RD Instruction 1942-A

Table of Contents

Page 1

(Revision 1)

PART 1942 - ASSOCIATIONS

Subpart A - Community Facility Loans

## [Table of Contents]{.underline}

[Sec]{.underline}. [Page]{.underline}

1942.1 General. 1

1942.2 Processing applications. 2

\(a\) Preapplications. 2

\(b\) Environmental review. 5

\(c\) Applications. 5

\(d\) Review of decision. 6

\(e\) Joint funding. 6

1942.3 Preparation of appraisal reports. 7

1942.4 Borrower contracts. 7

1942.5 Application review and approval. 7

\(a\) Procedures for review. 7

\(b\) Projects requiring National Office review. 10

\(c\) For all applications. 11

\(d\) Loan approval and obligating funds. 12

1942.6 Preparation for loan closing. 13

\(a\) Obtaining closing instructions. 13

\(b\) Verification of users and other funds. 13

\(c\) Initial compliance review. 14

\(d\) Ordering loan checks. 14

\(e\) Multiple advances of Rural Development funds. 14

1942.7 Loan closing. 15

\(a\) Authority to execute, file, and record legal\
instruments. 15

\(b\) Preparation of mortgages. 15

\(c\) Source of funds for insured loans. 15

\(d\) Unused funds. 15

\(e\) Loan disbursements. 15

\(f\) Supervised bank accounts. 15

(11-17-04) SPECIAL PN

RD Instruction 1942-A

Table of Contents

Page 2

(Revision 1)

[Sec]{.underline}. [Page]{.underline}

1942.8 Actions subsequent to loan closing. 15

\(a\) Mortgages. 15

\(b\) Notes and bonds. 16

\(c\) Multiple advances - bond(s). 16

\(d\) Bond registration record. 16

\(e\) Disposition of title evidence. 16

\(f\) Material for State Office. 16

\(g\) State Office review of loan closing. 16

\(h\) Safeguarding bond shipments. 17

\(i\) Water stock certificates. 17

1942.9 Planning, bidding, contracting, and constructing. 17

\(a\) Review of construction plans and specifications. 17

\(b\) Contract approval. 17

\(c\) Bid irregularities. 17

\(d\) Noncompliance. 17

1942.10 - 1942.11 \[Reserved\] 17

1942.12 Loan cancellation. 17A

\(a\) Form RD 1940-10, \"Cancellation of U.S. Treasury

Check and/or Obligation.\" 17A

\(b\) Notice of cancellation. 17A

1942.13 Loan servicing. 17A

1942.14 Subsequent loans. 17A

1942.15 Delegation and redelegation of authority. 17A

1942.16 State supplements and guides. 17A

\(a\) State supplements. 17B

\(b\) State guides. 17B

1942.17 Community Facilities. 18

1942.18 Community Facilities - Planning, Bidding,

Contracting, Constructing. 75

1942.19 Information pertaining to preparation of notes or bonds and

bond transcript documents for public body applicants. 96

1942.20 Community Facility Guides. 107

1942.21 Statewide Nonmetropolitan Median Household Income. 108

1942.22 - 1942.49 \[Reserved\] 108

1942.50 OMB control number. 109

Exhibit A OMB CIRCULAR NO. A-128

Exhibit B USDA Regional Inspector General (OIG) Contacts for Audits

Automation Supplement Engineering Fee Analysis (Distribution: WS only)

## oOo 

RD Instruction 1942-A

PART 1942 - ASSOCIATIONS

Subpart A - Community Facility Loans

§ 1942.1 [General]{.underline}.

\(a\) This subpart outlines the policies and procedures for making and
processing insured loans for community facilities except fire and rescue
and other small essential community facility loans and water and waste
disposal facilities. This subpart applies to Community Facilities loans
for fire and rescue and other small essential community facility loans
only as specifically provided for in subpart C of this part. Water and
waste loans are provided for in part 1780 of this title. The Agency
shall cooperate fully with State and local agencies in making loans to
ensure maximum support to the State strategy for rural development.
State Directors and their staffs shall maintain coordination and liaison
with State agency and substate planning districts. Funds allocated for
use under this subpart are also for the use of Indian tribes within the
State, regardless of whether State development strategies include Indian
reservations within the State\'s boundaries. Indians residing on such
reservations must have equal opportunity to participate in the benefits
of these programs as compared with other residents of the State. Federal
statutes provide for extending the Agency's financial programs without
regard to race, color, religion, sex, national origin, marital status,
age, or physical/mental handicap. The participants must possess the
capacity to enter into legal contracts under State and local statutes.
Any processing or servicing activity conducted pursuant to this subpart
involving authorized assistance to Agency employees, members of their
families, known close relatives, or business or close personal
associates, is subject to the provisions of subpart D of part 1900 of
this chapter. Applicants for this assistance are required to identify
any known relationship or association with an Agency employee. (Revised
02-09-04, SPECIAL PN.)

\(b\) Indian tribes on Federal and State reservations and other
Federally recognized Indian tribes are eligible to apply for and are
encouraged to participate in this program. Such tribes might not be
subject to State and local laws or jurisdiction. However, any
requirements of this subpart that affect applicant eligibility, the
adequacy of the Agency\'s security or the adequacy of service to users
of the facility and all other requirements of this subpart must be met.

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

DISTRIBUTION: WSAL Loan and Grant Making

Associations

## 1

## (Revision 10)

(2-6-85) PN 956

RD Instruction 1942-A

§ 1942.1 (Con.)

> \(c\) Loans sold without insurance by the Agency to the private sector
> will be serviced in the private sector and will not be serviced under
> this subpart. The provisions of this subpart are not applicable to
> such loans. Future changes to this subpart will not be made applicable
> to such loans. (Revised 10-20-87, SPECIAL PN.)

\(d\) The Area Office will normally be the entry point for
preapplications and serve as a local contact point. Applications will be
filed with the Area Office and loans will be processed to the maxium
extent possible by the Area Office staff. The applicant\'s governing
body should designate one person to coordinate the activities of its
engineer, architect, attorney, and any other professional employees and
to act as contact person during loan processing. Agency personnel should
make every effort to involve the applicant\'s contact person when
meeting with the applicant\'s professional consultants and/or agents.
The State Office staff will monitor community programs loanmaking and
servicing, and will provide assistance to Area Office personnel to the
extent necessary to assure that the activities are being accomplished in
an orderly manner consistent with the Agency's regulations. (Revised
05-19-92, SPECIAL PN.)

§ 1942.2 [Processing applications]{.underline}.

\(a\) [Preapplications]{.underline}.

\(1\) The Area Office may handle initial inquiries and provide basic
information about the program. They are to provide the preapplication,
SF 424.2, \"Application for Federal Assistance (For Construction).\" The
Rural Development Manager will assist applicants as needed in completing
SF 424.2, and in filing written notice of intent and request for
priority recommendation with the appropriate clearinghouse. The Rural
Development Manager will inform the applicant that it may be necessary
to apply for credit from commercial sources. It will be explained that
if credit for the project is available from commercial sources at
reasonable rates and terms the applicant is not eligible for the
Agency's financing. The Rural Development Manager will meet with the
applicant, whenever appropriate to discuss the

## 2

## (Revision 10) 

RD Instruction 1942-A

§ 1942.2(a)(1) (Con.)

Agency's preapplication processing. Guidance and assistance will be
provided by the State Director, as needed, for orderly application
processing. The District Director will determine that the preapplication
is properly completed and fully reviewed. The District Director will
then forward to the State Director:\
(Revised 02-14-96, PN 257.)

\(i\) Eligibility determination and recommendations.

\(ii\) One copy of SF 424.2. (Revised 4-11-90, SPECIAL PN.)

\(iii\) State intergovernmental review comments and recommendations
(clearinghouse comments).

\(iv\) Priority recommendations.

\(v\) Supporting documentation necessary to make an eligibility
determination, such as financial statements, audits, or copies of
organizational documents or existing debt instruments. The District
Director will advise applicants on what documents are necessary.
Applicants should not be required to expend significant amounts of money
or time developing supporting documentation at the preapplication stage.
(Added 3-1-88, SPECIAL PN.)

\(2\) The State Director will review each SF 424.2 along with other
information that is deemed necessary to determine whether financing from
commercial sources at reasonable rates and terms is available. If credit
elsewhere is indicated, the State Director will instruct the District
Director to so inform the applicant and recommend the applicant apply to
commercial sources for financing. Projects may be funded jointly with
other lenders provided the requirements of §1942.17 (g) of this subpart
are met. Joint financing occurs when two or more lenders make separate
loans to supply the funds required by one applicant for a project.

## 3

## (Revision 5)

(2-6-85) PN 956

RD Instruction 1942-A

§ 1942.2(a)(2) (Con.)

\(i\) In order to provide a basis for referral of preapplications of
only those applicants who may be able to finance projects through
commercial sources, State Directors should maintain liaison with
representatives of banks, investment bankers, financial advisors, and
other lender representatives in the State. State Directors should
maintain criteria for determining preapplications which should be
referred to commercial lenders. A list of lenders representatives
interested in receiving such referral should be maintained.

\(ii\) The State Director shall maintain a working relationship with the
State Office or official that has been designated as the single point of
contact for the intergovernmental review process and give full
consideration to their comments when selecting preapplications to be
processed. (Revised 05-19-92, SPECIAL PN.)

\(iii\) The State Director will review the District Director\'s
eligibility determination and recommendations in sufficient time for the
District Director\'s use in preparing and issuing Form AD-622.

\(iv\) Form AD-622 will be prepared by the District Director within
forty-five (45) calendar days from receipt of the preapplication by the
Agency, stating the results of the review action. The original will be
signed and delivered to the applicant with a copy to the State Director.

\(3\) For preapplications eligible for Agency funding which have the
necessary priority to compete with similar preapplications, the Agency
will issue Form AD-622 inviting an application containing the following
statement: (Revised 10-19-88, SPECIAL PN.)

\"You are advised against taking any actions or incurring any
obligations which would either limit the range of alternatives to be
considered, or which would have an adverse effect on the environment.
Satisfactory completion of the environmental review process must occur
prior to the issuance of the letter of conditions.\"

## 4

## (Revision 5) 

RD Instruction 1942-A

§ 1942.2(a) (Con.)

\(4\) The following statement must be added to Form AD-622 when
notifying preapplicants who are eligible, but do not have the priority
necessary for further consideration at this time:

\"You are advised against incurring obligations which would limit the
range of alternatives to be considered, or which cannot be fulfilled
without Rural Development funds until the funds are actually made
available. Therefore, you should refrain from such actions as initiating
engineering and legal work, taking actions which would have an adverse
effect on the environment, taking options on land rights, developing
detailed plans and specifications, or inviting construction bids until
notified by Rural Development to proceed.\"

\(b\) [Environmental review]{.underline}. Environmental requirements
will be documented in accordance with Subpart G of Part 1940 of this
chapter and submitted to the State Director. Starting with the earliest
discussions with prospective applicants or review of preapplications and
continuing throughout application processing, environmental issues must
be considered. This should provide flexibility to consider alternatives
to the project and develop methods to mitigate identified adverse
environmental impacts. Documentation of the appropriate environmental
review should be completed as soon as possible; however, the State
Director will ensure that the appropriate environmental review is
completed prior to issuing the letter of conditions. (Revised 10-19-88,
SPECIAL PN.)

\(c\) [Applications]{.underline}. The District Director should assist
the applicant in application assembly and processing.

\(1\) State Directors should have applications in process representing
approximately 150 percent of the current State allocation.

\(2\) The application docket will include SF 424.2 and related forms,
materials, and information. The application will be assembled in
accordance with Guide 15 of this subpart or State guides developed under
§1942.16 of this subpart. (Revised 4-11-90, SPECIAL PN.)

## 5

## (Revision 5)

(2-6-85) PN 956

RD Instruction 1942-A

§ 1942.2(c) (Con.)

\(3\) When an applicant is notified to proceed with an application, the
District Director should arrange for a conference with the applicant to
provide copies of appropriate appendices and forms; furnish guidance
necessary for orderly application processing; and to initiate a
processing checklist for establishing a time schedule for completing
items using Form RD 1942-39, \"Processing Check List (Other Than Public
Bodies),\" or Form RD 1942-40, \"Processing Check List (Public
Bodies),\" or other checklist adopted for use in the State. The District
Director will confirm decisions made at this conference by letter to the
applicant and by copy of the processing checklist. The original and a
copy of the processing checklist will be retained in the District Office
and a copy will be forwarded to the State Office. The original and copy
of the checklist retained in the District Office will be kept current as
application processing actions are taken. The copy will be sent to the
State Office to use in updating its copy of this form. The State Office
will then return the District Office\'s copy. As the application is
being processed, and the need develops for additional conferences, the
District Director will arrange with the applicant for such conferences
to extend and update the processing checklist.\
(Revised 11-8-89, PN 121)

\(d\) [Review of decision]{.underline}. If at any time prior to loan
approval it is decided that favorable action will not be taken on a
preapplication or application, the District Director will notify the
applicant in writing of the reasons why the request was not favorably
considered. The notification to the applicant will state that a review
of this decision by Rural Development may be requested by the applicant
under Subpart B of Part 1900 of this chapter. The following statement
will also be made on all notifications of adverse action. \"The Federal
Equal Credit Opportunity Act prohibits creditors from discriminating
against credit applicants on the basis of race, color, religion,
national origin, sex, marital status, age (Provided that the applicant
has the capacity to enter into a binding contract); because all or part
of the applicant\'s income is derived from any public assistance
program; or because the applicant has in good faith exercised any right
under the Consumer Credit Protection Act. The Federal Agency that
administers compliance with this law is the Federal Trade Commission,
Equal Credit Opportunity, Washington, D.C. 20580." (Revised 3/1/88,
SPECIAL PN.)

\(e\) [Joint funding]{.underline}. Rural Development may finance
projects jointly with funds from other sources, such as,
commercial/private lenders, Federal agencies, State and local
Governments, etc. Other departments, agencies, and

## 6

## (Revision 5) 

RD Instruction 1942-A

§ 1942.2(e) (Con.)

executive establishments of the Federal Government may participate and
provide financial and technical assistance jointly with Rural
Development to any applicant to whom Rural Development is providing
assistance. The amount of participation by the other department, agency,
or executive establishment shall only be limited by its authorities
except that any limitation on joint participation itself is superseded
by Section 125 of PL 95-334 (Section 347, Consolidated Farm and Rural
Development Act, as amended).

§ 1942.3 [Preparation of appraisal reports]{.underline}.

When the loan approval official requires an appraisal, Form RD 442-10,
\"Appraisal Report - Water and Waste Disposal Systems,\" may be used
with appropriate supplements. Form RD 442-10 may be modified as
appropriate or other appropriate format may be used for facilities other
than water and waste disposal. Appraisal reports prepared for use in
connection with the purchase of existing essential community facilities
or when required by\
§ 1942.17(g)(2)(iii)(8)(2), (9)(3)(iii)(B)(2), and (j)(4) of this
subpart, may be prepared by the RD engineer/architect or, if desired by
the State Director or other qualified appraiser. The loan approving
official may require an applicant to provide an appraisal prepared by an
independent qualified appraisers however, the loan approving official
must determine that the appraised value shown in such reports reflects
the present market value. (Revised 3-1-88, SPECIAL PN.)

§ 1942.4 [Borrower contracts]{.underline}.

The State Director will, with assistance as necessary by the Office of
the General Counsel (OGC), concur in agreements between borrowers and
third parties such as contracts for professional and technical services
and contracts for the purchase of water or treatment of waste. State
Directors are expected to work closely with representatives or
engineering and architectural societies, bar associations, commercial
lenders, accountant associations, and others in developing standard
forms of agreements, where needed, and other such matters in order to
expedite application processing, minimize referrals to OGC, and resolve
problems which may arise.

§ 1942.5 [Application review and approval]{.underline}.

\(a\) [Procedures for review]{.underline}. Ordinarily the Rural
Development staff review will proceed as applications are being
developed. An overall review of the applicant\'s financial status,
including a review of all assets and liabilities, will be a part of the
docket review process by the staff and approval officials. The
engineering/architect reports and association data are to be reviewed by
the Rural Development staff engineer or architect, as appropriate, as
soon as available but prior to

## 

## 7

## (Revision 5)

(2-6-85) PN 956

RD Instruction 1942-A

§ 1942.5(a) (Con.)

the Rural Development Manager\'s completion of the Project Summary.
During the review, the Rural Development Manager, in all cases, will
make certain that no low-income or minority community within the service
area has been omitted or discouraged from participating in the proposed
project. The Rural Development Manager will also determine how the
service area was defined to ensure that gerrymandering of specific
communities or areas has not occurred. The findings should be documented
in the running record. Prior to presenting the assembled application to
the approval official, the assembled application ordinarily will be
processed in the following sequence:

\(1\) The Rural Development Manager will complete the automated
Community Facilities Project Summary, including written analysis and
recommendations and will prepare a draft Letter of Conditions listing
all the requirements that the applicant must agree to meet within a
specific time. (Revised 03-19-03, PN 357.)

\(i\) Requirements listed in the Letter of Conditions will include the
following, unless inappropriate due to the particular type of funding or
entity involved: Maximum amount of loan and/or grant that may be
considered; scheduling of payments; term of loan and any deferment of
principal that may be allowed; reserve requirements; compliance with
Section 504 of the Rehabilitation Act of 1973; number of users (members)
and verification required; contributions; rates and charges; interim
financing; disbursement of funds; security requirements; graduation
requirements; debt collection policies through the execution of Form RD
1910-11, \"Application Certification, Federal Collection Policies for
Consumer or Commercial Debts\"; organization; business operations;
insurance and bonding (including applicant/borrower and contractor);
construction contract documents and bidding requirements; accounts;
records; audit reports required (including requirements of OMB Circulars
A-128 and A-110); adoption of Form RD 1942-47, \"Loan Resolution (Public
Bodies),\" for public bodies or Form RD 1942-9, \"Loan Resolution
(Security Agreement),\" for other than public bodies; closing
instructions; and any other requirements. (Revised 8-11-89, SPECIAL PN.)

\(ii\) Each Letter of Conditions will contain the following paragraphs:
(Revised 1-31-85, SPECIAL PN.)

This letter establishes conditions that must be understood and agreed to
by you before further

## 8

## (Revision 5) 

RD Instruction 1942-A

§ 1942.5(a)(1)(ii) (Con.)

consideration may be given to the application. Any changes in project
cost, source of funds, scope of services, or any other significant
changes in the project or applicant must be reported and approved by
written amendment to this letter. Any changes not approved by the Agency
shall be cause for discontinuing processing of the application.

This letter is not to be considered as loan approval or as
representation to the availability of funds. The docket may be completed
on the basis of a loan not to exceed \$\_\_\_\_\_\_\_\_\_\_\_.

If (insert agency name) makes the loan, you may make a written request
that the interest rate be the lower of the rate in effect at the time of
loan approval or the time of loan closing. If you do not request the
lower of the two interest rates, the interest rate charged will be the
rate in effect at the time of loan approval. The loan will be considered
approved on the date a signed copy of Form RD 1940-1, \"Request for
Obligation of Funds,\" is mailed to you. If you want the lower of the
two rates, your written request should be submitted to the Agency as
soon as practical. In order to avoid possible delays in loan closing,
such a request should ordinarily be submitted at least 30 calendar days
before loan closing.

Please complete and return the attached Form RD 1942-46, "Letter of
Intent to Meet Conditions," if you desire further consideration be given
to your application. (Revised 11-08-89, PN 121.)

\(iii\) Rural Development Managers may add the following:

If the conditions set forth in this letter are not met within
\_\_\_\_\_\_\_\_\_ days from the date hereof, Rural Development reserves
the right to discontinue the processing of the application.

\(2\) The State staff engineer or architect, as appropriate, will
include a written analysis and recommendations on the automated
Community Facilities Project Summary. (Revised 03-19-03, PN 357.)

## 9

## (Revision 5)

(2-6-85) PN 956

RD Instruction 1942-A

§ 1942.5(a) (Con.)

\(3\) The Chief, Community Programs or Community and Business Programs,
will review the assembled application and include in the automated
Community Facilities Project Summary a written analysis and
recommendations, including the availability of other credit and other
eligibility determinations. The draft Letter of Conditions will be
reviewed and any necessary modifications made. (Revised\
03-19-03, PN 357.)

\(b\) [Project requiring National Office review]{.underline}. Prior
National Office review is required for certain proposals. (See subpart A
of part 1901 of this chapter.)

\(1\) The Rural Development Manager should assemble applications for the
National Office review in the following order, from top to bottom, and
forward them to the State Director for review and recommendation prior
to submission to the National Office:

\(i\) Transmittal memorandum including:

\(A\) Recommendation.

\(B\) Date of expected obligation.

\(C\) Any unusual circumstances.

\(ii\) Copies of the following:

\(A\) Proposed Letter of Conditions.

\(B\) Applicable State Intergovernmental Review comments.

(RD Instruction 1940-J, available in any Rural Development office.)

\(C\) A copy of the automated Community Facilities Project Summary.
(Revised 03-19-03, PN 357.)

> \(D\) Preliminary architectural or engineering report.\
> (Renumbered 04-02-98, SPECIAL PN.)
>
> \(E\) Form RD 442-3, \"Balance Sheet,\" or a financial statement or
> audit that includes a balance sheet.\
> (Renumbered 04-02-98, SPECIAL PN.)

\(F\) For other essential community facility loan applicants whose
proposals do not meet the assured income or tax-based security
requirements of

## 10

## (Revision 5) 

RD Instruction 1942-A

§ 1942.5(b)(1)(ii)(F) (Con.)

§ 1942.17(g)(2)(iii) and (g)(3)(iii) of this subpart, financial
information for the last 5 years of operation will be submitted if
available. The type of financial information to be submitted should be
determined based on what is available, in the following order of
preference: (Renumbered 04-02-98, SPECIAL PN.)

([1]{.underline}) Complete audits.

([2]{.underline}) Unaudited financial statements, including balance
sheets and statements of income and expenses.

([3]{.underline}) Lists of income and expenses. (Revised\
03-01-88, SPECIAL PN.)

\(G\) For other essential community facility loans secured under
paragraph (b)(l)(ii)(F) of this section, submit a detailed explanation
of the proposed security, evidence that the application cannot be
processed and the loan secured under paragraph (b)(l)(ii)(F) of this
section, evidence supporting the efforts by the applicant in persuading
appropriate public bodies to provide the proposed facility and services,
and the results and comments of the Regional Attorney concurring in the
applicant\'s legal authority to give the proposed security. (Revised and
renumbered 04-02-98, SPECIAL PN.)

\(H\) Financial Feasibility Report when required by\
§ 1942.17(h)(l). (Renumbered 04-02-98, SPECIAL PN.)

\(I\) Proposed lease agreements, management agreements, or other
agreements when facility management will be provided by other than the
applicant. (Renumbered 04-02-98, SPECIAL PN.)

\(J\) Other forms and documents on which there are specific questions.
(Renumbered 04-02-98, SPECIAL PN.)

\(K\) Environmental impact analysis and documentation.\
(Renumbered 04-02-98, SPECIAL PN.)

\(L\) Civil Rights Impact Analysis. (Added 04-02-98, SPECIAL PN.)

## 11

## (Revision 5)

(2-6-85) PN 956

RD Instruction 1942-A

§ 1942.5(b) (Con.)

\(2\) For applications to be reviewed in the State or field, at least
those items in paragraph (b)(l)(ii) of this section should be available.

\(c\) [For all applications]{.underline}. All Letters of Conditions will
be addressed to the applicant, signed by the Rural Development Manager
or other Agency representative designated by the State Director, and
delivered to the applicant. Upon signing the Letter of Conditions, the
Rural Development Manager will send two copies of the Letter of
Conditions and two copies of the automated Community Facilities Project
Summary to the State Director. The State Director will immediately send
one copy of the automated Community Facilities Project Summary and a
copy of the Letter of Conditions to the National Office, Attention:
Community Facilities Division. The Rural Development Manager, with
assistance as needed from the State Office, will discuss the
requirements of the Letter of Conditions with the applicant\'s
representatives and afford them an opportunity to execute Form RD
1942-46. (Revised 03-19-03,\
PN 357.)

\(1\) The Letter of Conditions should not ordinarily be issued unless
the State Director expects to have adequate funds in the State
allocation to fund the project within the next 12 months, based on
historic allocations or other reliable projections.

\(2\) If the applicant declines to execute Form RD 1942-46, the Rural
Development Manager will immediately notify the State Director and
provide complete information of the reasons for such declination.
(Revised 11-08-89, PN 121.)

\(3\) If the applicant accepts the letter of conditions by executing
Form RD 1942-46, the Rural Development Manager will forward the executed
Form RD 1942-46 and a signed and an unsigned copy of Form RD 1940-1 to
the State Director. (Revised 03-19-03, PN 357.)

\(d\) [Loan approval and obligating funds]{.underline}. Loans will be
approved under this subpart and subpart A of part 1901 of this chapter
(available in any Rural Development office). The loan will be considered
approved on the date the signed copy of Form RD 1940-1 is mailed to the
applicant. The State Director or designee may request an obligation of
funds when available within their State allocation and according to the
following:

\(1\) Form RD 1940-1, authorizing funds to be reserved, may be executed
by the loan approval official providing the applicant has the legal
authority to contract for a loan, enter into required agreements, and
has signed Form RD 1940-1.

## 12

## (Revision 5) 

RD Instruction 1942-A

§ 1942.5(d) (Con.)

\(2\) If approval was concurred in by the National Office, a copy of the
concurring memorandum will be attached to the original of Form RD
1940-1.

\(3\) The State Director or designee will request an obligation of loan
and/or grant funds via the automated system after signing\
Form RD 1940-1. The requesting official will furnish security
identification as necessary. The requesting official will record the
date, time of request, and their initials on the original Form RD
1940-1. (Revised 03-19-03, PN 357.)

\(4\) The obligation date and the date the applicant is notified of the
loan and/or grant approval is 6 working days from the date funds are
reserved unless an exception is granted by the National Office. (Revised
and Renumbered 03-01-88, SPECIAL PN.)

\(5\) Immediately after verifying that funds have been reserved,
utilizing the Rural Development field office terminal system status
inquiry function, the State Director or designee will notify, by
telephone, the Legislative and Public Affairs Staff in the National
Office as required by RD Instruction 2015-C. (Revised 03-19-03,\
PN 357.)

\(6\) Loan approval and applicant notification will be accomplished by
the State Director or designee by mailing to the applicant on the
obligation date a copy of Form RD 1940-1 which has been previously
signed by the applicant and loan approval official. The date the
applicant is notified is also the date interest rate at loan approval is
established. The State Director or designee will record the date of
applicant notification and the interest rate in effect at the time on
the original of Form RD 1940-1 and include it as a permanent part of the
District Office project file with a copy placed in the Stare Office
file. (Revised and Renumbered 3-1-88, SPECIAL PN.)

## 12A

## (Revision 1)

(02-06-85) PN 956

RD Instruction 1942-A

§ 1942.5(d) (Con.)

\(7\) If a transfer of obligation of funds is necessary, complete Form
RD 450-10, \"Advice of Borrower\'s Change of Address, Name, Case Number,
or Loan Number,\" and process via the Rural Development field office
terminal system. An obligation of funds established for and applicant
may be transferred to a different (substituted) applicant provided:

\(i\) The substituted applicant is eligible to receive the assistance
approved for the original applicant;

\(ii\) The substituted applicant bears a close and genuine relationship
to the original applicant (such as two organizations that are controlled
by the same individuals); and

\(iii\) The need for and scope of the project and the purpose(s) for
which Rural Development funds will be used remain substantially
unchanged. (Added 3-1-88, SPECIAL PN.)

1942.6 [Preparation for loan closing]{.underline}

\(a\) [Obtaining closing instructions]{.underline}. Completed dockets
will be reviewed by the State Director. The information required by OGC
will be transmitted to OGC with a request for closing instructions. Upon
receipt of the closing instructions from OGC, the State Director will
forward them along with any appropriate instructions co the District
Director. Upon receipt of closing instructions, the District Director
will discuss with the applicant and its architect or engineer, attorney,
and other appropriate representatives, the requirements contained
therein and any actions necessary to proceed with closing.

\(b\) [Verification of users and other funds]{.underline}.

\(1\) In connection with a loan for a utility type project to be secured
by a pledge of user fees or revenues, the District Director will
authenticate the number of users prior to loan closing or the
commencement of construction, whichever occurs first. Such individual
will review each signed user agreement and check evidence of cash
contributions. If during the renew any indication is received that all
signed users may not connect to the system, there will be such
additional investigation made as deemed necessary to determine the
number of users who will connect to the system. The District Director
will record the determination in memorandum to the State Director.

## 13

## (Revision 4)

(2-6-85) PN 956

RD Instruction 1942-A

§ 1942.6(b)(1) (Con.)

\(2\) In all cases the availability and amount of other funds to be used
in the project will be verified by Rural Development.

\(c\) [Initial compliance review]{.underline}. An initial compliance
review should be completed under Subpart E of Part 1901 of this chapter.

\(d\) [Ordering loan checks]{.underline}. Checks will not be ordered
until:\
(Revised 7-12-88, PN 89.)

\(1\) The applicant has complied with approval conditions and closing
instructions, except for those actions which are to be completed on the
date of loan closing or subsequents thereto; and

\(2\) The applicant is ready to start construction or funds are needed
to pay interim financing obligations.

\(e\) [Multiple advances of Rural Development funds]{.underline}. When
Rural Development provides loan funds during the construction period
using interim (temporary) instruments described in § 1942.19(g) of this
subpart, the following action will be taken prior to the issuance of the
permanent instruments:

\(1\) The Finance Office will be notified of the anticipated date for
retirement of the interim instruments and issuance of permanent
instruments of debt.

\(2\) The Finance Office will prepare a statement of account including
accrued interest through the proposed date of retirement and also show
the daily interest accrual. The statement of account and the interim
financing instrument will be forwarded to the District Director.

\(3\) The District Director will collect interest through the actual
date of the retirement and obtain the permanent instrument(s) of debt in
exchange for the interim financing instruments. The permanent
instruments and the cash collection will be forwarded to the Finance
Office immediately, except that for promissory notes and single
instrument bonds fully registered as to principal and interest the
original will be retained in the District Office and a copy will be
forwarded to the Finance Office. In developing the permanent
instruments, the sequence of preference set out in\
§ 1942.19(e) of this subpart will be followed. (Revised 8-10-88,\
PN 92.)

## 14

## (Revision 4) 

RD Instruction 1942-A

§ 1942.7 [Loan closing]{.underline}.

Loans will be closed in accordance with the closing instructions issued
by the OGC and § 1942.17(o) of this subpart and as soon as possible
after receiving the check.

\(a\) [Authority to execute, file, and record legal
instruments]{.underline}. Area Office employees are authorized to
execute and file or record any legal instruments necessary to obtain or
preserve security for loans. This includes, as appropriate, mortgages
and other lien instruments, as well as affidavits, acknowledgments, and
other certificates.

(Revised 05-18-05, PN 386.)

\(b\) [Preparation of mortgages]{.underline}. Unless otherwise required
by State law or unless an exception is approved by the State Director
with advice of the OGC, only one mortgage will be taken even though the
indebtedness is to be evidenced by more than one instrument.

\(c\) [Source of funds for insured loans]{.underline}. All loans will be
made from the Rural Development Insurance Fund (RDIF).

\(d\) [Unused funds]{.underline}. Obligated funds planned for project
development, which remain after all authorized costs have been provided
for, will be disposed of in accordance with § 1942.17(p)(6) of this
subpart. See Subpart B of Part 1951 of this chapter as to the method of
returning loan and grant funds.

\(e\) [Loan disbursements]{.underline}. Whenever a loan disbursement is
received, lost, or destroyed, the Rural Development Manager will take
appropriate actions outlined in RD Instruction 2018-D. (Revised
05-18-05, PN 386.)

\(f\) [Supervised bank accounts]{.underline}. Supervised bank accounts
will be handled under Subpart A of Part 1902 of this chapter. (Revised
3-1-88,\
SPECIAL PN.)

§ 1942.8 [Actions subsequent to loan closing]{.underline}.

\(a\) [Mortgages]{.underline}. Real estate or chattel mortgages or
security instruments will be delivered to the recording office for
recordation or filing, as appropriate. A copy of such instruments will
be delivered to the borrower. The original instrument, if returnable
after recording or filing, will be retained in the borrower\'s case
folder.

## 15

## (Revision 3)

(2-6-85) PN 956

RD Instruction 1942-A

§ 1942.8 (Con.)

\(b\) [Notes and bonds]{.underline}. When the debt instrument is a
promissory note or single instrument bond fully registered as to
principal and interest, a conformed copy will be sent to the Finance
Office immediately after loan losing and the original instrument will be
stored in the District Office. When other types of bonds are used, the
original bond(s) will be forwarded to the Finance Office immediately
after loan closing. (Revised 3-1-88, SPECIAL PN.)

\(c\) [Multiple advances \-- bond(s)]{.underline}. When temporary paper,
such as bond anticipation notes or interim receipts, is used to conform
with the multiple advance requirement, the original temporary paper will
be forwarded to the Finance Office after each advance is made to the
borrower. The borrower\'s case number will be entered in the upper
right-hand corner of such paper by the District Office. The permanent
debt instrument(s) should be forwarded to the Finance Office as soon as
possible after the last advance is made, except that for promissory
notes and single instrument bonds fully registered as to principal and
interest, the original will be retained in the District Office and a
copy will be forwarded to the Finance Office. (Revised 3-1-88,\
SPECIAL PN.)

\(d\) [Bond registration record]{.underline}. Form RD 442-28, \"Bond
Registration Book,\" may be used as a guide to assist borrowers in the
preparation of a bond registration book in those cases where a
registration book is required and a book is not provided in connection
with the printing of the bonds.

\(e\) [Disposition of title evidence]{.underline}. All title evidence
other than the opinion of title, mortgage title insurance policy, and
water stock certificates will be returned to the borrower when the loan
has been closed.

\(f\) [Material for State Office]{.underline}. When the loan has been
closed, the District Director will submit to the State Director:

\(1\) The completed docket; and

\(2\) A statement covering information other than the completion of
legal documents showing what was done in carrying out loan closing
instructions.

\(g\) [State Office review of loan closing]{.underline}. The State
Director will review the District Director\'s statement concerning loan
closing, the security instruments, and other documents used in closing
to determine whether the transaction was closed properly. All material
submitted by the District Director, including the executed contract
documents (if required by OGC) with the certification of the borrower\'s
attorney, along with a statement by the State Director

## 16

## (Revision 3) 

RD Instruction 1942-A

§ 1942.8(g) (Con.)

that all administrative requirements have been met, will be referred to
OGC for post closing review. OGC will review the submitted material to
determine whether all legal requirements have been met. OGC\'s review of
Rural Development\'s standard forms will be only for proper execution
thereof, unless the State Director brings specific questions or
deviations to the attention of OGC. It is not expected that facility
development including construction will be held up pending receipt of
the opinion from OGC. When the opinion from OGC is received, the State
Director will advise the District Director of any deficiencies that must
be corrected and return all material that was submitted for review.
(Revised 3-1-88, SPECIAL PN.)

## 16A

## (Added 11-02-94, PN 236)

(2-6-85) PN 956

§ 1942.8 (Con.) RD Instruction 1942-A

\(h\) [Safeguarding bond shipments]{.underline}. Rural Development
personnel will follow the procedures for safeguarding mailings and
deliveries of bonds and coupons outlined in RD Instruction 2018-E
(available in any Rural Development office), whenever they mail or
deliver these items.

\(i\) [Water stock certificates]{.underline}. Water stock certificates
will be filed in the loan docket in the District Office.

§1942.9 [Planning, bidding, contracting, and constructing]{.underline}.
\[See §§1942.17 (p) and 1942.18\]

\(a\) [Review of construction plans and specifications]{.underline}. All
plans and specifications will be submitted as soon as available to the
State Office for review and comments.

\(b\) [Contract approval]{.underline}. 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
§1942.18 (1) of this subpart exceeding \$100,000 must be concurred in by
the National Office. Procurement under §1942.18 (1) of this subpart will
not be considered when an Rural Development grant is involved. When an
applicant requests such concurrence, the State Director will submit the
following to the National Office: (Revised 3-1-88, SPECIAL PN.)

\(1\) State Director\'s and Rural Development engineer/architect\'s
comments and recommendations, and when noncompetitive negotiation is
proposed, submit an evaluation of previous work of the proposed
construction firm.

\(2\) Regional attorney\'s opinion and comments regarding the legal
adequacy of the proposed procurement method and proposed contract
documents.

\(3\) Copy of owner\'s written request and description of the
procurement method proposed.

\(4\) Copy of the proposed contract.

\(c\) [Bid irregularities]{.underline}. Any irregularities in the bids
received or other matters pertaining to the contract award having legal
implications will be cleared with OGC before the State Director consents
to the contract award.

\(d\) [Noncompliance]{.underline}. State Directors, upon receipt of
information indicating borrowers or their officers, employees, or agents
are not performing in compliance with §1942.18 (j)(l) of this subpart,
may request the Regional Office of the Inspector General (OIG) to
investigate the matter and provide a report. The State Director is
responsible for resolving the issue.

§1942.10 - 1942.11 \[Reserved\]

## 17

(2-6-85) PN 956 (Revision 1)

RD Instruction 1942-A

§ 1942.12 [Loan cancellation]{.underline}.

Loans which have been approved and obligations which have been
established may be cancelled before closing as follows:

\(a\) [Form RD 1940-10, \"Cancellation of U.S. Treasury Check and/or
Obligation]{.underline}.\" The Rural Development Manager or State
Director may prepare and execute Form RD 1940-10 in accordance with the
Forms Manual Insert (FMI). If the disbursement has been received or is
subsequently received in the Area Office, the Rural Development Manager
will return it as prescribed in RD Instruction 2018-D. (Revised
05-18-05, PN 386.)

\(b\) [Notice of Cancellation]{.underline}. If the docket has been
forwarded to OGC, that office will be notified of the cancellation by
copy of Form RD 1940-10. Any application for title insurance, if
ordered, will be cancelled. The borrower\'s attorney and
engineer/architect, if any, should be notified of the cancellation. The
Rural Development Manager may provide the borrower\'s attorney and
engineer/architect with a copy of the notification to the applicant. The
State Director will notify the Director of Legislative Affairs and
Public Information by telephone or electronic mail and give the reason
for such cancellation. (Revised 05-18-05, PN 386.)

§ 1942.13 [Loan servicing]{.underline}.

Loans will be serviced under Subpart E of Part 1951 of this chapter.

§ 1942.14 [Subsequent loans]{.underline}.

Subsequent loans will be processed under this subpart.

§ 1942.15 [Delegation and redelegation of authority]{.underline}.

The State Director is responsible for implementing the authorities in
this subpart and for issuing State supplements redelegating authorities.
Loan and grant approval authority is in Subpart A of Part 1901 of this
chapter. Except for loan and grant approval authority, Rural Development
Manager may redelegate their duties to qualified staff members. (Revised
05-18-05,\
PN 386.)

§ 1942.16 [State supplements and guides]{.underline}.

State Directors will obtain National Office clearance for all State
supplements and guides under RD Instruction 2006-B, (available in any
Rural Development office).

## 17A

## (Revision 4)

(2-6-85) PN 956

RD Instruction 1942-A

§ 1942.16 (Con.)

\(a\) [State supplements]{.underline}. State Directors may supplement
this subpart to meet State and local laws and regulations and to provide
for orderly application processing and efficient service to applicants.
State supplements shall not contain any requirements pertaining to bids,
contract awards, and materials more restrictive than those in § 1942.18
of this subpart.

\(b\) [State guides]{.underline}. State Directors may develop guides for
use by applicants if the guides to this subpart are not adequate. State
Director may prepare guides for items needed for the application, items
necessary for the docket, and items required prior to loan closing or
start of construction.

## 17B

## (Revision 4) 

RD Instruction 1942-A

## [Table of Contents]{.underline}

[Sec]{.underline}. [Page]{.underline}

1942.17 - Community Facilities 21

\(a\) General. 21

\(b\) Eligibility. 21

\(1\) Applicant. 21

\(2\) Facility. 22

\(3\) Credit elsewhere. 22

\(4\) Legal authority and responsibility. 22A

\(5\) Refinancing debt. 22A

\(6\) Expanded eligibility for timber‑dependent

communities in Pacific Northwest. 22

\(c\) Priorities. 23

\(1\) Truly rural areas. 23

\(2\) Project selection process. 23

\(d\) Eligible loan purposes. 28

\(e\) Facilities for public use. 32

\(f\) Rates and terms. 34

\(1\) General. 34

\(2\) Poverty line rate. 34

\(3\) Intermediate rate. 35

\(4\) Market rate. 35

\(5\) Prime farmland. 35

\(6\) Income determination. 35

\(7\) Repayment terms. 36

\(g\) Security. 36A

\(1\) Joint financing security. 37

\(2\) Public bodies. 38

\(3\) Other-than-public bodies. 41

\(h\) Economic feasibility requirements. 44

\(1\) Financial feasibility reports. 44

\(2\) Applicants for loans for utility-type

facilities. 44

\(3\) Utility-type facilities for new developing

communities or areas. 47

## 18

## (Revision 4)

(2-6-85) PN 956

RD Instruction 1942-A

Table of Contents (Con.)

[Sec.]{.underline} [Page]{.underline}

1942.17 (Con.)

\(i\) Reserve requirements. 48

\(1\) General obligation or special assessment bonds. 48

\(2\) Other than general obligation or special

assessment bonds. 48

\(j\) General requirements. 48

\(1\) Membership authorization. 48

\(2\) Planning, bidding, contracting, constructing. 49

\(3\) Insurance and fidelity bonds. 49

\(4\) Acquisition of land, easements, water rights,

and existing facilities. 50B

\(5\) Lease agreements. 53

\(6\) Notes and bonds. 54

\(7\) Environmental requirements. 54

\(8\) Health care facilities. 54

\(9\) Public information. 54

\(10\) Service through individual installation. 55

\(11\) Funds from other sources. 55

\(k\) Other Federal, State, and local requirements. 56

\(1\) Compliance with special laws and regulations. 56

\(2\) Compliance exceptions. 56

\(3\) State Pollution Control or Environmental Protection Agency
Standards. 56 (4) Consistency with other development plans. 56

\(5\) State agency regulating water rights. 56

\(6\) Civil Rights Act of 1964. 57

\(7\) Title IX of the Education Amendments of 1972. 57

\(8\) Section 504 of the Rehabilitation Act of 1973. 57

\(9\) Age Discrimination Act of 1975. 57

19

(Revision 4)

RD Instruction 1942-A

Table of Contents (Con.)

[Sec.]{.underline} [Page]{.underline}

1942.17 (Con.)

\(l\) Professional services and contracts related to the

facility. 58

\(1\) Professional services. 58

\(2\) Bond counsel. 58

\(3\) Contracts for other services. 58

\(4\) Fees. 58

\(m\) Applying for loans. 58

\(1\) Preapplication. 58

\(2\) Preapplication review. 58

\(3\) Incurring obligations. 59

\(4\) Results of preapplication review. 59

\(5\) Application conference. 59

\(6\) Application completion and assembling. 59

\(7\) Review of decision. 59

## 19A

## (Added 09-06-95, PN 250)

(2-6-85) PN 956

Table of Contents (Con.) RD Instruction 1942-A

1942.17 (Con.)

[Sec]{.underline}. [Page]{.underline}

\(n\) Actions prior to loan closing and start of

construction. 59

\(1\) Excess Rural Development loan and grant funds. 59

\(2\) Loan resolutions. 60

\(3\) Interim financing. 62

\(4\) Obtaining closing instructions. 63

\(5\) Applicant contribution. 63

\(6\) Evidence of and disbursement of other funds. 63

\(o\) Loan closing. 64

\(1\) Closing instructions. 64

\(2\) Obtaining insurance and fidelity bonds. 64

\(3\) Distribution of recorded documents. 64

\(4\) Review of loan closing. 64

\(p\) Project monitoring and fund delivery during

construction. 64

\(1\) Coordination of funding sources. 64

\(2\) Multiple advances. 64

\(3\) Use and accountability of funds. 65

\(4\) Development inspections. 66

\(5\) Payment for construction. 67

\(6\) Use of remaining funds. 67

\(q\) Borrower accounting methods, management reporting

and audits. 68

\(1\) Accounting methods and records. 68

\(2\) Management reports. 68

\(3\) Substitute for management reports. 69

\(4\) Audits. 70

\(5\) Borrowers exempt from audits. 71

\(r\) Rural Development actions for borrower supervision and

servicing. 71

\(1\) Management assistance and management reports. 71

\(2\) Audits and financial statements. 73

\(3\) Security inspections. 73

\(4\) Civil rights compliance reviews. 74

\(5\) Other loan servicing actions. 74

## 20

## (Revision 2)

(2-6-85) PN 956

RD Instruction 1942-A

§1942.17 [Community Facilities]{.underline}.

\(a\) [General]{.underline}. This section includes information and
procedures specifically designed for use by applicants, including their
professional consultants and/or agents who provide such assistance and
services as architectural, engineering, financial, legal, or other
services related to application processing and facility planning and
development. This section is made available as needed for such use. It
includes Rural Development policies and requirements pertaining to loans
for community facilities. It provides applicants with guidance for use
in proceeding with their application. Rural Development shall cooperate
fully with appropriate State agencies to give maximum support of the
State\'s strategies for development of rural areas. (Revised 05-19-92,
SPECIAL PN.)

\(b\) [Eligibility]{.underline}. Financial assistance to areas or
communities adjacent to, or closely associated with, nonrural areas is
limited by §1942.17 (c) of this subpart. (Revised 05-19-92, SPECIAL PN.)

\(1\) [Applicant]{.underline}.

\(i\) A public body, such as a municipality, county, district,
authority, or other political subdivision of a state.

\(A\) Loans for water or waste disposal facilities will not be made to a
city or town with a population in excess of 10,000 inhabitants,
according to the latest decennial Census of the United States.

\(B\) Loans for essential community facilities will not be made to a
city or town with a population in excess of 20,000 inhabitants,
according to the latest decennial Census of the United States.

\(ii\) An organization operated on a not-for-profit basis, such as an
association, cooperative, or private corporation. Applicants organized
under the general profit corporation laws may be eligible if they
actually will be operated on a not-for-profit basis under their charter,
bylaws, mortgage, or supplemental agreement provisions as may be
required as a condition of loan approval. Essential community facility
applicants other than utility-type must have significant ties with the
local rural community. Such ties are necessary to ensure to the greatest
extent possible that a facility under private control will carry out a
public purpose and continue to primarily serve rural areas. Ties may be
evidenced by items such as:

## 21

## (Revision 2)

(2-6-85) PN 956

RD Instruction 1942-A

§1942.17 (b)(1)(ii) (Con.)

\(A\) Association with or controlled by a local public body or bodies,
or broadly based ownership and controlled by members of the community.

\(B\) Substantial public funding through taxes, revenue bonds, or other
local Government sources, and/or substantial voluntary community
funding, such as would be obtained through a community-wide funding
campaign.

\(iii\) Indian tribes on Federal and State reservations and other
Federally recognized Indian tribes.

\(2\) [Facility]{.underline}.

\(i\) Facilities must be located in rural areas, except for utility-type
services such as water, sewer, natural gas, or hydroelectric, serving
both rural and non-rural areas. In such cases, Rural Development funds
may be used to finance only that portion serving rural areas, regardless
of facility location.

\(ii\) Essential community facilities must primarily serve rural areas.

\(iii\) For water or waste disposal facilities, the terms \"rural\" and
\"rural area\" will not include any area in any city or town with a
population in excess of 10,000 inhabitants, according to the latest
decennial Census of the United States.

\(iv\) For essential community facilities, the terms \"rural\" and
\"rural area\" will not include any area in any city or town with a
population in excess of 20,000 inhabitants, according to the latest
decennial Census of the United States.

\(3\) [Credit elsewhere]{.underline}. Applicants must certify in writing
and Rural Development shall determine and document that the applicant is
unable to finance the proposed project from their own resources or
through commercial credit at reasonable rates and terms.

## 22

## (Revision 2) 

RD Instruction 1942-A

§1942.17 (b) (Con.)

\(4\) [Legal authority and responsibility]{.underline}. Each applicant
must have or will obtain the legal authority necessary for constructing
operating and maintaining the proposed facility or service and for
obtaining giving security for and repaying the proposed loan. The
applicant shall be responsible for operating maintaining and managing
the facility and providing for its continued availability and use at
reasonable rates and terms. This responsibility shall be exercised by
the applicant even though the facility may be operated maintained or
managed by a third party under contract management agreement or written
lease. Leases may be used when this is the only feasible way to provide
the service and is the customary practice. Management agreements should
provide for at least those items listed in Guide 24 of this subpart
(available in any Agency office). Such contracts management agreements
or leases must not contain options or other provisions for transfer of
ownership.

\(5\) [Refinancing debt]{.underline}. The Government shall require an
agreement that if at any time it shall appear to the Government that the
borrower is able to refinance the amount of the indebtedness then
outstanding in whole or in part by obtaining a loan for such purposes
from responsible cooperative or private credit sources at reasonable
rates and terms for loans for similar purposes and periods of time the
borrower will upon request of the Government apply for and accept such
loan in sufficient amount to repay the Government and will take all such
actions as may be required in connection with such loan.

\(6\) [Expanded eligibility for timber‑dependent communities in Pacific
Northwest]{.underline}. In the Pacific Northwest defined as an area
containing national forest covered by the Federal document entitled
Forest Plan for a Sustainable Economy and a Sustainable Environment,
dated July 1 1993; the population limits contained §1942.17(b) are
expanded to include communities with not more than 25,000 inhabitants
until September 30, 1998 if: (Added 09-06-95, PN 250.)

\(i\) Part or all of the community lies within 100 miles of the boundary
of a national forest covered by the Federal document entitled Forest
Plan for a Sustainable Economy and a Sustainable Environment, dated July
1, 1993; and

\(ii\) The community is located in a county in which at least 15 percent
of the total primary and secondary labor and proprietor income is
derived from forestry, wood products, or forest‑related industries such
as recreation and tourism.

## 22A

## (Revision 1)

(2-6-85) PN 956

§1942.17 (Con.) RD Instruction 1942-A

\(c\) [Priorities]{.underline}.

\(1\) [Truly rural areas]{.underline}. Rural Development program
assistance will be directed toward truly rural areas and rural
communities. Normally, priority will not be given to preapplications for
projects that will serve other than truly rural areas. Truly rural areas
are areas other than densely settled areas or communities adjacent to,
or closely associated with, a city or town with a population exceeding
10,000 residents for water or waste disposal assistance, or 20,000
residents for essential community facility assistance. When determining
whether a rural area or rural community is adjacent to, or closely
associated with, a city or town with a population exceeding 10,000
residents for water and waste disposal, or 20,000 residents for
essential community facility assistance, minor open spaces such as those
created by physical or legal barriers, commercial or industrial
development, parks, areas reserved for convenience or appearance, or
narrow strips of cultivated land, will be disregarded. An area or
community shall be considered adjacent to or closely related with a
nonrural area when it constitutes for general, social, and economic
purposes a single community having a contiguous boundary.

\(2\) [Project selection process]{.underline}. The following paragraphs
indicate items and conditions which must be considered in selecting
preapplications for further development. When ranking eligible
preapplications for consideration for limited funds, Rural Development
officials must consider the priority items met by each preapplication
and the degree to which those priorities are met, and apply good
judgment.

\(i\) [Preapplications]{.underline}. The preapplication and supporting
information submitted with it will be used to determine the proposed
project\'s priority for available funds.

\(ii\) [State Office review]{.underline}. All preapplications will be
reviewed and scored and Form AD-622, \"Notice of Preapplication Review
Action,\" issued within the time limits in §1942.2 (a)(2)(iv) of this
subpart. When considering authorizing the development of an application
for funding, the State Director should consider the remaining funds in
the State allocation, and the anticipated allocation of funds for the
next fiscal year as well as the amount of time necessary to complete
that application. Applicants whose preapplications are found to be
ineligible will be so advised. These applicants will be given adverse
notice through Form AD-622 and advised of their appeal rights under
Subpart B of Part 1900

## 23

## 

(2-6-85, PN 956)

RD Instruction 1942-A

§1942.17 (c) (2) (ii) (Con.)

of this chapter. Those applicants with eligible lower scoring
preapplications which obviously cannot be funded within an eighteen
month period of time, and are not within 150 percent of the State\'s
allocation, should be notified that funds are not available; and
requested to advise whether they wish to have their preapplication
maintained in an active file for future consideration. The State
Director may request an additional allocation of funds from the National
Office for such preapplications. Such requests will be considered along
with all others on hand.

\(iii\) [Selection priorities]{.underline}. The priorities described
below will be used by the State Director to rate preapplications. The
priorities should be applied to water and waste disposal or community
facilities preapplications as directed. The format found in Part I of
Guide 26 of this subpart should be followed in scoring each
preapplication. A copy of the score sheet should be placed in the case
file for future reference.

