
for design/build and construction management. Providing these Guides 
within the Agency regulation eliminates the need for National Office 
review of these projects, which reduces review time for the applicant. 
A new Guide is added listing the Agency requirements for review of 
alternate contract methods, to assist field staff and applicants.

List of Subjects in 7 CFR Part 1942

    Community development, Community facilities, Loan programs--Housing 
and community development, Loan security, Rural areas.

    For the reasons set forth in the preamble, Chapter XVIII, Title 7 
of the Code of Federal Regulations is amended as follows:

PART 1942--ASSOCIATIONS

    1. The authority citation for part 1942 continues to read as 
follows:

    Authority: 7 U.S.C. 1926; 7 U.S.C. 1927, 7 U.S.C. 7901, and Pub. 
L. 110-246.

Subpart A--Community Facility Loans

    2. Section 1942.9 is amended by revising paragraph (b) introductory 
text and (b)(1) to read as follows:


Sec.  1942.9  Planning, bidding, contracting, and constructing.

* * * * *
    (b) Contract approval. The State Director or designee is 
responsible for approving all construction contracts using legal advice 
and guidance of OGC as necessary. The use of a contracting method under 
Sec.  1942.18(1) of this subpart exceeding $250,000 must be concurred 
by the National Office. When an applicant requests such concurrence, 
the State Director will submit the following to the National Office.
    (1) State Director's and Rural Development engineer/architect's 
comments and recommendations, and if noncompetitive negotiation per 
1942.18(k)(4) is accepted by the Agency, submit an evaluation of 
previous work of the proposed construction firm.
* * * * *
    3. Section 1942.18, paragraph (l) is amended to read as follows:


Sec.  1942.18  Community facilities--Planning, bidding, contracting 
constructing.

* * * * *
    (l) Alternate contracting methods. The services of the consulting 
engineer or architect and the general construction contractor shall 
normally be procured from unrelated sources in accordance with 
paragraph (j)(7) of this section. Alternate contracting methods which 
combine or rearrange design, inspection or construction services (such 
as design/build or construction management/constructor) may be used 
with Rural Development written approval.
    (1) The owner will request Rural Development approval by providing 
the following information to the State Office for review and approval 
by the State Architect:
    (i) The owner's written request to use an unconventional 
contracting method with a description of the proposed method.
    (ii) A proposed scope of work describing in clear, concise terms 
the technical requirements for the contract. This would include a 
nontechnical statement summarizing the work to be performed by the 
contractor and the results expected. Also include the sequence in which 
the work is to be performed and a proposed construction schedule.
    (iii) A proposed firm-fixed-price contract for the entire project 
which provides that the contractor shall be responsible for any extra 
cost which

[[Page 22633]]

may result from errors or omissions in the services provided under the 
contract and compliance with all Federal, State, and local requirements 
effective on the contract execution date.
    (iv) An evaluation of the contractor's performance on previous 
similar projects in which the contractor acted in a similar capacity.
    (v) A detailed listing and cost estimate of equipment and supplies 
not included in the construction contract but which are necessary to 
properly operate the facility.
    (vi) Evidence that a qualified construction inspector who is 
independent of the contractor has or will be hired.
    (vii) Preliminary plans and outline specifications. However, final 
plans and specifications must be completed and reviewed by Rural 
Development prior to the start of construction.
    (viii) The owner's attorney's opinion and comments regarding the 
legal adequacy of the proposed contract documents and evidence that the 
owner has the legal authority to enter into and fulfill the contract.
    (2) The State Office may approve design/build or construction 
management/constructor projects if the contract amount is equal to or 
less than $250,000.
    (3) If the contract amount exceeds $250,000, National Office prior 
concurrence must be obtained in accordance with Sec.  1942.9(b) of this 
subpart. Only that information required under Sec.  1942.9(b) of this 
subpart must be provided to National Office Program Support Staff for 
review. Additional information, such as plans and specifications, may 
be submitted by the State Office, if a review of those items is 
desired.
    (4) The design/build method of construction is one in which the 
architectural and engineering services, normally provided by an 
independent consultant to the owner, are combined with those of the 
General Contractor under a single source contract. These services are 
commonly provided by a design/build firm, a joint venture between an 
architectural firm and a construction firm, or a company providing pre-
engineered buildings and design services.
    (5) The Construction Management/constructor (CMc), acts in the 
capacity of a General Contractor and is actually responsible for the 
construction. This type of construction management is also referred to 
as Construction Manager ``At Risk''. The construction contract is 
between the owner and the CMc. The CMc, in turn, may subcontract for 
some or all of the work.
    (6) The National Office may approve other alternative contact 
methods, such as Construction Management/advisor (CMa), with a 
recommendation from the State Office. The recommendation shall indicate 
the circumstances which prove this method advantageous to the applicant 
and the government. A CMa acts in an advisory capacity to the owner, 
and the actual contract for construction is between the owner and a 
prime contractor or multiple prime contractors. When a contract for an 
architect and a CMa are being provided, care must be taken to assure 
that separate professionals are not being paid to provide similar 
services. Further, paragraph (e)(3) of this section discourages 
separate contracts for construction.
    (7) All alternate contracting method projects must comply with the 
requirements for ``maximum open and free competition'' in paragraph 
(j)(2) of this section. Choosing an alternate contracting method is not 
a way to avoid competition. Further information on procurement methods, 
which must be followed, is provided in paragraph (k) of this section.
* * * * *

    Dated: April 1, 2011.
Dallas Tonsager,
Under Secretary, Rural Development.
    Dated: April 11, 2011.
Michael Scuse,
Acting Under Secretary, Farm and Foreign Agricultural Services.
[FR Doc. 2011-9630 Filed 4-21-11; 8:45 am]
BILLING CODE 3410-XV-P