[Federal Register Volume 77, Number 97 (Friday, May 18, 2012)]
[Rules and Regulations]
[Pages 29537-29540]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-11961]


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DEPARTMENT OF AGRICULTURE

Rural Housing Service

Rural Business-Cooperative Service

Rural Utilities Service

Farm Service Agency

7 CFR Part 1942

RIN 0575-AC78


Community Facility Loans

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

ACTION: Final rule.

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SUMMARY: The Rural Housing Service (Agency) is amending regulations on 
Community Facility Loans, to maintain consistency with standard 
industry contracts and to make minor revisions to streamline processing 
applications. These revisions are needed to conform to 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.

DATES: This rule is effective July 17, 2012.

FOR FURTHER INFORMATION CONTACT: William Downs, Technical Support 
Branch, Program Support Staff, Rural Housing Service, U.S. Department 
of

[[Page 29538]]

Agriculture, STOP 0761, 1400 Independence Avenue SW., Washington, DC 
20250-0761; Telephone: 202-720-1499; Fax: 202-690-4335; Email: 
[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. 
Applications for funding under this program are voluntary. Applicants 
who apply and are selected for funding 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 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 10.766 Community Facilities Loans and Grants.

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

    The information collection and record keeping requirements 
contained in this regulation have been approved by OMB in accordance 
with the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.). The 
assigned OMB control number is 0575-0042.

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 William Downs, 202-720-1499.

Executive Order 13175, Consultation and Coordination With Indian Tribal 
Governments

    This executive order imposes requirements on Rural Development in 
the development of regulatory policies that have tribal implications or 
preempt tribal laws. Rural Development has determined that the proposed 
rule does not have a substantial direct effect on one or more Indian 
tribe(s) or on either the relationship or the distribution of powers 
and responsibilities between the Federal Government and Indian tribes. 
Thus, this final rule is not subject to the requirements of Executive 
Order 13175. If a tribe determines that this rule has implications of 
which Rural Development is not aware and would like to engage in 
consultation with Rural Development on this rule, please contact Rural 
Development's Native American Coordinator at (202) 690-1681 or 
[email protected].

Background

    The change removes restrictive language in 7 CFR part 1942, subpart 
A 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

[[Page 29539]]

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 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.
    In conjunction with this rule, the Agency is revising Agency Guide 
documents used with American Institute of Architects (AIA) contracts 
for construction to reflect their updated contracts. Contracts 
referenced in the present regulation will be replaced with the new 
updated contracts. New Guides will be added for AIA contracts for 
Design/Build and Construction Management. A new Guide will be added 
listing the Agency requirements for review of alternate contract 
methods, to assist field staff and applicants.
    A proposed rule was published in the Federal Register on April 22, 
2011 (76 FR 22631) to address issues mentioned above. No comments were 
received, and there have been no changes implemented in this rule that 
were not addressed in the proposed rule.

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

0
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

0
2. Section 1942.9 is amended by revising the section heading, paragraph 
(b) introductory text and paragraph (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 National Office must concur with 
the use of a contracting method under Sec.  1942.18(l) of this subpart 
exceeding $250,000. 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 
Sec.  1942.18(k)(4) is accepted by the Agency, submit an evaluation of 
previous work of the proposed construction firm.
* * * * *

0
3. Section 1942.18, paragraph (l) is revised 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, the expected results, 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 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. Additional information, such as plans and specifications, may 
be requested by the National Office.
    (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

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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, it is important to make sure 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 4, 2012.
Dallas P. Tonsager,
Under Secretary, Rural Development.
    Dated: April 2, 2012.
Michael T. Scuse,
Acting Under Secretary, Farm and Foreign Agriculture Services.
[FR Doc. 2012-11961 Filed 5-17-12; 8:45 am]
BILLING CODE 3410-XV-P