\(A\) [Population priorities]{.underline}. The following priorities
apply to both Water and Waste Disposal and Community Facilities
preapplications. Points will be distributed as indicated.

([1]{.underline}) The proposed project is located in a rural community
having a population not in excess of 2,500 - 25 points.

([2]{.underline}) The proposed project is located in a rural community
having a population not in excess of 5,500 - 20 points. (Points under
this priority should not be assigned to a preapplication if points were
assigned under paragraph (c)(2)(iii) (A) ([1]{.underline}) of this
section.

\(B\) [Health priorities]{.underline}. Points will be distributed as
indicated.

([1]{.underline}) Water and Waste Disposal preapplications only. The
proposed project is:

([i]{.underline}) needed to alleviate the sudden unexpected diminution
or deterioration of a water supply, or to meet health or sanitary
standards which pertain to a community\'s water supply - 25 points.

## 24

##  

§1942.7 (c) (2) (iii) (B) (1) (Con.) RD Instruction 1942-A

([ii]{.underline}) required to correct an inadequate waste disposal
system due to unexpected occurrences, or to meet health or sanitary
standards which pertain to a community\'s waste disposal system - 25
points.

([2]{.underline}) Community Facility preapplication only. The proposed
project is required either to correct a health or sanitary problem, or
to meet a health or sanitary standard - 25 points.

\(C\) [Income priorities]{.underline}. The following priorities apply to
both Water and Waste Disposal and Community Facilities preapplications.
Points will be distributed as indicated. The median income of the
population to be served by the proposed facility is:

([1]{.underline}) Less than the poverty line for a family of four, as
defined in Section 673 (2) of the Community Services Block Grant Act (42
U.S.C. 9902 (2)), or less than 80% of the statewide nonmetropolitan
median household income - 25 points. (Revised 3-1-88, SPECIAL PN.)

([2]{.underline}) Equal to or more than the poverty line and between 80%
and 100%, inclusive, of the State\'s nonmetropolitan median household
income - 20 points. (Revised 3-1-88, SPECIAL PN.)

\(D\) Other factors. Points will be distributed as indicated.

([1]{.underline}) Water and Waste Disposal preapplication only. The
proposed project will: merge ownership, management, and operation of
smaller facilities providing for more efficient management and
economical service; and/or enlarge, extend, or otherwise modify existing
facilities to provide service to additional rural residents - 10 points.

([2]{.underline}) Community Facilities preapplications only. The purpose
of the proposed project is to construct, enlarge, extend or otherwise
improve the following types of facilities. (Select only the factor most
applicable to the proposed project.)

## 25

## (Revision 3)

(2-6-85) PN 956

§1942.17 (c) (2) (iii) (D) (2) (Con.) RD Instruction 1942-A

([i]{.underline}) Public safety - 10 points. (Examples include police
services and fire, rescue and ambulance services as authorized by
Subpart C of this Part.) (Revised 11-4-87, PN 68.)

([ii]{.underline}) Health care - 5 points. (Examples include clinics,
nursing homes, convalescent facilities, and hospital projects designed
to make the facility conform with life/safety codes, Medicare and
Medicaid requirements, and minor expansions needed to meet the immediate
requirements of the community. Points under this authority should not be
awarded to a preapplication if points were awarded under §1942.17
(c)(2)(iii)(B)([2]{.underline}) of this subpart.)

([3]{.underline}) Water and Waste Disposal and Community Facilities
preapplications.

([i]{.underline}) Applicant is a public body or Indian tribe - 5 points.

([ii]{.underline}) Project is located in a \"truly rural area\" as
described in §1942.17(c)(l) of this subpart - 10 points.

([iii]{.underline}) Amount of joint financing committed to the project
is:

([a]{.underline}) 20% or more private, local or

state funds except federal funds

channeled through a state agency - 10

points.

\(b\) 5% - 19% private, local or state

funds except federal funds channeled

through a state agency - 5 points.

\(E\) In certain cases the State Director may assign up to 15 points to
a preapplication, in addition to those that may be scored under
paragraphs (c)(2)(iii)(A) through (D), of this section. These points are
primarily intended to address an unforeseen exigency or emergency, such
as the loss of a community facility due to accident or natural disaster
or the loss of joint financing if Rural Development funds are not
committed in a timely fashion. However, the points may also be awarded
to projects in order to improve compatibility/coordination between Rural
Development\'s and other agencies\' selection systems and to assist
those projects that are the most cost effective. A written justification
must be prepared and placed in the project file each time the State
Director assigns these points.

## 26

## (Revision 3) 

§1942.17 (c)(2) (Con.) RD Instruction 1942-A

\(iv\) [Results of State Office review]{.underline}. After completing
the review, the State Director will normally select the eligible
preapplications with the highest scores for further processing. In cases
where preliminary cost estimates indicate that an eligible, high scoring
preapplication is unfeasible or would require an amount of funding from
Rural Development that exceeds either 25 percent of a State\'s current
annual allocation or an amount greater than that remaining in the
State\'s allocation, the State Director may instead select the next
lower scoring preapplication(s) for further processing provided the high
scoring applicant is notified of this action and given an opportunity to
revise the proposal and resubmit it. If it is found that there is no
effective way to reduce costs, the State Director, after consultation
with applicant, may submit a request for an additional allocation of
funds for the proposed project to the National Office. The request
should be submitted during the fiscal year in which obligation is
anticipated. Such requests will be considered along with all others on
hand. A written justification must be prepared and placed in the project
file when an eligible preapplication with a higher rating is not
selected for further processing. The State Director will notify the
District Director of the results of the review action. The State
Director will return the pre-application information with an
authorization for the District Director to prepare and issue Form AD-622
in accordance with §1942.2 (a)(2)(iv) of this subpart. Priority will be
given to those preapplications and applications for funding which meet
criteria in §1942.17 (c)(2) (iii)(A)([1]{.underline}) or
([2]{.underline}); and the criteria in §1942.17 (c)(2)(iii)
(B)([1]{.underline})([i]{.underline}) or ([ii]{.underline}) or
(B)([2]{.underline}) of this subpart.

\(v\) [Application development]{.underline}. Applications should be
developed expeditiously following good management practices.
Applications that are not developed in a reasonable period of time
taking into account the size and complexity of the proposed project may
be removed from the State\'s active file. Applicants will be consulted
prior to taking such action.

\(vi\) [Project obligations]{.underline}. To ensure efficient use of
resources, obligations should occur in a timely fashion throughout the
fiscal year. Projects may be obligated as their applications are
completed and approved.

\(vii\) [Requests for additional funding]{.underline}. All requests for
additional allocations of funds submitted to the National Office must
follow the formats found in Parts I and II of Guide 26. In selecting
projects for funding at the National Office level, additional points may
be scored based on the priority assigned to the project by the State
Office.

## 27

## (Revision 2)

## (2-6-85) PN 956 

RD Instruction 1942-A

§1942.17 (c)(2)(vii)

These points will be scored in the manner shown below. Only the three
highest priority projects can score points. In addition, the
Administrator may assign up to 15 additional points to account for items
such as geographic distribution of funds and emergency conditions caused
by economic problems or natural disasters.

[Priority]{.underline} [Points]{.underline}

1 5

2 3

3 1

\(viii\) [Cost overruns]{.underline}. A preapplication may receive
consideration for funding before others at the State Office level or at
the National Office level, if funds are not available in the State
Office, when it is a subsequent request for a previously approved
project which has encountered cost overruns due to high bids or
unexpected construction problems that cannot be reduced by negotiations,
redesign, use of bid alternatives, rebidding or other means.

\(d\) [Eligible loan purposes]{.underline}.

\(1\) Funds may be used:

\(i\) To construct, enlarge, extend, or otherwise improve water or waste
disposal and other essential community facilities providing essential
service primarily to rural residents and rural businesses. Rural
businesses would include facilities such as educational and other
publicly owned facilities. (Revised 05-19-92, SPECIAL PN.)

\(A\) \"Water or waste disposal facilities" include water, sanitary
sewerage, solid waste disposal, and storm wastewater facilities.

\(B\) \"Essential community facilities\" are those public improvements
requisite to the beneficial and orderly development of a community
operated on a nonprofit basis including but not limited to: (Revised
11-4-87, PN 68.)

([1]{.underline}) Health services;

([2]{.underline}) Community, social, or cultural services;

([3]{.underline}) Transportation facilities, such as streets, roads, and
bridges;

## 28

## (Revision 2) 

§1942.17 (d)(1)(i)(B) (Con.) RD Instruction 1942-A

([4]{.underline}) Hydroelectric generating facilities and related
connecting systems and appurtenances, when not eligible for Rural
Electrification Administration (REA) financing;

## 28A

## (Added 05-19-92, SPECIAL PN)

(2-6-85) PN 956

§1942.17 (d) (1) (i) (B) (Con.) RD Instruction 1942-A

([5]{.underline}) Supplemental and supporting structures for other rural
electrification or telephone systems (including facilities such as
headquarters and office buildings, storage facilities, and maintenance
shops) when not eligible for Rural Electrification Administration
financing:

([6]{.underline}) Natural gas distribution systems; and

([7]{.underline}) Industrial park sites, but only to the extent of land
acquisition and necessary site preparation, including access ways and
utility extensions to and throughout the site. Funds may not be used in
connection with industrial parks to finance on-site utility systems, or
business and industrial buildings.

\(C\) \"Otherwise improve\" includes but is not limited to the
following:

([1]{.underline}) The purchase of major equipment, such as solid waste
collection trucks, and X-ray machines, which will in themselves provide
an essential service to rural residents; (Revised 11-4-87, PN 68.)

([2]{.underline}) The purchase of existing facilities when it is
necessary either to improve or to prevent a loss of service;

([3]{.underline}) Payment of tap fees and other utility connection
charges as provided in utility purchase contracts prepared under section
1942.18(f) of this subpart.

\(ii\) To construct or relocate public buildings, roads, bridges,
fences, or utilities, and to make other public improvements necessary to
the successful operation or protection of facilities authorized in
paragraph (d)(l)(i) of this section.

\(iii\) To relocate private buildings, roads, bridges, fences, or
utilities, and other private improvements necessary to the successful
operation or protection of facilities authorized in paragraph (d)(l)(i)
of this section.

\(iv\) To pay the following expenses, but only when such expenses are a
necessary part of a loan to finance facilities authorized in paragraphs
(d)(l)(i), (d)(l)(ii), and (d)(l) (iii) of this section:

## 29

## (Revision 1)

(2-6-85) PN 956

RD Instruction 1942-A

§1942.17 (d) (1) (iv) (Con.)

\(A\) Reasonable fees and costs such as legal, engineering,
architectural, fiscal advisory, recording, environmental impact
analyses, archaeological surveys and possible salvage or other
mitigation measures, planning, establishing or acquiring rights.

\(B\) Interest on loans until the facility is self-supporting, but not
for more than three years unless a longer period is approved by the
National Office; interest on loans secured by general obligation bonds
until tax revenues are available for payment, but not for more than two
years unless a longer period is approved by the National Office; and
interest on interim financing, including interest charges on interim
financing from sources other than Rural Development.

\(C\) Costs of acquiring interest in land; rights, such as water rights,
leases, permits, rights-of-way; and other evidence of land or water
control necessary for development of the facility.

\(D\) Purchasing or renting equipment necessary to install, maintain,
extend, protect, operate, or utilize facilities.

\(E\) Initial operating expenses for a period ordinarily not exceeding
one year when the borrower is unable to pay such expenses.

\(F\) Refinancing debts incurred by, or on behalf of, a community when
all of the following conditions exist:

([1]{.underline}) The debts being refinanced are a secondary part of the
total loan;

([2]{.underline}) The debts are incurred for the facility or service
being financed or any part thereof;

([3]{.underline}) Arrangements cannot be made with the creditors to
extend or modify the terms of the debts so that a sound basis will exist
for making a loan.

\(G\) Prepay costs for which Rural Development grant funds were
obligated provided there is:

## 30

## (Revision 1) 

§1942.17 (d)(1)(iv)(G) (Con.) RD Instruction 1942-A

([1]{.underline}) No conflict with the loan resolution, State statutes,
or any other loan requirements; and

([2]{.underline}) Full documentation showing that:

([i]{.underline}) Loan funds will only be utilized on a temporary basis;
and

([ii]{.underline}) All Rural Development loan funds are restored at a
later date for purpose(s) for which they were obligated.

\(v\) To pay obligations for construction incurred before loan approval.
Construction work should not be started and obligations for such work or
materials should not be incurred before the loan is approved. However,
if there are compelling reasons for proceeding with construction before
loan approval, applicants may request Rural Development approval to pay
such obligations. Such requests may be approved if Rural Development
determines that:

\(A\) Compelling reasons exist for incurring obligations before loan
approval; and

\(B\) The obligations will be incurred for authorized loan purposes; and

\(C\) Contract documents have been approved by Rural Development; and

\(D\) All environmental requirements applicable to Rural Development and
the applicant have been met; and

\(E\) The applicant has the legal authority to incur the obligations at
the time proposed, and payment of the debts will remove any basis for
any mechanic, material or other liens that may attach to the security
property. Rural Development may authorize payment of such obligations at
the time of loan closing. Rural Development\'s authorization to pay such
obligations, however, is on the condition that it is not committed to
make the loan; it assumes no responsibility for any obligations incurred
by the applicant; and the applicant must subsequently meet all loan
approval requirements. The applicant\'s request and Rural Development
authorization for paying such obligations shall be in writing. If
construction is started without Rural Development approval, post
approval in accordance with this section may be considered.

## 31

## (Revision 2)

(2-6-85) PN 956

RD Instruction 1942-A

§1942.17 (d) (Con.)

\(2\) Funds may not be used to finance:

\(i\) On-site utility systems or business and industrial buildings in
connection with industrial parks.

\(ii\) Facilities to be used primarily for recreation purposes.

\(iii\) Community antenna television services or facilities.

\(iv\) Electric generation or transmission facilities or telephone
systems, except as provided in paragraph (d)(1)(i) (B)(4) or
(d)(1)(i)(B)(5) of this section; or extensions to serve a particular
essential community facility as provided in paragraph (d)(1)(ii) or
(d)(1)(iii) of this section. (Revised 11-4-87, PN 68.)

\(v\) Facilities which are not modest in size, design, and cost.

\(vi\) Loan or grant finder\'s fees.

\(vii\) Projects located within the Coastal Barriers Resource System
that do not qualify for an exception as defined in Section 6 of the
Coastal Barriers Resource Act, P.L. 97-348.

\(viii\) New combined sanitary and storm water sewer facilities.

\(ix\) That portion of a water and/or waste disposal facility normally
provided by a business or industrial user. (Added 05-19-92, SPECIAL PN.)

\(e\) [Facilities for public use]{.underline}. All facilities financed
under the provisions of this subpart shall be for public use. (Revised
05-19-92, SPECIAL PN.)

\(1\) Utility-type service facilities will be installed so as to serve
any user within the service area who desires service and can be feasibly
and legally served. Applicants and borrowers must obtain written
concurrence of the Rural Development prior to refusing service to such
user. Upon failure to provide service which is reasonable and legal,
such user shall have direct right of action against the
applicant/borrower. A notice of the availability of this service should
be given by the applicant/borrower to all persons living within the area
who can feasibly and legally be served by the phase of the project being
financed.

\(i\) If a mandatory hookup ordinance will be adopted,\
the required bond ordinance or resolution advertisement\
will be considered adequate notification.

## 32

## (Revision 2) 

RD Instruction 1942-A

§ 1942.17 (e)(1) (Con.)

\(ii\) When any portion of the income will be derived from user fees and
a mandatory hookup ordinance will not be adopted, each potential user
will be afforded an opportunity to request service by signing a Users
Agreement. Those declining service will be afforded an opportunity to
sign a statement to such effect. Rural Development has guides available
for these purposes in all Rural Development offices.

\(2\) In no case will boundaries for the proposed service area be chosen
in such a way that any user or area will be excluded because of race,
color, religion, sex, marital status, age, handicap, or national origin.
(Revised 3-1-88, SPECIAL PN.)

\(3\) This does not preclude:

\(i\) Financing or constructing projects in phases when it is not
practical to finance or construct the entire project at one time, and

\(ii\) Financing or constructing facilities where it is not economically
feasible to serve the entire area, provided economic feasibility is
determined on the basis of the entire system and not by considering the
cost of separate extensions to or parts thereof; the applicant publicly
announces a plan for extending service to areas not initially receiving
service from the system; and potential users located in the areas not to
be initially served received written notice from the applicant that
service will not be provided until such time as it is economically
feasible to do so, and (Revised 05-19-92, SPECIAL PN.)

\(iii\) Extending services to industrial areas when service is made
available to users located along the extensions.

\(4\) The State Director will determine that, when feasibly and legally
possible, inequities within the proposed project\'s service area for the
same type service proposed (i.e., water or waste disposal) will be
remedied by the owner on or before completion of the project that
includes Rural Development funding. Inequities are defined as flagrant
variations in availability, adequacy or quality of service. User rate
schedules for portions of existing systems that were developed under
different financing, rates, terms or conditions, as determined by the
State Director, do not necessarily constitute inequities.

\(5\) Before a loan is made to an applicant other than a public body,
for other than utility type projects, the articles of incorporation or
loan agreement will include a condition similar to the following:

## 33

## (Revision 6)

(2-6-85) PN 956

RD Instruction 1942-A

§ 1942.17(e)(5) (Con.)

\"In the event of dissolution of this corporation, or in the event it
shall cease to carry out the objectives and purposes herein set forth,
all business, property, and assets of the corporation shall go and be
distributed to one or more non-profit corporations or public bodies as
may be selected by the board of directors of this corporation and
approved by at least 75 percent of the users or members to be used for,
and devoted to, the purpose of a community facility project or other
purpose to serve the public welfare of the community. In no event shall
any of the assets or property, in the event of dissolution thereof, go
or be distributed to members, directors, stockholders, or others having
financial or managerial interest in the corporation either for the
reimbursement of any sum subscribed, donated or contributed by such
members or for any other purposes, provided that nothing herein shall
prohibit the corporation from paying its just debts.\"

\(f\) [Rates and terms]{.underline}.

\(1\) [General]{.underline}. Each loan will bear interest at the rate
prescribed in RD Instruction 440.1, Exhibit B (available in any Rural
Development office). The interest rates will be set by Rural Development
at least for each quarter of the fiscal year. All rates will be adjusted
to the nearest one-eighth of one percent. For each loan, the basis for
determining what interest rate is appropriate will be completely
documented on the automated Community Facilities Project Summary. The
applicant may submit a written request prior to loan closing that the
interest rate charged on the loan be the lower of the rate in effect at
the time of loan approval or the rate in effect at the time of loan
closing. If the interest rate is to be that in effect at loan closing,
the interest rate charged on a loan involving multiple advances of Rural
Development funds, using temporary debt instruments, shall be that in
effect on the date when the first temporary debt instrument is issued.
If no written request is received from the applicant prior to loan
closing, the interest rate charged on the loan will be the rate in
effect at the time of loan approval. (Revised 03-19-03, PN 357.)

\(2\) [Poverty line rate]{.underline}. The poverty line interest rate
will not exceed 5 per centum per annum. The provisions of paragraph
(f)(2)(i) of this section do not apply to health care and related
facilities that provide direct health care to the public. Otherwise, all
loans must comply with the following conditions: (Revised 05-19-92,
SPECIAL PN.)

## 34

## (Revision 6) 

§1942.17 (f)(2) (Con.) RD Instruction 1942-A

\(i\) The primary purpose of the loan is to upgrade existing facilities
or construct new facilities required to meet applicable health or
sanitary standards. Documentation will be obtained from the appropriate
regulatory agency with jurisdiction to establish the standard, to verify
that a bona fide standard exists, what that standard is, and that the
proposed improvements are needed and required to meet the standard; and
(Revised 3-1-88, SPECIAL PN.)

\(ii\) The median household income of the service area is below the
poverty line for a family of four, as defined in Section 673 (2) of the
Community Services Block Grant Act (42 U.S.C. 9902(2)), or below 80
percent of the Statewide nonmetropolitan median household income.
(Revised 3-25-86, SPECIAL PN.)

## 34A

## (Added 05-19-92, SPECIAL PN)

(2-6-85) PN 956

§1942.17 (f) (Con.) RD Instruction 1942-A

\(3\) [Intermediate rate]{.underline}. The intermediate interest rate
will be set at the poverty line rate plus one-half of the difference
between the poverty line rate and the market rate, not to exceed 7
percent per annum. It will apply to loans that do not meet the
requirements for the poverty line rate and for which the median
household income of the service area is below the poverty line or not
more than 100 percent of the nonmetropolitan median household income of
the State. (Revised 10-28-87, PN 67.)

\(4\) [Market rate]{.underline}. The market interest rate will be set
using as guidance the average of the Bond Buyer Index for the four weeks
prior to the first Friday of the last month before the beginning of the
quarter. The market rate will apply to all loans that do not qualify for
a different rate under paragraph (f)(2) or (f)(3) of this section. It
may be adjusted as provided in paragraph (f)(5) of this section.

\(5\) [Prime farmland]{.underline}. For essential community facilities
loans, the rate indicated by paragraphs (f)(2), (f)(3) or (f)(4) of this
section will be increased by two per centum per annum if the project
being financed will involve the use of, or construction on, prime or
unique farmland in accordance with RD Instruction 440.1,\
Exhibits B and J (available in any Rural Development office).

\(6\) [Income determination]{.underline}. The income data used to
determine median household income should be that which most accurately
reflects the income of the service area. The service area is that area
reasonably expected to be served by the facility being financed by Rural
Development. The median household income of the service area and the
nonmetropolitan median household income of the State will be determined
from income data from the most recent decennial census of the U.S. If
there is a reason to believe that the census data is not an accurate
representation of the median household income within the area to be
served, the reasons will be documented and the applicant may furnish, or
Rural Development may obtain, additional information regarding such
median household income. Information will consist of reliable data from
local, regional, State or Federal sources or from a survey conducted by
a reliable impartial source. The nonmetropolitan median household income
of the State may only be updated on a national basis by the Rural
Development National Office. This will be done only when median
household income data for the same year for all Bureau of the Census
areas is available from the Bureau of the Census, or other reliable
sources. Bureau of the Census areas would include areas such as:
Counties, County Subdivisions, Cities, Towns, Townships, Boroughs, and
other places. (Revised 10-28-87, PN 67.)

## 35

## (Revision 5)

(02-06-85) PN 956

RD Instruction 1942-A

§1942.17 (f) (Con.)

\(7\) [Repayment terms]{.underline}. The loan repayment period shall not
exceed the useful life of the facility, State statute or 40 years from
the date of the note(s) or bond(s), whichever is less. Where Rural
Development grant funds are used in connection with an Rural Development
loan, the loan will be for the maximum term permitted by this subpart,
State statute, or the useful life of the facility, whichever is less,
unless there is an exceptional case where circumstances justify making
an Rural Development loan for less than the maximum term permitted. In
such cases, the reasons must be fully documented. In all cases,
including those in which the Rural Development is jointly financing with
another lender, the Rural Development payments of principal and interest
should approximate amortized installments. (Revised 06-26-91, PN 168.)

\(i\) Principal payments may be deferred, in whole or in part, for a
period not to exceed 36 months following the date the first interest
installment is due. If for any reason it appears necessary to permit a
longer period of deferment, the State Director may authorize such
deferment with the prior approval of the National Office. Deferments of
principal will not be used to: (Revised and Renumbered 03-01-88, SPECIAL
PN.)

\(A\) Postpone the levying of taxes or assessments.

\(B\) Delay collection of the full rates which the borrower has agreed
to charge users for its services as soon as major benefits or the
improvements are available to those users.

\(C\) Create reserves for normal operation and maintenance.

\(D\) Make any capital improvements except those approved by Rural
Development determined to be essential to the repayment of the loan or
to the obtaining of adequate security thereof.

\(E\) Accelerate the payment of other debts.

\(ii\) [Payment date]{.underline}. Loan payments will be scheduled to
coincide with income availability and be in accordance with State law.
If consistent with the foregoing, monthly payments will be required and
will be enumerated in the bond, other evidence of indebtedness, or other
supplemental agreement. However, if State law only permits principal
plus interest (P&I) type bonds, annual or seminannual payments will be
used.

## 36

## (Revision 5) 

§1942.17 (f)(7)(ii) (Con.) RD Instruction 1942-A

Insofar as practical monthly payments will be scheduled one full month
following the date of loan closing; or semiannual or annual payments
will be scheduled six or twelve full months respectively, following the
date of loan closing or any deferment period. Due dates falling on the
29th, 30th or 31st day of the month will be avoided. (Revised 06-26-91,
PN 168.)

\(g\) [Security]{.underline}. Loans will be secured by the best security
position practicable in a manner which will adequately protect the
interest of Rural Development during the repayment period of the loan.
Specific requirements for security for each loan will be included in a
letter of conditions.

## 36A

## (Added 06-26-91, PN 168)

(02-06-85) PN 956

§1942.17 (g) (Con.) RD Instruction 1942-A

\(1\) [Joint financing security]{.underline}. For projects utilizing
joint financing, when adequate security of more than one type is
available, the other lender may take one type of security with the
United States taking another type. For projects utilizing joint
financing with the same security to be shared by the United States and
another lender, the United States will obtain at least a parity position
with the other lender. A parity position is to ensure that with joint
security, in the event of default, each lender will be affected on a
proportionate basis. A parity position will conform with the following
unless an exception is granted by the National Office:

\(i\) [Terms]{.underline}. It is not necessary for loans to have the
same repayment terms to meet the parity requirements. Loans made by
other lenders involved in joint financing with the United States for
facilities should be scheduled for repayment on terms similar to those
customarily used in the State for financing such facilities.

\(ii\) [Use of trustee or other similar paying agent]{.underline}. The
use of a trustee or other similar paying agent by the other lender in a
joint financing arrangement is acceptable to the United States. A
trustee or other similar paying agent will not normally be used for the
United States portion of the funding unless required to comply with
State law. The responsibilities and authorities of any trustee or other
similar paying agent on projects that include United States funds must
be clearly specified by written agreement and approved by the State
Director and Regional Attorney. The United States must be able to deal
directly with the borrower to enforce the provisions of loan and grant
agreements and perform necessary servicing actions.

\(iii\) [Regular payments]{.underline}. In the event adequate funds are
not available to meet regular installments on parity loans, the funds
available will be apportioned to the lenders based on the respective
current installments of principal and interest due.

\(iv\) [Disposition of property]{.underline}. Funds obtained from the
sale or liquidation of secured property or fixed assets will be
apportioned to the lenders on the basis of the pro rata amount loaned,
but not to exceed their respective outstanding balances; provided,
however, funds obtained from such sale or liquidation for a project that
included grant funds will be apportioned as may be required by the grant
agreement.

\(v\) [Protective advances]{.underline}. Protective advances are
payments made by a lender for items such as insurance or taxes, to
protect the financial interest of the lender,

## 37

## (Revision 3)

(2-6-85) PN 956

RD Instruction 1942-A

§1942.17 (g)(1)(v) (Con.)

and charged to the borrower\'s loan account. To the extent consistent
with State law and customary lending practices in the area, repayment of
protective advances made by either lender, for the mutual protection of
both lenders, should receive first priority in apportionment of funds
between the lenders. To ensure agreement between lenders, efforts should
be made to obtain the concurrence of both lenders before one lender
makes a protective advance.

\(2\) [Public bodies]{.underline}. Loans to such borrowers will be
evidenced by notes, bonds, warrants, or other contractual obligations as
may be authorized by relevant State statutes and by borrower\'s
documents, resolutions, and ordinances.

\(i\) [Utility-type facilities]{.underline} such as water and sewer
systems, natural gas distribution systems, electric systems, etc., will
be secured by:

\(A\) The full faith and credit of the borrower when the debt is
evidenced by general obligation bonds; and/or

\(B\) Pledges of taxes or assessments; and/or

\(C\) Pledges of facility revenue and, when it is the customary
financial practice in the State, liens will be taken on the interest of
the applicant in all land, easements, rights-of-way, water rights, water
purchase contracts, water sales contracts, sewage treatment contracts,
and similar property rights, including leasehold interest, used or to be
used in connection with the facility whether owned at the time the loan
is approved or acquired with loan funds; and/or (Revised 3-1-88, SPECIAL
PN.)

\(D\) In those cases involving water and waste disposal projects where
there is a substantial number of other than full-time users and facility
costs result in a higher than reasonable rate for such full-time users,
the loan will be secured by the full faith and credit of the borrower or
by an assignment or pledge of taxes or assessments from public bodies or
other organizations having the authority to issue or pledge such taxes
or assessments. (Revised 05-19-92, SPECIAL PN.)

\(ii\) [Solid waste projects]{.underline}. The type of security required
will be based on State law and what is determined adequate to protect
the interest of the United States during the repayment period of the
loan. (Revised 03-01-95, PN 241.)

## 38

## (Revision 3) 

§1942.17 (g) (2) (Con.) RD Instruction 1942-A

\(iii\) [Other essential community facilities]{.underline} other than
utility type, such as those for public health and safety, social, and
cultural needs and the like will meet the following security
requirements:

\(A\) Such loans will be secured by one or a combination of the
following and in the following order of preference:

([1]{.underline}) General obligation bonds.

([2]{.underline}) Assessments.

([3]{.underline}) Bonds which pledge other taxes.

([4]{.underline}) Bonds pledging revenues of the facility being financed
when such bonds provide for the mandatory levy and collection of taxes
in the event revenues later become insufficient to properly operate and
maintain the facility and to retire the loan.

([5]{.underline}) Assignment of assured income which will be available
for the life of the loan, from such sources as insurance premium
rebates, income from endowments, irrevocable trusts, or commitments from
industries, public bodies, or other reliable sources.

([6]{.underline}) Liens on real and chattel property when legally
permissible and an assignment of the borrowers income from applicants
who have been in existence and are able to present evidence of a
financially successful operation of a similar facility for a period of
time sufficient to indicate project success. National Office concurrence
is required when the applicant has been in existence for less than five
years or has not operated on a financially successful basis for five
years immediately prior to loan application.

([7]{.underline}) Liens on real and chattel property when legally
permissible and an assignment of income from an organization receiving
Health and Human Services (HHS) operating grants under the \"Memorandum
of Understanding Between Health Resources and Services Administration,
U. S. Department of Health and Human Services and Rural Development, U.
S. Department of Agriculture\" (see RD Instruction\
2000-T, available in any Rural Development office.)

## 39

(2-6-85, PN 956)

RD Instruction 1942-A

§1942.17 (g) (2) (iii) (A) (Con.)

([8]{.underline}) Liens on real and chattel property when legally
permissible and an assignment of income from an organization proposing a
facility whose users receive reliable income from programs such as
social security, supplemental security income (SSI), retirement plans,
long-term insurance annuities, Medicare or Medicaid. Examples are homes
for the handicapped or institutions whose clientele receive State or
local government assistance.

([9]{.underline}) When the applicant cannot meet the criteria in
paragraph (g)(2)(iii)(A)([1]{.underline}) through ([8]{.underline}) of
this section, such proposals may be considered when all the following
are met:

([i]{.underline}) The applicant is a new organization or one that has
not operated the type of facility being proposed.

([ii]{.underline}) There is a demonstration of exceptional community
support such as substantial financial contributions, and aggressive
leadership in the formation of the organization and proposed project
which indicates a commitment of the entire community.

([iii]{.underline}) The State Director has determined that adequate and
dependable revenues will be available to meet all operation expenses,
debt repayment, and the required reserve.

([iv]{.underline}) Prior National Office review and concurrence is
obtained.

\(B\) Real estate and chattel property taken as security in accordance
with paragraphs (g)(2)(iii)(A)([6]{.underline}) through
([9]{.underline}) of this section:

([1]{.underline}) Ordinarily will include the property that is used in
connection with the facility being financed; and

([2]{.underline}) Will have an as-developed present market value
determined by a qualified appraiser equal to or exceeding the amount of
the loan to be obtained plus any other indebtedness against the proposed
security; and

## 40

##  

§1942.17 (g)(2)(iii)(B) (Con.) RD Instruction 1942-A

([3]{.underline}) May have one of the lien requirements deleted when the
loan approval official determines that the loan will be adequately
secured with a lien on either the real estate or chattel property.

\(C\) When security is not available in accordance with paragraphs
(g)(2)(iii)(A)(1) through (5) of this section and State law precludes
securing the loan with liens on real or chattel property, the loan will
be secured in the best manner consistent with State law and customary
security taken by private lenders in the State, such as revenue bonds,
and any other security the loan approval official determines necessary
for a sound loan. Such loans will otherwise meet the requirements of
(g)(2)(iii)(A)(6) through (9) of this section as appropriate.

\(3\) [Other-than-public bodies]{.underline}. Loans to other-than-public
body applicants will be secured as follows:

\(i\) [Utility-type facilities]{.underline} eligible for financial
assistance under paragraph (d) of this section such as water and sewer
systems, natural gas distribution systems, electric systems, etc., will
be secured as follows:

\(A\) Assignments of borrower income will be taken and perfected by
filing, if legally permissible; and

\(B\) A lien will be taken on the interest of the applicant in all land,
easements, rights-of-way, water rights, water purchase contracts, water
sales contracts, sewage treatment contracts and similar property rights,
including leasehold interest, used, or to be used in connection with the
facility whether owned at the time the loan is approved or acquired with
loan funds. In unusual circumstances where it is not feasible to obtain
a lien on such land (such as land rights obtained from Federal or local
government agencies, and from railroads) and the loan approval official
determines that the interest of the United States otherwise is secured
adequately, the lien requirement may be omitted as to such land rights.
(Revised 3-1-88, SPECIAL PN.)

## 41

## (Revision 3)

(2-6-85) PN 956

RD Instruction 1942-A

§1942.17 (g)(3)(i) (Con.)

\(C\) When the loan is approved or the acquisition of real property is
subject to an outstanding lien indebtedness, the next highest priority
lien obtainable will be taken if the loan approval official determines
that the loan is adequately secured.

\(D\) Other security. Promissory notes from individuals, stock or
membership subscription agreements, individual member\'s liability
agreements, or other evidences of debt, as well as mortgages or other
security instruments encumbering the private property of members of the
association may be pledged or assigned to the United States as
additional security in any case in which the interest of the United
States will not be otherwise adequately protected.

\(E\) In those cases where there is a substantial number of other than
full-time users and facility costs result in a higher than reasonable
rate for such full-time users, the loan will be secured by an assignment
or pledge of general obligation bonds, taxes, or assessments from public
bodies or other organizations having the authority to issue bonds or
pledge such taxes, or assessments. (Revised 05-19-92, SPECIAL PN.)

\(ii\) [Solid waste projects]{.underline}. The type of security required
will be based on State law and what is determined adequate to protect
the interest of the United States during the repayment period of the
loan. (Revised 03-01-95, PN 241.)

\(iii\) [Essential community facilities]{.underline} other than utility
type such as those for public health and safety, social, and cultural
needs and the like will meet the following security requirements:

\(A\) Such loans will be secured by one or a combination of the
following and in the following order of preference:

([1]{.underline}) An assignment of assured income that will be available
for the life of the loan, from sources such as insurance premium
rebates, income from endowments, irrevocable trusts, or commitments from
industries, public bodies, or other reliable sources.

## 42

## (Revision 3) 

§1942.17 (g)(3)(iii)(A) (Con.) RD Instruction 1942-A

([2]{.underline}) Liens on real and chattel property with an assignment
of income from applicants who have been in existence and are able to
present evidence of a financially successful operation of a similar
facility for a period of time sufficient to indicate project success.
National Office concurrence is required when the applicant has been in
existence for less than five years or has not operated on a financially
successful basis for at least the five years immediately prior to loan
application.

([3]{.underline}) Liens on real and chattel property and an assignment
of income from an organization receiving HHS operating grants under the
\"Memorandum of Understanding Between Health Resources and Services
Administration, U.S. Department of Health and Human Services and Rural
Development, U.S. Department of Agriculture\" (see RD Instruction
2000-T, available in any Rural Development office).

([4]{.underline}) Liens on real and chattel property when legally
permissible and an assignment of income from an organization proposing a
facility whose users receive reliable income from programs such as
social security, supplemental security income (SSI), retirement plans,
long-term insurance annuities, Medicare or Medicaid. Examples are homes
for the handicapped or institutions whose clientele receive State or
local government assistance.

([5]{.underline}) When the applicant cannot meet the criteria in
paragraphs (g)(3)(iii)(A)(1) through (4) of this section, such proposals
may be considered when all the following are met:

([i]{.underline}) The applicant is a new organization or one that has
not operated the type of facility being proposed.

([ii]{.underline}) There is a demonstration of exceptional community
support such as substantial financial contributions, and aggressive
leadership in the formation of the organization and proposed project
which indicates a commitment of the entire community.

## 43

## (Revision 1)

(2-6-85) PN 956

RD Instruction 1942-A

§1942.17 (g)(3)(iii)(A)(5) (Con.)

([iii]{.underline}) The State Director has determined that adequate and
dependable revenues will be available to meet all operation expenses,
debt repayment, and the required reserve.

([iv]{.underline}) Prior National Office review and concurrence is
obtained.

([6]{.underline}) Additional security may be taken as determined
necessary by the loan approval official.

\(B\) Real estate and chattel property taken as security:

([1]{.underline}) Ordinarily will include the property that is used in
connection with the facility being financed; and

([2]{.underline}) Will have an as-developed present market value
determined by a qualified appraiser equal to or exceeding the amount of
the loan to be obtained plus any other indebtedness against the proposed
security; and

([3]{.underline}) May have one of the lien requirements deleted when the
loan approval official determines that the loan will be adequately
secured with a lien on either the real estate or the chattel property.

\(h\) [Economic feasibility requirements]{.underline}. All projects
financed under the provisions of this section must be based on taxes,
assessments, revenues, fees or other satisfactory sources of revenues in
an amount sufficient to provide for facility operation and maintenance,
a reasonable reserve, and debt payment. An overall review of the
applicant\'s financial status, including a review of all assets and
liabilities, will be a part of the docket review process by the Rural
Development staff and approval official. If the primary use of the
facility is by business and the success or failure of the facility is
dependent on the business, then the economic viability of that business
must be assessed. The number of users for a rural business will be based
on equivalent dwelling units, which is the level of service provided to
a typical rural residential dwelling. (Revised 05-19-92,\
SPECIAL PN.)

\(1\) [Financial feasibility reports]{.underline}. All applicants will
be expected to provide a financial feasibility report prepared by a
qualified firm or individual. These financial feasibility reports will
normally be:

## 44

## (Revision 1) 

§1942.17 (h)(1) (Con.) RD Instruction 1942-A

\(i\) Included as part of the preliminary engineer/ architectural report
using Guides 6 through 10 as applicable; or

\(ii\) Prepared by a qualified firm or individual not having a direct
interest in the management or construction of the facility using Guide 5
when:

\(A\) The project will significantly affect the applicant\'s financial
operations and is not a utility-type facility but is dependent on
revenues from the facility to repay the loan; or

\(B\) It is specifically requested by Rural Development.

\(2\) [Applicants for loans for utility-type facilities]{.underline}
dependent on users fees for debt payment shall base their income and
expense forecast on realistic user estimates in accordance with the
following:

\(i\) In estimating the number of users and establishing rates or fees
on which the loan will be based for new systems and for extensions or
improvements to existing systems, consideration should be given to the
following:

## 44A

## (Added 05-19-92, SPECIAL PN)

(2-6-85) PN 956

§1942.17 (h) (2) (i) (Con.) RD Instruction 1942-A

\(A\) An estimated number of maximum initial users should not be used
when setting user fees and rates since it may be several years before
all residents in the community will need the services provided by the
system. In establishing rates a realistic number of initial users should
be employed.

\(B\) User agreements from individual vacant property owners will not be
considered when determining project feasibility unless:

([1]{.underline}) The owner has plans to develop the property in a
reasonable period of time and become a user of the facility; and

([2]{.underline}) The owner agrees in writing to make a monthly payment
at least equal to the proportionate share of debt service attributable
to the vacant property until the property is developed and the facility
is utilized on a regular basis. A bond or escrowed security deposit must
be provided to guarantee this monthly payment and to guarantee an amount
at least equal to the owner\'s proportionate share of construction
costs. If a bond is provided, it must be executed by a surety company
that appears on the Treasury Department\'s most current list (Circular
570, as amended) and be authorized to transact business in the State
where the project is located. The guarantee shall be payable jointly to
the borrower and Rural Development; and

([3]{.underline}) Such guarantee will mature not later than 4 years from
the date of execution and will be finally due and payable upon default
of a monthly payment or at maturity, unless the property covered by the
guarantee has been developed and the facility is being utilized on a
regular basis.

\(C\) Income from other vacant property owners will be considered only
as extra income.

\(ii\) Realistic user estimates will be established as follows:

\(A\) Meaningful potential user cash contributions. Potential user cash
contributions are required except:

## 45

(2-6-85, PN 956)

RD Instruction 1942-A

§1942.17 (h)(2)(ii)(A) (Con.)

([1]{.underline}) For users presently receiving service, or

([2]{.underline}) Where Rural Development determines that the potential
users as a whole in the applicant\'s service area cannot make cash
contributions, or

([3]{.underline}) Where State statutes or local ordinances require
mandatory use of the system and the applicant or legal entity having
such authority agrees in writing to enforce such statutes, or
ordinances.

\(B\) The amount of cash contributions required in paragraph
(h)(2)(ii)(A) of this section will be set by the applicant and concurred
in by Rural Development. Contributions should be an amount high enough
to indicate sincere interest on the part of the potential user, but not
so high as to preclude service to low income families. Contributions
ordinarily should be an amount approximating one year\'s minimum user
fee, and shall be paid in full before loan closing or commencement of
construction, whichever occurs first. Once economic feasibility is
ascertained based on a demonstration of meaningful potential user cash
contributions, the contribution, membership fee or other fees that may
be imposed are not a requirement of Rural Development under this
section. However, borrowers do have an additional responsibility
relating to generating sufficient revenues as set forth in paragraph
(n)(2)(iii) of this section.

\(C\) Enforceable user agreement. Except for users presently receiving
service, an enforceable user agreement with a penalty clause is required
unless State statutes or local ordinances require mandatory use of the
system and the applicant or legal entity having such authority agrees in
writing to enforce such statutes or ordinances.

\(iii\) In those cases where all or part of the borrower\'s debt payment
revenues will come from user fees, applicants must provide a positive
program to encourage connection by all users as soon as service is
available. The program will be available for review and approval by
Rural Development before loan closing or commencement of construction,
whichever occurs first. Such a program shall include:

\(A\) An aggressive information program to be carried out during the
construction period. The borrower should send written notification to
all signed users

## 46 

§1942.17 (h) (2) (iii) (A) (Con.) RD Instruction 1942-A

at least three weeks in advance of the date service will be available,
stating the date users will be expected to have their connections
completed, and the date user charges will begin.

\(B\) Positive steps to assure that installation services will be
available. These may be provided by the contractor installing the
system, local plumbing companies, or local contractors.

\(C\) Aggressive action to see that all signed users can finance their
connections. This might require collection of sufficient user
contributions to finance connections. Extreme cases might necessitate
additional loan funds for this purpose; however, loan funds should be
used only when absolutely necessary and when approved by Rural
Development prior to loan closing.

\(3\) [Utility-type facilities for new developing communities or
areas]{.underline}. Developers are normally expected to provide
utility-type facilities in new or developing areas and such facilities
shall be installed in compliance with appropriate State statutes and
regulations. Rural Development financing will be considered to an
eligible applicant in such cases when failure to complete development
would result in an adverse economic condition for the rural area (not
the community being developed); the proposal is necessary to the success
of an area development plan; and loan repayment can be assured by:

\(i\) The applicant already having sufficient assured revenues to repay
the loan; or

\(ii\) Developers providing a bond or escrowed security deposit as a
guarantee sufficient to meet expenses attributable to the area in
question until a sufficient number of the building sites are occupied
and connected to the facility to provide enough revenues to meet
operating, maintenance, debt service, and reserve requirements. Such
guarantees from developers will meet the requirements in paragraph
(h)(2)(i)(B) of this section; or

\(iii\) Developers paying cash for the increased capital cost and any
increased operating expenses until the developing area will support the
increased costs; or

\(iv\) The full faith and credit of a public body where the debt is
evidenced by general obligation bonds; or

## 47

(2-6-85, PN 956)

RD Instruction 1942-A

§1942.17 (h) (3) (Con.)

\(v\) The loan is to a public body evidenced by a pledge of tax
assessments; or

\(vi\) The user charges can become a tax lien upon the property being
served and income from such lien can be collected in sufficient time to
be used for its intended purposes.

\(i\) [Reserve requirements]{.underline}. Provision for the accumulation
of necessary reserves over a reasonable period of time will be included
in the loan documents and in assessments, tax levies, or rates charged
for services. In those cases where statutes providing for extinguishing
assessment liens of public bodies when properties subject to such liens
are sold for delinquent State or local taxes, special reserves will be
established and maintained for the protection of the borrower\'s
assessment lien.

\(1\) [General obligation or special assessment bonds]{.underline}.
Ordinarily, the requirements for reserves will be considered to have
been met if general obligation or other bonds which pledge the full
faith and credit of the political subdivision are used, or special
assessment bonds are used, and if such bonds provide for the annual
collection of sufficient taxes or assessments to cover debt service,
operation and maintenance, and a reasonable amount for emergencies and
to offset the possible nonpayment of taxes or assessments by a
percentage of the property owners, or a statutory method is provided to
prevent the incurrence of a deficiency.

\(2\) [Other than general obligation or special assessment
bonds]{.underline}. Each borrower will be required to establish and
maintain reserves sufficient to assure that loan installments will be
paid on time, for emergency maintenance, for extensions to facilities,
and for replacement of short-lived assets which have a useful life
significantly less than the repayment period of the loan. It is expected
that borrowers issuing bonds or other evidences of debt pledging
facility revenues as security will ordinarily plan their reserve to
provide for a total reserve in an amount at least equal to one average
loan installment. It is also expected that ordinarily such reserve will
be accumulated at the rate of at least one-tenth of the total each year
until the desired level is reached.

\(j\) [General requirements]{.underline}.

\(1\) [Membership authorization]{.underline}. For organizations other
than public bodies, the membership will authorize the project and its
financing except that the State Director may, with the concurrence of
OGC,

## 48 

§1942.17 (j) (1) (Con.) RD Instruction 1942-A

accept the loan resolution without such membership authorization when
State statutes and the organization\'s charter and bylaws do not require
such authorization; and

\(i\) The organization is well established and is operating with a sound
financial base; or

\(ii\) For utility-type projects the members of the organization have
all signed an enforceable user agreement with a penalty clause and have
made the required meaningful user cash contribution, except for members
presently receiving service or when State statutes or local ordinances
require mandatory use of the facility.

\(2\) [Planning, bidding, contracting, constructing]{.underline}. (See
§1942.18).

\(3\) [Insurance and fidelity bonds]{.underline}. The purpose of Rural
Development\'s insurance and fidelity bond requirements is to protect
the government\'s financial interest based on the facility financed. The
requirements below apply to all types of coverage determined necessary.
The National Office may grant exceptions to normal requirements when
appropriate justification is provided establishing that it is in the
best interest of the applicant/borrower and will not adversely affect
the government\'s interest. (Revised 5-3-89, SPECIAL PN)

\(i\) [General]{.underline}.

\(A\) Applicants must provide evidence of adequate insurance and
fidelity bond coverage by loan closing or start of construction,
whichever occurs first. Adequate coverage in accordance with this
section must then be maintained for the life of the loan. It is the
responsibility of the applicant/borrower and not that of Rural
Development to assure that adequate insurance and fidelity bond coverage
is maintained.

\(B\) Insurance and fidelity bond requirements by Rural Development
shall normally not exceed those proposed by the applicant/borrower if
the Rural Development loan approval or servicing official determines
that proposed coverage is adequate to protect the government\'s
financial interest. Applicants/borrowers are encouraged to have

## 49

## (Revision 2)

(2-6-85, PN 956)

RD Instruction 1942-A

§1942.17 (j) (3) (i) (B) (Con.)

their attorney, consulting engineer/architect, and/or insurance
provider(s) review proposed types and amounts of coverage, including any
deductible provisions. If the Rural Development official and the
applicant/borrower cannot agree on the acceptability of coverage
proposed, a decision will be made by the State Director.

\(C\) The use of deductibles, i.e., an initial amount of each claim to
be paid by the applicant/borrower, may be allowed by Rural Development
providing the applicant/borrower has financial resources which would
likely be adequate to cover potential claims requiring payment of the
deductible.

\(D\) Borrowers must provide evidence to Rural Development that adequate
insurance and fidelity bond coverage is being maintained. This may
consist of a listing of policies and coverage amounts in yearend reports
submitted with management reports required under section 1942.17(q)(2)
or other documentation. The borrower is responsible for updating and/or
renewing policies or coverage which expire between submissions to Rural
Development. Any monitoring of insurance and fidelity bond coverage by
Rural Development is solely for the benefit of Rural Development, and
does not relieve the applicant/borrower of its obligation under the loan
resolution to maintain such coverage.

\(ii\) [Fidelity bond]{.underline}. Applicants/borrowers will provide
fidelity bond coverage for all persons who have access to funds.
Coverage may be provided either for all individual positions or persons,
or through \"blanket\" coverage providing protection for all appropriate
employees and/or officials. An exception may be granted by the State
Director when funds relating to the facility financed are handled by
another entity and it is determined that the entity has adequate
coverage or the government\'s interest would otherwise be adequately
protected.

\(A\) The amount of coverage required by Rural Development will normally
approximate the total annual debt service requirements for the Rural
Development loans.

## 50

## (Revision 2) 

§1942.17 (j) (3) (ii) (Con.) RD Instruction 1942-A

\(B\) Form RD 440-24, \"Position Fidelity Schedule Bond\" may be used.
Similar forms may be used if determined acceptable to Rural Development.
Other types of coverage may be considered acceptable if it is determined
by Rural Development that they fulfill essentially the same purpose as a
fidelity bond.

\(iii\) [Insurance]{.underline}. The following types of coverage must be
maintained if appropriate for the type of project and entity involved:

\(A\) [Property insurance]{.underline}. Fire and extended coverage will
normally be maintained on all structures except as noted in
§§(j)(3)(iii)(A)(1) and (2) below. Ordinarily, Rural Development should
be listed as mortgagee on the policy when Rural Development has a lien
on the property. Normally, major items of equipment or machinery located
in the insured structures must also be covered. Exceptions:

([1]{.underline}) Reservoirs, standpipes, elevated tanks, and other
structures built entirely of noncombustible materials if such structures
are not normally insured.

([2]{.underline}) Subsurface lift stations except for the value of
electrical and pumping equipment therein.

\(B\) [Liability and property damage insurance, including vehicular
coverage]{.underline}.

\(C\) [Malpractice insurance]{.underline}. The need and requirements for
malpractice insurance will be carefully and thoroughly considered in
connection with each health care facility financed.

\(D\) [Flood insurance]{.underline}. Facilities located in special
flood- and mudslide-prone areas must comply with the eligibility and
insurance requirements of Subpart B of Part 1806 of this chapter (RD
Instruction 426.2).

\(E\) [Worker\'s compensation]{.underline}. The borrower will carry
worker\'s compensation insurance for employees in accordance with State
laws.

## 50A

## (Added 5-3-89, SPECIAL PN) 

RD Instruction 1942-A

§1942.17 (j) (Con.)

\(4\) [Acquisition of land, easements, water rights, and existing
facilities]{.underline}. Applicants are responsible for acquisition of
all property rights necessary for the project and will determine that
prices paid are reasonable and fair. Rural Development may require an
appraisal by an independent appraiser or Rural Development employee.

\(i\) [Title for land, rights-of-way, easements, or existing
facilities]{.underline}. The applicant must certify and provide a legal
opinion relative to the title to rights-of-way and easements. Form RD
442-21, \"Rights-of-Way Certificate,\" and Form RD 442-22, \"Opinion of
Counsel Relative to Rights-of-Way,\" may be used.

\(A\) [Rights-of-way and easements]{.underline}. Applicants are
responsible for and will obtain valid, continuous and adequate
rights-of-way and easements needed for the

## 50B

## (Added 5-3-89, SPECIAL PN) 

§1942.17 (j)(4)(i)(A) (Con.) RD Instruction 1942-A

construction, operation, and maintenance of the facility. Form RD
442-20, \"Right-of-Way Easement,\" may be used. When a site is for major
structures for utility-type facilities such as a reservoir or pumping
station and the applicant is able to obtain only a right-of-way or
easement on such a site rather than a fee simple title, the applicant
will furnish a title report thereon by the applicant\'s attorney showing
ownership of the land and all mortgages or other lien defects,
restrictions, or encumbrances, if any. It is the responsibility of the
applicant to obtain and record such releases, consents or subordinations
to such property rights from holders of outstanding liens or other
instruments as may be necessary for the construction, operation, and
maintenance of the facility and give Rural Development the required
security.

