[Federal Register Volume 77, Number 14 (Monday, January 23, 2012)]
[Rules and Regulations]
[Pages 3070-3073]
From the Federal Register Online via the Government Publishing 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 [email protected].

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]
BILLING CODE P