\(B\) [Title for land or existing facilities]{.underline}. Title to land
essential to the successful operation of facilities or title to
facilities being purchased, must not contain any restrictions that will
adversely affect the suitability, successful operation, security value,
or transferability of the facility. Title opinions must be provided by
the applicant\'s attorney. The opinions must be in sufficient detail to
assess marketability of the property. Form RD 1927-9, \"Preliminary
Title Opinion,\" and Form RD 1927-10, \"Final Title Opinion,\" may be
used to provide the required title opinions. If other forms are used
they must be reviewed and approved by Rural Development and OGC.

(Revised 03-31-92 SPECIAL PN.)

([1]{.underline}) In lieu of receiving title opinions from the
applicant\'s attorney, the applicant may use a title insurance company.
If a title insurance company is used, the company must provide Rural
Development a title insurance binder, disclosing all title defects or
restrictions, and include a commitment to issue a title insurance
policy. The policy should be in an amount at least equal to the market
value of the property as improved. The title insurance binder and
commitment should be provided to Rural Development prior to requesting
closing instructions. Rural Development will be provided a title
insurance policy which will insure Rural Development\'s interest in the
property without any title defects or restrictions which have not been
waived by Rural Development.

## 51

## (Revision 1)

(2-6-85, PN 956)

RD Instruction 1942-A

§1942.17 (j)(4)(i)(B) (Con.)

([2]{.underline}) The loan approval official may waive title defects or
restrictions, such as utility easements, that do not adversely affect
the suitability, successful operation, security value, or
transferability of the facility. If the District Director is the loan
approval official and is unable to waive the defect or restriction, the
title opinion or title insurance binder will be forwarded to the State
Director. If the State Director, with the advice of the OGC, determines
that the defect or restriction cannot be waived, the defect or
restriction must be removed.

\(ii\) [Water rights]{.underline}. When legally permissible, an
assignment will be taken on water rights owned or to be acquired by the
applicant. The following will be furnished as applicable:

\(A\) A statement by the applicant\'s attorney regarding the nature of
the water rights owned or to be acquired by the applicant (such as
conveyance of title, appropriation and decree, application and permit,
public notice and appropriation and use).

\(B\) A copy of a contract with another company or municipality to
supply water; or stock certificates in another company which represents
the right to receive water.

\(iii\) [Land purchase contract]{.underline}:

\(A\) A land purchase contract (known in some areas as a contract for
deed) is an agreement between two or more parties which obligates the
purchaser to pay the purchase price, gives the purchaser the rights of
immediate possession, control, and beneficial use of the property, and
entitles the purchaser to a deed upon paying all or a specified part of
the purchase price.

\(B\) Applicants may obtain land through land purchase contracts when
all of the following conditions are met:

([1]{.underline}) The applicant has exhausted all reasonable means of
obtaining outright fee simple title to the necessary land.

## 52

## (Revision 1) 

§1942.17 (j)(4)(iii)(B) (Con.) RD Instruction 1942-A

([2]{.underline}) The applicant cannot obtain the land through
condemnation.

([3]{.underline}) There are no other suitable sites available.

## 52A

## (Added 03-31-92, SPECIAL PN)

(2-6-85, PN 956)

§1942.17 (j) (4) (iii) (B) (Con.) RD Instruction 1942-A

([4]{.underline}) National Office concurrence is obtained in accordance
with paragraph (j)(4)(iii)(D)(2) of this section.

\(C\) The land purchase contract must provide for the transfer of
ownership by the seller without any restrictions, liens or other title
defects. The contract must not contain provisions for future advances
(except for taxes, insurance, or other costs needed to protect the
security), summary cancellations, summary forfeiture, or other clauses
that may jeopardize the Government\'s interest or the purchaser\'s
ability to pay the Rural Development loan. The contract must provide
that if the purchaser fails to make payment that Rural Development will
be given at least 90 days written notice with an option to cure the
default before the contract can be canceled, terminated or foreclosed.
Then Rural Development must have the option of making the payment and
charging it to the purchaser\'s account, making the payment and taking
over the ownership of the purchase contract, or taking any other action
necessary to protect the Government\'s interest.

\(D\) Prior to loan closing or the beginning of construction, whichever
occurs first, the following actions must be taken in the order listed
below:

([1]{.underline}) The land purchase contract and any appropriate title
opinions must be reviewed by the Regional Attorney to determine if they
are legally sufficient to protect the interest of the Government.

([2]{.underline}) The land purchase contract, the Regional Attorney\'s
comments, and the State Director\'s recommendations must be submitted to
the National Office for concurrence.

([3]{.underline}) The land purchase contract must be recorded.

\(5\) [Lease agreements]{.underline}. Where the right of use or control
of real property not owned by the applicant/borrower is essential to the
successful operation of the facility during the life of the loan, such
right will be evidenced by written agreements or contracts between the
owner(s) of the property and the applicant/borrower. Lease agreements
shall not contain provisions for restricted use of the site or facility,
forfeiture or summary cancellation clauses and shall provide for the
right to transfer and lease without restriction. Lease agreements will
ordinarily be written for a term at least equal to the term of the loan.
Such lease

## 53

(2-6-85, PN 956)

RD Instruction 1942-A

§1942.17 (j) (5) (Con.)

contracts or agreements will be approved by the Rural Development loan
approval official with the advice and counsel of the Regional Attorney,
OGC, as to the legal sufficiency of such documents. A copy of the lease
contract or agreement will be included in the loan docket.

\(6\) [Notes and bonds]{.underline}. Notes and bonds will be completed
on the date of loan closing except for the entry of subsequent multiple
advances where applicable. The amount of each note will be in multiples
of not less than \$100. The amount of each bond will ordinarily be in
multiples of not less than \$1,000.

\(i\) Form RD 440-22, \"Promissory Note (Association or Organization),\"
will ordinarily be used for loans to nonpublic bodies.

\(ii\) §1942.19 contains instructions for preparation of notes and bonds
evidencing indebtedness of public bodies.

\(7\) [Environmental requirements]{.underline}. Environmental
requirements will be documented by Rural Development in accordance with
Subpart G Part 1940 of this chapter. The applicant will provide any
information required.

\(8\) [Health care facilities]{.underline}. The applicant will be
responsible for obtaining the following documents:

\(i\) A statement from the responsible State agency certifying that the
proposed health care facility is not inconsistent with the State Medical
Facilities Plan.

\(ii\) A statement from the responsible State agency or regional office
of the Department of Health and Human Services certifying that the
proposed facility meets the standards in §1942.18 (d)(4)

\(9\) [Public information]{.underline}. Applicants should inform the
general public regarding the development of any proposed project. Any
applicant not required to obtain authorization by vote of its membership
or by public referendum, to incur the obligations of the proposed loan
or grant, will hold at least one public information meeting. The public
meeting must be held after the preapplication is filed and not later
than loan approval. The meeting must give the citizenry an opportunity
to become acquainted with the proposed project and to comment on such
items as economic and environmental impacts, service area, alternatives
to the project, or any other issue identified by Rural Development. The
applicant will be required, at least 10 days prior to the meeting, to
publish a notice of the meeting in a newspaper of

## 54 

§1942.17 (j) (9) (Con.) RD Instruction 1942-A

general circulation in the service area, to post a public notice at the
applicant\'s principal office, and to notify Rural Development. The
applicant will provide Rural Development a copy of the published notice
and minutes of the public meeting. A public meeting is not normally
required for subsequent loans which are needed to complete the financing
of the project.

\(10\) [Service through individual installation]{.underline}. Community
owned water or waste disposal systems may provide service through
individual installations or small clusters of users within the
applicant\'s service area. When individual installations or small
clusters are proposed, the loan approval official should consider items
such as: quantity and quality of the individual installations that may
be developed; cost effectiveness of the individual facility compared
with the initial and long term user cost on a central system; health and
pollution problems attributable to individual facilities; operational or
management problems peculiar to individual installations; and permit and
regulatory agency requirements.

\(i\) Applicants providing service through individual facilities must
meet the eligibility requirements in §1942.17 (b).

\(ii\) Rural Development must approve the form of agreement between the
owner and individual users for the installation, operation and payment
for individual facilities.

\(iii\) If taxes or assessments are not pledged as security, owners
providing service through individual facilities must obtain security as
necessary to assure collection of any sum the individual user is
obligated to pay the owner.

\(iv\) Notes representing indebtedness owed the owner by a user for an
individual facility will be scheduled for payment over a period not to
exceed the useful life of the individual facility or the loan, whichever
is shorter. The interest rate will not exceed the interest rate charged
the owner on the Rural Development indebtedness.

\(v\) Owners providing service through individual or cluster facilities
must obtain:

\(A\) Easements for the installation and ingress to and egress from the
facility; and

\(B\) An adequate method for denying service in the event of nonpayment
of user fees.

\(11\) [Funds from other sources]{.underline}. Rural Development loan
funds may be used along with or in connection with funds provided by the
applicant or from

## 55

## (Revision 1)

(2-6-85, PN 956)

RD Instruction 1942-A

§1942.17 (j) (Con.)

other sources. Since \"matching funds\" is not a requirement for Rural
Development loans, shared revenues may be used with Rural Development
funds for project construction.

\(k\) [Other Federal, State, and local requirements]{.underline}. Each
application shall contain the comments, necessary certifications and
recommendations of appropriate regulatory or other agency or institution
having expertise in the planning, operation, and management of similar
facilities. Proposals for facilities financed in whole or in part with
Rural Development funds will be coordinated with appropriate Federal,
State, and local agencies in accordance with the following:

\(1\) [Compliance with special laws and regulations]{.underline}. Except
as provided in paragraph (k)(2) of this section, applicants will be
required to comply with Federal, State, and local laws and any
regulatory commission rules and regulations pertaining to: (Revised
3-1-88, SPECIAL PN.)

\(i\) Organization of the applicant and its authority to construct,
operate, and maintain the proposed facilities;

\(ii\) Borrowing money, giving security therefore, and raising revenues
for the repayment thereof;

\(iii\) Land use zoning; and

\(iv\) Health and sanitation standards and design and installation
standards unless an exception is granted by Rural Development.

\(2\) [Compliance exceptions]{.underline}. If there are conflicts
between this subpart and State or local laws or regulatory commission
regulations, the provisions of this subpart will control. (Revised
3-1-88, SPECIAL PN.)

\(3\) [State Pollution Control or Environmental Protection Agency
Standards]{.underline}. Water and waste disposal facilities will be
designed, installed, and operated in such a manner that they will not
result in the pollution of water in the State in excess of established
standards and that any effluent will conform with appropriate State and
Federal Water Pollution Control Standards. A certification from the
appropriate State and Federal agencies for water pollution control
standards will be obtained showing that established standards are met.
(Renumbered 3-1-88, SPECIAL PN.)

\(4\) [Consistency with other development plans]{.underline}. Rural
Development Financed facilities will not be inconsistent with any
development plans of State, multijurisdictional areas, counties, or
municipalities in which the proposed project is located. (Renumbered
3-1-88, SPECIAL PN.)

\(5\) [State agency regulating water rights]{.underline}. Each Rural
Development financed facility will be in compliance with appropriate
State agency regulations which have control of the appropriation,
diversion, 56

## (Revision 1) 

RD Instruction 1942-A

§ 1942.17(k)(5) (Con.)

storage and use of water and disposal of excess water. All of the rights
of any landowners, appropriators, or users of water from any source will
be fully honored in all respects as they may be affected by facilities
to be installed. (Renumbered 03-01-88, SPECIAL PN.)

\(6\) [Civil Rights Act of 1964]{.underline}. The Act states that no
person shall, on the ground of race, color or national origin, be
excluded from participation in, be denied the benefits to, or be subject
to discrimination under any program or activity receiving financial
assistance. All borrowers are subject to, and facilities must be
operated in accordance with, Title VI of the Act and Subpart E of Part
1901 of this chapter, etc. (Renumbered 03-01-88, SPECIAL PN.)

\(7\) [Title IX of the Education Amendments of 1972]{.underline}. No
person in the United States shall, on the basis of sex, be excluded from
participation in, be denied the benefits of, or be subject to
discrimination under any education program or education activity
receiving agency financial assistance except as otherwise provided for
in the Education Amendments of Title IX. The State Director will provide
guidance and technical assistance to carry out the intent of this
paragraph. (Renumbered 03-01-88, SPECIAL PN.)

\(8\) [Section 504 of the Rehabilitation Act of 1973]{.underline}. Under
section 504 of the Rehabilitation Act of 1973, as amended (29 U.S.C.
794), no handicapped individual in the United States shall, solely by
reason of their handicap, be excluded from participation in, be denied
the benefits of, or be subject to discrimination under any program or
activity receiving agency financial assistance. (Renumbered 03-01-88,
SPECIAL PN.)

> \(9\) [Age Discrimination Act of 1975]{.underline}. This Act provides
> that no person in the United States shall on the basis of age, be
> excluded from participation in, be denied the benefits of, or be
> subjected to discrimination under any program or activity receiving
> Federal financial assistance. This Act also applies to programs or
> activities funded under the State and Local Fiscal Assistance Act\
> of 1972 (31 U.S.C. 1221 et. seq.). This Act does not apply to:\
> (a) age distinctions contained in Federal, State or local statutes or
> ordinances adopted by an elected, general purpose legislative body
> which provides benefits or assistance based on age; (b) established
> intended beneficiaries or target groups in age-related terms; and, (d)
> any employment practice of any employer, employment agency, labor
> organization, or any labor-management joint apprenticeship training
> program except for any program or activity receiving Federal financial
> assistance for public service employment under the Comprehensive
> Employment and Training Act of 1974 (CETA) (29 U.S.C. 801 et seq.).
> (Renumbered 03-01-88, SPECIAL PN.)

## 57

## (Revision 5)

(02-06-85) PN 956

RD Instruction 1942-A

§ 1942.17 (Con.)

\(l\) [Professional services and contracts related to the
facility]{.underline}.

\(1\) [Professional services]{.underline}. Applicants will be
responsible for providing the services necessary to plan projects
including design of facilities, preparation of cost and income
estimates, development of proposals for organization and financing, and
overall operation and maintenance of the facility. Professional services
of the following may be necessary: engineer, architect, attorney, bond
counsel, accountant, auditor, appraiser, and financial advisory or
fiscal agent (if desired by applicant). Contracts or other forms of
agreement between the applicant and its professional and technical
representatives are required and are subject to agency concurrence. Form
RD 1942-19, \"Agreement for Engineering Services,\" may be used when
appropriate. Guide 20, \"Agreement for Engineering Services
(Agency/EPA - Jointly Funded Projects),\" may be used on projects
jointly funded by the Agency and EPA. Guide 14 may be used in the
preparation of the legal services agreement. Guide 27, Attachment 1 to
AIA Document B141, 1997 Edition, \"Standard Form of Agreement Between
owner and Architect,\" may be used when appropriate. (Revised 08-26-98,
PN 296.)

\(2\) [Bond counsel]{.underline}. Unless otherwise provided by §
1942.19(b), public bodies are required to obtain the services of
recognized bond counsel in the preparation of evidence of indebtedness.

\(3\) [Contracts for other services]{.underline}. Contracts or other
forms of agreements for other services including management, operation,
and maintenance will be developed by the applicant and presented to
agency for review and approval. Management agreements should provide at
least those items in Guide 24.

\(4\) [Fees]{.underline}. Fees provided for in contracts or agreements
shall be reasonable. They shall be considered to be reasonable if not in
excess of those ordinarily charged by the professional for similar work
when agency financing is not involved. An Engineer Fee Analysis
described in the attached Automation Supplement may be used as an aid in
reviewing the engineer fees described herein.

\(m\) [Applying for Agency loans]{.underline}.

\(1\) [Preapplication]{.underline}. Applicants desiring loans will file
SF 424.2 and comments from the appropriate A-95 clearinghouse agency
normally with the appropriate agency County Office. The County
Supervisor will immediately forward all documents to the District
Office. The District Director has prime responsibility for all community
program loan making and servicing activities within the District.\
(Revised 04-11-90, SPECIAL PN.)

## 58

## (Revision 5) 

RD Instruction 1942-A

§ 1942.17(m) (Con.)

\(2\) [Preapplication review]{.underline}. Upon receipt of the
preapplication, the agency will tentatively determine eligibility
including the likelihood of credit elsewhere at reasonable rates and
terms and availability of agency loan funds. The determination as to the
availability of

## 58A

## (Added 08-26-98, PN 296)

(02-06-85) PN 956

§1942.17 (m)(2) (Con.) RD Instruction 1942-A

other credit will be made after considering present rates and terms
available for similar proposals (not necessarily based upon rates and
terms available from Rural Development); the repayment potential of the
applicant; long-term cost to the applicant; and average user or other
charges. In those cases where Rural Development determines that loans at
reasonable rates and terms should be available from commercial sources,
Rural Development will notify the applicant so that it may apply for
such financial assistance. Such applicants may be reconsidered for Rural
Development loans upon their presenting satisfactory evidence of
inability to obtain commercial financing at reasonable rates and terms.

\(3\) [Incurring obligations]{.underline}. Applicants should not proceed
with planning nor obligate themselves for expenditures until authorized
by Rural Development.

\(4\) [Results of preapplication review]{.underline}. After Rural
Development has reviewed the preapplication material and any additional
material that may be requested, Form AD-622 will be sent to the
applicant. Ordinarily the review will not exceed 45 days.

\(5\) [Application conference]{.underline}. Before starting to assemble
the application and after the applicant selects its professional and
technical representatives, it should arrange with Rural Development for
an application conference to provide a basis for orderly application
assembly. Rural Development will provide applicants with a list of
documents necessary to complete the application. Guide 15 may be used
for this purpose. Applications will be filed with the District Office.

\(6\) [Application completion and assembling]{.underline}. This is the
responsibility of the applicant with guidance from Rural Development.
The applicant may utilize their professional and technical
representatives or other competent sources.

\(7\) [Review of decision]{.underline}. If an application is rejected,
the applicant may request a review of this decision under Subpart B of
Part 1900 of this chapter.

\(n\) [Actions prior to loan closing and start of
construction]{.underline}.

## (1) [Excess Rural Development loan and grant funds]{.underline}. If there is a significant reduction in project cost, the applicant\'s funding needs will be reassessed before loan closing or the start of construction, whichever occurs first. In such cases applicable Rural Development forms, the letter of conditions, and other items will be revised. Decreases in Rural Development funds will be based on revised project costs and current number of users, however, other factors including Rural Development regulations used at the time of loan/grant approval will remain the same. Obligated loan or grant funds not needed to complete the proposed project will be deobligated.

## 59

## (Revision 1)

(2-6-85, PN 956)

RD Instruction 1942-A

§1942.17 (n) (Con.)

\(2\) [Loan resolutions]{.underline}. Loan resolutions will be adopted
by both public and other-than-public bodies using Form RD 1942-47,
\"Loan Resolution (Public Bodies),\" or Form RD 1942-9, \"Loan
Resolution (Security Agreement).\" These resolutions supplement other
provisions in this subpart. The applicant will agree:

\(i\) To indemnify the Government for any payments made or losses
suffered by the Government on behalf of the association. Such
indemnification shall be payable from the same source of funds pledged
to pay the bonds or any other legally permissible source.

\(ii\) To comply with applicable local, State and Federal laws,
regulations, and ordinances.

\(iii\) To provide for the receipt of adequate revenues to meet the
requirements of debt service, operation and maintenance, establishment
of adequate reserves, and to continually operate and maintain the
facility in good condition. Except for utility-type facilities, free
service use may be permitted. If free services are extended, no
distinctions will be made in the extension of those services because of
race, color, religion, sex, national origin, marital status, or physical
or mental handicap.

\(iv\) To acquire and maintain such insurance coverage including
fidelity bonds, as may be required by the Government.

\(v\) To establish and maintain such books and records relating to the
operation of the facility and its financial affairs and to provide for
required audit thereof in such a manner as may be required by the
Government and to provide the Government without its request, a copy of
each such audit and to make and forward to the Government such
additional information and reports as it may, from time to time,
require.

\(vi\) To provide the Government at all reasonable times, access to all
books and records relating to the facility and access to the property of
the system so that the Government may ascertain

## 60

## (Revision 1) 

§1942.17 (n) (2) (vi) (Con.) RD Instruction 1942-A

that the association is complying with the provisions hereof and of the
instruments incident to the making or insuring of the loan.

\(vii\) To provide adequate service to all persons within the service
area who can feasibly and legally be served and to obtain Rural
Development\'s concurrence prior to refusing new or adequate services to
such persons. Upon failure of the applicant to provide services which
are feasible and legal, such person shall have a direct right of action
against the applicant organization.

\(viii\) To have prepared on its behalf and to adopt an ordinance or
resolution for the issuance of its bonds or notes or other debt
instruments or other such items and in such forms as are required by
State statutes and as are agreeable and acceptable to the Government.

\(ix\) To refinance the unpaid balance, in whole or in part, of its debt
upon the request of the Government if at any time it should appear to
the Government that the association is able to refinance its bonds by
obtaining a loan for such purposes from responsible cooperative or
private sources at reasonable rates and terms.

\(x\) To provide for, execute, and comply with Form RD 400-4,
\"Assurance Agreement,\" and Form RD 400-1, \"Equal Opportunity
Agreement,\" including an \"Equal Opportunity Clause,\" which is to be
incorporated in or attached as a rider to each construction contract and
subcontract in excess of \$10,000.

\(xi\) To place the proceeds of the loan on deposit in a manner approved
by the Government. Funds may be deposited in institutions insured by the
State or Federal Government as invested in readily marketable securities
backed by the full faith and credit of the United States. Any income
from these accounts will be considered as revenues of the system.

\(xii\) Not to sell, transfer, lease, or otherwise encumber the facility
or any portion thereof or interest therein, and not to permit others to
do so, without the prior written consent of the Government.

\(xiii\) Not to borrow any money from any source, enter into any
contract or agreement, or incur any other liabilities in connection with
making enlargements, improvements or extensions to, or for any other
purpose in connection with the facility (exclusive of normal
maintenance) without the prior written consent of the Government if such
undertaking would involve the source of funds pledged to repay the debt
to Rural Development.

## 61

## (Revision 1)

(2-6-85, PN 956)

RD Instruction 1942-A

§1942.17 (n) (2) (Con.)

\(xiv\) That upon default in the payments of any principal and accrued
interest on the bonds or in the performance of any covenant or agreement
contained herein or in the instruments incident to making or insuring
the loan, the Government, at its option, may:

\(A\) Declare the entire principal amount then outstanding and accrued
interest, due and payable;

\(B\) For the account of the association (payable from the source of
funds pledged to pay the bonds or notes or any other legally permissible
source), incur and pay reasonable expenses for repair, maintenance and
operation of the facility and such other reasonable expenses as may be
necessary to cure the cause of default; and/or

\(C\) Take possession of the facility, repair, maintain and operate, or
otherwise dispose of the facility. Default under the provisions of the
resolution or any instrument incident to the making or insuring of the
loan may be construed by the Government to constitute default under any
other instrument held by the Government and executed or assumed by the
association and default under any such instrument may be construed by
the Government to constitute default hereunder.

\(3\) [Interim financing]{.underline}. In all loans exceeding \$50,000,
where funds can be borrowed at reasonable interest rates on an interim
basis from commercial sources for the construction period, such interim
financing will be obtained so as to preclude the necessity for multiple
advances of Rural Development funds. Guide 1 or Guide la, as
appropriate, may be used to inform the private lender of Rural
Development\'s commitment. When interim commercial financing is used,
the application will be processed, including obtaining construction
bids, to the stage where the Rural Development loan would normally be
closed, that is immediately prior to the start of construction. The
Rural Development loan should be closed as soon as possible after the
disbursal of all interim funds. Interim financing may be for a fixed
term provided the fixed term does not extend beyond the time projected
for completion of construction. For this purpose, a fixed term is when
the interim lender cannot be repaid prior to the end of the stipulated
term of the interim instruments. When an Rural Development Water and
Waste Disposal grant is included, any interim financing involving a
fixed term must be for the total Rural Development loan amount. Multiple
advances may be used in conjunction with interim commercial financing
when the applicant is unable to obtain sufficient funds through interim
commercial financing in an amount equal to the loan. The Rural
Development loan proceeds (including advances) will be used to retire

## 62

## (Revision 1) 

§1942.17 (n) (3) (Con.) RD Instruction 1942-A

the interim commercial indebtedness. Before the Rural Development loan
is closed, the applicant will be required to provide Rural Development
with statements from the contractor, engineer, architect, and attorney
that they have been paid to date in accordance with their contracts or
other agreements and, in the case of the contractor, that any suppliers
and subcontractors have been paid. If such statements cannot be
obtained, the loan may be closed provided:

\(i\) Statements to the extent possible are obtained; and

\(ii\) The interest of Rural Development can be adequately protected and
its security position is not impaired; and

\(iii\) Adequate provisions are made for handling the unpaid accounts by
withholding or escrowing sufficient funds to pay such claims.

\(4\) [Obtaining closing instructions]{.underline}. After loan approval,
the completed docket will be reviewed by the State Director. The
information required by OGC will be transmitted to OGC with request for
closing instructions. Upon receipt of the closing instructions from OGC,
the State Director will forward them along with any appropriate
instructions to the District Director. Upon receipt of closing
instructions, the District Director will discuss with the applicant and
its architect or engineer, attorney, and other appropriate
representatives, the requirements contained therein and any actions
necessary to proceed with closing.

\(5\) [Applicant contribution]{.underline}. An applicant contributing
funds toward the project cost shall deposit these funds in its
construction account on or before loan closing or start of construction,
whichever occurs first. Project costs paid prior to the required deposit
time with applicant funds shall be appropriately accounted for.

\(6\) [Evidence of and disbursement of other funds]{.underline}.
Applicants expecting funds from other sources for use in completing
projects being partially financed with Rural Development funds will
present evidence of the commitment of these funds from such other
sources. This evidence will be available before loan closing, or the
start of construction, whichever occurs first. Ordinarily, the funds
provided by the applicant or from other sources will be disbursed prior
to the use of Rural Development loan funds. If this is not possible,
funds will be disbursed on a pro rata basis. Rural Development funds
will not be used to pre-finance funds committed to the project from
other sources.

## 63

## (Revision 1)

(2-6-85, PN 956)

RD Instruction 1942-A

§1942.17 (o)

\(o\) [Loan closing]{.underline}.

\(1\) [Closing instructions]{.underline}. Loans will be closed in
accordance with the closing instructions issued by OGC.

\(2\) [Obtaining insurance and fidelity bonds]{.underline}. Required
property insurance policies, liability insurance policies, and fidelity
bonds will be obtained by the time of loan closing or start of
construction, whichever occurs first.

\(3\) [Distribution of recorded documents]{.underline}. The originals of
the recorded deeds, easements, permits, certificates of water rights,
leases, or other contracts and similar documents which are not to be
held by Rural Development will be returned to the borrower. The original
mortgage(s) and water stock certificates, if any, if not required by the
recorder\'s office will be retained by Rural Development.

\(4\) [Review of loan closing]{.underline}. In order to determine that
the loan has been properly closed, the loan docket will be reviewed by
the State Director and OGC.

\(p\) [Project monitoring and fund delivery during
construction]{.underline}.

\(1\) [Coordination of funding sources]{.underline}. When a project is
jointly financed, the State Director will reach any needed agreement or
understanding with the representatives of the other source of funds on
distribution of responsibilities for handling various aspects of the
project. These responsibilities will include supervision of
construction, inspections and determinations of compliance with
appropriate regulations concerning equal employment opportunities, wage
rates, nondiscrimination in making services or benefits available, and
environmental compliance. If any problems develop which cannot be
resolved locally, complete information should be sent to the National
Office for advice.

> \(2\) [Multiple advances]{.underline}. In the event interim commercial
> financing is not legally permissible or not available, multiple
> advances of Rural Development loan funds are required. An exception to
> this requirement may be granted by the National Office when a single
> advance is necessitated by State law or public exigency. Multiple
> advances will be used only for loans in excess of \$50,000. Advances
> will be made only as needed to cover disbursements required by the
> borrower over a 30-day period. Advances should not exceed 24 in number
> nor

## 64

## (Revision 1) 

§1942.17 (p) (2) (Con.) RD Instruction 1942-A

> extend longer than two years beyond loan closing. Normally, the
> retained percentage withheld from the contractor to assure
> construction completion will be included in the last advance.

\(i\) §1942.19 contains instructions for making multiple advances to
public bodies.

\(ii\) Advances will be requested by the borrower in writing. The
request should be in sufficient amounts to pay cost of construction,
rights-of-way and land, legal, engineering, interest, and other expenses
as needed. The applicant may use Form RD 440-11, \"Estimate of Funds
Needed for 30 Day Period Commencing \_\_\_\_\_\_\_\_\_,\" to show the
amount of funds needed during the 30-day period.

\(iii\) Rural Development loan funds obligated for a specific purpose,
such as the paying of interest, but not needed at the time of loan
closing will remain in the Finance Office until needed unless State
statutes require all funds to be delivered to the borrower at the time
of closing. Loan funds may be advanced to prepay costs under paragraph
(d)(l)(iv)(G) of this section. If all funds must be delivered to the
borrower at the time of closing to comply with State statutes, funds not
needed at loan closing will be handled as follows:

\(A\) Deposited in an appropriate borrower account, such as the debt
service account, or

\(B\) Deposited in a supervised bank account under paragraph (p)(3)(i)
of this section.

\(3\) [Use and accountability of funds]{.underline}.

\(i\) [Supervised bank account]{.underline}. Rural Development loan
funds and any funds furnished by the applicant/borrower to supplement
the loan including contributions to purchase major items of equipment,
machinery, and furnishings may be deposited in a supervised bank account
if determined necessary as provided in Subpart A of Part 1902 of this
chapter. When Rural Development has a memorandum of understanding with
another agency that provides for the use of supervised bank accounts, or
when Rural Development is the primary source of funds for a project and
has determined that the use of a supervised bank account is necessary,
project funds from other sources may also be deposited in the supervised
bank account. Rural Development shall not be accountable to the source
of the other funds nor shall Rural Development undertake responsibility
to administer the funding program of the other entity. Supervised bank
accounts should not be used for funds advanced by an interim lender.
(Revised 3-1-88, SPECIAL PN.)

## 

## 65

## (Revision 2)

(2-6-85) PN 956

RD Instruction 1942-A

§1942.17 (p) (3) (Con.)

\(ii\) [Other than supervised bank account]{.underline}. If a supervised
bank account is not used, arrangement will be agreed upon for the prior
concurrence by Rural Development of the bills or vouchers upon which
warrants will be drawn, so that the payments from loan funds can be
controlled and Rural Development records are current. If a supervised
bank account is not used, use Form RD 402-2, \"Statement of Deposits and
Withdrawals,\" or a similar form to monitor funds. Periodic reviews of
nonsupervised accounts shall be made by Rural Development at the times
and in the manner as Rural Development prescribes in the conditions of
loan approval. State laws regulating the depositories to be used shall
be complied with.

\(iii\) [Use of minority owned banks]{.underline}. Applicants are
encouraged to use minority banks (a bank which is owned at least 50
percent by minority group members) for the deposit and disbursement of
funds. A list of minority owned banks can be obtained from the Office of
Minority Business Enterprise, Department of Commerce, Washington, D.C.
20230 and is also available in all Rural Development offices.

\(4\) [Development inspections]{.underline}. The District Director will
be responsible for monitoring the construction of all projects being
financed, wholly or in part, with Rural Development funds. Technical
assistance will be provided by the State Director\'s staff. Project
monitoring will include construction inspections and a review of each
project inspection report, each change order and each partial payment
estimate and other invoices such as payment for engineering/
architectural and legal fees and other materials determined necessary to
effectively monitor each project. These activities will not be performed
on behalf of the applicant/borrower, but are solely for the benefit of
Rural Development and in no way are intended to relieve the
applicant/borrower of corresponding obligations to conduct similar
monitoring and inspection activities. Project monitoring will include
periodic inspections to review partial payment estimates prior to their
approval and to review project development in accordance with plans and
specifications. Each inspection will be recorded using Form RD 1924-12,
\"Inspection Reports.\" The original Form RD 1924-12 will be filed in
project case folder and a copy furnished to the State Director. The
State Director will review inspection reports and will determine that
the project is being effectively monitored. The District Director is
authorized to review and accept partial payment estimates prepared by
the contractor and approved by the borrower, provided the consulting
engineer or architect, if one is being utilized for the project, has
approved the estimates and certified that all material purchased or work
performed is in accordance with the plans and specifications, or if a
consulting engineer or architect is not being utilized, the District
Director has determined that the funds requested are for authorized
purposes. If there is any indication that construction

## 66

## (Revision 2) 

RD Instruction 1942-A

§ 1942.17(p)(4) (Con.)

is not being completed in accordance with the plans and specifications
or that any other problems exist, the District Director should notify
the State Director immediately and withhold all payments on the
contract. (Revised 5-12-87, SPECIAL PN.)

\(5\) [Payment for construction]{.underline}. Each payment for project
costs must be approved by the borrower\'s governing body. Payment for
construction must be for amounts shown on payment estimate forms. Form
RD 1924-18, \"Partial Payment Estimate,\" may be used for this purpose
or other similar forms may be used with the prior approval of the State
Director or designee. However, the State Director or designee cannot
require a greater reporting burden than is required by Form RD 1924-18.
Advances for contract retainage will not be made until such retainage is
due and payable under the terms of the contract. The review and
acceptance of project costs, including construction partial payment
estimates by the agency, does not attest to the correctness of the
amounts, the quantities shown, or that the work has been performed under
the terms of agreements or contracts. (Revised 5-12-87, SPECIAL PN.)

\(6\) [Use of remaining funds]{.underline}. Funds remaining after all
costs incident to the basic project have been paid or provided for will
not include applicant contributions. Applicant contributions will be
considered as funds initially expended for the project. Funds remaining,
with exception of applicant contributions, may be considered in direct
proportion to the amounts obtained from each source. Remaining funds
will be handled as follows:

\(i\) [Agency loan and/or grant funds]{.underline}. Remaining funds may
be used for purposes authorized by paragraph (d) of this section,
provided the use will not result in major changes to the facility design
or project and that the purpose of the loan and/or grant remains the
same. (Revised 06-19-97, SPECIAL PN.)

\(A\) On projects that only involve an agency loan and no agency grant,
funds that are not needed will be applied as an extra payment on the
agency indebtedness unless other disposition is required by the bond
ordinance, resolution, or State statute.

\(B\) On projects that involve an agency grant, all remaining agency
funds will be considered to be grant funds up to the full amount of the
grant. Grant funds not expended under paragraph (p)(6)(i) of this
section will be deobligated.

## 67

## (Revision 5)

(2-6-85) PN 956

RD Instruction 1942-A

§ 1942.17(p)(6) (Con.)

\(ii\) [Funds from other sources]{.underline}. Funds remaining from
other sources will be handled according to rules, regulations and/or the
agreement governing their participation in the project.

\(q\) Borrower accounting methods, management reporting and audits.

\(1\) Accounting methods and records.

\(i\) [Method of accounting and financial statements]{.underline}.
Financial statements must be prepared on the accrual basis of accounting
unless State statutes or regulatory agencies provide otherwise, or an
exception is made by the agency. This requirement is for accrual basis
financial statements and not for accrual basis accounting systems.
Organizations may keep their books on an accounting basis other than
accrual and then make adjustments so that the financial statements are
presented on the accrual basis.

\(ii\) [Approval requirement]{.underline}. Before loan closing or start
of construction, whichever is first, each borrower shall provide to, and
obtain approval from the agency loan approval official for its
accounting and financial reporting system, including the agreement with
its auditor, if an auditor is required.

\(iii\) [Record retention]{.underline}. Each borrower shall retain all
records, books, and supporting material for 3 years after the issuance
of the audit reports and financial statements. Upon request, this
material will be made available to the agency, the Comptroller General,
or to their representatives. (Renumbered 02-24-05, SPECIAL PN.)

\(2\) [Management reports]{.underline}. These reports will furnish the
management with a means of evaluating prior decisions and serve as a
basis for planning future operations and financial conditions. In those
cases where revenues from multiple sources are pledged as security for
an agency loan, two reports will be required; one for the project being
financed by the agency and one combining the entire operation of the
borrower. In those cases where agency loans are secured by general
obligation bonds or assessments and the borrower combines revenues from
all sources, one management report combining all such revenues will
suffice. The following management data will be submitted by the borrower
to the District Director.

## 68

## (Revision 5) 

§1942.17 (q) (2) (Con.) RD Instruction 1942-A

\(i\) [Financial information]{.underline}.

\(A\) Form RD 442-2, \"Statement of Budget, Income and Equity,\" which
includes Schedule I, \"Statement of Budget, Income and Equity,\" and
Schedule 2, \"Projected Cash Flow.\"

\(B\) Prior to the beginning of each fiscal year, two copies, with data
entered in column three only of Schedule 1, page one, \"Annual Budget,\"
and all of Schedule 2, will be submitted to the District Director.
Twenty (20) days after the end of each of the first three quarters of
each year, two copies with all information furnished on Schedule 1 will
be submitted. For the fourth quarter of each year, submit together with
the year-end financial requirements of paragraphs (q)(4) and (5) of this
section. More frequent submissions may be required by Rural Development
when necessary. The submission dates to the District Director will be 90
days following year-end for audited statements and 60 days following
year-end for unaudited statements. The fourth quarter submission may
serve the dual purpose of management report and year-end financial
requirement for Statement of Income. (Revised 3-1-88, SPECIAL PN.)

\(ii\) Additional information.

\(A\) A list of the names and addresses of all members of the governing
body as appropriate, also indicating the officers and their terms of
office, will be included with the other information required at the end
of the year.

\(B\) Borrowers delinquent on payment to Rural Development or
experiencing financial problems, will develop a positive action plan to
resolve financial problems. The plan will be reviewed with Rural
Development and updated at least quarterly. Guide 22 may be used for
developing a positive action plan.

\(3\) [Substitute for management reports]{.underline}. When Rural
Development loans are secured by the general obligation of the public
body or tax assessments which total 100 percent of the debt service
requirements, the State Director may authorize an annual audit to
substitute for other management reports if the audit is received within
90 days following the period covered by the audit. (Revised 3-1-88,
SPECIAL PN.)

## 69

## (Revision 1)

(2-6-85, PN 956)

RD Instruction 1942-A

§1942.17 (q)

\(4\) [Audits]{.underline}. All audits are to be performed in accordance
with generally accepted government auditing standards (GAGAS), using the
publication, \"Standards for Audit of Governmental Organizations,
Programs, Activities and Functions,\" developed by the Comptroller
General of the United States in 1981, and any subsequent revisions. In
addition, the audits are also to be performed in accordance with various
Office of Management and Budget (OMB) Circulars and Rural Development
requirements as specified in the separate sections of this subpart.
(Revised 3-1-88, SPECIAL PN.)

\(i\) [Audits based upon Federal financial assistance
received]{.underline}. The following requirements shall apply to audits
of the years in which funds are received by the borrower.

\(A\) [Local governments and Indian tribes]{.underline}. These
organizations are to be audited in accordance with this subpart and OMB
Circular A-128, with copies of the audits being forwarded by the
borrower to the Rural Development District Director and the appropriate
Federal cognizant agency. The Circular is attached as Exhibit A
(available in any Rural Development office). For years in which an audit
is not required by OMB Circular A-128, see paragraph (q)(4)(ii) of this
section.

\(1\) [Cognizant agency]{.underline}.

([i]{.underline}) \"Cognizant agency\" means the Federal agency assigned
by OMB Circular A-128. Within the Department of Agriculture (USDA), the
OIG shall fulfill cognizant agency responsibilities.

([ii]{.underline}) [Cognizant agency assignments]{.underline}. Smaller
borrowers not assigned a cognizant agency by OMB should contact the
Federal agency that provided the most funds. When USDA is designated as
the cognizant agency or when it has been determined by the borrower that
Rural Development provided the major portion of Federal financial
assistance, the appropriate USDA OIG Regional Inspector General shall be
contacted. Rural Development and the borrower shall coordinate all
proposed audit plans with the appropriate USDA OIG. A list of OIG
contact persons is attached as Exhibit B (available in any Rural
Development office).

> ([2]{.underline}) [Audit requirements]{.underline}. It is not intended
> that audits required by this subpart be separate and apart from audits
> performed in accordance with State and local laws. To the extent
> feasible, the audit work should be done in conjunction with those
> audits.

## 

## 70

## (Revision 1) 

RD Instruction 1942-A

§1942.17 (q)(4)(i)(A)([2]{.underline}) (Con.)

([i]{.underline}) Local governments and Indian tribes that receive
\$100,000 or more a year in Federal financial assistance shall have an
audit made in accordance with OMB Circular A-128.

([ii]{.underline}) Local governments and Indian tribes that receive
between \$25,000 and \$100,000 a year in Federal financial assistance
shall have an audit made in accordance with OMB Circular A-128 or in
accordance with Rural Development audit requirements. This is an option
of the local government or Indian tribe. If the election is made to have
an audit performed in accordance with Rural Development requirements,
the audit shall be in accordance with paragraph (q)(4)(i)(B) of this
section.

([iii]{.underline}) Local governments and Indian tribes that receive
less than \$25,000 a year in Federal financial assistance shall be
exempt from both OMB Circular A-128 audits and Rural Development audit
requirements, except for those based upon annual gross income which may
apply in paragraph (q)(4)(ii) of this section. However, any audits
performed shall be governed by the requirements prescribed by State or
local law or regulation.\
(Revised 05-26-93, PN 207.)

([iv]{.underline}) Public hospitals and public colleges and universities
may be excluded from OMB Circular A-128 audit requirements. If such
entities are excluded, audits shall be made in accordance with paragraph
(q)(4)(i)(B) of this section.

([3]{.underline}) [Fraud, abuse, and illegal acts]{.underline}. If the
auditor becomes aware of any indication of fraud, abuse, or illegal acts
in Rural Development financed projects, prompt written notice shall be
given to the appropriate USDA OIG Regional Inspector General and the
Rural Development District Director.

## 70A

## (Revision 1)

(2-6-85, PN 956)

RD Instruction 1942-A

§1942.17 (q)(4)(i) (Con.)

\(B\) [Nonprofit organizations and others]{.underline}. These
organizations are to be audited in accordance with Rural Development
requirements, and OMB Circular A-110, \"Uniform Requirements for Grants
to Universities, Hospitals, and Other Nonprofit Organizations.\" These
requirements also apply to public hospitals and public colleges and
universities if they are excluded from the audit requirements of
paragraph (q)(4)(i)(A) of this section.

\(1\) Audits shall be annual unless otherwise prohibited and supplied to
the Rural Development District Director as soon as possible but in no
case later than 150 days following the period covered by the audit.
(Revised 05-26-93,\
PN 207.)

([2]{.underline}) [Audit requirements]{.underline}.

([i]{.underline}) Borrowers which receive \$25,000 or more a year in
Federal financial assistance shall have an audit. Also, refer to
paragraph (q)(4)(ii) of this section for additional audit requirements.

([ii]{.underline}) Borrowers which receive less than \$25,000 a year in
Federal financial assistance shall be exempt from audits, except for
those based upon annual gross income which may apply in paragraph
(q)(4)(ii) of this section. (Revised 05-26-93, PN 207.)

([iii]{.underline}) Indications of fraud, abuse, and illegal acts shall
be processed in accordance with paragraph (q)(4)(i)(A)(3) of this
section.

\(ii\) [Audits based upon annual gross income]{.underline}. The
following annual gross income audit requirements shall apply to all
borrowers (local government, Indian tribes, and nonprofit organizations)
for all years except the ones in which there is an audit requirement
based upon the amount of Federal assistance received as required by
paragraphs (q)(4)(i)(A) and (q)(4)(i)(B) of this section. Audits shall
be on an annual basis unless otherwise prohibited and shall be supplied
to the Rural Development District Director as soon as possible but in no
case later than 150 days following the period covered by the audit.
(Revised 05-26-93, PN 207.)

## 70B

## (Revision 1) 

RD Instruction 1942-A

§1942.17 (q)(4)(ii) (Con.)

\(A\) [Gross annual income of \$500,000 or more and an unpaid loan
balance exceeding \$100,000]{.underline}.

([1]{.underline}) Local governments and Indian tribes shall have audits
made in accordance with State or local law or regulation or regulatory
agency requirements. If no such requirements exist, audits shall be made
in accordance with OMB Circular A-110 and paragraphs
(q)(4)(i)(B)([1]{.underline}) and ([2]{.underline})([iii]{.underline})
of this section.

([2]{.underline}) All other organizations shall have audits in
accordance with OMB Circular A-110 and paragraph
(q)(4)(i)(B)([1]{.underline}) and ([2]{.underline})([iii]{.underline})
of this section.

\(B\) [Gross annual income of less than \$500,000]{.underline}. For
borrowers that have gross annual income of less than \$500,000, the
requirements for audits shall be at the discretion of the State
Director. However, when audits are required, they shall be in accordance
with paragraph (q)(4)(ii)(A) of this section. (Revised 06-30-93, PN
208.)

## 70C

## (Revision 1)

(2-6-85, PN 956)

§1942.17 (q) (5) RD Instruction 1942-A

\(5\) [Borrowers exempt from audits]{.underline}. All borrowers who are
exempt from Rural Development audit requirements and who do not
otherwise have annual audits, will within 60 days following the end of
each fiscal year, furnish the Rural Development District Director with
annual financial statements, consisting of a verification of the
organization\'s balance sheet and statement of income and expense by an
appropriate official of the organization. Forms Rural Development 442-2
and 442-3 may be used. For borrowers using Form RD 442-2, the dual
purpose of fourth quarter management reports, when required, and annual
statements of income will be met with this one submission. (Revised
3-1-88, SPECIAL PN)

\(r\) [Rural Development actions for borrower supervision and
servicing]{.underline}.

\(1\) [Management assistance and management reports]{.underline}.
Management assistance will be based on such factors as observation of
borrower operations and review of the periodic financial reports. The
amount and type of assistance provided will be that needed to assure
borrower success and compliance with its agreements with Rural
Development.

\(i\) [The District Director]{.underline} is responsible for obtaining
all management report data from the borrower, promptly reviewing it and
making any necessary recommendations to the borrower within 40 calendar
days. However, after receiving management reports for borrowers whose
Rural Development indebtedness exceeds \$1,000,000 and for delinquent
and problem case borrowers, the District Director will forward them with
comments to the State Director for review. (Revised 3-1-88, SPECIAL PN.)

\(ii\) [District Director reviews of borrower operations]{.underline}.

\(A\) A review of the borrower\'s total operational and management
practices, including records and accounts to be maintained, will be made
between the beginning of the ninth and the end of the eleventh full
month of the first year of operation. A report will be made to the State
Director by sending a copy of Form RD 442-4, \"District Director
Report.\" Earlier reviews will be made when needed to resolve
operational and management problems that may arise.

\(B\) Subsequent reviews will be made for all delinquent and other
borrowers having financial problems and reported to the State Director
by a copy of Form RD 442-4. These borrowers will adopt a positive action
plan (see Guide 22). The plan will be reviewed quarterly by the District
Director until the delinquency is eliminated or other servicing actions
are recommended.

## 71

## (Revision 1)

(2-6-85, PN 956)

RD Instruction 1942-A

§1942.17 (r) (1) (ii) (Con.)

\(C\) The District Director may, after the end of the borrower\'s third
fiscal year of operation, exempt it from submitting management reports
provided it:

([1]{.underline}) Is current on its loan payments.

([2]{.underline}) Is meeting the conditions of its agreements with Rural
Development.

([3]{.underline}) Has demonstrated its ability to successfully operate
and manage the organization and has not obtained subsequent loans in the
last 3 years which have significantly altered the scope of the project.

([4]{.underline}) Has the State Director\'s written concurrence for all
borrowers whose Rural Development indebtedness exceeds \$1,000,000.
(Revised 3-1-88, SPECIAL PN.)

\(D\) Borrowers qualifying for this exemption will still be required to
submit a copy of their audits or annual financial statements.

\(E\) Ordinarily an exception will not be made to the requirement for
the borrower to submit a copy of its annual budget.

\(F\) The District Director or State Director may reinstate the
requirements for submission of periodic management reports for those
borrowers who became delinquent or otherwise are not carrying out their
agreements with Rural Development or require more frequent submission of
management reports. This requirement will be reinstated for borrowers
receiving a subsequent loan which will significantly alter the scope of
the project.

\(G\) The District Director may accept management reports which are not
prepared on page 1 of Form RD 442-2 Schedule 1 but contain like
information. However, page 2 of this form must be used by all borrowers
required to furnish management reports.

\(iii\) [The State Director is responsible for]{.underline}:

> \(A\) The review of the District Director\'s submission for all
> borrowers whose indebtedness exceeds \$1,000,000. The State Director
> will forward comments to the District Director in order that a
> response, if necessary, can be sent to the borrower within 40 calendar
> days after the borrower\'s submission of its management reports.
> (Revised 3-1-88, SPECIAL PN.)

## 

## 72

## (Revision 1) 

§1942.17 (r)(1)(iii) (Con.) RD Instruction 1942-A

\(B\) The review of all delinquent and problem case borrower management
reports. Ordinarily, review findings and instructions regarding further
management assistance will be determined and provided to the District
Office within 20 calendar days of submission for delinquent and problem
borrowers. (Revised 3-1-88, SPECIAL PN.)

\(C\) Forwarding to the National Office copies of review findings,
instructions for further assistance, and positive action plans on
delinquent borrowers and borrowers experiencing financial problems at
the same time the findings and instructions are provided to the District
Office. (Revised 3-1-88, SPECIAL PN.)

\(2\) [Audits and financial statements]{.underline}.

\(i\) [The District Director]{.underline} is responsible for obtaining
all audit reports and financial statements from the borrower. Those
received from borrowers whose Rural Development indebtedness exceeds
\$1,000,000 and from delinquent and problem case borrowers will be
promptly reviewed and forwarded to the State Director with appropriate
comments. (Revised 3-1-88, SPECIAL PN.)

\(ii\) [The District Director]{.underline} is responsible for the review
of audits and financial statements and for recommendations and
instructions for borrower assistance. For borrowers required to have
audits, in accordance with paragraph (q)(4)(i)(A) of this section, the
District Director is also responsible for any necessary follow up
required because of audit resolution items received from the cognizant
agencies. The borrower will be required to furnish any additional
information necessary to satisfy the requirement. Guide 21 may be used
in the audit review process. (Revised 3-1-88, SPECIAL PN.)

\(iii\) [The State Director]{.underline} is responsible for the review
of audits of borrowers whose indebtedness exceeds \$1,000,000 and
delinquent and problem case borrowers. The State Director may recommend
to the District Director any necessary actions to be taken. (Revised
3-1-88, SPECIAL PN)

\(3\) [Security inspections]{.underline}. A representative of the
borrower will ordinarily accompany the District Director during each
inspection.

## 73

## (Revision 5)

(2-6-85) PN 956

RD Instruction 1942-A

§1942.17 (r)(3) (Con.)

\(i\) [Post construction inspection]{.underline}. The District Director
will inspect each facility between the beginning of the ninth and the
end of the eleventh full month of the first year of operation. This will
normally coincide with the District Director\'s review of the
borrower\'s total operational and management practices described in
paragraph (r)(1)(ii)(A) of this section. The results of this inspection
will be reported to the State Director on Form RD 1924-12. Earlier
inspections will be made when operational or other problems indicate a
need. The State Director will provide guidance to the District Director
to assure that action will be taken to correct project deficiencies.
(Revised 5-12-87, SPECIAL PN.)

\(ii\) [Subsequent inspections]{.underline}. The District Director will
make subsequent inspections of borrower security property and facilities
during each third year after the post construction inspection. The
results of this inspection will be reported to the State Director on
Form RD 1924-12. (Revised 5-12-87, SPECIAL PN.)

\(iii\) [Special inspections]{.underline}. The District Director may
request, or the State Director may determine, the need for a member of
the State staff to make certain security inspections. In such cases, the
State Director will detail a staff member to make such inspections.

\(iv\) [Follow-up inspections]{.underline}. If any inspection discloses
deficiencies or exceptions, or otherwise indicates a need for subsequent
inspections prior to the third year, the State Director will prescribe
the type and frequency of follow-up inspections. These inspections will
be made until all deficiencies and exceptions have been corrected.

\(4\) [Civil rights compliance reviews]{.underline} will be performed
under Subpart E of Part 1901 of this chapter for the life of the loan.

\(5\) [Other loan servicing actions]{.underline} will be in accordance
with Subpart E of Part 1951 of this chapter.

## 74

## (Revision 5) 

RD Instruction 1942-A

## Table of Contents

[Sec]{.underline}. [Page]{.underline}

1942.18 - Community Facilities - Planning, Bidding,

Contracting, Constructing.

\(a\) General. 76

\(b\) Technical services. 76

\(c\) Preliminary reports. 76

\(d\) Design policies. 76

\(1\) Natural resources. 76

\(2\) Historic preservation. 77

\(3\) Architectural barriers. 77

\(4\) Health Care Facilities. 77

\(5\) Energy conservation. 78

\(6\) Lead base paints. 78

\(7\) Fire protection. 78

\(8\) Growth capacity. 78

\(9\) Water conservation. 78

\(10\) Water quality. 78

\(11\) Combined sewers 78

\(12\) Compliance. 79

\(13\) Dam safety. 79

\(14\) Pipe. 79

\(15\) Water system testing. 79

\(16\) Metering devices. 79

\(17\) Seismic safety. 79

\(e\) Construction contracts. 79A

\(f\) Utility purchase contracts. 80

\(g\) Sewage treatment and bulk water sales contracts. 82

\(h\) Performing construction. 82

\(i\) Owner\'s contractual responsibility. 83

\(j\) Owner\'s procurement regulations. 83

\(k\) Procurement methods. 86

\(l\) Contracting methods. 88

\(m\) Contracts awarded prior to preapplications. 89

\(n\) Contract provisions. 90

\(o\) Contract administration. 92

\(1\) Preconstruction conference. 92

\(2\) Monitoring reports. 93

\(3\) Inspection. 93

\(4\) Inspector\'s daily diary. 94

\(5\) Prefinal inspections. 94

\(6\) Final inspection. 94

\(7\) Changes in development plans. 94

## 

## 75

(Revision 2)

(02-06-85) PN 956

RD Instruction 1942-A

§1942.18 [Community Facilities - Planning, Bidding,
Contracting,]{.underline}

[Constructing]{.underline}.

\(a\) [General]{.underline}. This section is specifically designed for
use by owners including the professional or technical consultants and/or
agents who provide assistance and services such as architectural,
engineering, inspection, financial, legal or other services related to
planning, bidding, contracting, and constructing community facilities.
These procedures do not relieve the owner of the contractual obligations
that arise from the procurement of these services. For this section, an
owner is defined as an applicant, borrower, or grantee.

\(b\) [Technical services]{.underline}. Owners are responsible for
providing the engineering or architectural services necessary for
planning, designing, bidding, contracting, inspecting, and constructing
their facilities. Services may be provided by the owner\'s \"in house\"
engineer or architect or through contract, subject to Rural Development
concurrence. Architects and engineers must be licensed in the State
where the facility is to be constructed.

\(c\) [Preliminary reports]{.underline}. Preliminary architectural and
engineering reports must conform with customary professional standards.
Preliminary report guidelines for water, sanitary sewer, solid waste,
storm sewer, and other essential community facilities are available from
Rural Development.

\(d\) [Design policies]{.underline}. Facilities financed by Rural
Development will be designed and constructed in accordance with sound
engineering and architectural practices, and must meet the requirements
of Federal, State and local agencies.

\(1\) [Natural resources]{.underline}. Facility planning should be
responsive to the owner\'s needs and should consider the long-term
economic, social and environmental needs as set forth in this section.
Rural Development\'s environmental considerations are under Subpart G of
Part 1940 of this chapter.

\(i\) [Floodplains and wetlands]{.underline}. Facilities must avoid, to
the extent possible, the long and short-term adverse impacts associated
with the occupancy and modification of floodplains and wetlands, and
avoid direct or indirect support of floodplain and wetland development
whenever there is a practicable alternative. The subject is more fully
discussed in Executive Order 11988, Executive Order 11990, and Water
Resources Council\'s Floodplain Management Guidelines (43 FR 6030) which
is available in all Rural Development offices. Facilities located in
special flood and mudslide

## 76

## (Revision 1)

(2-6-85, PN 956)

§1942.18 (d)(l)(i) (Con.) RD Instruction 1942-A

prone areas must comply with Rural Development\'s eligibility and
insurance requirements in Subpart B of Part 1806 of this chapter (RD
Instruction 426.2).

\(ii\) [Coastal Zone Management]{.underline}. Facilities shall be
designed and constructed in a manner consistent with approved State
management programs, under the Coastal Zone Management Act of 1972 (P.L.
92-583 Section 307 (c)(l) and (2)) as supplemented by the Department of
Commerce regulations 15 CFR 930.

\(iii\) [Wild and Scenic Rivers]{.underline}. Facilities shall be
designed and constructed in order that designated wild and scenic rivers
be preserved in free-flowing condition and that they and their immediate
environments be protected for the benefit and enjoyment of present and
future generations under the Wild and Scenic Rivers Act of 1978 (P.L.
95-625).

\(iv\) [Endangered species]{.underline}. Facilities shall be designed
and constructed in a manner to conserve, to the extent practicable, the
various endangered and threatened species of fish and wildlife and
plants, and will not jeopardize their continued existence and will not
result in destruction or modification of the habitat of species in the
Endangered Species Act of 1973 (P.L. 93-205).

\(2\) [Historic preservation]{.underline}. Facilities should be designed
and constructed in a manner which will contribute to the preservation
and enhancement of sites, structures, and objects of historical
architectural, and archaeological significance. All facilities must
comply with the National Historic Preservation Act of 1966 (16 U.S.C.
470) as supplemented by 36 CFR 800 and Executive Order 11593,
\"Protection and Enhancement of the Cultural Environment.\" Subpart F of
Part 1901 of this chapter sets forth procedures for the protection of
Historic and Archaeological Properties.

\(3\) [Architectural barriers]{.underline}. All facilities intended for
or accessible to the public or in which physically handicapped persons
may be employed or reside must be developed in compliance with the
Architectural Barriers Act of 1968 (P.L. 90-480) as implemented by the
General Services Administration regulations 41 CFR 101-19.6 and Section
504 of the Rehabilitation Act of 1973 (P.L. 93-112) as implemented by 7
CFR, Parts 15 and 15b.

\(4\) [Health Care Facilities]{.underline}. The proposed facility must
meet the minimum standards for design and construction contained in the
American Institute of Architects Press Publication No. ISBN
0913962-96-1, \"Guidelines for Construction and Equipment of

## 77

## (Revision 1) 

RD Instruction 1942-A

§1942.18(d)(4) (Con.)

Hospital and Medical Facilities,\" 1987 Edition. The facility must also
meet the life/safety aspects of the 1985 edition of the National Fire
Protection Association (NFPA) 101 Life Safety Code, or any subsequent
code that may be designated by the Secretary of HHS. All publications
referenced in this section are available in all Agency State Offices.
Under §1942.17(j)(8)(ii) of this subpart, a statement by the responsible
regulatory agency that the facility meets the above standards will be
required. Any exceptions must have prior National Office concurrence.
(Revised 05-03-89,\
SPECIAL PN)

\(5\) [Energy conservation]{.underline}. Facility design should consider
cost effective energy saving measures or devices.

\(6\) [Lead base paints]{.underline}. Lead base paints shall not be used
in facilities designed for human habitation. Owners must comply with the
Lead Base Paints Poisoning and Prevention Act of 1971 (42 U.S.C. 4801)
and the National Consumer Health Information and Health Promotion Act of
1976 (Pub. L. 94-317) with reference to paint specifications used
according to Exhibit H of Subpart A of Part 1924 of this chapter.

\(7\) [Fire protection]{.underline}. Water facilities must have
sufficient capacity to provide reasonable fire protection to the extent
practicable.

\(8\) [Growth capacity]{.underline}. Facilities must have sufficient
capacity to provide for reasonable growth to the extent practicable.

\(9\) [Water conservation]{.underline}. Owners are encouraged, when
economically feasible, to incorporate water conservation practices into
a facility\'s design. For existing water systems, evidence must be
provided showing that the distribution system water losses do not exceed
reasonable levels.

\(10\) [Water quality]{.underline}. All water facilities must meet the
requirements of the Safe Drinking Water Act (Pub. L. 93-523) and provide
water of a quality that meets the current Interim Primary Drinking Water
Regulations (40 CFR 141).

\(11\) [Combined sewers]{.underline}. New combined sanitary and storm
water sewer facilities will not be financed by the Agency. Extensions to
existing combined systems can only be financed when separate systems are
impractical.

## 

## 78

## (Revision 2)

(02-06-85) PN 956

RD Instruction 1942-A

§1942.18(d) (Con.)

\(12\) [Compliance]{.underline}. All facilities must meet the
requirements of Federal, State, and local agencies having the
appropriate jurisdiction.

\(13\) [Dam safety]{.underline}. Projects involving any artificial
barrier which impounds or diverts water, or the rehabilitation or
improvement of such a barrier, should comply with the provisions for dam
safety as discussed in the Federal Guidelines for Dam Safety (Government
Printing Office stock No. 041-001-00187-5) as prepared by the Federal
Coordinating Council for Science, Engineering and Technology.

\(14\) [Pipe]{.underline}. All pipe used shall meet current American
Society for Testing Materials (ASTM) or American Water Works Association
(AWWA) standards.

\(15\) [Water system testing]{.underline}. For new water systems or
extensions to existing water systems, leakage shall not exceed 10
gallons per inch of pipe diameter per mile of pipe per 24 hours when
tested at 1 1/2 times the working pressure or rated pressure of the
pipe, whichever is greater.

\(16\) [Metering devices]{.underline}. Water facilities financed by RUS
will have metering devices for each connection. An exception to this
requirement may be granted by the Agency's State Director when the owner
demonstrates that installation of metering devices would be a
significant economic detriment and that environmental consideration
would not be adversely affected by not installing such devices.

\(17\) [Seismic safety]{.underline}. (Added 01-10-97, SPECIAL PN.)

\(i\) All new building construction shall be designed and constructed in
accordance with the seismic provisions of one of the following model
building codes or the latest edition of that code providing an
equivalent level of safety to that contained in the latest edition of
the National Earthquake Hazard Reduction Program's (NEHRP) Recommended
Provisions for the Development of Seismic Regulations for New Building
(NEHRP Provisions):

\(A\) 1991 International Conference of Building Officials (ICBO) Uniform
Building Code;

\(B\) 1993 Building Officials and Code Administrators International,
Inc. (BOCA) National Building Code; or

## 79

## (Revision 2) 

RD Instruction 1942-A

§1942.18(d)(17)(i) (Con.)

\(C\) 1992 Amendments to the Southern Building Code Congress
International (SBCCI) Standard Building Code.

\(ii\) The date, signature, and seal of a registered architect or
engineer and the identification and date of the model building code on
the plans and specifications will be evidence of compliance with the
seismic requirements of the appropriate building code.

\(e\) [Construction contracts]{.underline}. Contract documents must be
sufficiently descriptive and legally binding in order to accomplish the
work as economically and expeditiously as possible.

\(1\) [Standard construction contract documents]{.underline} are
available from the Agency. When the Agency\'s standard construction
contract documents are used, it will normally not be necessary for the
Office of the General Counsel (OGC) to perform a detailed legal review.
If the construction contract documents utilized are not in the format of
guide forms previously approved by the Agency, OGC\'s review of the
construction contract documents will be obtained prior to their use.

\(2\) [Contract review and approval]{.underline}. The owner\'s attorney
will review the executed contract documents, including performance and
payment bonds, and will certify that they are adequate, and that the
persons executing these documents have been properly authorized to do
so. The contract documents, bid bonds, and bid tabulation sheets will be
forwarded to the Agency for approval prior to awarding. All contracts
will contain a provision that they are not in full force and effect
until they have been approved by the Agency. The Agency State Director
or designee is responsible for approving construction contracts with the
legal advice and guidance of the OGC when necessary.

## 79A

## (Added 01-10-97, SPECIAL PN)

(02-06-85) PN 956

RD Instruction 1942-A

§1942.18 (e) (Con.)

\(3\) [Separate contracts]{.underline}. Arrangements which split
responsibility of contractors (separate contracts for labor and
material, extensive subcontracting and multiplicity of small contracts
on the same job), should be avoided whenever it is practical to do so.
Contracts may be awarded to suppliers or manufacturers for furnishing
and installing certain items which have been designed by the
manufacturer and delivered to the job site in a finished or semifinished
state such as prefabricated buildings and lift stations. Contracts may
also be awarded for material delivered to the job site and installed by
a patented process or method.

\(f\) [Utility purchase contracts]{.underline}. Applicants proposing to
purchase water or other utility service from private or public sources
shall have written contracts for supply or service which are reviewed
and approved by the Rural Development State Director or designee. To the
extent practical, Rural Development review and approval of such
contracts should take place prior to their execution by the owner. Form
RD 442-30, \"Water Purchase Contract,\" may be used when appropriate. If
the Rural Development loan will be repaid from system revenues, the
contract will be pledged to Rural Development as part of the security
for the loan. Such contracts will:

\(1\) Include a commitment by the supplier to furnish, at a specified
point, an adequate quantity of water or other service and provide that,
in case of shortages, all of the supplier\'s users will proportionately
share shortages. If it is impossible to obtain a firm commitment for
either an adequate quantity or sharing shortages proportionately, a
contract may be executed and approved provided adequate evidence is
furnished to enable Rural Development to make a determination that the
supplier has adequate supply and/or treatment facilities to furnish its
other users and the applicant for the foreseeable future; and

\(i\) The supplier is subject to regulations of the Federal Energy
Regulatory Commission or other Federal or State agency whose
jurisdiction can be expected to prevent unwarranted curtailment of
supply; or

\(ii\) A suitable alternative supply could be arranged within the
repayment ability of the borrower if it should become necessary; or

\(iii\) Prior approval is obtained from the National Office. The
following information should be submitted to the National Office:

\(A\) Transmittal memorandum including:

([1]{.underline}) Alternative supplies considered; and

## 80

(2-6-85, PN 956)

§1942.18 (f) (1) (iii) (A) (Con.) RD Instruction 1942-A

([2]{.underline}) Recommendations and comments; and

([3]{.underline}) Any other necessary supporting information.

\(B\) Copies of the following:

([1]{.underline}) Proposed letter of conditions; and

([2]{.underline}) Form RD 442-7, \"Operating Budget\"; and

([3]{.underline}) Form RD 442-3, \"Balance Sheet\"; and

([4]{.underline}) Preliminary Engineering Report; and

([5]{.underline}) Proposed Contract.

\(C\) Owner and Rural Development engineer\'s comments and
recommendations.

\(D\) Documentation and statement from the supplier that it has an
adequate supply and treatment facilities available to meet the needs of
its users and the owner for the foreseeable future.

\(2\) Set out the ownership and maintenance responsibilities of the
respective parties including the master meter if a meter is installed at
the point of delivery.

\(3\) Specify the initial rates and provide some kind of escalator
clause which will permit rates for the association to be raised or
lowered proportionately as certain specified rates for the supplier\'s
regular customers are raised or lowered. Provisions may be made for
altering rates in accordance with the decisions of the appropriate State
agency which may have regulatory authority.

\(4\) Run for a period of time which is at least equal to the repayment
period of the loan. State Directors may approve contracts for shorter
periods of time if the supplier cannot legally contract for such period,
or if the owner and supplier find it impossible or impractical to
negotiate a contract for the maximum period permissible under State law,
provided:

\(i\) The supplier is subject to regulations of the Federal Energy
Regulatory Commission or other Federal or State agency whose
jurisdiction can be expected to prevent unwarranted curtailment of
supply; or

## 81 

RD Instruction 1942-A

§1942.18 (f) (4) (Con.)

\(ii\) The contract contains adequate provisions for renewal; or

\(iii\) A determination is made that in the event the contract is
terminated, there are or will be other adequate sources available to the
owner that can feasibly be developed or purchased.

\(5\) Set out in detail the amount of connection or demand charges, if
any, to be made by the supplier as a condition to making the service
available to the owner. However, the payment of such charges from loan
funds shall not be approved unless Rural Development determines that it
is more feasible and economical for the owner to pay such a connection
charge than it is for the owner to provide the necessary supply by other
means.

\(6\) Provide for a pledge of the contract to Rural Development as part
of the security for the loan.

\(7\) Not contain provisions for:

\(i\) Construction of facilities which will be owned by the supplier.
This does not preclude the use of money paid as a connection charge for
construction to be done by the supplier.

\(ii\) Options for the future sale or transfer. This does not preclude
an agreement recognizing that the supplier and owner may at some future
date agree to a sale of all or a portion of the facility.

\(g\) [Sewage treatment and bulk water sales contracts]{.underline}.
Owners entering into agreements with private or public parties to treat
sewage or supply bulk water shall have written contracts for such
service and all such contracts shall be subject to Rural Development
concurrence. Paragraph (f) of this section should be used as a guide to
prepare such contracts. (Revised 3-1-88, SPECIAL PN.)

\(h\) [Performing construction]{.underline}. Owners are encouraged to
accomplish construction through contracts with recognized contractors.
Owners may accomplish construction by using their own personal and
equipment provided the owners possess the necessary skills, abilities
and resources to perform the work and provided a licensed engineer or
architect prepares design drawings and specifications and inspects
construction and furnishes inspection reports as required by paragraph
(o) of this section. For other than utility-type facilities, inspection
services may be provided by individuals as approved by the Rural
Development State Director. In either case, the requirements of
paragraph (j) of this section apply. Payments for construction will be
handled under §1942.17(p)(5) of this part.

## 82

## (Revision 1)

(2-6-85, PN 956)

§1942.18 (Con.) RD Instruction 1942-A

\(i\) [Owner\'s contractual responsibility]{.underline}. This subpart
does not relieve the owner of any contractual responsibilities under its
contract. The owner is responsible for the settlement of all contractual
and administrative issues arising out of procurements entered into in
support of a loan or grant. These include, but are not limited to:
source evaluation, protests, disputes, and claims. Matters concerning
violation of laws are to be referred to the local, State, or Federal
authority as may have jurisdiction.

\(j\) [Owner\'s procurement regulations]{.underline}. Owner\'s
procurement regulations must comply with the following standards:
(Revised 3-1-88, SPECIAL PN.)

\(1\) [Code of conduct]{.underline}. Owners shall maintain a written
code or standards of conduct which shall govern the performance of their
officers, employees or agents engaged in the award and administration of
contracts supported by Rural Development funds. No employee, officer or
agent of the owner shall participate in the selection, award, or
administration of a contract supported by Rural Development funds if a
conflict of interest, real or apparent, would be involved. Examples of
such conflicts would arise when: the employee, officer or agent or
agent; any member of their immediate family; their partner; or an
organization which employs, or is about to employ, any of the above; has
a financial or other interest in the firm selected for the award.

\(i\) The owner\'s officers, employees or agents shall neither solicit
nor accept gratuities, favors or anything of monetary value from
contractors, potential contractors, or parties to subagreements.

\(ii\) To the extent permitted by State or local law or regulations, the
owner\'s standards of conduct shall provide for penalties, sanctions, or
other disciplinary actions for violations of such standards by the
owner\'s officers, employees, agents, or by contractors or their agents.

\(2\) [Maximum open and free competition]{.underline}. All procurement
transactions, regardless of whether by sealed bids or by negotiation and
without regard to dollar value, shall be conducted in a manner that
provides maximum open and free competition. Procurement procedures shall
not restrict or eliminate competition. Examples of what are considered
to be restrictive of competition include, but are not limited to:
placing unreasonable requirements on firms in order for them to qualify
to do business; noncompetitive practices between firms; organizational
conflicts of interest; and unnecessary experience and bonding
requirements. In specifying material(s), the

## 83

## (Revision 1) 

RD Instruction 1942-A

§1942.18 (j) (2) (Con.)

owner and its consultant will consider all materials normally suitable
for the project commensurate with sound engineering practices and
project requirements. For a water or waste disposal facility, Rural
Development shall consider fully any recommendation made by the loan
applicant or borrower concerning the technical design and choice of
materials to be used for such a facility. If Rural Development
determines that a design or material, other than those that were
recommended should be considered by including them in the procurement
process as an acceptable design or material in the water or waste
disposal facility, Rural Development shall provide such applicant or
borrower with a comprehensive justification for such a determination.
The justification will be documented in writing. (Revised 3-1-88,
SPECIAL PN.)

\(3\) [Owner\'s review]{.underline}. Proposed procurement actions shall
be reviewed by the owner\'s officials to avoid the purchase of
unnecessary or duplicate items. Consideration should be given to
consolidation or separation of procurement items to obtain a more
economical purchase. Where appropriate, an analysis shall be made of
lease versus purchase alternatives, and any other appropriate analysis
to determine which approach would be the most economical. To foster
greater economy and efficiency, owners are encouraged to enter into
State and local intergovernmental agreements for procurement or use of
common goods and services.

\(4\) [Solicitation of offers]{.underline}, whether by competitive
sealed bids or competitive negotiation, shall:

\(i\) Incorporate a clear and accurate description of the technical
requirements for the material, product, or service to be procured. The
description shall not, in competitive procurements, contain features
which unduly restrict competition. The description may includes a
statement of the qualitative nature of the material, product or service
to be procured, and when necessary, shall set forth those minimum
essential characteristics and standards to which it must conform if it
is to satisfy its intended use. Detailed product specifications should
be avoided if at all possible. When it is impractical or uneconomical to
make a clear and accurate description of the technical requirements, a
\"brand name or equal\" description may be used to define the
performance or other salient requirements of a procurement. The specific
features of the named brands which must be met by offerors shall be
clearly stated.

\(ii\) Clearly specify all requirements which offerors must fulfill and
all other factors to be used in evaluating bids or proposals.

\(5\) Small, minority, and women\'s businesses and labor surplus area
firms.

## 84

## (Revision 1)

(2-6-85, PN 956)

§1942.18 (j) (5) (Con.) RD Instruction 1942-A

\(i\) Affirmative steps should be taken to assure that small and
minority businesses are utilized when possible as sources of supplies,
equipment, construction and services. Affirmative steps shall include
the following:

\(A\) Include qualified small and minority businesses on solicitation
lists.

\(B\) Assure that small and minority businesses are solicited whenever
they are potential sources.

\(C\) When economically feasible, divide total requirements into smaller
tasks or quantities so as to permit maximum small and minority business
participation.

\(D\) Where the requirement permits, establish delivery schedules which
will encourage participation by small and minority businesses.

\(E\) Use the services and assistance of the Small Business
Administration and the Office of Minority Business Enterprise of the
Department of Commerce.

\(F\) If any subcontracts are to be let, require the prime contractor to
take the affirmative steps in paragraphs (j)(5)(i)(A) through (E) of
this section.

\(ii\) Owners shall take similar appropriate affirmative action in
support of women\'s businesses.

\(iii\) Owners are encouraged to procure goods and services from labor
surplus areas.

\(iv\) Owners shall submit a written statement or other evidence to
Rural Development of the steps taken to comply with paragraphs
(j)(5)(i)(A) through (F), (j)(5)(ii), and (j)(5)(iii) of this section.

\(6\) [Contract pricing]{.underline}. Cost plus a percentage of cost
method of contracting shall not be used.

\(7\) [Unacceptable bidders]{.underline}. The following will not be
allowed to bid on, or negotiate for, a contract or subcontract related
to the construction of the project:

\(i\) An engineer or architect as an individual or firm who has prepared
plans and specifications or who will be responsible for monitoring the
construction;

## 85

## (Revision 1) 

RD Instruction 1942-A

§1942.18 (j) (7)(Con.)

\(ii\) Any firm or corporation in which the owner\'s architect or
engineer is an officer, employee, or holds or controls a substantial
interest;

\(iii\) The governing body\'s officers, employees, or agents;

\(iv\) Any member of the immediate family or partners in paragraphs
(j)(7)(i), (j)(7)(ii) or (j)(7)(iii) of this section; or

\(v\) An organization which employs, or is about to employ, any person
in paragraph (j)(7)(i), (j)(7)(ii), (j)(7)(iii) or (j)(7)(iv) of this
section.

\(8\) [Contract award]{.underline}. Contracts shall be made only with
responsible parties possessing the potential ability to perform
successfully under the terms and conditions of a proposed procurement.
Consideration shall include but not be limited to matters such as
integrity, record of past performance, financial and technical
resources, and accessibility to other necessary resources. Contracts
shall not be made with parties who are suspended or debarred. (Revised
4-11-89, SPECIAL PN)

\(k\) [Procurement methods]{.underline}. Procurement shall be made by
one of the following methods: small purchase procedures; competitive
sealed bids (formal advertising); competitive negotiation; or
noncompetitive negotiation. Competitive sealed bids (formal advertising)
is the preferred procurement method for construction contracts.

\(1\) [Small purchase procedures]{.underline}. Small purchase procedures
are those relatively simple and informal procurement methods that are
sound and appropriate for a procurement of services, supplies or other
property, costing in the aggregate not more than \$10,000. If small
purchase procedures are used for a procurement, written price or rate
quotations shall be obtained from an adequate number of qualified
sources.

\(2\) [Competitive sealed bids]{.underline}. In competitive sealed bids
(formal advertising), sealed bids are publicly solicited and a
firm-fixed-price contract (lump sum or unit price) is awarded to the
responsible bidder whose bid, conforming with all the material terms and
conditions of the invitation for bids, is lowest, price and other
factors considered. When using this method the following shall apply:

> \(i\) At a sufficient time prior to the date set for opening of bids,
> bids shall be solicited from an adequate number of qualified sources.
> In addition, the invitation shall be publicly advertised.

## 86

## (Revision 1)

(2-6-85, PN 956)

§1942.18 (k) (2) (Con.) RD Instruction 1942-A

\(ii\) The invitation for bids, including specifications and pertinent
attachments, shall clearly define the items or services needed in order
for the bidders to properly respond to the invitation under paragraph
(j)(4) of this section.

\(iii\) All bids shall be opened publicly at the time and place stated
in the invitation for bids.

\(iv\) A firm-fixed-price contract award shall be made by written notice
to that responsible bidder whose bid, conforming to the invitation for
bids, is lowest. When specified in the bidding documents, factors such
as discounts and transportation costs shall be considered in determining
which bid is lowest.

\(v\) Any or all bids may be rejected by the owner when it is in their
best interest.

\(3\) [Competitive negotiation]{.underline}. In competitive
negotiations, proposals are requested from a number of sources and the
Request for Proposal is publicized. Negotiations are normally conducted
with more than one of the sources submitting offers. Competitive
negotiation may be used if conditions are not appropriate for the use of
formal advertising and where discussions and bargaining with a view to
reaching agreement on the technical quality, price, other terms of the
proposed contract and specifications may be necessary. If competitive
negotiation is used for a procurement, the following requirements shall
apply:

\(i\) Proposals shall be solicited from an adequate number of qualified
sources to permit reasonable competition consistent with the nature and
requirements of the Procurement. The Request for Proposal shall be
publicized and reasonable requests by other sources to compete shall be
honored to the maximum extent practicable.

\(ii\) The Request for Proposal shall identify all significant
evaluation factors, including price or cost where required, and their
relative importance.

\(iii\) The owner shall provide mechanisms for technical evaluation of
the proposals received, determination of responsible offerors for the
purpose of written or oral discussions, and selection for contract
award.

## 87

## (Revision 1) 

RD Instruction 1942-A

§1942.18 (k) (2) (Con.)

\(iv\) Award may be made to the responsible offeror whose proposal will
be most advantageous to the owner, price and other factors considered.
Unsuccessful offerors should be promptly notified.

\(v\) Owners may utilize competitive negotiation procedures for
procurement of architectural/engineering and other professional
services, whereby competitors\' qualifications are evaluated and the
most qualified competitor is selected, subject to negotiations of fair
and reasonable compensation.

\(4\) [Noncompetitive negotiation]{.underline}. Noncompetitive
negotiation is procurement through solicitation of a proposal from only
one source, or after solicitation of a number of sources competition is
determined inadequate. Noncompetitive negotiation may be used when the
award of a contract is not feasible under small purchase, competitive
sealed bids (formal advertising) or competitive negotiation procedures.
Circumstances under which a contract may be awarded by noncompetitive
negotiations are limited to the following: (Revised 3-1-88, SPECIAL PN.)

\(i\) The item is available only from a single source; or

\(ii\) There exists a public exigency or emergency and the urgency for
the requirement will not permit a delay incident to competitive
solicitation; or

\(iii\) After solicitation of a number of sources, competition is
determined inadequate; or

\(iv\) No acceptable bids have been received after formal advertising;
or

\(v\) The procurement of architectural/engineering and other
professional services; or

\(vi\) The aggregate amount does not exceed \$50,000. (Added 3-1-88,
SPECIAL PN.)

\(5\) [Additional procurement methods]{.underline}. Additional
innovative procurement methods may be used by the owner with prior
written approval of the Rural Development National Office.

\(l\) [Contracting methods]{.underline}. 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. Procurement methods which combine or rearrange
design, inspection or construction services (such as design/build or
construction management) may be used with Rural Development written
approval. If the contract amount exceeds \$100,000, National Office
prior concurrence must be obtained under section 1942.9(b) of this
subpart. This method cannot be used when an Rural Development grant is
involved. The owner should request Rural Development approval by
providing at least the following information to Rural Development:

## 88

## (Revision 1)

(2-6-85, PN 956)

§1942.18 (l) (Con.) RD Instruction 1942-A

\(1\) The owner\'s written request to use an unconventional contracting
method with a description of the proposed method.

\(2\) A proposed scope of work describing in clear, concise terms the
technical requirements for the contract. It should include items such
as:

\(i\) A nontechnical statement summarizing the work to be performed by
the contractor and the results expected.

\(ii\) The sequence in which the work is to be performed and a proposed
construction schedule.

\(3\) A proposed firm-fixed-price contract for the entire project which
provides that the contractor shall be responsible for:

\(i\) Any extra cost which may result from errors or omissions in the
services provided under the contract.

\(ii\) Compliance with all Federal, State, and local requirements
effective on the contract execution date.

\(4\) Where noncompetitive negotiation is proposed, an evaluation of the
contractor\'s performance on previous similar projects in which the
contractor acted in a similar capacity.

\(5\) A detailed listing and cost estimate of equipment and supplies
no-t included in the construction contract but which are necessary to
properly operate the facility.

\(6\) Evidence that a qualified construction inspector who is
independent of the contractor has or will be hired.

\(7\) Preliminary plans and outline specifications. However, final plans
and specifications must be completed and reviewed by Rural Development
prior to the start of construction.

\(8\) 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.

\(m\) [Contracts awarded prior to preapplications]{.underline}. Owners
awarding construction or other procurement contracts prior to filing a
preapplication with Rural Development must comply with the following:

\(1\) [Evidence]{.underline}. Provide conclusive evidence that the
contract was entered into without intent to circumvent the requirements
of Rural Development regulations. The evidence will consist of at least
the following:

## 89

## (Revision 1) 

RD Instruction 1942-A

§1942.18 (m)

\(i\) The lapse of a reasonable period of time between the date of
contract award and the date of filing the preapplication which clearly
indicates an irreconcilable failure of previous financial arrangements;
or

\(ii\) A written statement explaining initial plans for financing the
project and reasons for failure to obtain the planned credit.

\(2\) [Modifications]{.underline}. Modify the outstanding contract to
conform with the provisions of the subpart. Where this is not possible,
modifications will be made to the extent practicable and, as a minimum,
the contract must comply with all State and local laws and regulations
as well as statutory requirements and executive orders related to the
Rural Development financing. When all construction is complete and it is
impracticable to modify the contracts, the owner must provide the
certification required by paragraph (m)(4) of this section.

\(3\) [Consultant\'s certification]{.underline}. Provide a certification
by an engineer or architect that any construction performed complies
fully with the plans and specifications.

\(4\) [Owner\'s certification]{.underline}. Provide a certification by
the owner that the contractor has complied with all statutory and
executive requirements related to Rural Development financing for
construction already performed even though the requirements may not have
been included in the contract documents.

\(n\) [Contract provisions]{.underline}. In addition to provisions
defining a sound and complete contract, any recipient of Rural
Development funds shall include the following contract provisions or
conditions in all contracts.

\(1\) [Remedies]{.underline}. Contracts other than small purchases shall
contain provisions or conditions which will allow for administrative,
contractual, or legal remedies in instances where contractors violate or
breach contract terms, and provide for such sanctions and penalties as
may be appropriate. A realistic liquidated damage provision should also
be included.

\(2\) [Termination]{.underline}. All contracts exceeding \$10,000, shall
contain suitable provisions for termination by the owner including the
manner by which it will be affected and the basis for settlement. In
addition, such contracts shall describe conditions under which the
contract may be terminated for default as well as conditions where the
contract may be terminated because of circumstances beyond the control
of the contractor.

## 90

## (Revision 2)

(2-6-85, PN 956)

§1942.18 (n) Con.) RD Instruction 1942-A

\(3\) [Surety]{.underline}. In all contracts for construction or
facility improvements exceeding \$100,000, the owner shall require
bonds, a bank letter of credit or cash deposit in escrow assuring
performance and payment each in the amount of 100 percent of the
contract cost. The surety will normally be in the form of performance
bonds and payment bonds; however, when other methods of surety may be
necessary, bid documents must contain provisions for such alternative
types of surety. The use of surety other than performance bonds and
payment bonds requires concurrence by the National Office after
submission of a justification by the State Director together with the
proposed form of escrow agreement or letter of credit. For contracts of
lesser amounts, the owner may require surety. When a surety is not
provided, contractors will furnish evidence of payment in full for all
materials, labor, and any other items procured under the contract. Form
RD 1924-10, \"Release by Claimants,\" and Form RD 1924-9, \"Certificate
of Contractor\'s Release,\" may be obtained at the local Rural
Development office and used for this purpose. The United States, acting
trough Rural Development, will be named as co-obligee on all surety
unless prohibited by State law. Companies providing performance bonds
and payment bonds must hold a certificate of authority as an acceptable
surety on Federal bonds as listed in Treasury Circular 570 as amended
and be legally doing business in the State where the facility is
located. (Revised 5-3-89, SPECIAL PN)

\(4\) [Equal Employment Opportunity]{.underline}. All contracts awarded
in excess of \$10,000 by owners shall contain a provision requiring
compliance with Executive Order 11246, entitled, \"Equal Employment
Opportunity,\" as amended by Executive Order 11375, and as supplemented
by Department of Labor regulations 41 CFR Part 60. (Revised 5-3-89,
SPECIAL PN)

\(5\) [Anti-kickback]{.underline}. All contracts for construction shall
include a provision for compliance with the Copeland \"Anti-Kickback\"
Act (18 U.S.C. 874). This Act provides that each contractor shall be
prohibited from inducing, by any means, any person employed in the
construction, completion, or repair of public work, to give up any part
of the compensation to which they are otherwise entitled. The owner
shall report suspected or reported violations to Rural Development.

\(6\) [Records]{.underline}. All negotiated contracts (except those of
\$2,500 or less) awarded by owners shall include a provision to the
effect that the owner, Rural Development, the Comptroller General of the
United States, or any of their duly authorized representatives, shall
have access to any books, documents, papers, and records of the
contractor which are directly pertinent to a specific Federal loan
program for the purpose of making audits, examinations, excerpts, and
transcriptions. Owners shall require contractors to maintain all
required records for 3 years after owners make final payments and all
other pending matters are closed.

## 91

## (Revision 2) 

RD Instruction 1942-A

§1942.18 (n) (Con.)

\(7\) [State Energy Conservation Plan]{.underline}. Contracts shall
recognize mandatory standards and policies relating to energy efficiency
which are contained in the State energy conservation plan issued in
compliance with the Energy Policy and Conservation Act (P.L. 94-163).

\(8\) [Change orders]{.underline}. The construction contract shall
require that all contract change orders be approved by Rural
Development.

\(9\) [Rural Development concurrence]{.underline}. All contracts must
contain a provision that they shall not be effective unless and until
the Rural Development State Director or designee concurs in writing.

\(10\) [Retainage]{.underline}. All construction contracts shall contain
adequate provisions for retainage. No payments will be made that would
deplete the retainage nor place in escrow any funds that are required
for retainage nor invest the retainage for the benefit of the
contractor. The retainage shall not be less than an amount equal to 10
percent of an approved partial payment estimate until 50 percent of the
work has been completed. If the job is proceeding satisfactorily at 50
percent completion, further partial payments shall be made in full,
however, previously retained amounts shall not be paid until
construction is substantially complete. Additional amounts may be
retained if the job is not proceeding satisfactorily, but in no event
shall the total retainage be more than 10 Percent of the value of the
work completed.

\(11\) [Other compliance requirements]{.underline}. Contracts in excess
of \$100,000 shall contain a provision which requires compliance with
all applicable standards, orders, or requirements issued under Section
306 of the Clean Air Act (42 U.S.C. 1857(h)), Section 508 of the Clean
Water Act (33 U.S.C. 1368), Executive Order 11738, and Environmental
Protection Agency (EPA) regulations 40 CFR Part 15, which prohibit the
use under non-exempt Federal contracts, grants or loans of facilities
included on the EPA List of Violating Facilities. The provision shall
require reporting of violations to Rural Development and to the U.S.
Environmental Protection Agency, Assistant Administrator for
Enforcement. Solicitations and contract provisions shall include the
requirements of 4 CFR Part 15.4 (c) as set forth in Guide 18 of this
subpart which is available in all Rural Development offices.

\(o\) [Contract administration]{.underline}. Owners shall be responsible
for maintaining s contract administration system to monitor the
contractors\' performance and compliance with the terms, conditions, and
specifications of the contracts.

\(1\) [Preconstruction conference]{.underline}. Prior to beginning
construction, the owner will schedule a preconstruction conference where
Rural Development will review the planned development with the owner,
its architect or

## 92

## (Revision 1)

(2-6-85) PN 956

§1942.18 (o) (1) (Con.) RD Instruction 1942-A

engineer, resident inspector, attorney, contractor(s), and other
interested parties. The conference will thoroughly cover applicable
items included in Form RD 1924-16, \"Record of Pre-construction
Conference,\" and the discussions and agreements will be documented.
Form RD 1924-16 may be used for this purpose. (Revised 5-12-87, SPECIAL
PN.)

\(2\) [Monitoring reports]{.underline}. Each owner will be required to
monitor and provide reports to Rural Development on actual performance
during construction for each project financed, or to be financed, in
whole or in part with Rural Development funds to include:

\(i\) A comparison of actual accomplishments with the construction
schedule established for the period. The partial payment estimate may be
used for this purpose.

\(ii\) A narrative statement giving full explanation of the following:

\(A\) Reasons why established goals were not met.

\(B\) Analysis and explanation of cost overruns or high unit costs and
how payment is to be made for the same.

\(iii\) If events occur between reports which have a significant impact
upon the project, the owner will notify Rural Development as soon as any
of the following conditions are known:

> \(A\) Problems, delays, or adverse conditions which will materially
> affect the ability to attain program objectives or prevent the meeting
> of project work units by established time periods. This disclosure
> shall be accompanied by a statement of the action taken, or
> contemplated, and any Federal assistance needed to resolve the
> situation.

\(B\) Favorable developments or events which enable meeting time
schedules and goals sooner than anticipated or producing more work units
than originally projected or which will result in cost underruns or
lower unit costs than originally planned and which may result in less
Rural Development assistance.

> \(3\) [Inspection]{.underline}. Full-time resident inspection is
> required for all construction unless a written exception is made by
> Rural Development upon written request of the owner. Unless otherwise
> agreed, the resident inspector will be provided by the consulting
> architect/engineer. Prior to the preconstruction conference, the
> architect/engineer will submit a resume of qualifications of the
> resident inspector to the owner and to Rural Development for
> acceptance in writing. If the owner provides the resident inspector,
> it must submit a resume of the inspector\'s qualifications to the
> project architect/engineer and Rural Development

## 93

## (Revision 1) 

RD Instruction 1942-A

§1942.18(o)(3) (Con.)

for acceptance in writing prior to the preconstruction conference. The
resident inspector will work under the general supervision of the
project architect/engineer. A guide format for preparing daily
inspection reports (Guide 11 of this subpart) and Form RD 1924-18
\"Partial Payment Estimate,\" are available on request from Rural
Development. (Revised 5-12-87, SPECIAL PN.)

\(4\) [Inspector\'s daily diary]{.underline}. The resident inspector
will maintain a record of the daily construction progress in the form of
a daily diary and daily inspection reports as follows:

\(i\) A complete set of all daily construction records will be
maintained and the original set furnished to the owner upon completion
of construction.

\(ii\) All entries shall be legible and shall be made in ink.

\(iii\) Daily entries shall include but not be limited to the date,
weather conditions, number and classification of personnel working on
the site, equipment being used to perform the work, persons visiting the
site, accounts of substantive discussions, instructions given to the
contractors, directions received, all significant or unusual happenings
involving the work, any delays, and daily work accomplished.

\(iv\) The daily entries shall be made available to Rural Development
personnel and will be reviewed during project inspections.

\(5\) [Prefinal inspections]{.underline}. A prefinal inspection will be
made by the owner, resident inspector, project architect or engineer,
representatives of other agencies involved, the District Director and a
Rural Development State Office staff representative, preferably the
State staff architect or engineer. Prefinal inspections may be made
without Rural Development State Office staff participation if the State
Director or a designee determines that the facility does not utilize
complicated construction techniques, materials or equipment for
(facilities such as small fire stations, storage buildings or minor
utility extensions, and that an experienced District Office staff
representative will be present. The inspection results will be recorded
on Form RD 1924-12, \"Inspection Report,\" and a copy provided to all
interested parties. (Revised 5-12-87, SPECIAL PN.)

\(6\) [Final inspection]{.underline}. A final inspection will be made by
Rural Development before final payment is made.

\(7\) [Changes in development plans]{.underline}.

\(i\) Changes in development plans may be approved by Rural Development
when requested by owners, provided:

## 94

## (Revision 1)

(02-06-85) PN 956

§1942.18 (o) 5 RD Instruction 1942-A

\(A\) Funds are available to cover any additional costs; and

\(B\) The change is for an authorized loan purpose; and

\(C\) It will not adversely affect the soundness of the facility
operation or Rural Development\'s security; and

\(D\) The change is within the scope of the contract,

\(ii\) Changes will be recorded on Form RD 1924-7, \"Contract Change
Order,\" or, other similar forms may be used with the prior approval of
the State Director or designee. Regardless of the form, change orders
must be approved by the Rural Development State Director or a designated
representative. (Revised 5-12-87, SPECIAL PN.)

\(iii\) Changes should be accomplished only after Rural Development
approval on all changes which affect the work and shall be authorized
only by means of contract change order. The change order will include
items such as:

\(A\) Any changes in labor and material and their respective cost.

\(B\) Changes in facility design.

\(C\) Any decrease or increase in quantities based on final measurements
that are different from those shown in the bidding schedule.

\(D\) Any increase or decrease in the time to complete the project.

\(iv\) All changes shall be recorded on chronologically numbered
contract change orders as they occur. Change orders will not be included
in payment estimates until approved by all parties.

## 95

## (Revision 1) 

RD Instruction 1942-A

## Table of Contents

[Sec]{.underline}. [Page]{.underline}

1942.19 - Information Pertaining to Preparation of Notes or Bonds

and Bond Transcript Documents for Public Body Applicants.

\(a\) General. 97

\(b\) Policies related to use of bond counsel. 97

\(1\) Issues of \$250,000 or less. 97

\(2\) Issues of \$50,000 or less. 97

\(3\) For loans of less than \$500,000. 98

\(c\) Bond transcript documents. 98

\(d\) Interim financing from commercial sources

during construction period for loans of \$50,000 or more. 100

\(e\) Permanent instruments for Rural Development loans to repay

interim commercial financing. 100

\(1\) First preference - Form RD 440-22. 100

\(2\) Second preference - single instruments with

amortized installments. 100

\(3\) Third preference - single instruments with install-

ments of principal plus interest. 102

\(4\) Fourth preference - serial bonds with installments

of principal plus interest. 103

\(f\) Multiple advances of Rural Development funds using permanent

instruments. 103

\(g\) Multiple advances of Rural Development funds using temporary debt

instruments. 103

\(h\) Minimum bond specifications. 103

\(1\) Type and denominations. 103

\(2\) Bond registration. 104

\(3\) Size and quality. 104

\(4\) Date and Bond. 104

\(5\) Payment date. 105

\(6\) Place of payment. 105

\(7\) Redemptions. 105

\(8\) Additional revenue bonds. 105

\(9\) Scheduling of Rural Development payments when joint

financing is involved. 105

\(10\) Precautions. 105

\(11\) Multiple loan instruments. 106

\(i\) Bidding by Rural Development. 106

## 96

(2-6-85, PN 956)

RD Instruction 1942-A

§1942.19 [Information Pertaining to Preparation of Notes or Bonds and
Bond Transcript Documents for Public Body Applicants]{.underline}.

\(a\) [General]{.underline}. This section includes information for use
by public body applicants in the preparation and issuance of evidence of
debt (bonds, notes, or debt instruments, herein referred to as bonds).
This section is made available to applicants as appropriate for
application processing and loan docket preparation.

\(b\) [Policies related to use of bond counsel]{.underline}. Preparation
of the bonds and the bond transcript documents will be the
responsibility of the applicant. Public body applicants will obtain the
services and opinion of recognized bond counsel with respect to the
validity of a bond issue, except as provided in (b)(1) through (3)
below. The applicant normally will be represented by a local attorney
who will obtain the assistance of a recognized bond counsel firm which
has experience in municipal financing with such investors as investment
dealers, banks, and insurance companies.

\(1\) [Issues of \$250,000 or less]{.underline}. At the option of the
applicant for issues of \$250,000 or less, bond counsel may be used for
the issuance of a final opinion only and not for the preparation of the
bond transcript and other documents when the applicant, Rural
Development, and bond counsel have agreed in advance as to the method of
preparation of the bond transcript documents. Under such circumstances
the applicant will be responsible for the preparation of the bond
transcript documents.

\(2\) [Issues of \$50,000 or less]{.underline}. At the option of the
applicant and with the prior approval of the Rural Development State
Director, the applicant need not use bond counsel if:

\(i\) The amount of the issue does not exceed \$50,000 and the applicant
recognizes and accepts the fact that processing the application may
require additional legal and administrative time.

\(ii\) There is a significant cost saving to the applicant particularly
with reference to total legal fees after determining what bond counsel
would charge as compared with what the local attorney will charge
without bond counsel.

\(iii\) The local attorney is able and experienced in handling this type
of legal work.

\(iv\) The applicant understands that, if it is required by Rural
Development to refinance its loan pursuant to the statutory refinancing
requirements, it will probably have to obtain at its expense a bond
counsel\'s opinion at that time.

## 97

(2-6-85, PN 956)

RD Instruction 1942-A

§1942.19 (b) (2) (Con.)

\(v\) All bonds will be prepared in accordance with this regulation and
will conform as nearly as possible to the preferred methods of
preparation stated in paragraph (e) of this section but still be
consistent with State law.

\(vi\) Many matters necessary to comply with Rural Development
requirements such as land rights, easements, and organizational
documents will be handled by the applicant\'s local attorney. Specific
closing instructions will be issued by the Office of the General Counsel
of the U. S. Department of Agriculture for the guidance of Rural
Development.

\(3\) [For loans of less than \$500,000]{.underline}. The applicant
shall not be required to use bond counsel in a straight mortgage-note
situation where competitive bidding is not required for the sale of the
debt instrument, unless a complicated financial situation exists with
the applicant. In addition, if there is a known backlog in a particular
OGC regional office the applicant will be advised of such backlog and it
will be suggested to the applicant that the appointment of bond counsel
may be more expeditious. However, it will be the decision of the
applicant whether or not to appoint bond counsel. The applicant must
comply with (b)(2)(iii) through (vi) of this section.

\(c\) [Bond transcript documents]{.underline}. Any questions with
respect to Rural Development requirements should be discussed with the
Rural Development representatives. The bond counsel (or local counsel
where no bond counsel is involved) is required to furnish at least two
complete sets of the following to the applicant, who will furnish one
complete set to Rural Development:

\(1\) Copies of all organizational documents.

\(2\) Copies of general incumbency certificate.

\(3\) Certified copies of minutes or excerpts therefrom of all meetings
of the applicant\'s governing body at which action was taken in
connection with the authorization and issuance of the bonds.

\(4\) Certified copies of documents evidencing that the applicant has
complied fully with all statutory requirements incident to calling and
holding of a favorable bond election, if such an election is necessary
in connection with bond issuance.

\(5\) Certified copies of the resolutions or ordinances or other
documents, such as the bond authorizing resolutions or ordinance and any
resolution establishing rates and regulating the use of the improvement,
if such documents are not included in the minutes furnished.

## 98 

§1942.19 (c) (Con.) RD Instruction 1942-A

\(6\) Copies of official Notice of Sale and affidavit of publication of
Notice of Sale where a public sale is required by State statute.

\(7\) Specimen bond, with any attached coupons.

\(8\) Attorney\'s no-litigation certificate.

\(9\) Certified copies of resolutions or other documents pertaining to
the bond award.

\(10\) Any additional or supporting documents required by bond counsel.

\(11\) For loans involving multiple advances of Rural Development loan
funds a preliminary approving opinion of bond counsel (or local counsel
if no bond counsel is involved) if a final unqualified opinion cannot be
obtained until all funds are advanced. The preliminary opinion for the
entire issue shall be delivered on or before the first advance of loan
funds and state that the applicant has the legal authority to issue the
bonds, construct, operate and maintain the facility, and repay the loan
subject only to changes during the advance of funds such as litigation
resulting from the failure to advance loan funds, and receipt of closing
certificates.

\(12\) Preliminary approving opinion, if any, and final unqualified
approving opinion of recognized bond counsel (or local counsel if no
bond counsel is involved) including opinion regarding interest on bonds
being exempt from Federal and any State income taxes. On approval of the
Administrator, a final opinion may be qualified to the extent that
litigation is pending relating to Indian claims that may affect title to
land or validity of the obligation. It is permissible for such opinions
to contain language referring to the last sentence of Section 306 (a)(1)
or to Section 309A (h) of the Consolidated Farm and Rural Development
Act \[7 U.S.C. 1926 (a)(1) or 1929a (h)\], and providing that if the
bonds evidencing the indebtedness in question are acquired by the
Federal Government and sold on an insured basis from the Agriculture
Credit Insurance Fund, or the Rural Development Insurance Fund, the
interest on such bonds will be included in gross income for the purpose
of the Federal income tax statutes.

## 99

(2-6-85, PN 956)

RD Instruction 1942-A

§1942.19 (Con.)

\(d\) [Interim financing from commercial sources during construction
period for loans of \$50,000 or more]{.underline}. In all cases where it
is possible for funds to be borrowed at current market interest rates on
an interim basis from commercial sources, such interim financing will be
obtained so as to preclude the necessity for multiple advances of Rural
Development funds.

\(e\) [Permanent instruments for Rural Development loans to repay
interim commercial financing]{.underline}. Rural Development loans will
be evidenced by the following types of instruments chosen in accordance
with the following order of preference:

\(1\) [First preference - Form RD 440-22, \"Promissory Note (Association
or Organization)\"]{.underline}. If legally permissible use Form RD
440-22 for insured loans.

\(2\) [Second preference - single instruments with amortized
installments]{.underline}. If Form RD 440-22 is not legally permissible,
use a single instrument providing for amortized installments. Show the
full amount of the loan on the face of the document and provide for
entering the date and amount of each Rural Development advance on the
reverse thereof or on an attachment to the instrument. Form RD 440-22
should be followed to the extent possible. When principal payment is
deferred, no attempt should be made to compute in dollar terms the
amount of interest due on these installment dates. Rather the instrument
should provide that \"interest only\" is due on these dates. The
appropriate amortized installment computed as follows will be shown due
on the installment dates thereafter.

\(i\) Annual payments - Subtract the due date of the [last annual
interest only]{.underline} installment from the due date of the final
installment to determine the number of annual payments applicable. When
there are no interest only installments, the number of annual payments
will equal the number of years over which the loan is amortized. Then
multiply the amount of the note by the applicable amortization factor
shown in Rural Development Amortization Tables and round to the next
higher dollar. Example of Computation of Annual Payment:

Date of Loan Closing: 7-5-1976

Amount of Loan: \$100,000.00

Interest Rate: 5%

Amortization Period: 40 years

Interest Only Installments: 7-5-1977 and

7-5-1978

First Regular Installment: 7-5-1979

Final Installment: 7-5-2016

## 100 

§1942.19 (e) (2)(i)(Con.) RD Instruction 1942-A

Computation: 2016-1978 =

38 annual payments

\$100,000.00 x .05929 = \$5,929.00 annual

payment due

\(ii\) Semiannual payments - Multiply by two the number of years between
the due date of the [last annual interest only]{.underline} installment
and the due date of the final installment to determine the correct
number of semiannual periods applicable. When there are no interest only
installments, multiply by two the number of years over which the loan is
amortized. Then multiply the amount of the note by the applicable
amortization factor shown in Rural Development Amortization Tables and
round to the next higher dollar.

Example of Computation of Semiannual Payment:

Date of Loan Closing: 7-5-1976

Amount of Loan: \$100,000.00

Interest Rate: 5%

Amortization Period: 40 years

Interest Only Installments: 7-5-1977 and

7-5-1978

First Regular Installment: 7-5-1979

Final Installment: 7-5-2016

Computation: 2016 - 1978 = 38 x 2 =

76 semiannual periods

\$100,000.00 x .02952 = \$2,952.00 semiannual

payment due

\(iii\) Monthly payments - Multiply by twelve the number of years
between the due date of the [last annual interest only]{.underline}
installment and the final installment to determine the number of monthly
payments applicable. When there are no interest only installments,
multiply by twelve the number of years over which the loan is amortized.
Then multiply the amount of the note by the applicable amortization
factor shown in Rural Development Amortization Tables and round to the
next higher dollar.

Example of Computation of Monthly Payment:

Date of Loan Closing: 7-5-1976

Amount of the Loan: \$100,000.00

Interest Rate: 5%

Amortization Period: 40 years

Interest Only Installments: 7-5-1977 and

7-5-1978

## 101

(2-6-85, PN 956)

RD Instruction 1942-A

§1942.19 (e) (2) (iii) (Con.)

First Regular Installment: 7-5-1979

Final Installment: 7-5-2016

Computation: 2016 - 1978 =

38 x 12 = 456 monthly payments

\$100,000.00 x .00491 = \$491.00 monthly

payment due

\(3\) [Third preference - single instrument with installments of
principal plus interest]{.underline}. If a single instrument with
amortized installments is not legally permissible, use a single
instrument providing for installments of principal plus interest accrued
on the unmatured principal balance. The principal should be in an amount
best adapted to making principal retirement and interest payments which
closely approximate equal installments of combined interest and
principal as required by the first two preferences.

\(i\) The repayment terms concerning interest only installments
described in paragraph (e)(2) of this section, \"Second preference\"
applies.

\(ii\) The instrument shall contain in substance the following
provisions:

\(A\) A statement of principal maturities and due dates.

\(B\) Payments made on indebtedness evidenced by this instrument shall
be applied to the interest due through the next installment due date and
the balance to principal in accordance with the terms of the bond.
Payments on delinquent accounts will be applied in the following
sequence:

([1]{.underline}) billed delinquent interest,

([2]{.underline}) past due interest installments,

([3]{.underline}) past due principal installments,

([4]{.underline}) interest installment due, and

([5]{.underline}) principal installment due.

Extra payments and payments made from security depleting sources shall
be applied to the principal last to come due or as specified in the bond
instrument.

## 102 

§1942.19 (e) (Con.) RD Instruction 1942-A

\(4\) [Fourth preference serial bonds with installments of principal
plus interest]{.underline}. If instruments described under the first,
second, and third preferences are not legally permissible, [use serial
bonds with a bond or bonds delivered in the amount of each advance.
Bonds will be delivered in the order of their numbers]{.underline}. Such
bonds will conform with the minimum requirements of paragraph (h) of
this section. Rules for application of payments on serial bonds will be
the same as those for principal installment single bonds as set out in
the preceding paragraph (e)(3) of this section.

\(f\) [Multiple advances of Rural Development funds using permanent
instruments]{.underline}. Where interim financing from commercial
sources is not available, Rural Development loan proceeds will be
disbursed on an \"as needed by borrower\" basis in amounts not to exceed
the amount needed during 30-day periods.

\(g\) [Multiple advances of Rural Development funds using temporary debt
instrument]{.underline}. When none of the instruments described in
paragraph (e) of this section are legally permissible or practical, a
bond anticipation note or similar temporary debt instrument may be used.
The debt instrument will provide for multiple advances of Rural
Development loan funds and will be for the full amount of the Rural
Development loan. The instrument will be prepared by bond counsel (or
local counsel if bond counsel is not involved and approved by the State
Director and OGC. At the same time Rural Development delivers the last
advance, the borrower will deliver the permanent bond instrument and the
canceled temporary instrument will be returned to the borrower. The
approved debt instrument will show at least the following:

\(1\) The date from which each advance will bear interest.

\(2\) The interest rate.

\(3\) A payment schedule providing for interest on outstanding principal
at least annually.

\(4\) A maturity date which shall be no earlier than the anticipated
issuance date of the permanent instrument(s).

\(h\) [Minimum bond specifications]{.underline}. The provisions of this
paragraph are minimum specifications only, and must be followed to the
extent legally permissible.

\(1\) [Type and denominations]{.underline}. Bond resolutions or
ordinances will provide that the instrument(s) be either a bond
representing the total amount of the indebtedness or serial bonds in
denominations customarily accepted in municipal financing (ordinarily in
multiples of not less than \$1000). Single bonds may provide for
repayment of

## 103

## (Revision 1)

(2-6-85, PN 956)

RD Instruction 1942-A

§1942.19 (h) (1) (Con.)

principal plus interest or amortized installments; amortized
installments are preferable from the standpoint of Rural Development.
Coupon bonds will not be used unless required by State statute.

\(i\) To compute the value of each coupon when the bond denomination is
consistent:

\(A\) Multiply the amount of the loan or advance by the interest rate
and divide the product by 365 days.

\(B\) Multiply the daily accrual factor determined in (A) by the number
of days from the date of advance or last installment date to the next
installment date.

\(C\) Divide the interest computed in (B) by the number of bonds
securing the advance; this is the individual coupon amount.

\(ii\) To compute the value of each coupon when the bond denomination
varies:

\(A\) Multiply the denomination of the bond by the interest rate and
divide the product by 365 days.

\(B\) Multiply the daily accrual factor determined in (A) by the number
of days from the date of advance or last installment date to the next
installment due date; this is the individual coupon amount.

\(2\) [Bond registration]{.underline}. Bonds will contain provisions
permitting registration as to both principal and interest. Bonds
purchased by Rural Development will be registered in the name of
\"United States of America, Rural Development,\" and will remain so
registered at all time while the bonds are held or insured by the United
States. The address of Rural Development for registration purposes will
be that of the appropriate Rural Development State Office. (Revised
3-1-88, SPECIAL PN.)

\(3\) [Size and quality]{.underline}. Size of bonds and coupons should
conform to standard practice. Paper must be of sufficient quality to
prevent deterioration through ordinary handling over the life of the
loan.

\(4\) [Date of bond]{.underline}. Bonds will preferably be dated as of
the day of delivery, however, may be dated another date at the option of
the borrower and subject to approval by Rural Development. If the date
of delivery is other than the date of the bond, the date of delivery
will be stated in the bond. In all cases, interest will accrue from the
date of delivery of the funds.

## 104

## (Revision 1) 

RD Instruction 1942-A

§1942.19 (h) (Con.)

\(5\) [Payment date]{.underline}. Loan payments will be scheduled to
coincide with income availability and be in accordance with State law.
If consistent with the foregoing, monthly payments will be required and
will be enumerated in the bond, other evidence of indebtedness, or other
supplemental agreement. However, if State law only permits principal
plus interest (P&I) type bonds, annual or seminannual payments will be
used. Insofar as practical monthly payments will be scheduled one full
month following the date of loan closing; or semiannual or annual
payments will be scheduled six or twelve full months respectively,
following the date of loan closing or any deferment period. Due dates
falling on the 29th, 30th or 31st day of the month will be avoided.
(Revised 06-26-91, PN 168.)

\(6\) [Place of payment]{.underline}. Payments on bonds purchased by
Rural Development should be submitted to the Rural Development District
Office by the borrower. The District Office will then remit the payments
to the Finance Office or deposit them in a Treasury General Account in
accordance with Subpart B of Part 1951 of this chapter.

\(7\) [Redemptions]{.underline}. Bonds should contain customary
redemption provisions; subject, however, to unlimited right of
redemption without premium of any bonds held by Rural Development except
to the extent limited by the provisions under the \"Third Preference\"
and \"Fourth Preference\" in paragraph (e) of this section.

\(8\) [Additional revenue bonds]{.underline}. Parity bonds may be issued
to complete the project. Otherwise, parity bonds may not be issued
unless the net revenues (that is, unless otherwise defined by the State
statute, gross revenues less essential operation and maintenance
expense) for the fiscal year preceding the year in which such parity
bonds are to be issued, were 120 percent of the average annual debt
service requirements on all bonds then outstanding and those to be
issued; provided, that this limitation may be waived or modified by the
written consent of bondholders representing 75 percent of the then
outstanding principal indebtedness. Junior and subordinate bonds may be
issued in accordance with the loan agreement.

\(9\) [Scheduling of Rural Development payments when joint financing is
involved]{.underline}. In all cases in which Rural Development is
participating with another lender in the joint financing of the project
to supply funds required by one applicant, the Rural Development
payments of principal and interest should approximate amortized
installments.

\(10\) [Precautions]{.underline}. The following types of provisions in
debt instruments should be avoided.

## 105

## (Revision 3)

(02-06-85) PN 956

RD Instruction 1942-A

§1942.19 (h)(10) (Con.)

\(i\) Provisions for the holder to manually post each payment to the
instrument.

\(ii\) Provisions for returning the permanent or temporary debt
instrument to the borrower in order that it, rather than Rural
Development, may post the date and amount of each advance or repayment
on the instrument.

\(iii\) Defeasance provisions in loan or bond resolutions. When a bond
issue is defeated, a new issue is sold which supersedes the contractual
provisions of the prior issue, including the refinancing requirement and
any lien on revenues. Since defeasance in effect precludes Rural
Development from requiring graduation before the final maturity date, it
represents a violation of the statutory refinancing requirement,
therefore it is disallowed. (Revised 05-03-89, SPECIAL PN.)

\(iv\) Provisions that amend covenants contained in Forms RD 1942-47,
\"Loan Resolution (Public Bodies),\" or RD 1942-9, \"Loan Resolution
Security Agreement.\" (Revised 06-26-91, PN 168.)

\(11\) [Multiple Loan Instruments]{.underline}. The following will be
adhered to when preparing debt instruments:

\(i\) When more than one loan type is used in financing a project, each
type of loan will be evidenced by a separate debt instrument or series
of debt instruments.

\(ii\) Loan funds obligated in different fiscal years and those
obligated with different interest rates or terms in the same fiscal year
will be evidenced by separate debt instruments.

\(iii\) Loan funds obligated for the same loan type in the same fiscal
year at the same interest rate and term may be combined in the same debt
instrument; provided the borrower has been notified on Form RD 1940-1,
\"Request for Obligation of Funds,\" of the action.

\(i\) [Bidding by Rural Development]{.underline}. Bonds offered for
public sale shall be offered in accordance with State law, in such a
manner to encourage public bidding. Rural Development will not submit a
bid at the advertised sale unless required by State law, nor will
reference to Rural Development\'s rates and terms be included. If no
acceptable bid is received, Rural Development will negotiate the
purchase of the bonds.

## 106

## (Revision 3) 

RD Instruction 1942-A

§ 1942.20 [Community Facility Guides]{.underline}.

\(a\) The following documents are attached and made part of this subpart
and may be used in administering this program.

\(1\) Guide 1 and 1a GUIDE LETTER FOR USE IN INFORMING PRIVATE\
LENDER OF AGENCY\'S COMMITMENT

\(2\) Guide 2 WATER USERS AGREEMENT

\(3\) Guide 3 SERVICE DECLINATION STATEMENT

\(4\) Guide 4 BYLAWS

\(5\) Guide 5 FINANCIAL FEASIBILITY REPORT

\(6\) Guide 6 PRELIMINARY ARCHITECTURAL FEASIBILITY\
REPORT

\(7\) Guide 7 PRELIMINARY ENGINEERING REPORT\
WATER FACILITY

\(8\) Guide 8 PRELIMINARY ENGINEERING REPORT\
SEWERAGE SYSTEMS

\(9\) Guide 9 PRELIMINARY ENGINEERING REPORT\
SOLID WASTE DISPOSAL SYSTEMS

\(10\) Guide 10 PRELIMINARY ENGINEERING REPORT\
STORM WASTE-WATER DISPOSAL

\(11\) Guide 11 DAILY INSPECTION REPORT

\(12\) Guide 12 MEMORANDUM OF UNDERSTANDING BETWEEN THE\
ECONOMIC DEVELOPMENT ADMINISTRATION -\
DEPARTMENT OF COMMERCE AND THE DEPARTMENT\
OF AGRICULTURE PERTAINING TO EPA PUBLIC\
WORKS PROJECTS ASSISTED BY AN AGENCY LOAN

\(13\) Guide 13 MEMORANDUM OF UNDERSTANDING BETWEEN THE\
ECONOMIC DEVELOPMENT ADMINISTRATION -\
DEPARTMENT OF COMMERCE AND THE DEPARTMENT\
OF AGRICULTURE REGARDING SUPPLEMENTARY\
GRANT ASSISTANCE FOR THE CONSTRUCTION OF\
PUBLIC WORKS AND DEVELOPMENT FACILITIES

## 107

## (Revision 4)

(02-06-85) PN 956

RD Instruction 1942-A

§ 1942.20(a) (Con.)

\(14\) Guide 14 LEGAL SERVICES AGREEMENT

\(15\) Guide 15 COMMUNITY FACILITY BORROWERS APPLICATION

\(16\) Guide 16 COMMUNITY FACILITY LOAN DOCKET

\(17\) Guide 17 CONSTRUCTION CONTRACT DOCUMENTS - SHORT\
FORM

\(18\) Guide 18 AGENCY SUPPLEMENTAL GENERAL CONDITIONS

\(19\) Guide 19 CONSTRUCTION CONTRACT DOCUMENTS

\(20\) Guide 20 AGREEMENT FOR ENGINEERING SERVICES\
(AGENCY/EPA JOINTLY FUNDED PROJECTS)

\(21\) Guide 21 REVIEW OF AUDIT REPORTS

\(22\) Guide 22 DELINQUENT ACCOUNTS POSITIVE ACTION PLAN

\(24\) Guide 24 MINIMUM SUGGESTED CONTENTS OF MANAGEMENT\
AGREEMENTS

\(25\) Guide 25 JOINT POLICY STATEMENT BETWEEN\
ENVIRONMENTAL PROTECTION AGENCY AND AGENCY

\(26\) Guide 26 COMMUNITY PROGRAMS PROJECT SELECTION\
CRITERIA

\(27\) Guide 27 ATTACHMENTS TO AIA DOCUMENT B141-1997,\
STANDARD FORM OF AGREEMENT BETWEEN OWNER\
AND ARCHITECT WITH STANDARD FORM OF\
ARCHITECT'S SERVICES (Revised 08-26-98,\
PN 296.)

\(28\) Exhibit A CIRCULAR NO. A-128 (Added 03-01-88,\
SPECIAL PN.)

\(29\) Exhibit B DEPARTMENT OF AGRICULTURE REGIONAL\
INSPECTOR GENERAL (OIG) (Added 03-01-88,\
SPECIAL PN.)

## 108

(Revision 4)

RD Instruction 1942-A

§ 1942.20 (Con.)

\(b\) These guides and exhibits are for use by agency officials,
applicants and applicant's officials and agents on certain matters
related to the planning, development, and operation of essential
community facilities which involve the use of loans and grants from the
agency. This includes activities related to applying for and obtaining
such financial assistance. These guides and exhibits are not published
in the Federal Register; however, they are available in any agency
office. (Revised 08-26-98, PN 296.)

§ 1942.21 Statewide Nonmetropolitan Median Household Income

Statewide Nonmetropolitan Median Household Income means the median
household income of the State's nonmetropolitan counties and portions of
metropolitan counties outside of cities, towns or places, of 50,000 or
more population. (Added 11-17-04, SPECIAL PN.)

§§ 1942.22 - 1942.49 \[Reserved\]

§ 1942.50 [OMB control number]{.underline}.

The reporting and recordkeeping requirements contained in this
regulation have been approved by the Office of Management and Budget
(OMB) and have been assigned OMB control number 0575-0015. Public
reporting burden for this collection of information is estimated to vary
from five minutes to 15 hours per response, with an average of 2.7 hours
per response, including time for reviewing instructions, searching
existing data sources, gathering and maintaining the data needed, and
completing and reviewing the collection of information. Send comments
regarding this burden estimate or any other aspect of this collection of
information, including suggestions for reducing this burden to the
Department of Agriculture, Clearance Officer, OIRM, Ag Box 7630,
Washington, D.C. 20250; and to the Office of Management and Budget,
Paperwork Reduction Project (OMB #0575-0015), Washington, D.C. 20503.

Attachments: Guides 1 through 22 and 24 through 27\
Exhibits A and B

o0o

## 109

(Revision 2)

(02-06-85) PN 956

(Guide 1) RD Instruction 1942-A

[GUIDE LETTER FOR USE IN INFORMING PRIVATE LENDER OF]{.underline}

[RURAL DEVELOPMENT\'S COMMITMENT]{.underline}

[(Name and Address of Private Lender)]{.underline}

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Dear \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_:

Reference is made to a request from the \_\_\_\_\_\_[(Town of
Friendly)]{.underline}\_\_\_\_\_\_\_\_\_\_ through
\_\_\_\_\_\_\_\_\_[(John Smith)]{.underline}\_\_\_\_\_\_\_\_\_\_ its
Mayor, for interim financing from your bank to construct its water
(and/or sewer) system at the interest rate and terms and conditions
agreed upon, as reflected in the attached copy of your letter.

This letter is to confirm certain understandings on behalf of Rural
Development.

Final plans and specifications have been prepared and approved, bids
have been taken, and the town council is prepared to award the
construction contract to the qualified low bidder. It has been
determined by the applicant and Rural Development that the conditions of
loan (and/or grant) closing can be met.

Funds have been obligated for the project, as evidenced by the attached
copy of [Form RD 440-57]{.underline}, \"Acknowledgment of Obligated
Funds/Check Request.\"

It is proposed by the town with the approval of Rural Development that
the bank advance funds, in accordance with the agreed terms and
conditions stated in the attached letter, as needed to pay for
construction and other authorized and legally eligible expenses incurred
by the town, upon presentation of proper statements or work estimates
approved by the town\'s authorized representative and the authorized
official of Rural Development.

We have scheduled Rural Development loan to be closed when construction
to be financed with loan funds is substantially complete, so that funds
will be available to pay off the total amount of advances your bank has
made for authorized approved purposes, including accrued interest to the
date of closing.

We appreciate your assistance to the community and look forward to
working with you on this project.

Sincerely,

State Director or District Director

Farmers Home Administration

(1-15-79) SPECIAL PN

RD Instruction 1942-A

(Guide 1a)

GUIDE LETTER FOR USE IN INFORMING OTHER LENDERS OF RURAL DEVELOPMENT\'S
COMMITMENT

TO: \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_[(NAME AND ADDRESS OF
LENDER)]{.underline}\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

SUB: [INTERIM FINANCING FOR THE (TOWN OF
FRIENDLY)]{.underline}\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

The\_\_[(Town of Friendly)]{.underline}\_\_\_\_\_\_\_\_\_\_\_\_(the
\"applicant\") proposes to sell \_\_\_[(type of debt
instrument)]{.underline}\_\_\_\_\_\_\_\_\_\_\_\_ in order to obtain
interim financing for the construction of a \_\_[(description of
project)]{.underline}\_\_\_\_\_\_ . The \_\_\_\_\_\_\_\_\_[(debt
instrument)]{.underline}\_\_\_\_ , in the aggregate principal amount of
\$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_, is being issued pursuant to a
certain \_\_\_\_\_\_\_[(authorizing document)]{.underline} Resolution
adopted by the applicant on \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_,
19\_\_\_. On the same date the applicant adopted a bond resolution
pursuant to which it will issue bonds for permanent financing.

This letter is to confirm certain understandings on behalf of Rural
Development.

Final plans and specifications have been prepared and approved, bids
have been taken and the applicant has awarded the construction contract
to the qualified low bidders. It has been determined by the applicant
and Rural Development that the conditions of a permanent loan closing
can be met. Presently, Rural Development has no reason to believe that
such conditions will not be met.

Funds have been obligated for the project, as evidenced by the attached
copy of Form RD 440-57, \"Acknowledgment of Obligated Funds/Check
Request.\"

It is proposed by the applicant, with the approval of Rural Development,
that the proceeds from the purchase of the \_\_\_\_[(type of debt
instrument)]{.underline}\_\_ will be used to provide for interest on the
\_\_[(type of debt instrument)]{.underline}\_\_ to maturity and to pay
for construction and other authorized and legally eligible expenses
incurred by the applicant upon presentation of proper statements or work
estimates approved by the applicant, its authorized representatives and
the District Director, or other authorized official of Rural
Development.

(1-15-79) SPECIAL PN

We have scheduled disbursement of the permanent loan to the applicant
for later than \_\_\_\_\_\_\_\_\_\_\_\_\_\_, 19\_\_\_, in immediately
available funds, so that funds will be available to pay the \_\_[(type
of debt instrument)]{.underline}\_\_ in full upon their maturity on
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_, 19\_\_\_. Upon meeting the loan
conditions, at the permanent loan closing Rural Development will
disburse the permanent loan by purchasing the applicant\'s [(permanent
debt instrument)]{.underline} issued pursuant to the Bond Resolution.

We appreciate your assistance to the applicant and look forward to
working with you on this project.

Sincerely yours,

State Director or District Director

Rural Development

## oOo 

RD Instruction 1942-A

(Guide 2)

## [WATER USERS AGREEMENT]{.underline}

This agreement entered into between the
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_, a nonprofit
corporation, hereinafter called the \"Association,\" and
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_,
member(s) of the Association, hereinafter called \"Member.\"

W I T N E S S E T H

Whereas, the Member desires to purchase water from the Association and
to enter into a water users agreement as required by the Bylaws of the

Association.

NOW THEREFORE, in consideration of the mutual covenants, promises, and
agreements herein contained, it is hereby understood and agreed by the
parties hereto as follows:

The Association shall furnish, subject to the limitation set out in its
Bylaws and Rules and Regulations now in force or as hereafter amended,
such quantity of water as Member may desire in connection with Member\'s
occupancy of the following described priority:

(1-15-79) SPECIAL PN

RD Instruction 1942-A

(Guide 2) (Page 2)

EXAMPLE: Lot 1 Section 1 of the Green Valley Subdivision

> fronting 52 feet on Highway No. 620 containing 1/2 acre joined on the
> East by John Jones and on the West by Pete Smith; or 162 N. South
> Street, Springfield, Virginia

The Member agrees to grant to the Association, its successors and
assigns, a perpetual easement in, over, under and upon the
above-described and, with the right to erect, construct, install, and
lay, and thereafter use, operate, inspect, repair, maintain, replace,
and remove water pipelines and appurtenant facilities, together with the
right to utilize adjoining lands belonging to the Member for the purpose
of ingress to and egress from the above-described lands.

The Member shall install and maintain at the member\'s expense a service
line which shall begin at the meter and extend to the dwelling or place
of use. The service line shall connect with the distribution system of
the Association at the nearest place of desired use by the Member,
provided the Association has determined in advance that the system has
sufficient capacity to permit delivery of water at that point.

The Member agrees to comply with and be bound by the Articles, Bylaws,
Rules and Regulations of the Association, now in force, or as hereafter
duly and legally supplemented, amended, or changed. The

RD Instruction 1942-A

(Guide 2) (Page 3)

Member also agrees to pay for water at such rates, time, and place as
shall be determined by the Association, and agrees to the imposition of
such penalties for noncompliance as are now set out in the
Association\'s Bylaws and Rules and Regulations, or which may be
hereafter adopted and imposed by the Association.

The Member agrees to pay a deposit in the amount of \$\_\_\_\_\_\_\_\_.
In the event service to the Member is terminated, either voluntarily by
the Member, or by the Association for cause, the deposit shall be held
and applied by the Association to any unpaid balance then owing on the
Member\'s account. Should the account be fully paid at the time of
termination of service to the Member, the deposit shall be refunded by
the Association within a reasonable time thereafter.

The Association shall purchase and install a cutoff valve and may also
include a water meter in each service. The Association shall have
exclusive right to use such cutoff and water meter.

The Association shall have final authority in any question of location
of any service line connection to its distribution system; shall
determine the allocation of water to Members in the event of a water
shortage; and may shut off water to a Member who allows a connection or
extension to be made of the member\'s service line for the purpose of
supplying water to another user. In the event the total water supply
shall be insufficient to meet

(1-15-79) SPECIAL PN

RD Instruction 1942-A

(Guide 2) (Page 4)

all of the needs of the Members, or in the event there is a shortage of
water, the Association may prorate the water available among the various
Members on such basis as is deemed equitable by the Board of Directors,
and may also prescribe a schedule of hours covering use of water for
garden purposes by particular Members and require adherence thereto or
prohibit the use of water for garden purposes; provided that, if at any
time the total water supply shall be insufficient to meet all of the
needs of all of the Members, the Association must first satisfy all of
the needs of all Members for domestic purposes before supplying any
water for livestock purposes and must satisfy all the needs of all
Members for both domestic and livestock purposes before supplying any
water for garden purposes.

The Member agrees that no other present or future source of water will
be connected to any waterlines served by the Association\'s waterlines
and will disconnect from the present water supply prior to connecting to
and switching to the Association\'s system and shall eliminate their
present or future cross-connections in the member\'s system.

The Member shall connect the service lines to the Association\'s
distribution system and shall commence to use water from the system on
the date the water is made available to the Member by the Association.
Water charges to the Member shall commence on the date service is made
available, regardless of whether the Member connects to the system.

RD Instruction 1942-A

(Guide 2) (Page 5)

In the event the Member shall breach this contract by refusing or
failing, without just cause, to connect a service line to the
Association\'s distribution system as set forth above, the Member agrees
to pay the Association a lump sum of Three Hundred Dollars (\$300.00) as
liquidated damages. It is expressly understood and agreed by the parties
hereto that the said amount is agreed upon as liquidated damages in that
a breach by the Member in either of the respects set forth above would
be difficult, if not impossible, to prove the amount of such damages.
The parties hereto have computed, estimated, and agreed upon said sum in
an attempt to make a reasonable forecast of probable actual loss because
of the difficulty of estimating with exactness the resulting damages.

The failure of a customer to pay water charges duly imposed shall result
in the automatic imposition of the following penalties:

1\. Nonpayment within ten days from the due date will be subject to a
penalty of ten percent of the delinquent account.

2\. Nonpayment within thirty days from the due date will result in the
water being shut off from the customer\'s property.

(1-15-79) SPECIAL PN

RD Instruction 1942-A

(Guide 2) (Page 6)

3\. In the event it becomes necessary for the Association to shut off
the water from a Member\'s property, a fee set by the corporation in its
rate schedule will be charged for a reconnection of the service.

IN WITNESS WHEREOF, we have executed this agreement this
\_\_\_\_\_\_\_\_

\_\_\_\_\_\_ day of \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_,
19\_\_\_\_\_\_\_\_\_\_\_.

[SEAL]{.underline}
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

(Name of Association)

ATTEST: By:
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

President

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Member

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Member

## oOo 

RD Instruction 1942-A

(Guide 3)

SERVICE DECLINATION STATEMENT

I understand that the \_\_\_\_\_\_\_\_\_\_\_\_[(Name of
Association)]{.underline}\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ proposes to
build a (water) (sewer) system to serve my area. I have been given an
opportunity to sign a (Water) (Sewer) Users Agreement so that I might
obtain service. I do not wish to be served because \_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Date Signature

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

(Mailing Address)

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

(Location)

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

The information inserted above is correct to the best of my knowledge.
It was not possible to obtain the signature of this potential user
because

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Date \*Signature

\*To be completed and signed by a representative of the association when
applicable.

## oOo

(1-15-79) SPECIAL PN

(Guide 4) RD Instruction 1942-A

## BYLAWS

## 

## of

## 

## \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

## 

## ARTICLE I

## 

## [General Purposes]{.underline}

The purposes for which this corporation is formed, and the powers which
it may exercise are set forth in the articles of incorporation of the
corporation.

## ARTICLE II

## 

## [Name and Location]{.underline}

Section 1. The name of this corporation is
the\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_.

Section 2. The principal office of this corporation shall be located in
the City (Village) or
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_, County of
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ State of
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_.

## ARTICLE III

## 

## [Seal]{.underline}

Section 1. The seal of the corporation shall have inscribed thereon the
name of the corporation, the year of its organization and the words,
\"Corporation Not For
Profit,\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_.\"

Section 2. The secretary of the corporation shall have custody of the
seal.

Section 3. The seal may be used for causing it or a facsimile thereof to
be impressed or affixed or reproduced or otherwise.

(1-15-79) SPECIAL PN

RD Instruction 1942-A

(Guide 4) (Page 2)

## ARTICLE IV

## 

## [Fiscal Year]{.underline}

The fiscal year of the corporation shall begin the
\_\_\_\_\_\_\_\_\_\_\_\_\_ day of
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ in each year.

## ARTICLE V

## 

## [Membership]{.underline}

Section 1. Membership will be limited to those who obtain the
organization\'s services, acquire a tangible interest in its assets in
proportion to the business done with the organization and have a voice
in its management.

Section 2. Every person (which word as used herein includes any legal
entity) who is a record owner of a fee or undivided fee interest, or
having a substantial possessory interest, in a property served by the
water system may become a member of the corporation upon signing such
applications and agreements for the purchase of water as may be provided
and required by the corporation and upon the payment of such connection
fee as may be imposed by the board of directors provided that only one
membership at a time may be held for each property served. A single
membership may be issued to all persons owning or having a substantial
possessory interest in the property. Only one membership may be held
with respect to property at one time. The board of directors shall cause
to be issued appropriate certificates of membership, provided that
membership shall not be denied because of the applicant\'s race, color,
creed, sex, age, marital status, or national origin. Membership may be
denied if capacity of the corporation\'s water system is exhausted by
the need of its existing members, or, if the proposed use of the
applicant is such that it would interfere with existing uses previously
authorized by the board of directors.

A. A substantial possessory interest is one where the person or persons
have a legal right to control and occupancy of a property but do not
have the legal or the equitable ownership of the property. It may be
under a lease or similar right to possession.

\(1\) Before membership is allowed to one or more persons claiming such
an interest, the corporation will endeavor to obtain the application for
membership from the owner of such property.

(Guide 4) (Page 3) RD Instruction 1942-A

\(2\) Where membership is granted to one or more persons having a
substantial possessory interest, the corporation, as a condition to the
membership, may require such applicant to post such collateral or bond
as the directors determine necessary to fully protect the corporation
from any additional risk that may be involved to the corporation by
reason of the lack of legal ownership in the applicant.

Section 3. Each member shall have only one membership for each property
served, regardless of the number of service connections the member may
obtain to serve the property. Each membership certificate shall
represent one vote. When more than one person holds the interest in a
property served, the vote shall be exercised by the person in whose name
the certificate is registered or by such person as the several persons
may designate, but in no event shall more than one vote be cast with
respect to any property.

Section 4. Membership shall be transferable but the transfer will be
effective only when noted on the books of the corporation. Such transfer
will be made only to a person who obtains a qualifying interest in the
property. A member will transfer membership in the corporation to a
successor in interest as part of the transaction whereby the member
disposes of any interest to said property. The secretary, upon request,
will make note of such transfer upon the records of the corporation but
need not issue a new certificate to the successor in interest of the
previous existing member.

Section 5. When membership in the corporation is not transferred, it
shall terminate upon the disposition or other termination of the
member\'s interest in the property, regardless of whether or not the
certificate is surrendered to the corporation. Membership also may be
terminated by action of the board of directors where the use of the
property is changed so as to materially increase the amount of water
consumed to the prejudice of other existing members or to the prejudice
of the orderly operation of the system.

Section 6. Termination of membership will not result in forfeiture of
the former member\'s rights and interest in the organization\'s assets
and the former member will not be precluded from receiving a
proportionate share of any subsequent distribution of such assets by the
organization.

Section 7. The termination of the membership of any member shall not
disqualify for membership any other person who has or obtains an
interest in the property of the terminated member and who otherwise
meets the requirements of these bylaws.

(1-15-79) SPECIAL PN

RD Instruction 1942-A

(Guide 4) (Page 4)

Section 8. In the event a member\'s property interest is divested other
than by voluntary means, such member\'s membership will pass to the
trustee, receiver, executor, or the like who will be entitled either in
person or through a designated representative to exercise all of the
rights incident to such membership, but subject to such duties and
liabilities also applicable to the membership. The trustee, receiver,
executor, or the like, may terminate such membership by written notice
to such effect delivered or mailed to the secretary of the corporation.
Upon the final disposition of such property rights, the owner thereof
shall be entitled to membership in like manner as if the membership had
been transferred to the owner by the original member as set forth in
Section 4 above.

Section 9. Upon the transfer of a membership, the corporation will not
look to the successor in interest for the payment of any past due
amounts. The corporation will seek collection only from the individual
who incurred such charges or assessments or from the property itself if
a judgment lien had been duly perfected against such property.

## ARTICLE VI

## 

## [Membership Certificates]{.underline}

Section 1. This corporation shall not have capital stock. Membership in
the corporation shall be represented by membership certificates. Such
certificates shall represent the right to use and enjoy the benefits of
the corporation\'s water supply system upon the payment of necessary
assessments, if any, and of reasonable charges based upon such use,
provided such use and enjoyment are consistent with the rules,
regulations, and contracts affecting the same as may from time to time
be prescribed by the board of directors.

Section 2. A membership certificate shall be issued to each holder of
fully paid membership, numbered consecutively in accordance with the
order of issue, and bear on its face the following statement:

This membership certificate is issued and accepted in accordance with
and subject to the conditions and restrictions stipulated in the
articles of incorporation and bylaws and amendments to the same\
of the
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Water Association.

(Guide 4) (Page 5) RD Instruction 1942-A

## ARTICLE VII

## 

## [Meetings of Members]{.underline}

Section 1. The annual meeting of the members of this corporation shall
be held at the City (Village) of
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_, County of
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_, State of
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_, at
\_\_\_\_\_\_\_\_\_\_\_\_ o\'clock \_\_\_\_.m., on the
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ in
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ of each year, if not a Sunday
or legal holiday, or if a Sunday or legal holiday on the next business
day following. The place, day, and time of the annual meeting may be
changed to any other convenient place, day, and time in the county by
the board of directors giving notice thereof to each member not less
than ten (10) days in advance thereof.

Section 2. Special meetings of the members may be called at any time by
the action of the board of directors and such meetings must be called
whenever a petition requesting such meetings is signed by at least ten
percent of the members and presented to the secretary or to the board of
directors. The purpose of every special meeting shall be stated in the
notice thereof, and no business shall be transacted thereat except such
as is specified in the notice.

Section 3. Notice of meetings of members of the corporation, both
regular and special, shall be given by notice mailed by first-class mail
to each member of record, directed to the address shown upon the books
of the corporation, not less than ten (10) nor more than forty (40) days
prior to such meeting. Such a notice shall state the nature, time, place
and purpose of the meeting, but no failure or irregularity of notice of
any annual meeting, regularly held, shall affect any proceedings taken
thereat.

Section 4. The presence at a meeting of members entitled to cast in
their own right or by proxy \_\_\_\_\_\_\_\_ percent of the total number
of votes shall constitute a quorum. All proxies shall be in writing and
filed with the secretary. Such proxies may be general or restrictive.
Proxies shall be revocable and shall not be valid beyond 11 months, nor
after termination of the membership by cessation of the member\'s
interest in the property.

Section 5. Directors of this corporation shall be elected at the annual
meeting of the members as provided in Article VIII, Section 1. No
cumulative voting shall be allowed.

Section 6. The order of business at the regular meetings and so far as
possible at all other meetings shall be:

(I-15-79) SPECIAL PN

RD Instruction 1942-A

(Guide 4) (Page 6)

1\. Calling to order and proof of quorum

2\. Proof of notice of meeting

3\. Reading and action on any unapproved minutes

4\. Reports of officers and committees

5\. Election of directors

6\. Unfinished business

7\. New business

8\. Adjournment

## ARTICLE VIII

## 

## [Directors and Officers]{.underline}

Section 1. The board of directors of this corporation shall consist of
five members, all of whom shall be members of the corporation. The
directors named in the articles of incorporation shall serve until the
first annual meeting of the members and until their successors are
elected and have qualified. At the first annual meeting of the members,
one director shall be elected for a term of one year; two directors for
a term of two years; and two directors for a term of three years. At
each annual meeting thereafter, the members shall elect for a term of
three years the number of directors whose terms of office have expired.
Each director shall hold office for the term for which elected and until
a successor shall have been elected and qualified.

Section 2. The board of directors shall meet within ten (10) days after
the annual election of directors and shall elect a president and
vice-president from among themselves and secretary-treasurer who need
not be a member of the board of directors, each of whom shall hold
office until the next annual meeting and until the election and
qualification of a successor unless sooner removed by death,
resignation, or for cause.

Section 3. If the office of any director becomes vacant by reason of
death, resignation, retirement, disqualification, or otherwise, except
by removal from office, a majority of the remaining directors, shall by
a majority vote, choose a successor who shall hold office until the next
regular meeting of the members of the corporation, at which time the
members shall elect a director for the unexpired term or terms.

(Guide 4) (Page 7) RD Instruction 1942-A

Section 4. A majority of the board of directors shall constitute a
quorum at any meeting of the board. The affirmative vote of the majority
of the directors at a meeting at which a quorum is present shall be the
act of the board.

Section 5. Compensation of officers may be fixed only at any regular or
special meeting of the members of the corporation. Directors shall
receive no compensation for their services as such.

Section 6. Officers and directors may be removed from office in the
following manner: Any member, officer, or director may present charges
against a director or officer by filing them in writing with the
secretary of the corporation. If presented by a member, the charges must
be accompanied by a petition signed by ten percent of the members of the
corporation. Such removal shall be voted on at the next regular or
special meeting of the members and shall be effective if approved by a
vote of a majority of those voting if a quorum is present. The director
or officer against whom such charges have been presented shall be
informed, in writing, of such charges at least twenty days prior to the
meeting, and shall have the opportunity at such meeting to be heard in
person or by counsel and to present witnesses; and the person or persons
presenting such charges shall have the same opportunity. If the removal
of a director is approved, such action shall also vacate any other
office held by the removed director in the corporation. A vacancy in the
board thus created shall immediately be filled by a vote of a majority
of the members present and voting at such meeting. A vacancy in any
office thus created shall be filled by the board of directors from among
their number so constituted after the vacancy in the board has been
filled.

ARTICLE IX

[Duties of Directors]{.underline}

Section 1. The board of directors, subject to restrictions of law, the
articles of incorporation, and these bylaws, shall exercise all of the
powers of the corporation, and, without prejudice to or limitation upon
their general powers, it is hereby expressly provided that the board of
directors shall have, and are hereby given full power and authority in
respect to the matters as hereinafter set forth to be exercised by
resolution duly adopted by the board:

(1-15-79) SPECIAL PN

RD Instruction 1942-A

(Guide 4) (Page 8)

A. To approve membership applications and to cause to be issued
appropriate certificates and to permit the connection of properties to
the system in the future in cases involving proposed construction or may
issue such certificates prior to the commencement of the proposed
construction.

B. To select and appoint all agents or employees of the corporation,
remove such agents or employees of the corporation, prescribe such
duties and designate such powers as may not be inconsistent with these
bylaws, fix their compensation and pay for faithful services.

C. To borrow from any source, money, goods, or services and to make and
issue notes and other negotiable or nonnegotiable instruments evidencing
indebtedness of the corporation; to make and issue mortgages, deeds of
trust, pledges of revenue, trust agreements, security agreements and
financing statements and other instruments evidencing a security
interest in the assets of the corporation; and, to do every act and
thing necessary to effectuate the same.

D. To prescribe, adopt and amend, from time to time such equitable
uniform rules and regulations as, in its discretion, may be deemed
essential or convenient for the conduct of the business and affairs of
the corporation and the guidance and control of its officers and
employees, and to prescribe adequate penalties for the breach thereof.

E. To order, at least once each year, an audit of the books and accounts
of the corporation by a competent public auditor or accountant. The
report prepared by such auditor or accountant shall be submitted to the
members of the corporation at their annual meeting, together with a
proposed budget for the ensuing year. Copies of such audits and budgets
shall be submitted to such parties as may be required by other
agreements.

F. To fix and alter the charges to be paid by each member for services
rendered by the corporation to the member, including connection or
reconnection fees where such are deemed to be necessary by the
directors, and to fix and alter the method of billing, time of payment,
manner of connection, and penalties for late or nonpayment of the same.
The board may establish one or more classes of users. All charges shall
be uniform and nondiscriminating within each class of users.

(Guide 4) (Page 9) RD Instruction 1942-A

G. To require all officers, agents, and employees charged with
responsibility for the custody of any of the funds of the corporation to
give adequate bonds, the cost thereof to be paid by the corporation, and
it shall be mandatory upon the directors to so require.

H. To select one or more banks to act as depositories of the funds of
the corporation and to determine the manner of receiving, depositing,
and disbursing the funds of the corporation and the form of checks and
the person or persons by whom the same shall be signed, with the power
to change such banks and the person or persons signing such checks and
the form thereof at will.

I. To levy assessments against the members of the corporation in such
manner and upon such proportionate basis as the directors deem
equitable, and to enforce collection of such assessments by the
suspension of water service or other legal methods. The board of
directors shall have the option to suspend the service of any member who
has not paid such assessment within 30 days from the date the assessment
was due, provided the corporation must give the member at least 15
days\' written notice at the address of the member on the books of the
corporation of its intention to suspend such service if the assessment
is not paid. Upon payment of such assessments, any penalties applicable
thereto, and a reconnection charge, if one is in effect, service will be
promptly restored to such a member.

ARTICLE X

[Duties of Officers]{.underline}

Section 1. Duties of President. The President shall preside over all
meetings of the corporation and the board of directors, call special
meetings of the board of directors, perform all acts and duties usually
performed by an executive and presiding officer, and sign all membership
certificates and such other papers of the corporation as may be
authorized or directed to sign by the board of directors, provided the
board of directors may authorize any person to sign any or all checks,
contracts, and other instruments in writing on behalf of the
corporation. The President shall perform such other duties as may be
prescribed by the board of directors.

Section 2. Duties of the Vice-President. In the absence or disability of
the President, the Vice-President shall perform the duties of the
President; provided, however, that in case of death, resignation, or
disability of the President, the board of directors may declare the
office vacant and elect a successor.

(1-15-79) SPECIAL PN

RD Instruction 1942-A

(Guide 4) (Page 10)

Section 3. Duties of the Secretary-Treasurer. The Secretary-Treasurer
shall keep a complete record of all meetings of the corporation and of
the board of directors and shall have general charge and supervision of
the books and records of the corporation. The Secretary-Treasurer shall
attest the President\'s signature on all membership certificates and
other papers pertaining to the corporation unless otherwise directed by
the board of directors. The Secretary-Treasurer shall serve, mail, or
deliver all notices required by law and by these bylaws and shall make a
full report of all matters and business pertaining to the office to the
members at the annual meeting or at such other time or times as the
board of directors may require. The Secretary-Treasurer shall keep the
corporate seal and membership certificates issued and affix said
corporate seal to all papers requiring a seal. The Secretary-Treasurer
all keep a proper membership certificate record, showing the name of
each member of the corporation and date of issuance, surrender,
transfer, termination, cancellation, or forfeiture. The
Secretary-Treasurer shall make all reports required by law and shall
perform such other duties as may be required by the corporation or the
board of directors. Upon the election of a successor, the
Secretary-Treasurer shall turn over to the successor all books and other
property belonging to the corporation that the Secretary Treasurer may
possess. The Secretary-Treasurer shall also perform such duties with
respect to the finances of the corporation as may be prescribed by the
board of directors.

ARTICLE XI

[Benefits and Duties of Members]{.underline}

Section 1. The corporation will install, maintain and operate a main
distribution pipeline or lines from the source of the water supply and
service lines from the main distribution pipeline or lines to the
property line of each member of the corporation, at which points,
designated as delivery points, meters to be purchased, installed, owned,
and maintained by the corporation shall be placed. The cost of the
service line or lines from the main distribution pipeline or lines of
the corporation to the property line of each member shall be paid by the
corporation. The corporation also may purchase and install a cutoff
valve in each service line from its main distribution line or lines,
such cutoff valve to be owned and maintained by the corporation and to
be installed on some portion of the service line owned by the
corporation. The corporation shall have the sole and exclusive right to
use of such cutoff valve. However, the provisions of this section shall
not be construed to require the acquisition or installation of meters or
cutoff valves where the directors determine under the circumstances of
the system and the nature of the membership that the use of either or
both devices is impractical, unnecessary to protect the system and the
rights of the membership, and/or economically not feasible.

(Guide 4) (Page 11) RD Instruction 1942-A

Section 2. Each member will be required, at the members expense, to have
dug a ditch for the connection of the service line or lines from the
property line of the member to member\'s dwelling or other portion of
the member\'s premises, and to purchase and have installed the portion
of the service line or lines from the member\'s property line to the
place of use on the member\'s premises. The member will maintain such
portion of such service line or lines which shall be owned by the
member, at the member\'s own expense. The corporation may, if the board
of directors so determines, purchase the pipe for and install such
portion of such service line or lines, the cost of which will, however,
be paid by the individual members. In addition, each member shall pay
such connection charge, if any, as may have been imposed by the board of
directors before such member will be entitled to receive water from the
system.

Section 3. Each member may be permitted to have additional service lines
from the corporation\'s water system in the discretion of the board of
directors upon proper application therefore and the tender or payment
not to exceed the then existing connection charge. The approval by the
board of directors of additional service lines to an existing member may
be made conditional upon such provisions as the board of directors
determines necessary to protect the interests of other members and to
allow for the orderly expansion and extension of the system. Each
service line shall connect with the corporation\'s water system at the
nearest available place to the place of desired use by the member if the
corporation\'s water system has sufficient capacity to permit the
delivery of water through a service line at that point without
interfering with the delivery of water through a prior service line. If
the corporation\'s water system is inadequate to permit the delivery of
water through a service line installed at such place without interfering
with the delivery of water through a prior service line, then such
service line shall be installed at such place designated by the
corporation.

Section 4. Each member may be permitted to purchase from the
corporation, pursuant to such agreement as may from time to time be
provided and required by the corporation, such water as is needed for
domestic, commercial, agricultural, industrial or other purposes as a
member may desire, subject, however, to the provisions of these bylaws
and to such rules and regulations as may be prescribed by the board of
directors. Each member shall be entitled to have delivered, through the
member\'s service lines, only such water as may be necessary to supply
the needs of each member, including the member\'s family, business,
agricultural or industrial requirements. The water delivered through
each service line may be metered separately, irrespective of the number
of service lines owned by a member.

(1-15-79) SPECIAL PN

RD Instruction 1942-A

(Guide 4) (Page 12)

Section 5. In the event the total water supply shall be insufficient to
meet all of the needs of the members or in the event there is a shortage
of water, the corporation may prorate the water available among the
various members on such basis as is deemed equitable by the board of
directors, and may also prescribe a schedule of hours covering use of
water for commercial, agricultural or industrial purposes by particular
members and require adherence thereto or prohibit the use of water for
commercial, agricultural or industrial purposes; provided, that if at
any time the total water supply shall be insufficient to meet all of the
needs of all of the members for domestic, livestock, commercial,
agricultural or industrial purposes, the corporation must first satisfy
all of the reasonable needs of the members for domestic purposes before
supplying any water for livestock purposes and must satisfy all of the
needs of all of the members for domestic and livestock purposes before
supplying any water for commercial or industrial purposes; and, provided
further, that where a member has more than one service line, the
corporation may cut off the flow of water to the nondomestic service
lines until such time as the supply of water from the system is
sufficient to meet the needs of all of the members for domestic and
livestock purposes. During such periods of shutoff of additional service
lines there shall be no minimum fee charged to the members having such
additional service lines and the cost, if any, of resuming the flow of
water to such additional service lines shall be borne by the
corporation.

Section 6. The board of directors shall, with the consent of Rural
Development, so long as it shall either hold any obligations or insure
any financing of the system, prior to the beginning of each calendar
year, determine the flat minimum monthly rate to be charged each member
during the following calendar year for a specified quantity of water,
such flat minimum monthly rate to be payable irrespective of whether any
water is used by a member during any month, the amount of additional
charges, if any, for additional water which may be supplied the members,
and the amount of penalty for late payments, and shall fix the date for
the payment of such charges. A member to be entitled to the delivery of
water shall pay such charges at the office designated by the corporation
at or prior to the dates fixed by the board of directors. The failure to
pay water charges duly imposed shall result in the automatic imposition
of the following penalties.

A. Nonpayment within ten days from the due date will be subject to a
penalty of ten (10) percent of the delinquent account, which percent may
be changed at the discretion of the board of directors.

(Guide 4) (Page 13) RD Instruction 1942-A

B. Nonpayment within thirty days from the due date will result in the
water being shut off from the member\'s property without any notice
thereof to such delinquent member. Upon the payment by the delinquent
member of past due water charges, penalties thereon and any reconnection
charge, such member shall be entitled to resumption of the water supply.
During the time of such suspension of water to a member, such member
shall have no right to vote in the affairs of the corporation.

Section 7. The board of directors shall be authorized to require each
member to enter into water users agreements which shall embody the
principles set forth in the foregoing provisions of these bylaws.

ARTICLE XII

[Distribution of Surplus Funds]{.underline}

Section 1. It is not anticipated that there will be any surplus funds or
net income to the corporation at the end of the fiscal year after
provisions are made for the payment of the expenses of operation and
maintenance and the funding of the various reserves for depreciation,
debt retirement, and other purposes, including those required by the
terms of any borrowing transaction. The occurrence in subsequent fiscal
years of surplus funds or net income above the requirements of the
corporation as above mentioned, including, if any, a reserve for
improvements and extension of the facilities shall be taken into
consideration by the board of directors in determining the water rates
to be charged the members.

Section 2. The organization will provide services substantially at cost.
Dividends shall not be paid on the basis of membership or shares of
stock in the organization. All funds from whatever sources remaining at
the end of the year in excess of those needed to meet current losses and
expenses will be distributed to members in proportion to the amount of
business done by them during the year subject to concurrence of Rural
Development or will be retained for such purposes as retiring
indebtedness incurred in acquiring assets, expanding the organization\'s
services, maintaining reserves for necessary purposes or reducing
subsequent year\'s water rates. However, the organization will maintain
records from which each member\'s rights and interest in the retained
funds and assets acquired with such funds in proportion to the member\'s
business with the organization can be determined at any time. Required
records for this purpose include financial records that show the
organization\'s revenues from all sources for each year and records,
such as bills or receipts, showing the amount of each member\'s business
annually with the organization.

(1-15-79) SPECIAL PN

RD Instruction 1942-A

(Guide 4) (Page 14)

Section 3. Upon dissolution, after paying off all debts and obligations,
members and former members will be entitled to receive their equitable
share of all the proceeds remaining to the extent practicable as
reflected by the records.

ARTICLE XIII

[Amendments]{.underline}

These bylaws may be repealed or amended by a vote of the majority of the
members present at any regular meeting of the corporation, or at any
special meeting of the corporation called for that purpose, except that
so long as any indebtedness is held by or guaranteed by Rural
Development, the members shall not have the power to change the purposes
of the corporation so as to decrease its rights and powers under the
laws of the State, or to waive any requirement of bond or other
provision for the safety and security of the property and funds of the
corporation or its members, or so to amend the bylaws as to effect a
fundamental change in the policies of the corporation without the prior
approval of Rural Development in writing.

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

We certify that the foregoing bylaws were duly adopted by the members on
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_, 19\_\_\_, that the same are in
full force and

Given under our hands and the seal of the corporation, this
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ day of
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_, 19\_\_\_\_.

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Secretary-Treasurer President

## o0o 

(Guide 5) RD Instruction 1942-A

## FINANCIAL FEASIBILITY REPORT

I [General]{.underline}.

The following may be used as a guide for the preparation of financial
feasibility reports as required for Rural Development financed
facilities. The guide contains minimal requirements and the report
writer is expected to fully disclose and analyze all significant factors
which will likely have a favorable or adverse effect on the financial
success of the proposed facility.

A [Need for the facility]{.underline}.

B [Existing facilities]{.underline}.

Explain current capacities, rates or usage, activities, suitability for
continued use, alternate usage, deficiencies in services, staffing,
physical conditions, and any other pertinent information.

C [Proposed facility]{.underline}.

1 Description of construction and renovation by component parts
including capacity of each component part and physical limiting factors.

2 Explain and document the need for the facility. Include comments
regarding the following:

a Service area

b Population trends

c Similar facilities and services in the area

d Usage trends

e Community support

f Regulatory agency approval

g Economy in the service area

h Analysis of staff and consultants

D [Financial information]{.underline}.

1 Explain all assumptions underlying the expected demand, use, and
projections of financial data, such as:

(1-15-79) SPECIAL PN

RD Instruction 1942-A

(Guide 5) (Page 2)

a Changes in usage

b All income and expense

c Rate structure

d Allowance for uncollectible accounts

e Depreciation life and method

f Description of long-term debts

2 Financial statements. The following financial statements must be
prepared reflecting five years projections:

a Balance sheet for all funds

b Statement of income and expense

c Statement of cash flow (cash receipts and disbursements)

d Comparison data for facilities in service area (latest year

only)

## o0o 

(Guide 6) RD Instruction 1942-A

[PRELIMINARY ARCHITECTURAL FEASIBILITY REPORT]{.underline}

I [GENERAL]{.underline}. The following may be used as a guide for
preparation of the Preliminary Architectural Feasibility Report as
required for Rural Development financed facilities.

A [Need for the facility]{.underline}.

B [Existing facilities]{.underline}. Describe - include condition,
adequacy, suitability for continued use and other pertinent information.

C [Proposed facility]{.underline}. General description of proposed
facility including design criteria adopted for continued use and other
pertinent information.

D [Building sites]{.underline}.

1 Amount of land required.

2 Location - Alternate locations.

3 Site plan.

4 Site suitability.

E [Cost estimate]{.underline}.

1 Development and construction.

2 Land and rights.

3 Legal.

4 Architect fees.

5 Interest.

6 Equipment.

7 Contingencies.

8 Refinancing.

9 Other (described).

(1-15-79) SPECIAL PN

RD Instruction 1942-A

(Guide 6) (Page 2)

F [Annual operating budget]{.underline}.

1 Income - Include rate schedule. Project income realistically.

2 Operation and maintenance costs - Project costs realistically. In the
absence of other data, base on actual costs of other existing facilities
of similar size and complexity. Include facts in the report to
substantiate operation and maintenance cost estimates.

G [Maps, drawings, sketches, and photographs]{.underline}.

1 Maps - Show locations, boundaries, elevations, population
distribution, existing and proposed facility, right-of-way, and land
ownership.

2 Drawings and sketches - Show preliminary design and layout elevations.

3 Photographs - As needed.

H [Construction problems]{.underline}. Discuss in detail - Include
information on items which may affect the cost of construction.

I [Conclusions and recommendations]{.underline}. Discuss possible
alternatives to proposed plans.

## oOo 

RD Instruction 1942-A

(Guide 7)

## [PRELIMINARY ENGINEERING REPORT]{.underline}

## [WATER FACILITY]{.underline}

I. [GENERAL]{.underline}. A Preliminary Engineering Report should
clearly describe the owner\'s present situation, analyze alternatives,
and propose a specific course of action, from an engineering
perspective. The level of effort required to prepare the report and the
depth of analysis within the report are proportional to the size and
complexity of the proposed project. Rural Development projects must be
modest in design, size and cost, and be constructed and operated in an
environmentally responsible manner. The following should be used as a
guide for the preparation of Preliminary Engineering Reports for Rural
Development financed water systems.

II\. [PROJECT PLANNING AREA]{.underline}. Describe the area under
consideration. The project planning area may be larger than the service
area determined to be economically feasible. The description should
include information on the following:

A. [Location]{.underline}. Maps, photographs, and sketches. These
materials should indicate legal and natural boundaries, major obstacles,
elevations, etc.

B. [Environmental Resources Present]{.underline}. Maps, photographs,
studies and narrative. These materials should provide information on the
location and significance of important land resources (farmland,
rangeland, forestland, wetlands and 100/500 year floodplains, including
stream crossings), historic sites, endangered species/critical habitats,
etc., that must be considered in project planning.

C. [Growth Areas and Population Trends]{.underline}. Specific areas of
concentrated growth should be identified. Population projections for the
project planning area and concentrated growth areas should be provided
for the project design period. These projections should be based on
historical records with justification from recognized sources.

III\. [EXISTING FACILITIES]{.underline}. Describe the existing
facilities including at least the following information:

A. [Location Map]{.underline}. Provide a schematic layout and general
service area map (may be identified on project planning area maps).

B. [History]{.underline}.

C. [Condition of Facilities]{.underline}. Describe present condition;
suitability for continued use; adequacy of water supply; and, if any
existing central facilities, the treatment, storage, and distribution
capabilities. Also, describe compliance with Safe Drinking Water Act and
applicable State requirements.

(07-08-92) PN 188

RD Instruction 1942-A

(Guide 7) (Page 2)

D. [Financial Status of any Operating Central Facilities]{.underline}.
Provide information regarding rate schedules, annual operating and
maintenance (o&m) cost, tabulation of users by monthly usage categories
and revenue received for last three fiscal years. Give status of
existing debts and required reserve accounts.

IV\. [NEED FOR PROJECT]{.underline}. Describe the needs in the following
order of priority:

A. [Health and Safety]{.underline}. Describe concerns and include
relevant regulations and correspondence from/to Federal, and State
regulatory agencies.

B. [System O&M]{.underline}. Describe the concerns and indicate those
with the greatest impact. Investigate water loss, management adequacy,
inefficient designs, and problem elimination prior to adding additional
capacity.

C. [Growth]{.underline}. Describe the reasonable growth capacity that is
necessary to meet needs during the planning period. Facilities proposed
to be constructed to meet future growth needs should generally be
supported by additional revenues. Consideration should be given to
desiging for phased capacity increases. Provide number of new customers
committed to this project.

V. [ALTERNATIVES CONSIDERED]{.underline}. This section should contain a
description of the reasonable alternatives that were considered in
planning a solution to meet the identified need. The description should
include the following information on each alternative:

A. [Description]{.underline}. Describe the facilities associated with
the alternative. Describe all feasible water supply sources and provide
comparison of such sources. Also, describe treatment, storage and
distribution facilities.

B. [Design Criteria]{.underline}. State the design parameters used for
evaluation purposes. These parameters must follow the criteria
established in RD Instruction 1942-A.

C. [Map]{.underline}. Schematic layout.

D. [Environmental Impacts]{.underline}. Do not duplicate the information
in the applicant\'s submittal of environmental information. Describe
unique direct and indirect impacts on floodplains, wetlands, other
important land resources, endangered species, historical and
archaeological properties, etc., as they relate to a specific
alternative. Rural Development must conduct an environmental assessment
prior to project approval.

E.  [Land Requirements]{.underline}. Identify sites and easements
    required. Further specify whether these properties are currently
    owned, to be acquired or leased.

F. [Construction Problems]{.underline}. Discuss concerns such as
subsurface rock, high water table, limited access, or other conditions
which may affect cost of construction or operation of facility.

RD Instruction 1942-A

(Guide 7) (Page 3)

G. [Cost Estimates]{.underline}.

1\. Construction.

2\. Non-Construction and Other Projects.

2\. Annual Operation and Maintenance.

3\. Present Worth, based on Federal discount rates.

H. [Advantages/Disadvantages]{.underline}. Describe the specific
alternative\'s ability to meet the owner\'s needs within its financial
and operational resources, comply with regulatory requirements,
compatibility with existing comprehensive area_wide development plans,
and satisfy public and environmental concerns. A matrix rating system
could be useful in displaying the information.

VI\. [PROPOSED PROJECT (RECOMMENDED ALTERNATIVE)]{.underline}. This
section should contain a fully developed description of the proposed
project based on the preliminary description under the evaluation of
alternatives. At least the following information should be included:

A. [Project Design]{.underline}.

1\. Water Supply. Include requirements for quality and quantity.
Describe recommended source, including site.

2\. Treatment. Describe process in detail and identify location of plant
and site of any process discharges.

3\. Storage. Identify size, type and site location.

4\. Pumping Stations. Identify size, type, site location and any special
power requirements.

5\. Distribution Layout. Identify general location of line improvements:
lengths, sizes and key components.

6\. Hydraulic Calculations. This information should provide sufficient
detail in a tabular format to determine compliance with Rural
Development design requirements. Automation tools may be used by the
engineer. The submittal should include a map with a list of nodes and
pipes and the associated characteristics, such as elevation of node,
pipe diameter, pipe segment length, reservoir elevation, domestic and
industrial water demands, fire flow, etc.

B. [Cost Estimate]{.underline}. Provide an itemized estimate of the
project cost based on the anticipated period of construction. Include
development and construction, land and rights, legal, engineering,
interest, equipment, contingencies, refinancing, and other costs
associated with the proposed project. (For projects containing both
water and waste disposal systems, provide a separate cost estimate for
each system.)

(07-08-92) PN 188

RD Instruction 1942-A

(Guide 7) (Page 4)

C. [Annual Operating Budget]{.underline}.

1\. Income. Provide a rate schedule. Project income realistically, based
on user billings, water treatment contracts, and other sources of
incomes. In the absence of other reliable information, for budget
purposes, base water use on 60 gallons per capita per day, or 150
gallons per residential_sized connection per day, or 4,500 gallons per
residential_sized connection per month. When large agricultural or
commercial users are projected, the report should include facts to
substantiate such projections and evaluate the impact of such users on
the economic viability of the project. The number of users should be
based on equivalent dwelling units, which is the level of service
provided to a typical rural residential dwelling.

2\. Operations and Maintenance Costs. Project costs realistically. In
the absence of other reliable data, base on actual costs of other
existing facilities of similar size and complexity. Include facts in the
report to substantiate operation and maintenance cost estimates. Include
salaries, wages, taxes, accounting and auditing fees, legal fees,
interest, utilities, gasoline, oil and fuel, insurance, repairs and
maintenance, supplies, chemicals, office supplies and printing, and
miscellaneous.

3\. Capital Improvements. If purchasing water or if water is being
treated by other, these costs should be included in o&m costs.

4\. Debt repayments. Describe existing and proposed project financing
from all sources. All estimates of Rural Development funding should be
based on loans, not grants. Rural Development will evaluate the proposed
project for the possible inclusion of Rural Development grant funds.

5\. Reserve. Unless otherwise required by State statute establish at
one-tenth (1/10) of annual debt repayment requirement.

VII\. [CONCLUSIONS AND RECOMMENDATIONS]{.underline}. Provide any
additional findings and recommendations that should be considered in
development of the project. This may include recommendations for special
studies, highlight the need for special coordination, a recommended plan
of action to expedite project development, etc.

## oOo 

RD Instruction 1942-A

(Guide 8)

## [PRELIMINARY ENGINEERING REPORT]{.underline}

## 

## [SEWERAGE SYSTEMS]{.underline}

I. [GENERAL]{.underline}. A Preliminary Engineering Report should
clearly describe the owner\'s present situation, analyze alternatives,
and propose a specific course of action, from an engineering
perspective. The level of effort required to prepare the report and the
depth of analysis within the report are proportional to the size and
complexity of the proposed project. Rural Development projects must be
modest in design, size and cost, and constructed and operated in an
environmentally responsible manner. The following should be used as a
guide for the preparation of Preliminary Engineering Reports for Rural
Development financed wastewater systems.

II\. [PROJECT PLANNING AREA]{.underline}. Describe the area under
consideration. The project planning area may be larger than the service
area determined to be economically feasible. The description should
include information on the following:

A. [Location]{.underline}. Maps, photographs, and sketches. These
materials should indicate legal and natural boundaries, major obstacles,
elevations, etc.

B. [Environmental resources present]{.underline}. Maps, photographs,
studies and narrative. These materials should provide information on the
location and significance of important land resources (farmland,
rangeland, forestland, wetlands and 100/500 year floodplains, including
stream crossings), historic sites, endangered species/critical habitats,
etc. that must be considered in project planning.

C. [Growth areas and population trends]{.underline}. Specific areas of
concentrated growth should be identified. Population projections for the
project planning area and concentrated growth areas should be provided
for the project design period. These projections should be based on
historical records with justification from recognized sources.

III\. [EXISTING FACILITIES]{.underline}. Describe the existing
facilities, including at least the following information:

A. [Location map]{.underline}. Provide a schematic layout and general
service area map (may be identified on project planning area maps).

B. [History]{.underline}.

C. [Condition of facilities]{.underline}. Describe present condition;
suitability for continued use; adequacy of current facilities; and, if
there are any existing central facilities, the treatment, storage, and
disposal capabilities. Also, describe compliance with Clean Water Act
and other applicable State requirements.

(07-08-92) PN 188

RD Instruction 1942-A

(Guide 8) (Page 2)

D. [Financial status of any operating central facilities]{.underline}.
Provide information regarding rate schedules, annual operating and
maintenance cost (O&M), tabulation of users by monthly usage categories
and revenue received for last three fiscal years. Give status of
existing debts, and required reserve accounts.

IV\. [NEED FOR PROJECT]{.underline}. Describe the needs in the following
order of priority:

A. [Health and safety]{.underline}. Describe concerns and include
relevant regulations and correspondence from/to Federal, and State
regulatory agencies.

B. [System O&M]{.underline}. Describe the concerns and indicate those
with the greatest impact. Investigate infiltration and inflow,
management adequacy, inefficient designs, and problem elimination prior
to adding additional capacity.

C. [Growth]{.underline}. Describe the reasonable growth capacity that is
necessary to meet needs during the planning period. Facilities proposed
to be constructed to meet future growth needs should generally be
supported by additional revenues. Consideration should be given to
designing for phased capacity increases. Provide number of new customers
committed to this project.

V. [ALTERNATIVES CONSIDERED]{.underline}. This section should contain a
description of the reasonable alternatives that were considered in
planning a solution to meet the identified need. The description should
include the following information on each alternative:

A. [Description]{.underline}. Describe the facilities associated with
the alternative. Describe all feasible wastewater treatment technologies
and provide comparison of such. Also, describe collection facilities. A
feasible alternative may be a combination of central facilities and
management of on-site facilities or only the latter.

B. [Design criteria]{.underline}. State the design parameters used for
evaluation purposes. These parameters must follow the criteria
established in RD Instruction 1942-A.

C. [Map]{.underline}. Schematic layout.

D. [Environmental impacts]{.underline}. Do not duplicate the information
in the applicant\'s submittal of environmental information. Describe
unique direct and indirect impacts on floodplains, wetlands, other
important land resources, endangered species, historical and
archaeological properties, etc., as they relate to a specific
alternative. Rural Development must conduct an environmental assessment
prior to project approval.

RD Instruction 1942-A

(Guide 8) (Page 3)

E. [Land requirements]{.underline}. Identify sites and easements
required. Further specify whether these properties are currently owned,
to be acquired, or leased.

F. [Construction problems]{.underline}. Discuss concerns such as
subsurface rock, high water table, limited access, or other conditions
which may affect cost of construction or operation of facility.

G. [Cost estimates (Separate estimates for collection and
treatment)]{.underline}.

1\. Construction.

2\. Non-Construction and Other Projects.

3\. Annual Operation and Maintenance.

4\. Present Worth, based on Federal discount rates.

H. [Advantages/disadvantages]{.underline}. Describe the specific
alternative\'s ability to meet the owner\'s needs within its financial
and operational resources, comply with regulatory requirements,
compatibility with existing comprehensive area_wide development plans,
and satisfy public and environmental concerns. A matrix rating system
could be useful in displaying the information.

VI\. [PROPOSED PROJECT (RECOMMENDED ALTERNATIVE)]{.underline}. This
section should contain a fully developed description of the proposed
project based on the preliminary description under the evaluation of
alternatives. At least the following information should be included:

A. Project design.

1\. Treatment. Describe process in detail and identify location of plant
and site of any discharges.

2\. Pumping Stations. Identify size, type, site location and any special
power requirements.

3\. Collection System Layout. Identify general location of line
improvements: lengths, sizes and key components.

4\. Hydraulic Calculations. This information should provide sufficient
detail in a tabular format to determine compliance with Rural
Development design requirements. Automation tools may be used by the
engineer. The submittal should include a map with a list of manholes and
pipes and the associated characteristics, such as elevation of inverts,
pipe diameter, pipe segment length, etc.

(07-08-92) PN 188

RD Instruction 1942-A

(Guide 8) (Page 4)

B. [Cost estimate]{.underline}. Provide an itemized estimate of the
project cost based on the anticipated period of construction. Include
development and construction, land and rights, legal, engineering,
interest, equipment, contingencies, refinancing, and any other costs
associated with the proposed project. (For projects containing both
water and waste disposal systems, provide a separate cost estimate for
each system.)

C. [Annual operating budget]{.underline}.

1\. Income. Provide a rate schedule. Project income realistically, based
on user billings, wastewater treatment contracts, and other sources of
income. In the absence of other reliable information, for budget
purposes, base wastewater generation on 60 gallons per capita per day,
or 150 gallons per residential_sized connection per day, or 4,500
gallons per residential_sized connection per month. When large users are
projected, the report should include facts to substantiate such
projections and evaluate the impact of such users on the economic
viability of the project. The number of users should be based on
equivalent dwelling units, which is the level of service provided to a
typical rural residential dwelling.

2\. Operations and Maintenance Costs. Project costs realistically. In
the absence of other reliable data, base on actual costs of other
existing facilities of similar size and complexity. Include facts in the
report to substantiate operation and maintenance cost estimates. Include
salaries, wages, taxes, accounting and auditing fees, legal fees,
interest, utilities, gasoline, oil and fuel, insurance, repairs and
maintenance, supplies, chemicals, office supplies and printing, and
miscellaneous.

3\. Capital Improvements.

4\. Debt Repayments. Describe existing and proposed project financing
from all sources. All estimates of Rural Development funding should be
based on loans, not grants. Rural Development will evaluate the proposed
project for the possible inclusion of Rural Development grant funds.

5\. Reserve. Unless otherwise required by State statute establish at
one-tenth (1/10) of annual debt repayment requirement.

VII\. [CONCLUSIONS AND RECOMMENDATIONS]{.underline}. Provide any
additional findings and recommendations that should be considered in
development of the project. This may include recommendations for special
studies, highlight the need for special coordination, a recommended plan
of action to expedite project development, etc.

oOo

RD Instruction 1942-A

(Guide 9)

## [PRELIMINARY ENGINEERING REPORT]{.underline}

## [SOLID WASTE DISPOSAL SYSTEMS]{.underline}

I. [GENERAL]{.underline}. A Preliminary Engineering Report should
clearly describe the owner\'s present situation, analyze alternatives,
and propose a specific course of action, from an engineering
perspective. The level of effort required to prepare the report and the
depth of analysis within the report are proportional to the size and
complexity of the proposed project. Rural Development projects must be
modest in design, size and cost, and constructed and operated in an
environmentally responsible manner. The following should be used as a
guide for the preparation of Preliminary Engineering Reports for Rural
Development financed solid waste disposal facilities.

II\. [PROJECT PLANNING AREA]{.underline}. Describe the area under
consideration. The project planning area may be larger than the service
area determined to be economically feasible. The description should
include information on the following:

A. [Location]{.underline}. Maps, photographs, and sketches. These
materials should indicate legal and natural boundaries, major obstacles,
etc.

B. [Environmental resources present]{.underline}. Maps, photographs,
studies and narrative. These materials should provide information on the
location and significance of important land resources (farmland,
rangeland, forestland, wetlands and 100/500 year floodplains) historic
sites, endangered species/critical habitats, etc., that must be
considered in project planning.

C. [Growth areas and population trends]{.underline}. Specific areas of
concentrated growth should be identified. Population projections for the
project planning area and concentrated growth areas should be provided
for the project design period. These projections should be based on
historical records with justification from recognized sources.

III\. [EXISTING FACILITIES]{.underline}. Describe the existing
facilities, including at least the following information:

A. [Location map]{.underline}. Provide a schematic layout and general
service area map (may be identified on project planning area maps).

B. [History]{.underline}.

C. [Condition of facilities]{.underline}. Describe present condition and
suitability for continued use and any existing central facilities used
for collection, storage, and disposal. Also, describe compliance with
applicable Federal and State requirements.

(07-08-92) PN 188

RD Instruction 1942-A

(Guide 9) (Page 2)

D. [Financial status of any operating central facilities]{.underline}.
Provide information regarding rate schedules, annual operating and
maintenance cost (O&M), tabulation of users by monthly usage categories
and revenue received for last three fiscal years. Give status of
existing debts and required reserve accounts.

IV\. [NEED FOR PROJECT]{.underline}. Describe the needs in the following
order of priority:

A. [Health and safety]{.underline}. Describe concerns and include
relevant regulations and correspondence from/to Federal, and State
regulatory agencies.

B. [System O&M]{.underline}. Describe the concerns and indicate those
with the greatest impact. Investigate management adequacy, inefficient
designs, and problem elimination prior to adding additional capacity.

C. [Growth]{.underline}. Describe the reasonable growth capacity that is
necessary to meet needs during the planning period. Facilities proposed
to be constructed to meet future growth needs should generally be
supported by additional revenues. Consideration should be given to
designing for phased capacity increases. Provide number of new customers
committed to this project.

V. [ALTERNATIVES CONSIDERED]{.underline}. This section should contain a
description of the reasonable alternatives that were considered in
planning a solution to meet the identified need. The description should
include the following information on each alternative:

A. [Description]{.underline}. Describe the facilities associated with
the alternative, including collection, storage and disposal facilities.

B. [Design criteria]{.underline}. State the design parameters used for
evaluation purposes. These parameters must follow the criteria
established in RD Instruction 1942-A.

C. [Map]{.underline}. Schematic layout.

D. [Environmental impacts]{.underline}. Do not duplicate the information
in the applicant\'s submittal of environmental information. Describe
unique direct and indirect impacts on floodplains, wetlands, other
important land resources, endangered species, historical and
archaeological properties, etc., as they relate to a specific
alternative. Rural Development must conduct an environmental assessment
prior to project approval.

E. [Land requirements]{.underline}. Identify sites and easements
required. Further specify whether these properties are currently owned,
to be acquired, or leased.

RD Instruction 1942-A

(Guide 9) (Page 3)

F. [Construction problems]{.underline}. Discuss concerns such as
subsurface rock, high water table, limited access, or other conditions
which may affect cost of construction or operation of facility.

G. [Cost estimates]{.underline}.

1\. Construction.

2\. Non-Construction and Other Projects.

3\. Annual Operation and Maintenance.

4\. Present Worth, based on Federal discount rates.

H. [Advantages/disadvantages]{.underline}. Describe the specific
alternative\'s ability to meet the owner\'s needs within its financial
and operational resources, comply with regulatory requirements,
compatibility with existing comprehensive area_wide development plans,
and satisfy public and environmental concerns. A matrix rating system
could be useful in displaying the information.

VI\. [PROPOSED PROJECT (RECOMMENDED ALTERNATIVE)]{.underline}. This
section should contain a fully developed description of the proposed
project based on the preliminary description under the evaluation of
alternatives. At least the following information should be included:

A. [Project design]{.underline}.

1\. Collection. Describe process in detail and identify quantities of
material, length of transport, and any special handling requirements.
Describe equipment required and plans for equipment rotation.

2\. Storage. If any, identify size, type and site location.

3\. Disposal System. Describe process in detail and identify permit
requirements, quantities of material, recycling processes, location of
plant and site of any process discharges.

B. [Cost estimate]{.underline}. Provide an itemized estimate of the
project cost based on the anticipated period of construction. Include
development and construction, land and rights, legal, engineering,
interest, equipment, contingencies, refinancing, and any other costs
associated with the proposed project.

(07-08-92) PN 188

RD Instruction 1942-A

(Guide 9) (Page 4)

C. [Annual operating budget]{.underline}.

1\. Income. Provide a rate schedule. Project income realistically, based
on user billings, disposal contracts and other sources of income. When
large users are projected, the report should include facts to
substantiate such projections and evaluate the impact of such users on
the economic viability of the project.

2\. Operations and Maintenance Costs. Project costs realistically. In
the absence of other reliable data, base on actual costs of other
existing facilities of similar size and complexity. Include facts in the
report to substantiate operation and maintenance cost estimates. Include
salaries, wages, taxes, accounting and auditing fees, legal fees,
interest, utilities, gasoline, oil and fuel, insurance, repairs and
maintenance, supplies, chemicals, office supplies and printing, and
miscellaneous.

3\. Capital Improvements.

4\. Debt Repayments. Describe existing and proposed project financing
from all sources. All estimates of Rural Development funding should be
based on loans, not grants. Rural Development will evaluate the proposed
project for the possible inclusion of Rural Development grant funds.

5\. Reserve. Unless otherwise required by State statute establish at
one-tenth (1/10) of annual debt repayment requirement.

VII\. [CONCLUSIONS AND RECOMMENDATIONS]{.underline}. Provide any
additional findings and recommendations that should be considered in
development of the project. This may include recommendations for special
studies, highlight the need for special coordination, a recommended plan
of action to expedite project development, etc.

## oOo 

RD Instruction 1942-A

(Guide 10)

## [PRELIMINARY ENGINEERING REPORT]{.underline}

## 

## [STORM WASTE-WATER DISPOSAL]{.underline}

I. [GENERAL]{.underline}. A Preliminary Engineering Report should
clearly describe the owner\'s present situation, analyze alternatives,
and propose a specific course of action, from an engineering
perspective. The level of effort required to prepare the report and the
depth of analysis within the report are proportional to the size and
complexity of the proposed project. Rural Development projects must be
modest in design, size and cost, and constructed and operated in an
environmentally responsible manner. The following should be used as a
guide for the preparation of Preliminary Engineering Reports for Rural
Development financed storm water facilities.

II\. [PROJECT PLANNING AREA]{.underline}. Describe the area under
consideration. The project planning area may be larger than the service
area determined to be economically feasible. The description should
include information on the following:

A. [Location]{.underline}. Maps, photographs, and sketches. These
materials should indicate legal and natural boundaries, major obstacles,
elevations, etc.

B. [Environmental resources present]{.underline}. Maps, photographs,
studies and narrative. These materials should provide information on the
location and significance of important land resources (farmland,
rangeland, forestland, wetlands and 100/500 year floodplains) historic
sites, endangered species/critical habitats, etc. that must be
considered in project planning.

C. [Growth areas and population trends]{.underline}. Specific areas of
concentrated growth should be identified. Population projections for the
project planning area and the concentrated growth areas should be
provided for the project design period. These projections should be
based on historical records with justification from recognized sources.

III\. [EXISTING FACILITIES]{.underline}. Describe the existing
facilities, including at least the following information:

A. [Location map]{.underline}. Provide a schematic layout and general
service area map (may be identified on project planning area maps).

B. [History]{.underline}.

C. [Condition of facilities]{.underline}. Describe present condition and
suitability for continued use. Also, describe compliance with applicable
Federal and State requirements.

(07-08-92) PN 188

RD Instruction 1942-A

(Guide 10) (Page 2)

D. [Financial status of any operating facilities]{.underline}. Provide
information regarding annual operating and maintenance cost and revenue
received for last three fiscal years. Give status of existing debts and
required reserve accounts.

IV\. [NEED FOR PROJECT]{.underline}. Describe the needs in the following
order of priority:

A. [Health and safety]{.underline}. Describe concerns and include
relevant regulations and correspondence from/to Federal, and State
regulatory agencies.

B. [System O&M]{.underline}. Describe the concerns and indicate those
with the greatest impact. Investigate management adequacy, inefficient
designs, and problem elimination prior to adding additional capacity.

C. [Growth]{.underline}. Describe the reasonable growth capacity that is
necessary to meet needs during the planning period. Facilities proposed
to be constructed to meet future growth needs should generally be
supported by additional revenues. Consideration should be given to
designing for phased capacity increases.

V. [ALTERNATIVES CONSIDERED]{.underline}. This section should contain a
description of the reasonable alternatives that were considered in
planning a solution to meet the identified need. The description should
include the following information on each alternative:

A. [Description]{.underline}. Describe the facilities associated with
the alternative. Also, describe collection, storage and disposal
facilities.

B. [Design criteria]{.underline}. State the design parameters used for
evaluation purposes. These parameters must follow the criteria
established in RD Instruction 1942-A.

C. [Map]{.underline}. Schematic layout.

D. [Environmental impacts]{.underline}. Do not duplicate the information
in the applicant\'s submittal of environmental information. Describe
unique direct and indirect impacts on floodplains, wetlands, other
important land resources, endangered species, historical and
archaeological properties, etc., as they relate to a specific
alternative. Rural Development must conduct an environmental assessment
prior to project approval.

E. [Land requirements]{.underline}. Identify sites and easements
required. Further specify whether these properties are currently owned,
to be acquired or leased.

F. [Construction problems]{.underline}. Discuss concerns such as
subsurface rock, high water table, limited access, or other conditions
which may affect cost of construction or operation of facility.

RD Instruction 1942-A

(Guide 10) (Page 3)

G. [Cost estimates]{.underline}.

1\. Construction.

2\. Non-Construction and Other Projects.

3\. Annual Operation and Maintenance.

4\. Present Worth, based on Federal discount rates.

H. [Advantages/disadvantages]{.underline}. Describe the specific
alternative\'s ability to meet the owner\'s needs within its financial
and operational resources, comply with regulatory requirements,
compatibility with existing comprehensive area_wide development plans,
and satisfy public and environmental concerns. A matrix rating system
could be useful in displaying the information.

VI\. [PROPOSED PROJECT (RECOMMENDED ALTERNATIVE)]{.underline}. This
section should contain a fully developed description of the proposed
project based on the preliminary description under the evaluation of
alternatives. At least the following information should be included:

A. [Project design]{.underline}.

1\. Collection Layout. Identify general location of line improvements:
lengths, sizes and key components.

2\. Pumping Stations. Identify size, type, site location and any special
power requirements.

3\. Storage. Identify size, type and site location.

4\. Treatment, if required. Describe process in detail and identify
location of plant and site of any process discharges in addition to
storm water.

5\. Hydraulic Calculations. This information should provide sufficient
detail in a tabular format to determine compliance with Rural
Development design requirements. Rural Development may use automation
tools to evaluate collection and storage systems. The submittal should
include a map with a list of inlets and pipes and the associated
characteristics, such as elevation of inverts, pipe diameter, pipe
segment length, reservoir elevation, etc.

B. [Cost estimate]{.underline}. Provide an itemized estimate of the
project cost based on the anticipated period of construction. Include
development and construction, land and rights, legal, engineering,
interest, equipment, contingencies, refinancing, and any other costs
associated with the proposed project.

(07-08-92) PN 188

RD Instruction 1942-A

(Guide 10) (Page 4)

C. [Annual operating budget]{.underline}.

1\. Income. Project income realistically.

2\. Operations and Maintenance Costs. Project costs realistically. In
the absence of other reliable data, base on actual costs of other
existing facilities of similar size and complexity. Include facts in the
report to substantiate operation and maintenance cost estimates. Include
salaries, wages, taxes, accounting and auditing fees, legal fees,
interest, utilities, gasoline, oil and fuel, insurance, repairs and
maintenance, supplies, chemicals, office supplies and printing
contracts, and miscellaneous.

3\. Capital Improvements.

4\. Debt Repayments. Describe existing and proposed project financing
from all sources. All estimates of Rural Development funding should be
based on loans, not grants. Rural Development will evaluate the proposed
project for the possible inclusion of Rural Development grant funds.

5\. Reserve. Unless otherwise required by State statute establish at
one-tenth (1/10) of annual debt repayment requirement.

VII\. [CONCLUSIONS AND RECOMMENDATIONS]{.underline}. Provide any
additional findings and recommendations that should be considered in
development of the project. This may include recommendations for special
studies, highlight the need for special coordination, a recommended plan
of action to expedite project development, etc.

## oOo 

RD Instruction 1942-A

(Guide 11)

## DAILY INSPECTION REPORT

Job No.\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\(1\)

Borrower Information

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
Date\_\_\_\_\_\_\_\_\_\_\_\_\_

Name

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
Report No.\_\_\_\_\_\_\_

Street County State Zip (2)

Project Information

Type of Project \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ Project
Location \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Contractor(s) Name \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
Superintendent \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Weather Conditions
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Description of Work Accomplished
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Items of Interest Occurred
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Delays or Work Restraining Orders
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Change Orders
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Additional Remarks
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

(Include problems, delays and controversies on orders)

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Resident Inspector

BY \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

[Note to Resident Inspector]{.underline}:

The original Daily Inspection Report shall be submitted to the borrower
at intervals not exceeding one (1) week with copies of the report
furnished the project engineer, Contractor(s), and Rural Development
District Director.

\(1\) Assigned by Rural Development.

\(2\) Assigned by Resident Inspector in consecutive order beginning with
No. 1.

oOo

(1-15-79) SPECIAL PN

(Guide 12) RD Instruction 1942-A

## MEMORANDUM OF UNDERSTANDING

## BETWEEN

## THE ECONOMIC DEVELOPMENT ADMINISTRATION -

## DEPARTMENT OF COMMERCE

## AND

## RURAL DEVELOPMENT -

## DEPARTMENT OF AGRICULTURE

## PERTAINING TO

## EDA PUBLIC WORKS PROJECTS ASSISTED BY AN FHA LOAN

I [INTRODUCTION]{.underline}. In order to provide efficient service to
Grantee/ Borrowers, eliminate duplication of effort, and reduce
administrative costs during the construction of projects jointly
financed by a grant from the Economic Development Administration and a
loan from Rural Development, EDA Area Directors and FHA State Directors
are authorized to enter into Project Management Agreements, as they deem
appropriate, covering the project construction phase. Projects involving
an EDA supplementary grant to an FHA grant are covered under a separate
Memorandum.

II [GENERAL]{.underline}.

A Prior to authorizing advertisement for bids, it is the responsibility
of each agency to assure the other that all approval conditions have
been met.

B The total project cost for the purpose of this Memorandum will include
only those costs eligible for EDA financial assistance.

C Any changes in location, scope, line items or cost of the project
shall be approved by both EDA and FHA.

D All construction contracts for project work financed in any part by
EDA shall contain binding provisions for payment of prevailing wage
rates as determined by the Secretary of Labor in accordance with the
Davis-Bacon Act, as amended (40 USC 267a - 276a-5).

E Certifications:

1\. EDA will obtain required certifications from the Federal

Water Pollution Control Administration under Section 106 of Public Law
89-136.

(1-15-79) SPECIAL PN

RD Instruction 1942-A

(Guide 12) (Page 2)

2\. FHA will be responsible for assuring that the applicant has

obtained the required certifications from the State Water Pollution
Control Agency under Section 306(a) (9&10) of the ConsolidatedRural
Development Act of 1961 (Public Law 87-128, as amended).

F All bidders and subcontractors must sign certifications of compliance
with Executive Order 11246 (EDA Forms 119 and 120).

III [SUGGESTED ITEMS FOR INCLUSION IN A PROJECT MANAGEMENT
AGREEMENT]{.underline}.

A EDA will have primary responsibility for managing the project during
the construction phase.

B The EDA Area Office will notify the FHA State Director of the date,
time and location of the Planning Conference.

C FHA will be represented at the Planning Conference.

D EDA will obtain FHA concurrence of the approval of final plans,
specifications and bid documents.

E EDA will notify FHA of the date of advertising for construction bids.

F EDA will notify FHA of the date, time and location of bid opening.

G FHA will be represented at the bid opening.

H Both EDA and FHA will concur in the awarding of construction
contracts.

I EDA will notify FHA of the date, time and location of the Pre
Construction Conference.

J EDA will notify FHA of the date of start of construction.

K EDA will notify FHA of any unusual problems which may be encountered
during the construction phase.

(Guide 12) (Page 3) RD Instruction 1942-A

L FHA will concur on the progress of construction and final inspection.
EDA will furnish FHA with copies of Progress Reports and will permit FHA
to make any additional inspections necessary in connection with the FHA
loan.

M EDA will advise the State Director of the date and time of final
inspection. Such inspection will be conducted by both EDA and FHA.

N The FHA County Supervisor will establish an FHA Supervised Bank
Account for the Grantee/Borrower and will be responsible for
disbursement of both the EDA grant funds and FHA loan funds.

a EDA will be responsible for timely deposits of the grant

funds. However, since EDA grant funds are not made available until all
construction contracts have been awarded, and then only for project
costs incurred, it is recognized that some, if not all, of the FHA loan
funds may be disbursed before receipt of any or all of the EDA grant
funds.

b Funds will be disbursed only on certification of the EDA

field engineer of \"Costs incurred to date.\"

O Final determination of the eligibility of costs incurred will be made
by EDA after completion of the project and final audit. The EDA Area
Office will furnish the FHA State Director a copy of any EDA audit
findings.

IV Services performed by either agency for the other shall be without
cost to the other agency.

FOR THE FOR THE

ECONOMIC DEVELOPMENT FARMERS HOME

ADMINISTRATION ADMINISTRATION

[/s/ Ross Davis]{.underline}\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ [/s/
Howard Bertsch]{.underline}\_\_\_\_\_\_\_\_

Assistant Secretary for Administrator

Economic Development

[August 27, 1968]{.underline}\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ [October
11, 1968]{.underline}\_\_\_\_\_\_\_\_\_\_

Date Date

## oOo

(1-15-79) SPECIAL PN

RD Instruction 1942-A

(Guide 13)

## MEMORANDUM OF UNDERSTANDING

## BETWEEN

## THE ECONOMIC DEVELOPMENT ADMINISTRATION -

## DEPARTMENT OF COMMERCE

## AND

## RURAL DEVELOPMENT -

## DEPARTMENT OF AGRICULTURE

## REGARDING

## SUPPLEMENTARY GRANT ASSISTANCE FOR THE CONSTRUCTION OF

## PUBLIC WORKS AND DEVELOPMENT FACILITIES

I [INTRODUCTION]{.underline}.

1 Section 101 of the Public Works and Economic Development Act of 1965
(Public Law 89-136, as amended) authorizes the Secretary of Commerce to
make direct grants, grants supplementary thereto, and grants
supplementary to basic grants from other Federal programs.
Notwithstanding any requirement that may otherwise be applicable to the
Federal program involved, supplementary grants shall be used for the
sole purpose of increasing the Federal contribution to specific projects
in eligible areas under such programs above the fixed maximum portion of
the cost of such project otherwise authorized by the applicable law, but
in no event shall the non-Federal share of the aggregate cost of any
project be less than 20 percent of such cost.

2 In determining the amount of any supplementary grant available to any
project, consideration will be given to the (a) relative needs of the
area, (b) the nature of the project to be assisted, and (c) the amount
of such fair user charges or other revenues as the project may
reasonably be expected to generate in excess of those which would
amortize the local share of initial costs and provide for its successful
operation and maintenance (including depreciation).

II [PROJECTS RECEIVING A BASIC GRANT FROM RURAL DEVELOPMENT UNDER THE
CONSOLIDATED FmHA ACT OF 1961 (Public Law 87-128, as
amended)]{.underline}:

1 If an area qualifies under Public Law 89-136, as amended, for a
maximum grant rate in excess of the fixed maximum portion authorized
under Public Law 87-128, as amended, for development costs, as defined
in Section 306(a) (4) (A) of that Act, the applicant may request
additional grant funds from the Economic Development Administration to
supplement the basic grant requested from Rural Development. Total
Federal participation may not exceed the maximum grant rate established
by EDA for the area in which the project is located.

(1-15-79) SPECIAL PN

RD Instruction 1942-A

(Guide 13) (Page 2)

2 If the amount of grant assistance requested from FHA is available and
the project appears approvable, the Rural Development State Office will
refer the

applicant to the appropriate EDA Area Office to discuss the proposed
project and the need for supplementary grant assistance.

3 At the time EDA decides it will consider the project for a
supplementary grant, it will advise FHA and furnish the applicant with
EDA application forms, together with pertinent instructions, and advise
the applicant to show on these forms the amount of the basic grant being
requested from FHA. The method of financing and project costs shown on
both the FHA application and the EDA application must be identical.

4 Prior to EDA approval of a supplementary grant, FHA will provide EDA
with the following statements:

a That the estimated cost of the project is reasonable and

that the requested basic grant and the supplementary grant, together
with the funds to be supplied by the applicant, are, in Rural
Development\'s judgment, sufficient to complete the project.

b That the funds to be supplied by the applicant are

available or that FHA is reasonably satisfied that the applicant has the
capability of supplying such funds.

c That FHA is reasonably satisfied that the applicant will

provide sufficient operating funds to assure the successful and
continuing operation of the facility.

d That adequate safeguards have been established to eliminate

the possibility of the supplementary grant exceeding the authorized
percentage relationship to the total cost of the project.

e That the amount of the supplementary grant will be reduced

to the extent actual costs of a project fall below estimated costs;
however, the savings in such cases may be applied to a proportionate
reduction of the supplementary grant and basic grant when necessary to
conform to limitations imposed by statute.

f That the amount of the FHA grant for the particular project

is as great as would have been approved in the absence of the
supplementary grant. If the basic grant is less than the 50% maximum
portion authorized under Public Law 87-128, as amended, FHA will include
a statement certifying that grant funds uncommitted for its current
fiscal year are insufficient to permit approval of the maximum
authorized portion.

RD Instruction 1942-A

(Guide 13) (Page 3)

g That the construction contract(s) for project work will

contain binding provisions for payment of prevailing wage rates as
determined by the Secretary of Labor in accordance with the Davis-Bacon
Act as amended, (40 USC 276a - 276a-5).

5 If EDA will not make a supplementary grant, it will advise FHA and the
applicant accordingly.

6 Prior to approval of the supplementary grant, EDA will obtain from the
applicant and substantial beneficiaries, if any, executed assurances of
compliance with the regulations of Title 15, Subtitle A, Part 8, of the
Code of Federal Regulations issued by the Department of Commerce in
effectuation of Title VI of the Civil Rights Act of 1964. EDA will also
obtain executed Certificates of Non-Relocation from the applicant and
substantial beneficiaries, where applicable.

7 When EDA approves a supplementary grant, it will inform FHA of such
approval and will take immediate steps to transfer the funds to the U.
S. Treasury account of Rural Development on Standard Form 1151. At the
same time, EDA will inform the applicant that an EDA supplementary grant
has been authorized, and that the EDA Grant Offer, together with the
terms and conditions of the EDA Offer, will be transmitted to the
applicant by FHA.

8 FHA will tender the EDA Grant Offer within a sufficient period of time
to allow acceptance of the offer before the end of the fiscal year
within which the EDA project has been approved. The FHA State Director
will notify the EDA Area Director immediately upon receipt of acceptance
of the offer.

9 After acceptance of the EDA grant offer, FHA will assume full
responsibility for the supervision of the project and disbursement of
the grant funds.

10 FHA will supply the EDA Area Office at reasonable intervals with
progress reports on the project and advise the Area Office whenever
unusual problems are encountered. The EDA Area Office will advise the
FHA State Office of the reports needed.

11 FHA will comply with the reporting requirements for transferred funds
as outlined in Economic Development Memorandum 2.03-7, \"Reporting of
Funds Transfers by Participating Agencies,\" a copy of which is attached
hereto.

(1-15-79) SPECIAL PN

RD Instruction 1942-A

(Guide 13) (Page 4)

12 Should an EDA loan also be involved, FHA will, upon request of EDA,
furnish a current construction status report to EDA at the time loan
advances are requested and at the time of the loan closing. FHA will
notify the EDA Area Office when final inspection is to take place and
permit an EDA representative to be present at the final inspection.
Also, FHA will, upon request of the EDA Area Office, permit an EDA
representative to inspect the project during construction where such
inspection is necessary in connection with the loan.

13 FHA will advise EDA of the completion of the project and submit a
final report on the costs of the project in sufficient detail to permit
a reasonable review of expenditures.

14 Since maximum use of local labor in construction of the project will
facilitate attainment of the objectives of the Public Works and Economic
Development Act of 1965, this matter should be given consideration in
arrangements with all contractors retained in connection with project
construction.

FOR THE FOR THE

ECONOMIC DEVELOPMENT FARMERS HOME

ADMINISTRATION ADMINISTRATION

[/s/ Ross D. Davis]{.underline}\_\_\_\_\_\_\_\_\_\_\_\_\_\_ [/s/ Howard
Bertsch]{.underline}\_\_\_\_\_\_\_\_\_\_\_

Assistant Secretary for Administrator

Economic Development

[August 27, 1968]{.underline}\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ [October
11, 1968]{.underline}\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Date Date

Attachment 1

## oOo 

RD Instruction 1942-A

(Guide 13) (Attachment 1)

## UNITED STATES OF AMERICA

## 

## DEPARTMENT OF COMMERCE

## 

## ASSISTANT SECRETARY AND DIRECTOR OF ECONOMIC DEVELOPMENT

## 

## MANUAL OF ECONOMIC DEVELOPMENT ORDERS

[\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ECONOMIC DEVELOPMENT
ORDER 2.03-7\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_]{.underline}

SUBJECT

REPORTING OF FUND TRANSFERS BY PARTICIPATING AGENCIES

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

REFERENCES EFFECTIVE DATE:\_\_\_3-3-67\_\_\_

SUPPLEMENT:\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

SUPERSEDES: MEDO Memorandum

2.03-7, \"Reporting by Partici-

pating Agencies,\" dated

August 1, 1966

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

APPROVED

Chief, Accounting Division Director, Office of Administration

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

[Section]{.underline} [Section Title]{.underline} [Page]{.underline}

1
Purpose\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\--
1

2
General\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\--
2

3 Transfers of Supplementary Grant Funds\-\-\-\-\-\-\-\-\-\-\-- 2

4 Transfers of Funds for Administrative Support, and for

Specific Projects or Studies Pertaining to Technical

Assistance, Management, or Research\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-- 3

5 Mailing Address for
Reports\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-- 4

6 Effect on Other
Orders\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-- 4

[SECTION 1. PURPOSE]{.underline}

The purpose of the Order is to prescribe reporting requirements which
must be included in all agreements to advance funds to other Federal
agencies for:

a\. Supplementary grants.

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

(1-15-79) SPECIAL PN

(Guide 13) (Attachment 1) (Page 2) RD Instruction 1942-A

2.03-7 lb

3-3-67

b\. Technical assistance and management research projects and/or
studies.

c\. Support activity (administrative and operating expenses).

[SECTION 2. GENERAL]{.underline}

This Order, which provides a schedule showing financial reporting
requirements, shall be made a part of each agreement to transfer funds
to another agency for the purposes listed in Section 1. Performing
agencies need not submit reports for work performed on a reimbursable
basis if EDA is billed monthly and bills are received by the tenth of
the following month. Such billings will suffice as a source of accrued
expenditure data.

[SECTION 3. TRANSFERS OF SUPPLEMENTARY GRANT FUNDS]{.underline}

.01 SF-1151, \"Nonexpenditure Transfer Authorization\":

SF-1151, \"Nonexpenditure Transfer Authorization,\" will be

used for transfers of supplementary grant funds.

.02 Required Reports:

The following reports shall be required in all agreements involving
transfers of supplementary grant funds:

a\. [Monthly Reports]{.underline} due by the tenth day after the end of
the

month showing cumulative totals, first by appropriation, and then by
projects thereunder, of:

\(1\) Obligations.

\(2\) Accrued expenditures.

\(3\) Cash disbursements.

Estimated amounts may be reported for obligations and accrued
expenditures, but actual amounts which agree with the SF-224 \"Statement
of Transactions,\" must be reported for cash disbursements. Attached as
Exhibit 1 is the suggested form for the monthly report.

RD Instruction 1942-A

(Guide 13) (Attachment 1) (Page 3)

3.02 2.03-0

3-3-67

b\. [Quarterly Report]{.underline} on SF-133, \"Report of Budget
Status,\" due

by the 15th day after the end of the quarter, supported by a schedule
showing by project:

\(1\) Obligations.

\(2\) Accrued expenditures.

\(3\) Cash disbursements in agreement with those reported on

the SF-224, \"Statement of Transactions.\"

NOTE: A supporting schedule for SF-133 will not be required if the
monthly report shows actual obligations and accrued expenditures.

c\. [Annual Reports, as follows]{.underline}:

\(1\) SF-220, \"Statement of Financial Condition,\" as

required by Treasury Circular No. 966, due by September 20 for the year
ending June 30.

\(2\) Treasury Form BA-R 2108, as required by Treasury

Circular No. 965, due by September 20 for the year ending June 30.

\(3\) Report on Federal grants-in-aid to States and payments

to individuals, as required by Treasury Circular No. 1014, due by
September 20 for the year ending June 30.

\(4\) Report to be submitted by May 31, showing estimated

unobligated funds as of June 30. Upon receipt of the report, the
Accounting Division will make a determination as to disposal of the
unobligated funds.

[SECTION 4. TRANSFERS OF FUNDS FOR ADMINISTRATIVE SUPPORT, AND FOR
SPECIFIC PROJECTS OR STUDIES PERTAINING TO TECHNICAL ASSISTANCE,
MANAGEMENT, OR RESEARCH]{.underline}

.01 [Use of SF-1081, \"Voucher and Schedule of Withdrawals
and]{.underline}

[Credits\"]{.underline}:

SF-1081 will be used for transfers of funds for administrative support
and for specific projects or studies pertaining to technical assistance,
management, or research.

(1-15-79) SPECIAL PN

RD Instruction 1942-A

(Guide 13) (Attachment 1) (Page 4)

2.03-0 4.02

3-3-67

.02 [Required Reports]{.underline}

The following reports shall be required in agreements involving
transfers of funds for the purposes cited in paragraph 4.01:

a\. [Monthly Report]{.underline}, due by the 10th day after the end of

the month, listing estimated accrued expenditures by appropriation and
projects thereunder.

b\. [Quarterly Report]{.underline}, due by the 15th day after the end of

the quarter, listing actual accrued expenditures by appropriation and
projects thereunder.

c\. [Annual Report]{.underline}, due by May 31, showing estimated

unobligated funds as of June 30. Upon receipt of the report, the
Accounting Division will make a determination as to disposal of the
unobligated funds.

[SECTION 5. MAILING ADDRESS FOR REPORTS]{.underline}

Agencies should mail the reports required in this Order to the following
address:

Chief, Accounting Division

Office of Administration

Economic Development Administration

U.S. Department of Commerce

Washington, D.C. 20230

[SECTION 6. EFFECT ON OTHER ORDERS]{.underline}

This Order supersedes MEDO Memorandum 2.03-7, \"Reporting by
Participating Agencies,\" dated August 1, 1966, and any other
instructions which may be in conflict with its provisions.

[INDEX CHANGE]{.underline}

Change M/2.03-7 to 2.03-7 (page 20)

Exhibit 1

Guide 13, Attachment 1, page 5 not automated see manual

RD Instruction 1942-A

(Guide 14)

## UNITED STATES DEPARTMENT OF AGRICULTURE

## Rural Development

## LEGAL SERVICES AGREEMENT

This agreement made this \_\_\_\_\_\_\_\_\_\_\_ day of
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_,

19\_\_\_\_\_\_\_\_\_\_\_\_ between
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

(sponsors) (organizing committee) (Name of organization)

hereinafter referred to as \"Owners,\" and
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_,

attorney at law, of
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_,
hereinafter referred

to as \"Attorney\":

[WHEREAS]{.underline}, Owners are intending to \_\_\_\_\_\_\_\_[(have
formed)]{.underline}\_\_\_\_\_\_\_\_

(\"public water supply

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

district,\" \"public service district,\" \"not for profit corporation,\"
or

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_,
a \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

other official designation) (\"body politic,\" \"municipal

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

corporation,\" \"nonprofit corporation,\" or other organization)

in \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ County
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

under the provisions of
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

(Cite statute(s) under which applicant will be

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_;
and

organized)

[WHEREAS]{.underline}, the Attorney agrees to perform all legal services
necessary

to organize and incorporate said
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
under the provisions of

(1-15-79) SPECIAL PN

RD Instruction 1942-A

(Guide 14) (Page 2)

said statutes and to perform all other customary legal services
necessary

to the organization, financing, construction, and initial operation of

a \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ system;

WITNESSETH:

That for and in consideration of the mutual covenants and promises
between

the parties hereto, it is hereby agreed:

SECTION A - LEGAL SERVICES

That the Attorney will perform such services as are necessary to

accomplish the above recited objectives including, but not limited to,
the

following:

1\. Preparation and filing of petition for incorporation and

supervision and assistance in the taking of such other actions as may be
necessary or incidental to cause the Owners to become duly organized and
incorporated and to be authorized to undertake the proposed system.

2\. Furnish advice and assistance to the governing body of the duly

incorporated association in connection with (a) the notice for and
conduct of meetings; (b) the preparation of minutes of meetings; (c) the
preparation and enactment of such resolutions as may be necessary in
connection with the authorization, financing, construction, and initial
operation of the system; (d) the preparation of such affidavits,
publication notices, ballots, reports, certifications, and other
instruments and advice as may be needed in the conduct of such bond
elections as may be necessary; (e) the preparation and completion of
such bonds or other obligations as may be necessary to finance the
system; (f) the completion and execution of documents for obtaining a
loan made or insured or a grant made by the United States of America,
acting through the Rural Development, U. S. Department of Agriculture;
(g) entering into construction contracts; (h) preparation and adoption
of By-Laws, Rules and Regulations, and rate schedules; (i) such other
corporate action as may be necessary in connection with the financing,
construction, and initial operation of the system.

RD Instruction 1942-A

(Guide 14) (Page 3)

3\. Review of construction contracts, bid-letting procedure, and

surety and contractual bonds in connection therewith.

4\. Preparation, negotiation, or review of contract with a city or

other source of water supply when necessary.

5\. Preparation, where necessary, and review of deeds, easements and

other rights-of-way documents, and other instruments for sites for
source of water supply, pumping stations, treatment plants, and other
facilities necessary to the system and to provide continuous
rights-of-way therefore; rendering title opinions with reference
thereto; and providing for the recordation thereof.

6\. Obtain necessary permits and certificates from county and

municipal bodies, from State regulatory agencies, and from other public
or private sources with respect to the approval of the system, the
construction and operation thereof, pipeline crossings, and the like.

7\. Cooperate with the engineer employed by Owners in connection

with preparation of tract sheets, easements, and other necessary title
documents, construction contracts, water supply contracts, health
permits, crossing permits, and other instruments.

8\. When applicable, secure assistance of and cooperate with

recognized bond counsel in the preparation of the documents necessary
for the financing aspects of the system. The attorney shall pay all bond
counsel in perfecting the financing aspects, e.g., assessment procedures
and completion of documents. Where bond counsel is retained, the
Attorney will not be responsible for the preparation and approval of
those documents pertaining to the issuance of the Owner\'s obligations.

SECTION B - COMPENSATION

1\. Owners will pay to the Attorney for professional services

rendered in accordance herewith, fees as follows:

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Said fees to be payable in the following manner and at the following
times:

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

(1-15-79) SPECIAL PN

RD Instruction 1942-A

(Guide 14) (Page 4)

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

SECTION C - OTHER PROVISIONS

1\. That upon organization and incorporation the association shall

by appropriate resolution adopt and ratify this Agreement, that the
association shall be substituted for the individual Owners as a party to
this Agreement, and that the Owners as individuals shall thereupon be
relieved of all personal liability existing or arising from this
Agreement.

2\. That upon organization and incorporation should the association

fail or refuse to adopt and ratify this Agreement by appropriate
resolution within \_\_\_\_\_\_\_\_ days from the date of the
commencement of its legal existence, this Agreement shall terminate and
Owners shall be liable to the Attorney for payment of
\$\_\_\_\_\_\_\_\_\_\_\_\_\_, which sum represents payment in full for
the organization and incorporation of the association and for all other
legal services rendered to Owners under the terms of this Agreement to
the date of said termination.

Attorney:

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Owners:

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

## oOo 

RD Instruction 1942-A

(Guide 15)

UNITED STATES DEPARTMENT OF AGRICULTURE

Rural Development

**[COMMUNITY FACILITY BORROWERS]{.underline}**

**[APPLICATION]{.underline}**

1\. SF 424.2, \"Application for Federal Assistance (For Construction).\"

2\. Clearinghouse Comments.

3\. Financial Feasibility Study.

4\. Form RD 442-7, \"Operating Budget,\" including projected cash flow.

5\. Form RD 442-3, \"Balance Sheet,\" or a financial statement or audit

that includes a balance sheet.

6\. Evidence of organization: Articles of Incorporation and Bylaws;

special legislation creating an entity; general legislation under which
it is created, charter, court order; or other basic data of similar
nature.

7\. Written evidence of compliance with State statutes.

8\. Written evidence of compliance with Federal, State, areawide, local

and municipal requirements, as appropriate.

9\. Contracts for professional services.

10\. Form RD 1940-20, \"Request for Environmental Information,\" when

applicable.

11\. Preliminary engineering or architectural report.

This Guide is prepared only for use by State Directors in the
preparation of documents which will inform applicants and Rural
Development personnel of the items to be included in the application.
State Directors will need separate documents for each different type
applicant such as municipalities, districts, and nonprofit corporations.

## oOo

(4-11-90) SPECIAL PN

RD Instruction 1942-A

(Guide 16)

(Page 1)

## [COMMUNITY FACILITY LOAN DOCKET]{.underline}

SF 424.2, \"Application for Federal Assistance (For Construction)\" (for
preapplication submission)

Form RD 1910-11, \"Application Certification, Federal Collection
Policies for Consumer or Commercial Debts\"

Clearinghouse Comments

Form RD 1940-20, \"Request for Environmental Information\"

Form RD 1940-22, \"Environmental Checklist for Categorical Exclusions,\"

Form RD 1940-21, \"Environmental Assessment for Class I Action,\" or

Class II Environmental Assessment

Environmental Impact Statement, if necessary

SF 424.2 (For application submission)

Letter of Conditions

Form RD 1942-46, \"Letter of Intent to Meet Conditions\"

Any required agreement for services such as engineering, architectural,

legal, accounting, auditing, maintenance, management, plant operations,

water purchase or water treatment.

Construction contract and bidding documents

Required evidence of compliance with any required State and local laws
or

regulations and not inconsistent with applicable development plans.

Legal Documents:

Promissory note/bond Notice of sale of bond (if applicable)

Bond Transcript Form RD 442-28, \"Bond Registration Book\"

Evidence of title to pledged assets

Form RD 442-20, \"Right-of-way Easement\"

(5-16-90) PN 134

RD Instruction 1942-A

(Guide 16)

(Page 2)

Form RD 442-21, \"Right-of-way Certificate\"

Form RD 442-22, \"Opinion of Counsel Relative to Rights-of-way\"

Form RD 440-34, \"Option to Purchase Real Property\"

Deeds Leases Liens Benefit Assessment Rolls

Assignment of Water Rights

Evidence of Organization:

Other than public body:

Articles of Incorporation Bylaws

Rules and regulations Charter

List of applicant officers Membership or user

certificate

Certified List of all members of the governing body indicating the

officers and term of office

Certified List of users or members (utility type projects only)

Form RD 1942-8, \"Resolution of Members or Stockholders\"

Form RD 1942-9, \"Loan Resolution (Security Agreement)\"

Other basic organization data

Public Body:

Legislation, court order, referendum, evidencing organization and

authority.

Certified List of users. Benefit assessment roll. (Utility type

projects only)

Form RD 1942-47, \"Loan Resolution (Public Bodies)\"

Fiscal:

Form RD 442-3, \"Balance Sheet\"

Form RD 442-7, \"Operating Budget,\" including projected cash flow

Evidence of user cash contribution and user agreements

RD Instruction 1942-A

(Guide 16)

(Page 3)

(Revision 2)

Automated Community Facility Project Summary (Added 03-19-03, PN 357.)

Provision for interim financing

Evidence of collateral pledge

Additional Forms:

Form RD 400-1, \"Equal opportunity Agreement\"

Form RD 440-4, \"Assurance Agreement\"

Form RD 440-8, \"Compliance Review\" (Added 04-02-98, SPECIAL PN.)

Form RD 400-6, \"Compliance Statement\"

Form AD-622, \"Notice of Preapplication Review Action\"

Form RD 1942-39, \"Processing Check List (Other Than Public Bodies)\"

Form RD 1942-40, \"Processing Check List (Public Bodies)\"

Form RD 442-10, \"Appraisal Report - Water and Waste Disposal System\"

Form RD 1940-1, \"Request for obligation of Funds\"

Form RD 440-57, \"Acknowledgement of Obligated Funds/Check Request\"

Form RD 1924-16, \"Record of Pre-Construction Conference\"

Form RD 2006-38, \"Civil Rights Impact Analysis\"\
(Added 04-02-98, SPECIAL PN.)

This Guide is prepared only for use by State Directors in the
preparation of documents which will inform applicants and Agency.
personnel on the items to be included in the docket. State Directors
will need separate documents for each different type applicant such as
municipalities, districts and nonprofit corporations.

oOo

(05-16-90) PN 134

RD Instruction 1942-A

(Guide 17)

## CONSTRUCTION CONTRACT DOCUMENTS

## ITEM I

## NOTICE AND INSTRUCTIONS TO BIDDERS

Date:\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

1\. Sealed bids will be received by the
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_,

hereinafter referred to as the \"Owner,\" for performing the work

as described as
follows:\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

as described more fully in the Plans and Specifications attached

hereto, on or before \_\_\_\_\_\_\_\_\_\_\_\_ o\'clock, in the
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
, at which time said bids will be publicly opened and read.

2\. All bids must be made on the blank form of proposal attached hereto.

3\. If the contract bid exceeds \$10,000, a bidder must submit Form RD

400-6. \"Compliance Statement,\" with the bid. \"Equal Opportunity
Clause,\" will be a part of all construction contracts exceeding
\$10,000.

4\. A bidder may withdraw any proposal submitted prior to the hour set

for the closing of the bids provided the request is signed in a manner
identical with the proposal being withdrawn.

5\. It is understood that Rural Development must concur in this
contract.

6\. The owner will be responsible for payment in accordance with the

terms of the contract when the work is completed.

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

(Owner)

By \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Title \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

(1-15-79) SPECIAL PN

(Guide 17) (Page 2) RD Instruction 1942-A

## ITEM II

## BIDDER\'S PROPOSAL

Place \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Date \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

1\. In compliance with your invitation for bids dated
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ and subject to all the conditions
thereof, the undersigned
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_(hereinafter called
BIDDER)\_\_\_\_\_\_\_\_\_\_\_\_\_\_doing business as

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\*,\"

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

of the City of\_\_\_\_\_\_\_\_\_\_\_, State of
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ hereby proposes to furnish and
complete work required by the Contract Documents for the construction of
all structures listed at the prices shown for each bid item on the Bid
Schedule. Any total cost found inconsistent with the unit cost when the
bids are examined will be deemed in error and corrected to agree with
the unit cost which shall be considered correct.

2\. The undersigned BIDDER does hereby declare and stipulate that this

proposal is made in good faith, without collusion or connection with any
other person or persons bidding for the same work, and that it is made
in pursuance of and subject to all the terms and conditions of the
Notice and Instructions to Bidders, the Construction Contract, the
Detailed Specifications, and the Plans pertaining to the work to be
done, all of which have been examined by the undersigned.

3\. The undersigned BIDDER agrees to abide by the requirements of

Executive Order No. 11246, as amended. To that end, the BIDDER submits a
completed Form RD 400-6, \"Compliance Statement,\" as ITEM (X) of the
Contract Documents. The BIDDER agrees to execute \"Equal Opportunity
Clause,\" as part of the Construction Contract.

4\. If the work to be performed under this contact is in hometown plan
or

imposed plan area the undersigned BIDDER agrees to abide by the \"Model
Special Bid Conditions\" attached hereto as item VI.

5\. All the various phases of work enumerated in the Detailed

Specifications with their individual jobs and overhead, whether
specifically mentioned, included by implication or appurtenant thereto,
are to be performed by the BIDDER under one of the items listed in the
Bid Schedule, irrespective of whether it is named in said list.

6\. Payment for work performed will be in accordance with the bid

Schedule, subject to changes as provided for in the Construction
Contract.

RD Instruction 1942-A

(Guide 17) (Page 3)

7\. The undersigned BIDDER understands that this contract must be

concurred in by Rural Development.

8\. The BIDDER will submit a construction schedule and execute the

contract within 10 days after notification of contract award.

9\. It is understood that time is of the essence in this contract and
the

BIDDER agrees to commence within 10 days after the Notice to Proceed and
complete work within \_\_\_\_\_\_\_\_\_\_\_ calendar days.

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

BIDDER\'S License No. (if applicable) BIDDER

By\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Seal (if a corporation)

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Title

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

(Business Address)

\*Insert: \"a corporation incorporated in the State
of\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_,\" \"a partnership\" or an
individual, as applicable.

(1-15-79) SPECIAL PN

RD Instruction 1942-A

(Guide 17) (Page 4)

BID SCHEDULE

NOTE: Bids shall include sales tax and all other applicable

taxes and fees.

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Item

No. Description Estimated Total Unit

Quantity Price Price Total

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

TOTAL BID PRICE \$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

(Guide 17) (Page 5) RD Instruction 1942-A

ITEM III

NOTICE OF AWARD

Description of work: Construction of
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
for the \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

To:\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

The Owner has considered the Proposal submitted by you for the above
described work in response to its Notice and Instructions to Bidders
dated \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_19\_\_\_.

It is to the best interest of said Owner to accept your Proposal in the
amount of \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
(\$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_); you are hereby
notified that your Proposal has been accepted for items
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

You are required by the Notice and Instruction to Bidders to execute the
contract within ten days from the date of the delivery of this Notice to
you.

Dated this \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ day of
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ 19 \_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Owner

ACCEPTANCE OF NOTICE By
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Receipt of the above Notice of Title
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Award is hereby acknowledged this

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ day

of \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_, 19\_\_\_\_\_\_ .

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

By \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Title \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

(1-15-79) SPECIAL PN

RD Instruction 1942-A

(Guide 17) (Page 6)

ITEM IV

C 0 N T R A C T

THIS AGREEMENT, made this \_\_\_\_\_\_\_\_\_ day of
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ , 19\_\_\_\_,

by and between
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_,

hereinafter referred to as the OWNER, and
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_,
hereinafter referred to as the

CONTRACTOR:

WITNESSETH:

That for and in consideration of the mutual covenants and promises

between the parties hereto, it is hereby agreed that:

1\. The CONTRACTOR will furnish all of the materials and supplies,

> equipment, and labor and other services necessary in conformance with
> these contract documents for the construction and completion of the
> project described in general as follows:

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

2\. COMPLETION OF WORK. The Contractor shall commence the work

> covered by this contract within ten (10) calendar days after the date
> of receipt of the Notice to Proceed and shall complete the same within
> \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ calendar days unless the period for
> completion is extended as provided for in the General Conditions.

RD Instruction 1942-A

(Guide 17) (Page 7)

(Revision 1)

3\. CONTRACT SUM. The Owner shall pay the Contractor for the

> performance of said work, subject to additions or deductions provided
> herein
> \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
> \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ dollars
> (\$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_) in conformity with the bid
> schedule in Item II.

4\. The Contract Documents include the following:

\(a\) Notice and Instructions to Bidders - Item I

\(b\) Bidder\'s Proposal - Item II

\(c\) Notice of Award - Item III

\(d\) Contract - Item IV

\(e\) General Conditions - Item V

\(f\) Model - Special Bid Conditions - Item VI (for hometown or

imposed plan areas)

\(g\) Rural Development Supplemental General

Conditions.

\(h\) Plans prepared by
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_,

numbered \_\_\_\_\_\_\_ through \_\_\_\_\_\_\_\_, and dated
\_\_\_\_\_\_, 19\_\_.

\(i\) Specifications prepared or issued
by\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_, dated
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_, 19\_\_\_.

5\. The OWNER will pay to the CONTRACTOR in the manner and at such

times as set forth in the General Conditions and in such amounts as

required by the Contract Documents.

6\. This contract shall be binding upon all parties hereto and their

respective heirs, executors, administrators, successors, and assigns.

(1-15-79) SPECIAL PN

RD Instruction 1942-A

(Guide 17) (Page 8)

(Revision 1)

IN WITNESS WHEREOF, the parties hereto have executed, or caused to be

executed by their duly authorized officials, this Contract in duplicate,

on the date first above written.

OWNER:

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

By\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

(SEAL) Type Name\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Title\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

ATTEST:

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Type Name \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Title\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

CONTRACTOR:

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

By\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Approved as lender or insurer of Type
Name\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

fund to defray the costs of this

contract, and without liability for
Title\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

any payments thereunder, the Farmers

Home Administration hereby concurs Employer Identification

in the award of this contract to
Number\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_.

U. S. Department of Agriculture

Rural Development

By \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
Title \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

This contract shall not be effective unless and until approved by the
State Director of Rural Development, U. S. Department of Agriculture, or
a delegated representative.

RD Instruction 1942-A

(Guide 17) (Page 9)

## 

## ITEM V

## 

## GENERAL CONDITIONS

1\. The contractor shall furnish and pay the cost, including sales tax

and all other applicable taxes and fees, of all the necessary materials
and shall furnish and pay for all the superintendence, labor, tools,
equipment and transportation and perform all the work required for the
construction of all items listed and itemized under the bid schedule of
the Bidder\'s Proposal attached hereto as Item II in strict accordance
with the Plans, Specifications and requirements, general conditions and
special conditions which are attached hereto and made a part hereof, and
any amendments thereto and such supplemental plans and specifications
which may hereafter be approved.

2\. The Owner shall provide the land upon which the work under this

contract is to be done, and will, so far as is convenient, permit the
Contractor to use as much of the land as is required for the erection of
temporary construction facilities and storage of materials, together
with the right of access to same, but beyond this, the Contractor shall
provide at the contractor\'s cost and expense any additional land
required.

3\. In the event the Owner is dissatisfied with the slow progress or

incompetency in the performance of the work in accordance with the
schedule for completion of the various aspects of construction, the
Owner shall give the Contractor written notice in which the owner shall
specify in detail the cause of dissatisfaction. Should the Contractor
fail or refuse to remedy the matters complained of within five days
after the written notice is received by the Contractor the Owner shall
have the right to take control of the work and either make good the
deficiencies of the Contractor itself or direct the activities of the
Contractor in doing so, employing such additional help as the Owner
deems advisable. In such event the Owner shall be entitled to collect
from the Contractor any expenses in completing the work.

4\. The owner will withhold \$\_\_\_\_\_\_\_\_ as liquidated damages
from the

amount payable to the Contractor for each calendar day that the
contractor is in default after the time of completion stipulated in
these Contract Documents. It is understood that the amount is
approximately equal to the interest and other charges incurred by the
Owner.

5\. The Contractor guarantees all material and equipment furnished and

all work performed for a period of 1 year from the date of substantial
completion of the contract. The contractor\'s guarantees that the
facility is free from defects due to faulty materials or workmanship and
the contractor shall make the necessary corrections to correct these
defects.

(1-15-79) SPECIAL PN

(Guide 17) (Page 10) RD Instruction 1942-A

6\. The contractor should give all notices and comply with all laws,

ordinances, rules, and regulations bearing on the conduct of the work as
specified in the Contract Documents. If the contractor observes that the
Contract Documents are at variation with any laws, ordinances, rules or
regulations, the contractor should promptly notify the owner in writing
and any necessary changes shall be adjusted through the use of contract
change orders.

7\. The Contractor agrees to pay all claims for labor, materials,

services and supplies and agrees to allow no such charge to be fixed on
the property of the Owner.

8\. The Contractor agrees to comply with all laws, rules and regulations

that apply to related work.

9\. The actual performance of work and superintendence shall be
performed

by the Contractor but the owner shall, at all times, have access to the
premises for the purpose of observing or inspecting the work performed
by the Contractor.

10\. It is fully understood and agreed that none of the requirements of

this contract shall be considered as waived unless changes are made in
writing and then only by the persons executing this contract upon
concurrence of Rural Development.

11\. The Contractor agrees not to sublet or assign this work without the

written consent of the owner.

12\. The Contractor shall have full responsibility under these
conditions,

general provisions, Plans and Specifications for any subcontracts which
the Contractor may let.

13\. All questions or controversies which may arise between the
Contractor

and the Owner, under or in reference to this contract, should be
resolved, to the fullest extent possible at a meeting between the
Contractor, the Owner, and a representative of Rural Development. The
agreements reached at such meetings shall be carefully documented and
become final and binding on all parties concerned. However, should the
Owner and Contractor be unable to agree, a board of three arbitrators
shall be chosen. One shall be chosen by the Contractor, one shall be
chosen by the Owner, and the third shall be selected through mutual
agreement by the first two. Should either party neglect or fail to
select an arbitrator within ten days, the arbitrator selected by the
other party shall have power to decide the dispute in the same manner as
though a board of three arbitrators had been selected.

14\. The Contractor shall indemnify and save harmless the Owner and the

Owner\'s agents and employees, from and against all losses and all
claims, demands, payments, suits, actions, recoveries, and judgments of
every nature, and description brought or recovered against them by
reasons of any act or omission of the said Contractor, its agents, or
employees, in the execution of the work or in guarding the same.

RD Instruction 1942-A

(Guide 17) (Page 11)

15\. Payment. Final payment shall be made to the Contractor when the
work

is completed and accepted by the owner and Rural Development. The total
amount of the payment shall be the amount of the contract plus the value
of all changes as reflected in approved contract change orders. The
entire balance found to be due the Contractor but excepting such sums as
may be lawfully retained by the Owner, shall be paid to the Contractor.
Such payment shall be conditioned, however, upon the submission by the
Contractor of evidence satisfactory to the Owner that all claims for
labor, material, and any other outstanding indebtedness in connection
with this Contract have been paid.

The Owner will make payments as follows: (Check (X) proper payment
clause and effectively cross out all of the clauses not applicable.)

\_\_\_\_\_\_

\_\_\_\_\_\_ A. ONE LUMP SUM will be made for the whole contract, upon

acceptance by the owner and Rural Development, of all work required
hereunder and compliance by the Contractor with all the terms and
conditions of this contract.

\_\_\_\_\_\_

\_\_\_\_\_\_ B. PARTIAL PAYMENTS NOT TO EXCEED 60 PERCENT of the value

of the work in place (less the aggregate of previous payments) will be
made at intervals of\_\_\_\_\_\_\_. The value of work in place shall be
as estimated by the contractor and approved by Rural Development. Prior
to receiving any partial payment, the contractor must furnish the owner
with a statement showing the total amount owed to date for materials and
labor procured under this contract and, if required by the owner or
Rural Development, must also submit evidence showing that previous
partial payments were properly applied and that the current payment will
be properly applied. Upon completion of the whole contract and
acceptance of the work as required hereunder, by the owner and Rural
Development, and compliance by the contractor with all terms and
conditions of this contract, the amount due the contractor will be paid.

16\. Upon completion or termination of the work, the Contractor shall

remove from the vicinity of the work all equipment and all temporary
structures, waste materials and rubbish resulting from its operations,
leaving the premises in a neat and presentable condition. In the event
of failure to do so, the same may be done by the Owner at the expense of
the Contractor.

(1-15-79) SPECIAL PN

(Guide 17) Attachment I RD Instruction 1942-A

## ITEM VI

## 

## MODEL

## 

## SPECIAL BID CONDITIONS

## 

## AFFIRMATIVE ACTION REQUIREMENTS

## 

## EQUAL EMPLOYMENT OPPORTUNITY

THE FOLLOWING NOTICE SHALL BE INCLUDED IN ALL INVITATIONS AND OTHER
SOLICITATIONS FOR BIDS ON (NON-EXEMPT) FEDERAL AND FEDERALLY-ASSISTED
CONSTRUCTION CONTRACTS TO BE AWARDED ON THE
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_\_\_\_, TO INSURE
EQUAL EMPLOYMENT OPPORTUNITY.

## [NOTICE OF REQUIREMENT]{.underline}

EACH BIDDER, CONTRACTOR OR SUBCONTRACTOR (HEREINAFTER THE CONTRACTOR)
MUST FULLY COMPLY WITH THE REQUIREMENTS, TERMS AND CONDITIONS OF THE
\_\_\_\_\_\_\_\_\_\_\_\_ AFFIRMATIVE ACTION PLAN (HEREINAFTER
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ PLAN) INCLUDING THE GOALS FOR
MINORITY MANPOWER UTILIZATION AS TO EACH CONSTRUCTION TRADE IT INTENDS
TO USE ON THIS CONSTRUCTION CONTRACT AND ALL OTHER CONSTRUCTION WORK
(BOTH FEDERAL AND NONFEDERAL) IN THE \_\_\_\_\_\_\_\_\_\_\_\_\_ AREA
DURING THE PERFORMANCE OF THIS CONTRACT OR SUBCONTRACT. THE CONTRACTOR
COMMITS ITSELF TO THE GOALS FOR MINORITY MANPOWER UTILIZATION CONTAINED
HEREIN AND ALL OTHER REQUIREMENTS, TERMS AND CONDITIONS OF THESE BID
CONDITIONS BY SUBMITTING A PROPERLY SIGNED BID.

THE CONTRACTOR WILL APPOINT A COMPANY EXECUTIVE TO ASSUME THE
RESPONSIBILITY FOR THE IMPLEMENTATION OF SUCH REQUIREMENTS, TERMS AND
CONDITIONS.

(1-15-79) SPECIAL PN

RD Instruction 1942-A

(Guide 17) Attachment 1 (Page 2)

PART 1 (GOALS FOR MINORITY UTILIZATION)

A. THE FOLLOWING GOALS FOR MINORITY MANPOWER UTILIZATION SHALL EXPRESS
THE CONTRACTOR\'S COMMITMENT TO THE PERCENTAGE OF MINORITY WORKHOURS TO
BE WORKED IN EACH SPECIFIED CRAFT ON ALL WORK PERFORMED BY THE
CONTRACTOR IN THE \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ AREA DURING THE
PERFORMANCE OF THIS CONTRACT. \"MINORITY\" IS DEFINED AS INCLUDING
BLACKS, SPANISH-SURNAMED AMERICANS, ORIENTALS, AND AMERICAN INDIANS AND
INCLUDES BOTH MINORITY MEN AND WOMEN.

FOR ALL TRADES THE FOLLOWING GOALS AND TIMETABLES SHALL BE APPLICABLE:

GOALS FOR MINORITY

\_\_\_UTILIZATION\_\_\_\_

UNTIL DECEMBER 31, 19\_\_\_\_ -

FROM JANUARY 1, 19\_\_\_\_ to DECEMBER 31, 19\_\_\_ -

FROM JANUARY 1, 19\_\_\_\_ to DECEMBER 31, 19\_\_\_ -

FROM JANUARY 1, 19\_\_\_\_ to DECEMBER 31, 19\_\_\_ -

FROM JANUARY 1, 19\_\_\_\_ to DECEMBER 31, 19\_\_\_ -

B. THE GOALS FOR MINORITY MANPOWER UTILIZATION ABOVE ARE EXPRESSED IN
TERMS OF WORKHOURS OF TRAINING AND EMPLOYMENT AS A PROPORTION OF THE
TOTAL WORKHOURS TO BE WORKED BY THE CONTRACTOR\'S AGGREGATE WORKFORCE IN
THAT TRADE ON ALL PROJECTS (BOTH FEDERAL AND NON-FEDERAL) IN THE
\_\_\_\_\_\_\_\_\_\_\_\_\_ AREA DURING THE PERFORMANCE OF ITS CONTRACT
OR SUBCONTRACT (i.e. THE PERIOD BEGINNING WITH THE FIRST DAY OF WORK ON
THE FEDERAL OR FEDERALLY-ASSISTED CONSTRUCTION CONTRACT AND ENDING WITH
THE LAST DAY OF WORK).

(Guide 17) Attachment I (Page 3) RD Instruction 1942-A

C. THE WORKHOURS OF MINORITY WORK MUST BE SUBSTANTIALLY UNIFORM
THROUGHOUT THE LENGTH OF THE CONTRACT IN EACH TRADE, AND MINORITIES
SHOULD BE EMPLOYED EVENLY ON EACH OF A CONTRACTOR\'S PROJECTS.
NEVERTHELESS, FAILURE OF A CONTRACTOR TO EMPLOY MINORITIES EVENLY ON
EACH OF ITS PROJECTS SHALL NOT CONSTITUTE NONCOMPLIANCE PROVIDED THE
PERCENTAGE OF MINORITY WORKHOURS EMPLOYED BY THE CONTRACTOR IN ITS
AGGREGATE WORKFORCE IN THE \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ AREA MEETS OR
EXCEEDS ITS COMMITMENT TO THE GOALS FOR MINORITY MANPOWER UTILIZATION IN
THE \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ PLAN AND THE CONTRACTOR HAS NOT
VIOLATED THE EQUAL OPPORTUNITY CLAUSE OF THE CONTRACT IN THE ASSIGNMENT
OF MINORITIES TO ITS PROJECTS. THE TRANSFER OF MINORITY EMPLOYEES FROM
EMPLOYER-TO-EMPLOYER OR FROM PROJECT-TO-PROJECT FOR THE PURPOSE OF
MEETING THE CONTRACTOR\'S GOAL SHALL BE A VIOLATION OF THE
\_\_\_\_\_\_\_\_\_\_\_\_ PLAN. OTHERWISE, THE CONTRACTOR SHALL BE DEEMED
TO BE IN COMPLIANCE WITH THE REQUIREMENTS, TERMS, AND CONDITIONS OF THE
\_\_\_\_\_\_\_\_\_\_\_ PLAN IF THE MINORITY MANPOWER UTILIZATION RATE OF
THE CONTRACTOR MEETS OR EXCEEDS ITS COMMITMENT TO THE GOALS FOR MINORITY
MANPOWER UTILIZATION IN ITS AGGREGATE WORKFORCE, BOTH FEDERALLY INVOLVED
AND NON-FEDERAL, WITHIN THE \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ AREA.
HOWEVER, IF THE CONTRACTOR HAS DENIED EQUAL EMPLOYMENT OPPORTUNITY IN
VIOLATION OF THE EQUAL OPPORTUNITY CLAUSE OF THIS CONTRACT, IT SHALL NOT
BE IN COMPLIANCE WITH THE \_\_\_\_\_\_\_\_\_\_\_ PLAN.

D. IN THE EVENT THAT WORK IS PERFORMED AFTER THE EXPIRATION DATE OF
THE\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ PLAN ON A CONSTRUCTION CONTRACT
AWARDED PURSUANT TO THE REQUIREMENTS, TERMS AND CONDITIONS OF THE PLAN
THE GOALS FOR MINORITY MANPOWER UTILIZATION FOR 1980 SHALL BE APPLICABLE
TO SUCH WORK.

(1-15-79) SPECIAL PN

RD Instruction 1942-A

(Guide 17) Attachment I (Page 4)

E. THE CONTRACTORS COMMITMENT TO GOALS OF MINORITY MANPOWER UTILIZATION
IS INTENDED TO MEET ITS AFFIRMATIVE ACTION OBLIGATIONS UNDER EXECUTIVE
ORDER 11246, AS AMENDED, AND IS NOT INTENDED AND SHALL NOT BE USED TO
DISCRIMINATE AGAINST ANY QUALIFIED APPLICANT OR EMPLOYEE. WHENEVER, IT
COMES TO THE CONTRACTOR\'S ATTENTION THAT THE GOALS ARE BEING USED IN A
DISCRIMINATORY MANNER, IT SHALL IMMEDIATELY REPORT THAT FACT TO THE
OFFICE OF FEDERAL CONTRACT COMPLIANCE PROGRAMS, EMPLOYMENT STANDARDS
ADMINISTRATION, U.S. DEPARTMENT OF LABOR, AND THE COMPLIANCE AGENCY SO
THAT APPROPRIATE PROCEEDINGS MAY BE INSTITUTED.

[PART II]{.underline}

[SPECIFIC AFFIRMATIVE ACTION STEPS (GOOD FAITH EFFORTS)]{.underline}

THE CONTRACTOR SHALL BE DEEMED TO BE IN COMPLIANCE WITH THE
REQUIREMENTS, TERMS, AND CONDITIONS OF THE \_\_\_\_\_\_\_\_\_\_\_\_\_\_
PLAN IF IT MEETS OR EXCEEDS ITS COMMITMENT TO THE GOALS FOR MINORITY
MANPOWER UTILIZATION IN ITS AGGREGATE WORKFORCE IN THE
\_\_\_\_\_\_\_\_\_\_\_\_\_ AREA FOR EACH TRADE FOR WHICH IT IS COMMITTED
TO A GOAL UNDER THE \_\_\_\_\_\_\_\_\_\_\_\_ PLAN. THE CONTRACTOR\'S
COMMITMENT TO THE GOALS FOR MINORITY MANPOWER UTILIZATION AS REQUIRED BY
THE \_\_\_\_\_\_\_\_\_\_\_ PLAN CONSTITUTES A COMMITMENT THAT IT WILL
MAKE EVERY GOOD FAITH EFFORT TO MEET SUCH GOALS. NO CONTRACTOR SHALL BE
FOUND TO BE IN NON-COMPLIANCE SOLELY ON ACCOUNT OF THE CONTRACTOR\'S
FAILURE TO MEET ITS GOALS, BUT SHALL BE GIVEN THE OPPORTUNITY TO
DEMONSTRATE THAT THE CONTRACTOR HAS INSTITUTED ALL THE SPECIFIC
AFFIRMATIVE ACTION STEPS SPECIFIED IN THE \_\_\_\_\_\_\_\_\_\_ PLAN AND
MADE EVERY GOOD FAITH EFFORT TO MAKE THESE STEPS WORK TOWARD THE
ATTAINMENT OF ITS GOALS WITHIN THE TIMETABLES, ALL TO THE PURPOSE OF
EXPANDING MINORITY MANPOWER UTILIZATION IN ITS AGGREGATE WORKFORCE IN
THE \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ AREA. CONTRACTORS WHO FAIL TO ACHIEVE
THEIR COMMITMENTS TO THE GOALS FOR MINORITY MANPOWER UTILIZATION MUST
HAVE ENGAGED IN

(Guide 17) Attachment I (Page 5) RD Instruction 1942-A

AFFIRMATIVE ACTION DIRECTED AT INCREASING MINORITY MANPOWER UTILIZATION,
WHICH IS AT LEAST AS EXTENSIVE AS THE FOLLOWING STEPS:

1\. SPECIFIC WRITTEN NOTIFICATION OF MINORITY RECRUITMENT SOURCES

> AND COMMUNITY ORGANIZATION WHEN THE CONTRACTOR OR ITS UNIONS HAVE
> EMPLOYMENT OPPORTUNITIES AVAILABLE AND MAINTENANCE OF RECORDS
> REGARDING THE ORGANIZATIONS\' RESPONSE.

2\. MAINTENANCE OF A FILE OF THE NAMES AND ADDRESSES OF EACH

> MINORITY WORKER REFERRED BY THE UNION, MINORITY RECRUITMENT SOURCE(S)
> AND COMMUNITY ORGANIZATION(S) TO THE CONTRACTOR AND WHAT ACTION HAS
> BEEN TAKEN WITH RESPECT TO EACH SUCH REFERRED WORKER. IF SUCH WORKER
> WAS NOT EMPLOYED BY THE CONTRACTOR, THE FILE SHOULD DOCUMENT THIS AND
> THE REASONS THEREFOR.

3\. WRITTEN NOTIFICATION TO BOTH THE CONTRACTING AGENCY AND THE

> OFFICE OF FEDERAL CONTRACT COMPLIANCE PROGRAMS WHEN THE UNION OR
> UNIONS WITH WHOM THE CONTRACTOR HAS A COLLECTIVE BARGAINING AGREEMENT
> HAS NOT REFERRED TO THE CONTRACTOR A MINORITY WORKER SENT BY THE
> CONTRACTOR, OR THE CONTRACTOR HAS OTHER INFORMATION THAT THE UNION
> REFERRAL PROCESS HAS IMPEDED ITS EFFORTS TO MEET ITS GOALS.

4\. PARTICIPATION IN TRAINING PROGRAMS IN THE AREA, INCLUDING

> APPRENTICESHIP, TRAINEE, AND JOURNEYMEN UPGRADING PROGRAMS, ESPECIALLY
> THOSE FUNDED BY THE DEPARTMENT OF LABOR.

5\. DISSEMINATION OF THE CONTRACTOR\'S OR UNION\'S EEO POLICY BY

> INCLUDING IT IN ANY POLICY MANUAL AND COLLECTIVE BARGAINING
> AGREEMENT(S); BY PUBLICIZING IT IN THE COMPANY OR UNION

(1-15-79) SPECIAL PN

RD Instruction 1942-A

(Guide 17) Attachment I (Page 6)

> NEWSPAPER, ANNUAL REPORT, ETC.; BY POSTING OF THE POLICY: AND BY
> SPECIFIC REVIEW OF THE POLICY WITH MINORITY EMPLOYEES AT LEAST ONCE A
> YEAR.

6\. DISSEMINATION OF THE CONTRACTOR\'S EEO POLICY EXTERNALLY BY

> ADVERTISING IN NEWS MEDIA, SPECIFICALLY INCLUDING MINORITY NEWS MEDIA,
> IF THE CONTRACTOR HAS A NEED TO ADVERTISE; AND BY NOTIFYING AND
> DISCUSSING IT WITH OTHER CONTRACTORS, AND SUBCONTRACTORS WITH WHOM THE
> CONTRACTOR DOES OR ANTICIPATES DOING BUSINESS.

7\. ENCOURAGE PRESENT MINORITY EMPLOYEES TO RECRUIT THEIR FRIENDS

AND RELATIVES.

8\. VALIDATION OF ALL TESTS AND OTHER SELECTION REQUIREMENTS AS

REQUIRED BY THE TESTING AND SELECTION ORDER (41 CFR PART 60-3).

9\. MAKING EVERY EFFORT TO PROVIDE AFTER SCHOOL, SUMMER AND VACATION

> EMPLOYMENT TO MINORITY YOUTH - BOTH ON THE JOB SITE AND IN OTHER AREAS
> OF A CONTRACTOR\'S WORKFORCE.

10\. CONDUCT INVENTORY AND EVALUATION OF ALL MINORITY PERSONNEL FOR

> PROMOTIONAL OPPORTUNITIES ON A QUARTERLY BASIS AND ENCOURAGE MINORITY
> EMPLOYEES TO SEEK SUCH OPPORTUNITIES.

11\. ENSURING THAT SENIORITY PRACTICES, JOB CLASSIFICATIONS,

ETC., DO NOT HAVE A DISCRIMINATORY EFFECT.

12\. ENSURING THAT ALL FACILITIES AND COMPANY ACTIVITIES ARE

NONSEGREGATED.

13\. CONTINUAL MONITORING OF ALL PERSONNEL ACTIVITIES TO ENSURE THAT

ITS EEO POLICY IS BEING CARRIED OUT.

(Guide 17) Attachment I (Page 7) RD Instruction 1942-A

14\. DOCUMENTATION OF SOLICITATION OF BIDS FOR SUBCONTRACTORS FROM

> AVAILABLE MINORITY SUBCONTRACTORS ENGAGED IN THE TRADES COVERED BY THE
> \_\_\_\_\_\_\_\_\_\_\_ PLAN, INCLUDING CIRCULATION TO MINORITY
> CONTRACTOR ASSOCIATIONS.

THE OFFICE OF FEDERAL CONTRACT COMPLIANCE PROGRAMS ASSISTANT REGIONAL
ADMINISTRATOR AND THE CONTRACTING AGENCY COMPLIANCE STAFF WILL PROVIDE
TECHNICAL ASSISTANCE, UPON REQUEST, PERTAINING TO MINORITY RECRUITMENT
SOURCES, COMMUNITY ORGANIZATIONS AND MINORITY NEWS MEDIA.

[PART III]{.underline}

[ADMINISTRATIVE PROCEDURES FOR ENFORCEMENT]{.underline}

A. THE AGENCY SHALL REVIEW THE CONTRACTOR\'S EMPLOYMENT PRACTICES DURING
THE PERFORMANCE OF THE CONTRACT. IF THE CONTRACTOR MEETS ITS GOAL(S) OR
CAN DEMONSTRATE THAT IT HAS MADE IN GOOD FAITH EVERY EFFORT TO MEET THE
GOAL(S) AND IS NOT OTHERWISE VIOLATING THE EQUAL OPPORTUNITY CLAUSE OF
THIS CONTRACT OR ANY OTHER FEDERAL EQUAL EMPLOYMENT OPPORTUNITY LAWS OR
REGULATIONS, THE CONTRACTOR SHALL BE PRESUMED TO BE IN COMPLIANCE WITH
EXECUTIVE ORDER 11246, AS AMENDED, AND THE \_\_\_\_\_\_\_\_\_\_ PLAN. IN
THAT EVENT, NO FORMAL SANCTIONS OR PROCEEDINGS LEADING TOWARD SANCTIONS
SHALL BE INSTITUTED UNLESS THE AGENCY OTHERWISE DETERMINES THAT THE
CONTRACTOR IS NOT PROVIDING EQUAL EMPLOYMENT OPPORTUNITIES.

B. WHERE THE AGENCY FINDS THAT THE CONTRACTOR HAS FAILED TO COMPLY WITH
REQUIREMENTS OF EXECUTIVE ORDER 11246, THE IMPLEMENTING REGULATIONS AND
THE \_\_\_\_\_\_\_\_\_ PLAN, THE AGENCY SHALL TAKE SUCH ACTION AND
IMPOSE

(1-15-79) SPECIAL PN

RD Instruction 1942-A

(Guide 17) Attachment I (Page 8)

SUCH SANCTIONS, WHICH INCLUDE SUSPENSION, TERMINATION, CANCELLATION, AND
DEBARMENT, AS MAY BE APPROPRIATE UNDER THE EXECUTIVE ORDER AND ITS
REGULATIONS.

C. WHEN THE AGENCY PROCEEDS WITH SUCH FORMAL ACTION, IT HAS THE BURDEN
OF PROVIDING THAT THE CONTRACTOR HAS NOT MET THE REQUIREMENTS OF THE
\_\_\_\_\_\_\_\_ PLAN. THE CONTRACTOR\'S FAILURE TO MEET ITS GOAL(S)
SHALL, HOWEVER, SHIFT TO THE REQUIREMENT TO COME FORWARD WITH EVIDENCE
TO SHOW THAT IT HAS MADE EVERY \"GOOD FAITH\" EFFORT TO MEET SUCH GOALS.

D. THE PENDENCY OF SUCH FORMAL PROCEEDINGS SHALL BE TAKEN INTO
CONSIDERATION BY FEDERAL AGENCIES BY DETERMINING WHETHER SUCH CONTRACTOR
CAN COMPLY WITH THE REQUIREMENTS OF EXECUTIVE ORDER 11246, AS AMENDED,
AND IS THEREFORE, A \"RESPONSIBLE PROSPECTIVE CONTRACTOR\" WITHIN THE
MEANING OF THE FEDERAL PROCUREMENT ACT.

E. IT SHALL BE NO EXCUSE THAT THE UNION WITH WHICH THE CONTRACTOR HAS A
COLLECTIVE BARGAINING AGREEMENT PROVIDES FOR THE EXCLUSIVE REFERRAL OF
MINORITY EMPLOYEES. DISCRIMINATION IN REFERRAL FOR EMPLOYMENT, EVEN IF
PURSUANT TO PROVISIONS OF A COLLECTIVE BARGAINING AGREEMENT, IS
PROHIBITED BY THE NATIONAL LABOR RELATIONS ACT, AS AMENDED, AND TITLE
VII OF THE CIVIL RIGHTS ACT FOR 1964. IT IS THE POLICY OF THE OFFICE OF
FEDERAL CONTRACT COMPLIANCE PROGRAMS THAT CONTRACTORS HAVE A
RESPONSIBILITY TO PROVIDE EQUAL EMPLOYMENT OPPORTUNITY IF THEY WISH TO
PARTICIPATE IN FEDERALLY-INVOLVED CONTRACTS. TO THE EXTENT THEY HAVE
DELEGATED THE RESPONSIBILITY FOR SOME OF THEIR EMPLOYMENT PRACTICES TO A
LABOR ORGANIZATION AND, AS A RESULT, ARE PREVENTED FROM MEETING THEIR
OBLIGATIONS PURSUANT TO EXECUTIVE ORDER 11246, AS AMENDED, SUCH
CONTRACTORS

(Guide 17) Attachment I (Page 9) RD Instruction 1942-A

CANNOT BE CONSIDERED TO BE IN COMPLIANCE WITH EXECUTIVE ORDER 11246, AS
AMENDED, AND ITS IMPLEMENTING RULES AND REGULATIONS.

[CONTRACTOR OBLIGATIONS]{.underline}

A. ALL CONTRACTORS SHALL INCLUDE THE \_\_\_\_\_\_\_\_\_\_\_\_\_ PLAN IN
ALL BID INVITATIONS OR OTHER PRE-BID COMMUNICATIONS, WRITTEN OR
OTHERWISE, WITH THEIR PROSPECTIVE SUBCONTRACTORS. WHENEVER A CONTRACTOR
SUBCONTRACTS A PORTION OF THE WORK IN ANY TRADE COVERED BY THE
\_\_\_\_\_\_\_\_\_\_\_\_\_ PLAN IT SHALL INCLUDE THE PLAN IN SUCH
SUBCONTRACTS AND EACH SUBCONTRACTOR SHALL BE BOUND BY THE
\_\_\_\_\_\_\_\_\_\_\_\_\_\_ PLAN TO THE FULL EXTENT AS IF IT WERE THE
PRIME CONTRACTOR. THE CONTRACTOR SHALL NOT BE ACCOUNTABLE FOR THE
FAILURE OF ITS SUBCONTRACTOR TO FULFILL ITS AFFIRMATIVE ACTION
COMMITMENTS. HOWEVER, THE PRIME CONTRACTOR SHALL GIVE NOTICE TO THE
OFFICE OF FEDERAL CONTRACT COMPLIANCE PROGRAMS OF THE DEPARTMENT OF
LABOR AND THE CONTRACTING AGENCY OF ANY REFUSAL OR FAILURE OF ANY
SUBCONTRACTOR TO FULFILL ITS OBLIGATIONS UNDER THE \_\_\_\_\_\_\_\_\_
PLAN. NONCOMPLIANCE WITH THESE REQUIREMENTS BY A SUBCONTRACTOR WILL BE
TREATED IN THE SAME MANNER AS SUCH FAILURE BY THE PRIME CONTRACTOR.

B. CONTRACTORS HEREBY AGREE TO REFRAIN FROM ENTERING INTO ANY CONTRACT
OR CONTRACT MODIFICATION SUBJECT TO EXECUTIVE ORDER 11246, AS AMENDED,
WITH A CONTRACTOR DEBARRED FROM, OR WHO IS DETERMINED NOT TO BE A
\"RESPONSIBLE\" BIDDER FOR GOVERNMENT CONTRACTS AND FEDERALLY-ASSISTED
CONSTRUCTION CONTRACTS PURSUANT TO THE EXECUTIVE ORDER.

C. THE CONTRACTOR SHALL CARRY OUT SUCH SANCTIONS AND PENALTIES FOR
VIOLATION OF THESE BID CONDITIONS AND THE EQUAL OPPORTUNITY CLAUSE
INCLUDING

(1-15-79) SPECIAL PN

RD Instruction 1942-A

(Guide 17) Attachment I (Page 10)

SUSPENSION. TERMINATION AND CANCELLATION OF EXISTING SUBCONTRACTS AND
DEBARMENT FROM FUTURE CONTRACTS AS MAY BE IMPOSED OR ORDERED PURSUANT TO
EXECUTIVE ORDER 11246, AS AMENDED, AND ITS IMPLEMENTING REGULATIONS BY
THE CONTRACTING OR ADMINISTERING AGENCY AND THE OFFICE OF FEDERAL
CONTRACT COMPLIANCE PROGRAMS. ANY CONTRACTOR WHO FAILS TO CARRY OUT SUCH
SANCTIONS AND PENALTIES SHALL ALSO BE DEEMED TO BE IN NONCOMPLIANCE WITH
THESE BID CONDITIONS AND EXECUTIVE ORDER 11246, AS AMENDED.

D. NOTHING HEREIN IS INTENDED TO RELIEVE ANY CONTRACTOR DURING THE TERM
OF ITS CONTRACT FROM COMPLIANCE WITH EXECUTIVE ORDER 11246, AS AMENDED,
AND THE EQUAL OPPORTUNITY CLAUSE OF ITS CONTRACT WITH RESPECT TO MATTERS
NOT COVERED IN THE \_\_\_\_\_\_\_\_\_\_\_\_ PLAN.

E. CONTRACTORS MUST KEEP SUCH RECORDS AND FILE SUCH REPORTS RELATING TO
PROVISIONS OF THE \_\_\_\_\_\_\_\_\_\_\_ PLAN AS SHALL BE REQUIRED BY
THE CONTRACTING OR ADMINISTERING AGENCY OR THE OFFICE OF FEDERAL
CONTRACT COMPLIANCE PROGRAMS.

[OBLIGATIONS OF THE FEDERAL GOVERNMENT]{.underline}

A. NOTHING IN THE \_\_\_\_\_\_\_\_\_\_\_\_ PLAN SHALL BE INTERPRETED TO
DIMINISH OR RELIEVE THE RESPONSIBILITIES OF THE CONTRACTING AND
ADMINISTERING AGENCIES PURSUANT TO EXECUTIVE ORDER 11246, AS AMENDED,
WITH RESPECT TO MATTERS NOT COVERED IN THESE BID CONDITIONS.

B. THE PROCEDURES SET FORTH IN THE \_\_\_\_\_\_\_\_\_\_\_ PLAN SHALL NOT
APPLY TO ANY CONTRACT WHEN THE HEAD OF THE AGENCY DETERMINES THAT SUCH
CONTRACT IS ESSENTIAL TO THE NATIONAL SECURITY AND THAT ITS AWARD
WITHOUT FOLLOWING SUCH PROCEDURE IS NECESSARY TO THE NATIONAL SECURITY.
UPON MAKING SUCH A DETERMINATION, THE AGENCY HEAD WILL NOTIFY, IN
WRITING, THE DIRECTOR OF THE OFFICE

(Guide 17) Attachment I (Page 11) RD Instruction 1942-A

OF FEDERAL CONTRACT COMPLIANCE PROGRAMS WITHIN 30 DAYS.

C. NOTHING IN THE \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ PLAN SHALL BE
INTERPRETED TO DIMINISH THE PRESENT CONTRACT COMPLIANCE REVIEW AND
COMPLIANT PROGRAMS.

D. REQUESTS FOR EXEMPTIONS FROM THE \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ PLAN
MUST BE MADE IN WRITING, WITH JUSTIFICATION, TO THE DIRECTOR, OFFICE OF
FEDERAL CONTRACT COMPLIANCE PROGRAMS, U.S. DEPARTMENT OF LABOR,
WASHINGTON, D.C., 20210, AND SHALL BE FORWARDED THROUGH AND WITH THE
ENDORSEMENT OF THE HEAD OF THE CONTRACTING OR ADMINISTERING AGENCY.

SIGNED THIS \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ DAY OF
\_\_\_\_\_\_\_\_\_\_\_\_\_.

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

DIRECTOR, OFFICE OF FEDERAL

Contract Compliance Programs

## oOo

(1-15-79) SPECIAL PN

RD Instruction 1942-A

Guide 18

Page 1

(Revision 1)

## Rural Development Supplemental General Conditions

The provisions of the Rural Development Supplemental General Conditions
as described herein change, amend, or supplement the General Conditions
and shall supersede any conflicting provisions of this CONTRACT. All
provisions of the General Conditions which are not changed, amended, or
supplemented, remain in full force.

1\. CONTRACT APPROVAL 9. SMALL, MINORITY AND WOMEN\'S

2\. CONTRACT CHANGE ORDERS BUSINESSES

3\. PARTIAL PAYMENT ESTIMATES 10. ANTI-KICKBACK

4\. CONFLICT OF INTEREST 11. VIOLATING FACILITIES

5\. PROTECTION OF LIVES AND PROPERTY 12. STATE ENERGY POLICY

6\. REMEDIES 13. EQUAL OPPORTUNITY REQUIREMENTS

7\. GRATUITIES 14. CERTIFICATE OF OWNER\'S ATTORNEY

8\. AUDIT AND ACCESS TO RECORDS 15. RURAL DEVELOPMENT CONCURRENCE

1\. [Contract Approval]{.underline}.

1.1 The OWNER and the CONTRACTOR will furnish the OWNER\'S Attorney such
evidence as required so that the OWNER\'S Attorney can complete and
execute \"Certificate of Owner\'s Attorney\" (Section 14) before the
OWNER submits the executed Contract Documents to Rural Development for
approval.

1.2 Concurrence by the Rural Development State Director or designee in
the award of the CONTRACT is required before it is effective and the
\"Rural Development Concurrence\" (Section 15), shall be attached and
made a part of the Agreement.

1.3 When a Performance BOND and Payment BOND are provided, the United
States acting through Rural Development will be named as co-obligee in
these BONDS unless prohibited by State law. Surety companies executing
BONDS must appear on the Treasury Department\'s most current list
(Circular 570 as amended) and be authorized to transact business in the
State where the project is located.

1.4 This CONTRACT is expected to be funded in part with funds from the
Rural Development. Neither the United States nor any of its departments,
agencies, or employees is or will be a party to this CONTRACT or any
SUBCONTRACT.

2\. [Contract Change Orders]{.underline}.

2.1 All changes affecting the project\'s construction cost or
modifications of the terms or conditions of the contract must be
authorized by means of a written contract change order which is mutually
agreed to by the OWNER and CONTRACTOR and is approved by Rural
Development. The contract change order will include extra work, work for
which quantities have been altered from those shown in the bidding
schedule, as well as decreases or increases in the quantities of
installed units which are different than those shown in the bidding
schedule because of final measurements. All changes must be recorded on
a contract change order before they can be included in a partial payment
estimate.

RD Instruction 1942-A

Guide 18

Page 2

(Revision 1)

2.2 Form RD 1924-7, \"Contract Change Order\" or similar form approved
by Rural Development shall be used to record CONTRACT changes. (Revised
5-12-87, SPECIAL PN.)

2.3 When the CONTRACT sum is, in whole or in part, based on unit prices,
the OWNER reserves the right to increase or decrease a unit price
quantity as may be deemed reasonable or necessary in order to complete
the work contemplated by this CONTRACT.

3\. [Partial Payment Estimates]{.underline}.

3.1 Form RD 1924-18, \"Partial Payment Estimate,\" or similar form
approved by Rural Development shall be used when periodic payments due
the CONTRACTOR. (Revised 5-12-87, SPECIAL PN.)

3.2 The OWNER may after consultation with the ARCHITECT/ENGINEER
withhold or, on account of subsequently discovered evidence, nullify the
whole or part of any approved partial payment estimate to such extent as
may be necessary to protect the OWNER from loss on account of:

3.2.1 Defective work not remedied.

3.2.2 Claims filed.

3.2.3 Failure of CONTRACTOR to make payments properly to subcontractors
or suppliers.

3.2.4 A reasonable doubt that the WORK can be completed for the balance
then unpaid.

3.2.5 Damage to another CONTRACTOR.

3.2.6 Performance of WORK in violation of the terms of the CONTRACT
DOCUMENTS.

3.3 Where WORK on unit price items is substantially complete but lacks
testing, clean-up and/or corrections, amounts shall be deducted from
unit prices in partial payment estimates to amply cover such testing,
clean-up and/or corrections.

3.4 When the items in 3.2 and 3.3 are cured, payment shall be made for
amounts withheld because of them.

3.5 Payments will not be made that would deplete the retainage nor place
in escrow any funds that are required for retainage nor invest the
retainage for the benefit of the CONTRACTOR.

RD Instruction 1942-A

Guide 18

Page 3

4\. [Conflict of Interest]{.underline}.

4.1. Unacceptable bidders. An ENGINEER or ARCHITECT (individual or firm
including persons they employ) who has prepared plans and specifications
will not be considered an acceptable bidder. Any firm or corporation in
which such ENGINEER or ARCHITECT (including persons they employ) is an
officer, employee, or holds or controls a substantial interest will not
be considered an acceptable bidder. Contracts or purchases by the
CONTRACTOR shall not be awarded or made to a supplier or manufacturer if
the ENGINEER or ARCHITECT (firm or individual) who prepared the plans
and specifications has a corporate or financial affiliation with the
supplier or manufacturer. Bids will not be awarded to firms or
corporations which are owned or controlled wholly or in part by a member
of the governing body of the OWNER or to an individual who is such a
member.

4.2. The OWNER\'S officers, employees, or agents shall not engage in the
award or administration of this CONTRACT if a conflict of interest, real
or apparent, would be involved. Such a conflict would arise when: (a)
the employee, officer or agent; (b) any member of their immediate
family; (c) their partner or (d) an organization which employs, or is
about to employ, any of the above baa financial or interest in the
CONTRACTOR. The OWNER\'S officers, employees, or agents shall neither
solicit nor accept gratuities, favors or anything of monetary value from
the CONTRACTOR or subcontractor.

5\. [Protection of Lives and Property]{.underline}

5.1 In order to protect the lives and health of its employees under the
CONTRACT, the CONTRACTOR shall comply with all pertinent provisions of
the Occupational Safety and Health Administration (OSHA) and any State
Safety and Health agency requirements.

5.2 The CONTRACTOR alone shall be responsible for the safety,
efficiency, and adequacy of its plant, appliances, and methods, and for
any damage which may result from their failure or their improper
construction, maintenance or operation.

6\. [Remedies]{.underline}. Unless otherwise provided in this CONTRACT,
all claims,

counterclaims, disputes, and other matters in question between the OWNER
and

(2-19-86) PN 998

RD Instruction 1942-A

Guide 18

Page 4

the CONTRACTOR arising out of or relating to this CONTRACT or the breach
thereof will be decided by arbitration if the parties mutually agree, or
in a court of competent jurisdiction within the State in which the OWNER
is located.

6.1 The arbitration provisions of this section may be initiated by
either party to this CONTRACT by filing with the other party and the
ENGINEER/ARCHITECT a WRITTEN REQUEST for arbitration.

6.2 Each party to this CONTRACT will appoint one arbitrator; the two
arbitrators will select a third arbitrator.

6.3 The arbitrators will select a hearing location as close to the
OWNER\'S locale as possible.

6.4 The procedure for conducting the hearings will follow the
Construction Industry Arbitration Rules of the American Arbitration
Association.

7\. [Gratuities]{.underline}.

7.1 If the OWNER finds after a notice and hearing that the CONTRACTOR,
or any of the CONTRACTOR\'S agents or representatives, offered or gave
gratuities (in the form of entertainment, gifts, or otherwise) to any
official, employee, or agent of the OWNER, the State, or Rural
Development officials in an attempt to secure this CONTRACT or favorable
treatment in awarding, amending, or making any determinations related to
the performance of this CONTRACT, the OWNER may, by written notice to
the CONTRACTOR, terminate this CONTRACT. The OWNER may also pursue other
rights and remedies that the law or this CONTRACT provides. However, the
existence of the facts on which the OWNER bases such findings shall be
an issue and may be reviewed in proceedings under the Remedies clause of
this CONTRACT.

7.2 In the event this CONTRACT is terminated as provided in paragraph
7.1 the OWNER may pursue the same remedies against the CONTRACTOR as it
could pursue in the event of a breach of the CONTRACT by the CONTRACTOR.
As a penalty, in addition to any other damages to which it may be
entitled by law, the OWNER may pursue exemplary damages in an amount has
determined by the OWNER) which shall be not less than three nor more
than ten times the costs the CONTRACTOR incurs in providing any such
gratuities to any such officer or employee.

RD Instruction 1942-A

Guide 18

Page 5

8\. [Audit and Access to Records]{.underline}. For all negotiated
contracts (except

those of \$10,000 or less), the Rural Development, the Comptroller
General, the OWNER or any of their duly authorized representatives,
shall have access to any books, documents, papers, and records of the
CONTRACTOR, which are pertinent to the CONTRACT, for the purpose of
making audits, examinations, excerpts and transcriptions. The CONTRACTOR
shall maintain all required records for three years after final payment
is made and all other pending matters are closed.

9\. [Small, Minority and Women\'s Businesses]{.underline}. If the
CONTRACTOR intends to

let any subcontracts for a portion of the work, the CONTRACTOR shall
take affirmative steps to assure that small, minority and women\'s
businesses are used when possible as sources of supplies, equipment,
construction, and services. Affirmative steps shall consist of (1)
including qualified small minority, and women\'s businesses on
solicitation lists; (2) assuring that small, minority and women\'s
businesses are solicited whenever they are potential sources; (3)
dividing total requirements when economically feasible, into small tasks
or quantities to permit maximum participation of small, minority and
women\'s businesses; (4) establishing delivery schedules, where the
requirements of the work permit, which will encourage participation by
small, minority and women\'s businesses; (5) using the services and
assistance of the Small Business Administration, and the Minority
Business Development Agency of the U.S. Department of Commerce; (6)
requiring each party to a subcontract to take the affirmative steps of
this section; and (7) CONTRACTORS are encouraged to procure goods and
services from labor surplus area firms.

10\. [Anti-Kickback]{.underline}. The CONTRACTOR shall comply with the
Copeland Anti-

Kickback Act (18 USC 874) as supplemented in Department of Labor
regulations (29 CFR, Part 3). This act provides that each CONTRACTOR
shall be prohibited from inducing, by any means, any person employed in
the construction, completion, or repair of public facilities, to give up
any part of the compensation to which they are otherwise entitled. The
OWNER shall report all suspected or reported violations to Rural
Development.

11\. [Violating Facilities]{.underline}. Where this CONTRACT exceeds
\$100,000 the

CONTRACTOR shall comply with all applicable standards, orders or
requirements issued under section 306 of the Clean Air Act (42 U.S.C.
1857(h)), section 508 of the Clean Water Act (33 U.S.C. 1368), Executive
Order 11738, and Environmental Protection Agency regulations 40 CFR Part
15 which prohibit the awarding of non-exempt federal contracts, grants,
or loans to facilities included on EPA\'s list of violating facilities.
The CONTRACTOR will report violations to the EPA.

(2-19-86) PN 998

RD Instruction 1942-A

Guide 18

Page 6

12\. [State Energy Policy]{.underline}. The CONTRACTOR shall comply with
the Energy

Policy and Conservation Act (P.L. 94-163). Mandatory standards and
policies relating to energy efficiency, contained in the State Energy
Conservation Plan, shall be utilized.

13\. [Equal Opportunity Requirements]{.underline}. For all contracts in
excess of

\$10,000, the CONTRACTOR shall comply with Executive Order 11246,
entitled \"Equal Employment Opportunity,\" as amended by Executive Order
11375, and as supplemented in Department of Labor regulations (41 CFR
Part 60).

13.1 If the CONTRACT exceeds \$10,000, the CONTRACTOR will execute Form
RD 400-6, \"Compliance Statement.\"

13.2 The CONTRACTOR\'S compliance with Executive Order 11246 shall be
based on its implementation of the Equal Opportunity Clause, specific
affirmative action obligations required by the Standard Federal Equal
Employment Opportunity Construction Contract Specifications, as set
forth in 41 CFR Part 60-4 and its efforts to meet the goals established
for the geographical area where the CONTRACT is to be performed. The
hours of minority and female employment and training must be
substantially uniform throughout the length of the CONTRACT, and in each
trade, and the CONTRACTOR shall make a good faith effort to employ
minorities and women evenly on each of its projects. The transfer of
minority or female employees or trainees from contractor to contractor
or from project to project for the sole purpose of meeting the
CONTRACTOR\'S goals shall be a violation of the CONTRACT, the Executive
Order and the regulations in 41 CFR Part 60-4. Compliance with the goals
will be measured against the total work hours performed.

13.3 The CONTRACTOR shall provide written notification to the Director
of the Office of Federal Contract Compliance Programs within 10 working
days of award of any construction subcontract in excess of \$10,000 at
any tier for construction work under the CONTRACT resulting from this
solicitation. The notification shall list the name, address and
telephone number of the subcontractor; employer identification number;
estimated dollar amount of subcontract; estimated starting and
completion dates of the subcontract; and the geographical area in which
the CONTRACT is to be performed.

RD Instruction 1942-A

Guide 18

Page 7

14\. [Certificate of Owner\'s Attorney]{.underline}.

I, the undersigned, \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ ,
the duly authorized and acting legal representative
of\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_, do hereby certify as
follows

I have examined the attached contract(s) and performance and payment
bond(s) and the manner of execution thereof, and I am of the opinion
that each of the aforesaid agreements are adequate and have has been
duly executed by the proper parties thereto acting through their duly
authorized representatives; that said representatives have full power
and authority to execute said agreements on behalf of the respective
parties named thereon; and that the foregoing agreements constitute
valid and legally binding obligations upon the parties executing the
same in accordance with terms, conditions, and provisions thereof.

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Date:\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

NOTE: Delete phrase \"performance and payment bonds\" when not
applicable.

(2-19-86) PN 998

RD Instruction 1942-A

Guide 18

Page 8

15\. [Rural Development Concurrence]{.underline}.

As lender or insurer of funds to defray the costs of this contract, and
without liability for any payments thereunder, Rural Development (Rural
Development) hereby concurs in the award of this CONTRACT to

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

U.S. Department of Agriculture

Rural Development

By\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
Title \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Date\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

This CONTRACT shall not be effective unless and until concurred in by
the State Director of Rural Development, U.S. Department of Agriculture
or a delegated representative.

RD Instruction 1942-A

(Guide 19)

## AGREEMENT

THIS AGREEMENT, made this \_\_\_\_\_\_\_\_\_\_\_\_ day of
\_\_\_\_\_\_\_\_\_\_\_, 19 \_\_\_\_, by

and between \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
, hereinafter called \"OWNER\"

(name of Owner), (an Individual)

and \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
doing business as (an individual,) or

(a partnership,) or (a corporation) hereinafter called \"CONTRACTOR\".

WITNESSETH: That for and in consideration of the payments and agreements

herein after mentioned:

1\. The CONTRACTOR will commence and complete the construction of

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

2\. The CONTRACTOR will furnish all of the materials, supplies, tools,
equipment, labor, and other services necessary for the construction and
completion of the PROJECT described herein.

3\. The CONTRACTOR will commence the work required by the CONTRACT
DOCUMENTS within \_\_\_\_\_\_\_\_\_ calendar days after the date of the
NOTICE TO PROCEED and will complete the same within
\_\_\_\_\_\_\_\_\_\_\_\_\_\_ calendar days unless the period for
completion is extended otherwise by the CONTRACT DOCUMENTS.

4\. The CONTRACTOR agrees to perform all of the WORK described in the
CONTRACT DOCUMENTS and comply with the terms therein for the sum of
\$\_\_\_\_\_\_\_\_\_\_\_\_\_ or as shown in the BID schedule.

5\. The term \"CONTRACT DOCUMENTS\" MEANS and includes the following:

(1-15-79) SPECIAL PN

RD Instruction 1942-A

(Guide 19) (Page 2)

\(A\) Advertisement For BIDS

\(B\) Information For BIDDERS

\(C\) BID

\(D\) BID BOND

\(E\) Agreement

\(F\) General Conditions

\(G\) SUPPLEMENTAL GENERAL CONDITIONS

\(H\) Payment BOND

\(I\) Performance BOND

\(J\) NOTICE OF AWARD

\(K\) NOTICE TO PROCEED

\(1\) CHANGE ORDER

\(M\) DRAWINGS prepared by
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

numbered \_\_\_\_\_\_\_\_ through \_\_\_\_\_\_\_\_, and dated
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_,

\(N\) SPECIFICATIONS prepared or issued by
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_,

dated \_\_\_\_\_\_\_\_\_\_\_, 19\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\(O\) ADDENDA:

No.\_\_\_\_\_\_\_\_\_\_\_\_, dated \_\_\_\_\_\_\_\_\_\_, 19
\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_, \_\_\_\_\_\_\_\_\_\_, \_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_, \_\_\_\_\_\_\_\_\_\_, \_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_, \_\_\_\_\_\_\_\_\_\_, \_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_, \_\_\_\_\_\_\_\_\_\_, \_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_, \_\_\_\_\_\_\_\_\_\_, \_\_\_\_\_\_\_\_\_\_\_

RD Instruction 1942-A

(Guide 19) (Page 3)

(Revision 1)

6\. The OWNER will pay to the CONTRACTOR in the manner and at such times
as set forth in the General Conditions such amounts as required by the
CONTRACT DOCUMENTS.

7\. This Agreement shall be binding upon all parties hereto and their
respective heirs, executors, administrators, successors, and assigns.

IN WITNESS WHEREOF, the parties hereto have executed or caused to be
executed by their duly authorized official, this Agreement in

(\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_) copies each of which shall be
deemed an original on the (Number of Copies) date first above written.

OWNER:

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

BY\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Name\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

(Please Type)

Title\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

(SEAL)

ATTEST:

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Name \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

(Please Type)

Title \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

(1-15-79) SPECIAL PN

(Guide 19) (Page 4) RD Instruction 1942-A

(Revision 1)

CONTRACTOR:

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

BY\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Name\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

(Please Type)

Address\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Employer Identification

(SEAL) Number \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

ATTEST:

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Name\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

(Please Type)

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

RD Instruction 1942-A

(Guide 19) (Attachment 1)

ADVERTISEMENT FOR BIDS

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Owner

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Address

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Separate sealed BIDS for the construction of (briefly describe nature,

scope, and major elements of the
work)\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

will be received by
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

at the office of
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

until \_\_\_\_\_\_\_, (Standard Time - Daylight Savings
Time)\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

19\_\_\_\_\_\_\_, and then at said office publicly opened and read
aloud.

The CONTRACT DOCUMENTS may be examined at the following locations:

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Copies of the CONTRACT DOCUMENTS may be obtained at the office of

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ located at
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

upon payment of \$\_\_\_\_\_\_\_ for each set.

(1-15-79) SPECIAL PN

RD Instruction 1942-A

(Guide 19) (Attachment 1) (Page 2)

Any BIDDER, upon returning the CONTRACT DOCUMENTS promptly and in

good condition, will be refunded the payment, and any non-bidder upon

so returning the CONTRACT DOCUMENTS will be refunded
\$\_\_\_\_\_\_\_\_\_\_\_\_\_.

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

DATE

RD Instruction 1942-A

(Guide 19 - Attachment 2)

## INFORMATION FOR BIDDERS

BIDS will be received by
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

(herein called the \"OWNER\"), at
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

until\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_, 19\_\_\_\_\_, and then at
said office publicly

opened and read aloud.

Each BID must be submitted in a sealed envelope, addressed to
\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
at \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_.
Each sealed envelope containing a BID must be plainly marked on the
outside as BID for
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_and
the envelope should bear on the outside the BIDDER\'S name, address, and
license number if applicable, and the name of the project for which the
BID is submitted. If forwarded by mail, the sealed envelope containing
the BID must be enclosed in another envelope addressed to the OWNER at
\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_.

All BIDS must be made on the required BID form. All blank spaces for BID
prices must be filled in, in ink or typewritten, and the BID form must
be fully completed and executed when submitted. Only one copy of the BID
form is required.

The OWNER may waive any informalities or minor defects or reject any and
all BIDS. Any BID may be withdrawn prior to the above scheduled time for
the opening of BIDS or authorized postponement thereof. Any BID received
after the time and date specified shall not be considered. No BIDDER may
withdraw a BID within 60 days after the actual date of the opening
thereof. Should there be reasons why the contract cannot be awarded
within the specified period, the time may be extended by mutual
agreement between the OWNER and the BIDDER.

BIDDERS must satisfy themselves of the accuracy of the estimated
quantities in the BID Schedule by examination of the site and a review
of the drawings and specifications including ADDENDA. After BIDS have
been submitted, the BIDDER shall not assert that there was a
misunderstanding concerning the quantities of WORK or of the nature of
the WORK to be done.

The OWNER shall provide to BIDDERS prior to BIDDING, all information
which is pertinent to, and delineates and describes, the land owned and
rights-of-way acquired or to be acquired.

(1-15-79) SPECIAL PN

RD Instruction 1942-A

(Guide 19 - Attachment 2) (Page 2)

The CONTRACT DOCUMENTS contain the provisions required for the
construction of the PROJECT. Information obtained from an officer,
agent, or employee of the OWNER or any other person shall not affect the
risks or obligations assumed by the CONTRACTOR or relieve the contractor
from fulfilling any of the conditions of the contract.

Each BID must be accompanied by a BID bond payable to the OWNER for five
percent of the total amount of the BID. As soon as the BID prices have
been compared, the OWNER will return the BONDS of all except the three
lowest responsible BIDDERS. When the Agreement is executed the bonds of
the two remaining unsuccessful BIDDERS will be returned. The BID BOND of
the successful BIDDER will be retained until the payment BOND and
performance BOND have been executed and approved, after which it will be
returned. A certified check may be used in lieu of a BID BOND.

A performance BOND and a payment BOND each in the amount of 100 percent
of the CONTRACT PRICE, with a corporate surety approved by the OWNER,
will be required for the faithful performance of the contract.

Attorneys-in-fact who sign BID BONDS or payment BONDS and performance
BONDS must file with each BOND a certified and effective dated copy of
their power of attorney.

The party to whom the contract is awarded will be required to execute
the Agreement and obtain the performance BOND and payment BOND within
ten (10) calendar days from the date when NOTICE OF AWARD is delivered
to the BIDDER. The NOTICE OF AWARD shall be accompanied by the necessary
Agreement and BOND forms. In case of failure of the BIDDER to execute
the Agreement, the OWNER may consider the BIDDER in default, in which
case the BID BOND accompanying the proposal shall become the Property of
the OWNER.

The OWNER within ten (10) days of receipt of acceptable performance
BOND, payment BOND and Agreement signed by the party to whom the
Agreement was awarded shall sign the Agreement and return to such party
an executed duplicate of the Agreement. Should the OWNER not execute the
Agreement within such period, the BIDDER may by WRITTEN NOTICE withdraw
the signed Agreement. Such notice of withdrawal shall be effective upon
receipt of the notice by the OWNER.

The NOTICE TO PROCEED shall be issued within ten (10) days of the
execution of the Agreement by the OWNER. Should there be reasons why the
NOTICE TO PROCEED cannot be issued within such period, the time may be
extended by mutual agreement between the OWNER AND CONTRACTOR. If the
NOTICE TO PROCEED has not been issued within the ten (10) day period or
within the period mutually agreed upon, the CONTRACTOR may terminate the
Agreement without further liability on the part of either party.

The OWNER may make such investigations as deemed necessary to determine
the ability of the BIDDER to perform the WORK, and the BIDDER shall
furnish to the OWNER all such information and data for this purpose as
the OWNER

RD Instruction 1942-A

(Guide 19 - Attachment 2) (Page 3)

may request. The OWNER reserves the right to reject any BID if the
evidence submitted by, or investigation of, such BIDDER fails to satisfy
the OWNER that such BIDDER is properly qualified to carry out the
obligations of the Agreement and to complete the WORK contemplated
therein.

A conditional or qualified BID will not be accepted.

Award will be made to the lowest responsible BIDDER.

All applicable laws, ordinances, and the rules and regulations of all
authorities having jurisdiction over construction of the PROJECT shall
apply to the contract throughout.

Each BIDDER is responsible for inspecting the site and for reading and
being thoroughly familiar with the CONTRACT DOCUMENTS. The failure or
omission of any BIDDER to do any of the foregoing shall in no way
relieve any BIDDER from any obligation in respect to its BID.

Further, the BIDDER agrees to abide by the requirements under Executive
Order No. 11246, as amended, including specifically the provisions of
the equal opportunity clause set forth in the SUPPLEMENTAL GENERAL
CONDITIONS.

The low BIDDER shall supply the names and addresses of major material
SUPPLIERS and SUBCONTRACTORS when required to do so by the OWNER.

Inspection trips for prospective BIDDERS will leave from the office of
the
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

at
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_.

The ENGINEER IS
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_.
The ENGINEER\'S

address is
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_.

(1-15-79) SPECIAL PN

(Guide 19 - Attachment 3) RD Instruction 1942-A

## BID

Proposal of
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
(hereinafter called \"BIDDER\"), organized and existing under the laws
of the State of \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ doing business as
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\*.
To the
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
(hereinafter called \"OWNER\").

In compliance with your Advertisement for Bids, BIDDER hereby proposes
to perform all WORK for the construction of
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
in strict accordance with the CONTRACT DOCUMENTS, within the time set
forth therein, and at the prices stated below.

By submission of this BID, each BIDDER certifies, and in the case of a
joint BID each party thereto certifies as to its own organization, that
this BID has been arrived at independently, without consultation,
communication, or agreement as to any matter relating to this BID with
any other BIDDER or with any competitor.

BIDDER hereby agrees to commence WORK under this contract on or before a
date to be specified in the NOTICE TO PROCEED and to fully complete the
PROJECT within \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ consecutive
calendar days thereafter. BIDDER further agrees to pay as liquidated
damages, the sum of \$\_\_\_\_\_\_\_\_ for each consecutive calendar day
thereafter as provided in Section 15 of the General Conditions.

(1-15-79) SPECIAL PN

RD Instruction 1942-A

(Guide 19 - Attachment 3) (Page 2)

BIDDER acknowledges receipt of the following ADDENDUM:

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\* Insert \"a corporation\", \"a partnership\", or \"an individual\" as
applicable.

BIDDER agrees to perform all the work described in the CONTRACT
DOCUMENTS for the following unit prices or lump sum:

BID SCHEDULE

NOTE: BIDS shall include sales tax and all other applicable taxes and

fees.

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

[NO.\_\_\_\_\_\_\_ITEM\_\_\_\_\_\_\_\_\_\_\_UNIT\_\_\_\_\_UNIT
PRICE\_\_\_\_\_\_\_AMOUNT\_\_\_\_\_\_TOTAL PRICE]{.underline}

(Guide 19 - Attachment 3) (Page 3) RD Instruction 1942-A

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

[NO.\_\_\_\_\_\_ITEM\_\_\_\_\_\_\_\_\_\_\_UNIT\_\_\_\_\_\_\_\_\_UNIT
PRICE\_\_\_\_\_AMOUNT\_\_\_\_\_TOTAL PRICE]{.underline}

TOTAL OF BID . . . . . . . . . . . . . . . . . . . . . . . . .
\$\_\_\_\_\_\_\_\_\_

LUMP SUM PRICE (if applicable) . . . . . . . . . . . . . . . .
\$\_\_\_\_\_\_\_\_\_

Respectfully submitted:

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Signature Address

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Title Date

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

License number (if applicable)

SEAL - (if BID is by a corporation)

(1-15-79) SPECIAL PN

RD Instruction 1942-A

(Guide 19 - Attachment 4) BID BOND

KNOW ALL MEN BY THESE PRESENTS, that we, the
undersigned,\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
as Principal, and
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
as Surety, are hereby held and firmly bound unto
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ as OWNER in the
penal sum of
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
for the payment of which, well and truly to be made, we hereby jointly
and severally bind ourselves, successors and assigns.

Signed, this \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ day of
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_, 19\_\_\_\_\_\_\_\_\_. The
Condition of the above obligation is such that whereas the Principal has
submitted to
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
a certain BID, attached hereto and hereby made a part hereof to enter
into a contract in writing, for the
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

NOW, THEREFORE,

\(a\) If said BID shall be rejected, or

\(b\) If said BID shall be accepted and the Principal shall execute

> and deliver a contract in the Form of Contract attachment hereto
> (Properly completed in accordance with said BID) and shall furnish a
> BOND for faithful performance of said contract, and for the payment of
> all persons performing labor furnishing materials in connection
> therewith, and shall in all other respects perform the agreement
> created by the acceptance of said BID, then this obligation shall be
> void, otherwise the same shall remain in force and effect; it being
> expressly understood and agreed that the liability of the Surety for
> any and all claims hereunder shall, in no event, exceed the penal
> amount of this obligation as herein stated.

(1-15-79) SPECIAL PN

(Guide 19 - Attachment 4) (Page 2) RD Instruction 1942-A

The Surety, for value received, hereby stipulates and agrees that the
obligations of said Surety and its BOND shall be in no way impaired or
affected by any extension of the time within which the OWNER may accept
such BID; and said Surety does hereby waive notice of any such
extension.

IN WITNESS WHEREOF, the Principal and the Surety have hereunto set their
hands and seals, and such of them as are corporations have caused their
corporate seals to be hereto affixed and these presents to be signed by
their proper officers, the day and year first set forth above.

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_(L.S.)

Principal

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Surety

By:\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

IMPORTANT - Surety companies executing BONDS must appear on the Treasury
Department\'s most current list (Circular 570 as amended) and be
authorized to transact business in the state where the project is
located.

## oOo 

RD Instruction 1942-A

(Guide 19 - Attachment 5)

## PERFORMANCE BOND

KNOW ALL PERSONS BY THESE PRESENTS: that

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

(Name of Contractor)

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

(Address of Contractor)

a
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_,
hereinafter called Principal, and

(Corporation, Partnership, or Individual)

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

(Name of Surety)

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

(Address of Surety)

hereinafter called Surety, are held and firmly bound unto
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

(Name of Owner)

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

(Address of Owner)

hereinafter called OWNER, and the United States of America acting
through Rural Development hereinafter referred to as the Government in
the total aggregate penal sum of
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
Dollars (\$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_)

in lawful money of the United States, for the payment of which sum well
and truly to be made, we bind ourselves, our heirs, executors,
administrators, successors, and assigns, jointly and severally, firmly
by these presents.

THE CONDITION OF THIS OBLIGATION is such that whereas, the Principal
entered into a certain contract with the OWNER, dated the
\_\_\_\_\_\_\_\_\_\_ day of \_\_\_\_\_ 19\_\_\_, a copy of which is
hereto attached and made a part hereof for the construction of:

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

(5-23-79) PN 675

RD Instruction 1942-A

(Guide 19 - Attachment 5) (Page 2)

NOW, THEREFORE, if the Principal shall well, truly and faithfully
perform its duties, all the undertakings, covenants, terms, conditions,
and agreements of said contract during the original term thereof, and
any extensions thereof which may be granted by the OWNER, or GOVERNMENT,
with or without notice to the SURETY and during the one year guaranty
period and if the PRINCIPAL shall satisfy all claims and demands
incurred under such contract, and shall fully indemnify and save
harmless the OWNER and GOVERNMENT from all costs and damages which it
may suffer by reason of failure to do so, and shall reimburse and repay
the OWNER and GOVERNMENT all outlay and expense which the OWNER and
GOVERNMENT may incur in making good any default, then this obligation
shall be void, otherwise to remain in full force and effect.

PROVIDED, FURTHER, that the liability of the PRINCIPAL AND SURETY
hereunder to the GOVERNMENT shall be subject to the same limitations and
defenses as may be available to them against a claim hereunder by the
OWNER, provided, however, that the GOVERNMENT may, at its option,
perform any obligations of the OWNER required by the contract.

PROVIDED, FURTHER, that the said SURETY, for value received hereby
stipulates and agrees that no change, extension of time, alteration or
addition to the terms of the contract or to WORK to be performed
thereunder or the SPECIFICATIONS accompanying same shall in any way
affect its obligation on this BOND, and it does hereby waive notice of
any such change, extension of time, alteration or addition to the terms
of the contract or to the WORK or to the SPECIFICATIONS.

PROVIDED, FURTHER, that it is expressly agreed that the BOND shall be
deemed amended automatically and immediately, without formal and
separate amendments hereto, upon amendment to the Contract not
increasing the contract price more than 20 percent, so as to bind the
PRINCIPAL and the SURETY to the full and faithful performance of the
CONTRACT as so amended. The term \"Amendment\", wherever used in this
BOND, and whether referring to this BOND, the Contract or the Loan
Documents shall include any alteration, addition, extension, or
modification of any character whatsoever.

PROVIDED, FURTHER, that no final settlement between the OWNER or
GOVERNMENT and the PRINCIPAL shall abridge the right of the other
beneficiary hereunder, whose claim may be unsatisfied. The OWNER and
GOVERNMENT are the only beneficiaries hereunder.

RD Instruction 1942-A

(Guide 19 Attachment 5) (Page 3)

IN WITNESS WHEREOF, this instrument is executed in \_\_\_\_\_\_\_\_
counterparts, each

Number

one of which shall be deemed an original, this the \_\_\_\_\_\_\_\_\_\_
day of \_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ .

ATTEST:

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Principal

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

(Principal) Secretary

(SEAL)

By\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_(s)

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

(Witness as to Principal) (Address)

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

(Address)

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Surety

ATTEST:

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
BY\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Witness to Surety Attorney-in-Fact

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

(Address) (Address)

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

NOTE: Date of BOND must not be prior to date of Contract.

If CONTRACTOR is partnership, all partners should execute BOND.
IMPORTANT: Surety companies executing BONDS must appear on the Treasury
Department\'s most current list (Circular 570 as amended) and be
authorized to transact business in the state where the Project is
located.

## oOo

(5-23-79) PN 675

RD Instruction 1942-A

(Guide 19 - Attachment 6)

## PAYMENT BOND

KNOW ALL PERSONS BY THESE PRESENTS: that

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

(Name of Contractor)

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

(Address of Contractor)

a
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
hereinafter called PRINCIPAL and

(Corporation, Partnership or Individual)

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

(Name of Surety)

hereinafter called SURETY, are held and firmly bound unto
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

(Name of Owner)

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

(Address of Owner)

hereinafter called OWNER and the United States of America acting through
Rural Development hereinafter referred to as GOVERNMENT, and unto all
persons, firms, and corporations who or which may furnish labor, or who
furnish materials to perform as described under the contract and to
their successors and assigns in the total aggregate penal sum of
\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
Dollars (\$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_)

in lawful money of the United States, for the payment of which sum well
and truly to be made, we bind ourselves, our heirs, executors,
administrators, successors, and assigns, jointly and severally, firmly
by these presents.

THE CONDITION OF THIS OBLIGATION is such that whereas, the PRINCIPAL
entered into a certain contract with the OWNER, dated the
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ day of \_\_\_\_\_\_\_19\_\_\_, a copy
of which is hereto attached and made a part hereof for the construction
of:

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

NOW, THEREFORE, if the PRINCIPAL shall promptly make payment to all
persons, firms, and corporations furnishing materials for or performing
labor in the prosecution of the WORK provided for in such contract, and
any authorized extensions or modification thereof, including all amounts
due for materials, lubricants, oil, gasoline, coal and coke, repairs on
machinery, equipment and tools, consumed or used in connection with the
construction of such WORK, and for all labor cost incurred in such WORK
including that by a SUBCONTRACTOR, and to any mechanic or materialman
lienholder whether it acquires its lien by operation of State or Federal
law; then this obligation shall be void, otherwise to remain in full
force and effect.

(1-15-79) SPECIAL PN

RD Instruction 1942-A

(Guide 19 - Attachment 6) (Page 2)

PROVIDED, that beneficiaries or claimants hereunder shall be limited to
the SUBCONTRACTORS, and persons, firms, and corporations having a direct
contract with the PRINCIPAL or its SUBCONTRACTORS.

PROVIDED, FURTHER, that the said SURETY for value received hereby
stipulates and agrees that no change, extension of time, alteration or
addition to the terms of the contract or to the WORK to be performed
thereunder or the SPECIFICATIONS accompanying the same shall in any way
affect its obligation on this BOND, and it does hereby waive notice of
any such change, extension of time, alteration or addition to the terms
of this contract or to the WORK or to the SPECIFICATIONS.

PROVIDE, FURTHER, that no suit or action shall be commenced hereunder by
any claimant: (a) Unless claimant, other than one having a direct
contract with the PRINCIPAL (or with the GOVERNMENT in the event the
GOVERNMENT Is performing the obligations of the OWNER), shall have given
written notice to any two of the following: The PRINCIPAL, the OWNER, or
the SURETY above named within ninety (90) days after such claimant did
or performed the last of the work or labor, or furnished the last of the
materials for which said claim is made, stating with substantial
accuracy the amount claimed and the name of the party to whom the
materials were furnished, or for whom the work or labor was done or
performed. Such notice shall be served by mailing the same by registered
mail or certified mail, postage prepaid, in an envelope addressed to the
PRINCIPAL, OWNER, or SURETY, at any place where an office is regularly
maintained for the transaction of business, or served in any manner in
which legal process may be served in the state in which the aforesaid
project is located, save that such service need not be made by a public
officer. (b) After the expiration of one (1) year following the date of
which PRINCIPAL ceased work on said CONTRACT, is being understood,
however, that if any limitation embodied in the BOND is prohibited by
any law controlling the construction hereof, such limitation shall be
deemed to be amended so as to be equal to the minimum period of
limitation permitted by such law.

PROVIDED, FURTHER, that it is expressly agreed that this BOND shall be
deemed amended automatically and immediately, without formal and
separate amendments hereto, upon amendment to the Contract not
increasing the contract price more than 20 percent, so as to bind the
PRINCIPAL and the SURETY to the full and faithful performance of the
Contract as so amended. The term \"Amendment\", wherever used in this
BOND and whether referring to this BOND, the contract or the loan
Documents shall include any alteration, addition, extension or
modification of any character whatsoever.

PROVIDED, FURTHER, that no final settlement between the OWNER or
GOVERNMENT and the CONTRACTOR shall abridge the right of any beneficiary
hereunder, whose claim may be unsatisfied.

RD Instruction 1942-A

(Guide 19 - Attachment 6) (Page 3)

WITNESS WHEREOF, this instrument is executed in \_\_\_\_ counterparts,
each of

Number

which shall be deemed an original, this the \_\_\_\_ day of
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_.

ATTEST:

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Principal

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

(Principal) Secretary

(SEAL)

By\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_(s)

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

(Address)

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Witness as to Principal

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

(Address)

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Surety

ATTEST:

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
By\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Witness as to Surety Attorney-in-Fact

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

(Address) (Address

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

NOTE: Date of BOND must not be prior to date of Contract.

If CONTRACTOR Is partnership, all partners should execute BOND.

IMPORTANT: Surety companies executing BONDS must appear on the Treasury
Department\'s most current list (Circular 570 as amended) and be
authorized to transact business in the State where the Project is
located.

## oOo

(1-15-79) SPECIAL PN

RD Instruction 1942-A

(Guide 19 - Attachment 7)

NOTICE OF AWARD

TO:\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

PROJECT
Description:\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

The OWNER has considered the BID submitted by you for the above
described WORK in response to its Advertisement for Bids dated
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_, 19\_\_\_\_\_, and Information for
Bidders.

You are hereby notified that your BID has been accepted for items in the
amount of \$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_.

You are required by the Information for Bidders to execute the Agreement
and furnish the required CONTRACTOR\'S Performance BOND, Payment BOND
and certificates of insurance within ten (10) calendar days from the
date of this Notice to you.

If you fail to execute said Agreement and to furnish said BONDS within
ten (10) days from the date of this Notice, said OWNER will be entitled
to consider all your rights arising out of the OWNER\'s acceptance of
your BID as abandoned and as a forfeiture of your BID BOND. The OWNER
will be entitled to such other rights as may be granted by law.

You are required to return an acknowledged copy of this NOTICE OF AWARD
to the OWNER.

Dated this\_\_\_\_\_\_\_\_\_\_\_\_ day of\_\_\_\_\_\_\_\_\_\_\_\_\_\_,
19\_\_\_\_.

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Owner

By\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Title\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

ACCEPTANCE OF NOTICE

Receipt of the above NOTICE OF AWARD is hereby acknowledged

by\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_.
this the\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ day
of\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_, 19\_\_\_\_\_\_\_\_\_\_\_.
By\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Title\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

(1-15-79) SPECIAL PN

(Guide 19 - Attachment 8) RD Instruction 1942-A

## NOTICE TO PROCEED

TO: \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ DATE:
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ Project:
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

You are hereby notified to commence WORK in accordance with the
Agreement dated \_\_\_\_\_\_\_\_\_\_\_, 19\_\_\_, on or before
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_, 19\_\_, and you are to complete the
WORK within \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ consecutive calendar
days thereafter. The date of completion of all WORK is therefore
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_, 19\_\_.

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Owner

By \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Title\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

ACCEPTANCE OF NOTICE

Receipt of the above NOTICE TO PROCEED is hereby acknowledged by
\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_,

this the\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_, 19\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

By\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Title\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Employer Identification

Number\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

## oOo

(1-28-81) PN 763

RD Instruction 1942-A

(Guide 19 - Attachment 9)

## GENERAL CONDITIONS

1\. Definitions 17. Subsurface Conditions

2\. Additional Instructions and Detail 18. Suspension of Work,

Drawings Termination, and Delay

3\. Schedules, Reports, and Records 19. Payments to Contractor

4\. Drawings and Specifications 20. Acceptance of Final

5\. Shop Drawings Payment as Release

6\. Materials, Services, and Facilities 21. Insurance

7\. Inspection and Testing 22. Contract Security

8\. Substitutions 23. Assignments

9\. Patents 24. Indemnification

10\. Surveys, Permits, Regulations 25. Separate Contracts

11\. Protection of Work, Property, Persons 26. Subcontracting

12\. Supervision by Contractor 27. Engineer\'s Authority

13\. Changes in the Work 28. land and Rights-of-Way

14\. Changes in Contract Price 29. Guaranty

15\. Time for Completion and Liquidated 30. Arbitration

Damages 31. Taxes

16\. Correction of Work

1\. DEFINITIONS

1.1 Wherever used in the CONTRACT DOCUMENTS, the following terms shall
have the meanings indicated and shall be applicable to both the singular
and plural thereof:

1.2 ADDENDA - Written or graphic instruments issued prior to the
execution of the Agreement which modify or interpret the CONTRACT
DOCUMENTS, DRAWINGS and SPECIFICATIONS, by additions, deletions,
clarifications, or corrections.

1.3 BID - The offer or proposal of the BIDDER submitted on the
prescribed form setting forth the prices for the WORK to be performed.

1.4 BIDDER - Any person, firm, or corporation submitting a BID for the
WORK.

1.5 BONDS - Bid, Performance, and Payment Bonds and other instruments of
surety, furnished by the CONTRACTOR and the CONTRACTOR\'S surety in
accordance with the CONTRACT DOCUMENTS.

1.6 CHANGE ORDER - A written order to the CONTRACTOR authorizing an
addition, deletion, or revision in the WORK within the general scope of
the CONTRACT DOCUMENTS, or authorizing an adjustment in the CONTRACT
PRICE or CONTRACT TIME.

1.7 CONTRACT DOCUMENTS - The contract, including Advertisement For BIDS,
Information For BIDDERS, BID, BID BOND, Agreement, Payment BOND,
Performance BOND, NOTICE OF AWARD, NOTICE TO PROCEED, CHANGE ORDER,
DRAWINGS, SPECIFICATIONS, and ADDENDA.

(1-15-79) SPECIAL PN

RD Instruction 1942-A

(Guide 19 - Attachment 9) (Page 2)

1.8 CONTRACT PRICE - The total monies payable to the CONTRACTOR under
the terms and conditions of the CONTRACT DOCUMENTS.

1.9 CONTRACT TIME - The number of calendar days stated in the CONTRACT
DOCUMENTS for the completion of the WORK.

1.10 CONTRACTOR - The person, firm, or corporation with whom the OWNER
has executed the Agreement.

1.11 DRAWINGS - The parts of the CONTRACT DOCUMENTS which show the
characteristics and scope of the WORK to be performed and which have
been prepared or approved by the ENGINEER.

1.12 ENGINEER - The person, firm, or corporation named as such in the
CONTRACT DOCUMENTS.

1.13 FIELD ORDER - A written order effecting a change in the WORK not
involving an adjustment in the CONTRACT PRICE or an extension of the
CONTRACT TIME, issued by the ENGINEER to the CONTRACTOR during
construction.

1.14 NOTICE OF AWARD - The written notice of the acceptance of the BID
from the OWNER to the successful BIDDER.

1.15 NOTICE TO PROCEED - Written communication issued by the OWNER to
the CONTRACTOR authorizing him/her to proceed with the WORK and
establishing the date for commencement of the WORK.

1.16 OWNER - A public or quasi-public body or authority, corporation,
association, partnership, or an individual for whom the WORK is to be
performed.

1.17 PROJECT - The undertaking to be performed as provided in the
CONTRACT DOCUMENTS.

1.18 RESIDENT PROJECT REPRESENTATIVE - The authorized representative of
the OWNER who is assigned to the PROJECT site or any part thereof.

1.19 SHOP DRAWINGS - All drawings, diagrams, illustrations, brochures,
schedules and other data which are prepared by the CONTRACTOR, a
SUBCONTRACTOR, manufacturer, SUPPLIER or distributor, which illustrate
how specific portions of the WORK shall be fabricated or installed.

1.20 SPECIFICATIONS - A part of the CONTRACT DOCUMENTS consisting of
written descriptions of a technical nature of materials, equipment,
construction systems, standards and workmanship.

RD Instruction 1942-A

(Guide 19 - Attachment 9) (Page 3)

1.21 SUBCONTRACTOR - An individual, firm, or corporation having a direct
contract with CONTRACTOR or with any other SUBCONTRACTOR for the
performance of a part of the WORK at the site.

1.22 SUBSTANTIAL COMPLETION - That date certified by the ENGINEER when
the construction of the PROJECT or a specified part thereof is
sufficiently completed, in accordance with the CONTRACT DOCUMENTS, so
that the PROJECT or specified part can be utilized for the purposes for
which it is intended.

1.23 SUPPLEMENTAL GENERAL CONDITIONS - Modifications to General
Conditions required by a Federal agency for participation in the PROJECT
and approved by the agency in writing prior to inclusion in the CONTRACT
DOCUMENTS, or such requirements that may be imposed by applicable state
laws.

1.24 SUPPLIER - Any person or organization who supplies materials or
equipment for the WORK, including that fabricated to a special design,
but who does not perform labor at the site.

1.25 WORK - All labor necessary to produce the construction required by
the CONTRACT DOCUMENTS, and all materials and equipment incorporated or
to be incorporated in the PROJECT.

1.26 WRITTEN NOTICE - Any notice to any party of the Agreement relative
to any 1 part of this Agreement in writing and considered delivered and
the service thereof completed, when posted by certified or registered
mail to the said party at their last given address, or delivered in
person to said party or their authorized representative on the WORK.

2\. ADDITIONAL INSTRUCTIONS AND DETAIL DRAWINGS

2.1 The CONTRACTOR may be furnished additional instructions and detail
drawings, by the ENGINEER, as necessary to carry out the WORK required
by the CONTRACT DOCUMENTS.

2.2 The additional drawings and instructions thus supplied will become a
part of the CONTRACT DOCUMENTS. The CONTRACTOR shall carry out the WORK
in accordance with the additional detail drawings and instructions.

3\. SCHEDULES, REPORTS AND RECORDS

3.1 The CONTRACTOR shall submit to the OWNER such schedule of quantities
and costs, progress schedules, payrolls, reports, estimates, records and
other data where applicable as are required by the CONTRACT DOCUMENTS
for the WORK to be performed.

(1-15-79) SPECIAL PN

RD Instruction 1942-A

(Guide 19 - Attachment 9) (Page 4)

3.2 Prior to the first partial payment estimate the CONTRACTOR shall
submit construction progress schedules showing the order in which the
CONTRACTOR proposes to carry on the WORK, including dates at which the
various parts of the WORK will be started, estimated date of completion
of each part and, as applicable:

3.2.1 The dates at which special detail drawings will be required; and

3.2.2 Respective dates for submission of SHOP DRAWINGS, the beginning of
manufacture, the testing and the installation of materials, supplies and
equipment.

3.3 The CONTRACTOR shall also submit a schedule of payments that the
CONTRACTOR anticipates will be earned during the course of the WORK.

4\. DRAWINGS AND SPECIFICATIONS

4.1 The intent of the DRAWINGS and SPECIFICATIONS is that the CONTRACTOR
shall furnish all labor, materials, tools, equipment, and transportation
necessary for the proper execution of the WORK in accordance with the
CONTRACT DOCUMENTS and all incidental work necessary to complete the
PROJECT in an acceptable manner, ready for use, occupancy or operation
by the OWNER.

4.2 In case of conflict between the DRAWINGS and SPECIFICATIONS, the
SPECIFICATIONS shall govern. Figure dimensions on DRAWINGS shall govern
over general DRAWINGS.

4.3 Any discrepancies found between the DRAWINGS and SPECIFICATIONS and
site conditions or any inconsistencies or ambiguities in the DRAWINGS or
SPECIFICATIONS shall be immediately reported to the ENGINEER, in
writing, who shall promptly correct such inconsistencies or ambiguities
in writing. WORK done by the CONTRACTOR after discovery of such
discrepancies, inconsistencies or ambiguities shall be done at the
CONTRACTOR\'S risk.

5\. SHOP DRAWINGS

5.1 The CONTRACTOR shall provide SHOP DRAWINGS as may be necessary for
the prosecution of the WORK as required by the CONTRACT DOCUMENTS. The
ENGINEER shall promptly review all SHOP DRAWINGS. The ENGINEER\'S
approval of any SHOP DRAWING shall not release the CONTRACTOR from
responsibility for deviations from the CONTRACT DOCUMENTS. The approval
of any SHOP DRAWING which substantially deviates from the requirement of
the CONTRACT DOCUMENTS shall be evidenced by a CHANGE ORDER.

5.2 When submitted for the ENGINEER\'S review, SHOP DRAWINGS shall bear
the CONTRACTOR\'S certification that he has reviewed, checked and
approved the SHOP DRAWINGS and that they are in conformance with the
requirements of the CONTRACT DOCUMENTS.

RD Instruction 1942-A

(Guide 19 - Attachment 9) (Page 5)

5.3 Portions of the WORK requiring a SHOP DRAWING or sample submission
shall not begin until the SHOP DRAWING or submission has been approved
by the ENGINEER. A copy of each approved SHOP DRAWING and each approved
sample shall be kept in good order by the CONTRACTOR at the site and
shall be available to the ENGINEER.

6\. MATERIALS, SERVICES AND FACILITIES

6.1 It is understood that, except as otherwise specifically stated in
the CONTRACT DOCUMENTS, the CONTRACTOR shall provide and pay for all
materials, labor, tools, equipment, water, light, power, transportation,
supervision, temporary construction of any nature, and all other
services and facilities of any nature whatsoever necessary to execute,
complete, and deliver the WORK within the specified time.

6.2 Materials and equipment shall be so stored as to insure the
preservation of their quality and fitness for the WORK. Stored materials
and equipment to be incorporated in the WORK shall be located so as to
facilitate prompt inspection.

6.3 Manufactured articles, materials, and equipment shall be applied,
installed, connected, erected, used, cleaned and conditioned as directed
by the manufacturer.

6.4 Materials, supplies, and equipment shall be in accordance with
samples submitted by the CONTRACTOR and approved by the ENGINEER.

6.5 Materials, supplies, or equipment to be incorporated into the WORK
shall not be purchased by the CONTRACTOR or the SUBCONTRACTOR subject to
a chattel mortgage or under a conditional sale contract or other
agreement by which an interest is retained by the seller.

7\. INSPECTION AND TESTING

7.1 All materials and equipment used in the construction of the PROJECT
shall be subject to adequate inspection and testing in accordance with
generally accepted standards, as required and defined in the CONTRACT
DOCUMENTS.

7.2 The OWNER shall provide all inspection and testing services not
required by the CONTRACT DOCUMENTS.

7.3 The CONTRACTOR shall provide at the CONTRACTOR\'S expense the
testing and inspection services required by the CONTRACT DOCUMENTS.

(1-15-79) SPECIAL PN

RD Instruction 1942-A

(Guide 19 - Attachment 9) (Page 6)

7.4 If the CONTRACT DOCUMENTS, laws, ordinances, rules, regulations or
orders of any public authority having jurisdiction require any WORK to
specifically be inspected, tested, or approved by someone other than the
CONTRACTOR, the CONTRACTOR will give the ENGINEER timely notice of
readiness. The CONTRACTOR will then furnish the ENGINEER the required
certificates of inspection, testing or approval.

7.5 Inspections, tests, or approvals by the engineer or others shall not
relieve the CONTRACTOR from the obligations to perform the WORK in
accordance with the requirements of the CONTRACT DOCUMENTS.

7.6 The ENGINEER and the ENGINEER\'S representatives will at all times
have access to the WORK. In addition, authorized representatives and
agents of any participating Federal or State agency shall be permitted
to inspect all work, materials, payrolls, records or personnel, invoices
of materials, and other relevant data and records. The CONTRACTOR will
provide proper facilities for such access and observation of the WORK
and also for any inspection or testing thereof.

7.7 If any WORK is covered contrary to the written instructions of the
ENGINEER it must, if requested by the ENGINEER, be uncovered for the
ENGINEER\'S observation and replaced at the CONTRACTOR\'S expense.

7.8 If the ENGINEER considers it necessary or advisable that covered
WORK be inspected or tested by others, the CONTRACTOR, at the
ENGINEER\'S request, will uncover, expose or otherwise make available
for observation, inspection or testing as the ENGINEER may require, that
portion of the WORK in question, furnishing all necessary labor,
materials, tools, and equipment. If it is found that such WORK is
defective, the CONTRACTOR will bear all the expenses of such uncovering,
exposure, observation, inspection and testing and of satisfactory
reconstruction, if, however, such WORK is not found to be defective, the
CONTRACTOR will be allowed an increase in the CONTRACT PRICE or an
extension of the CONTRACT TIME, or both, directly attributable to such
uncovering, exposure, observation, inspection, testing and
reconstruction and an appropriate CHANGE ORDER shall be issued.

8\. SUBSTITUTIONS

8.1 Whenever a material, article, or piece of equipment is identified on
the DRAWINGS or SPECIFICATIONS by reference to brand name or catalogue
numbers, it shall be understood that this is referenced for the purpose
of defining the performance or other salient requirements and that other
products of equal capacities, quality and function shall be considered.
The CONTRACTOR may recommend the substitution of a material, article, or
piece of equipment of equal substance and function for those referred to
in the CONTRACT DOCUMENTS

RD Instruction 1942-A

(Guide 19 - Attachment 9) (Page 7)

by reference to brand name or catalogue number, and if, in the opinion
of the ENGINEER, such material, article, or piece of equipment is of
equal substance and function to that specified, the ENGINEER may approve
its substitution and use by the CONTRACTOR. Any cost differential shall
be deductible from the CONTRACT PRICE and the CONTRACT DOCUMENTS shall
be appropriately modified by CHANGE ORDER. The CONTRACTOR warrants that
if substitutes are approved, no major changes in the function or general
design of the PROJECT will result. Incidental changes or extra component
parts required to accommodate the substitute will be made by the
CONTRACTOR without a change in the CONTRACT PRICE or CONTRACT TIME.

9\. PATENTS

9.1 The CONTRACTOR shall pay all applicable royalties and license fees,
and shall defend all suits or claims for infringement of any patent
rights and save the OWNER harmless from loss on account thereof, except
that the OWNER shall be responsible for any such loss when a particular
process, design, or product of a particular manufacturer or
manufacturers is specified, however, if the CONTRACTOR has reason to
believe that the design, process or product specified is an infringement
of a patent, the CONTRACTOR shall be responsible for such loss unless
the CONTRACTOR promptly gives such information to the ENGINEER.

10\. SURVEYS, PERMITS, REGULATIONS

10.1 The OWNER shall furnish all boundary surveys and establish all base
lines for locating the principal component parts of the WORK together
with a suitable number of bench marks adjacent to the WORK as shown in
the CONTRACT DOCUMENTS. From the information provided by the OWNER,
unless otherwise specified in the CONTRACT DOCUMENTS, the CONTRACTOR
shall develop and make all detail surveys needed for construction such
as slope stakes, batter boards, stakes for pipe locations and other
working points, lines, elevations and cut sheets.

10.2 The CONTRACTOR shall carefully preserve bench marks, reference
points and stakes and, in case of willful or careless destruction, shall
be charged with the resulting expense and shall be responsible for any
mistake that may be caused by their unnecessary loss or disturbance.

10.3 Permits and licenses of a temporary nature necessary for the
prosecution of the WORK shall be secured and paid for by the CONTRACTOR
unless otherwise stated in the SUPPLEMENTAL GENERAL CONDITIONS. Permits,
licenses and easements for permanent structures or permanent changes in
existing facilities shall be secured and paid for by the OWNER, unless
otherwise specified. The

(1-15-79) SPECIAL PN

RD Instruction 1942-A

(Guide 19 - Attachment 9) (Page 8)

CONTRACTOR shall give all notices and comply with all laws, ordinances,
rules and regulations bearing on the conduct of the WORK as drawn and
specified. If the CONTRACTOR observes that the CONTRACT DOCUMENTS are at
variance therewith, the CONTRACTOR shall promptly notify the ENGINEER in
writing, and any necessary changes shall be adjusted as provided in
Section 13, CHANGES IN THE WORK.

11\. PROTECTION OF WORK, PROPERTY, AND PERSONS

11.1 The CONTRACTOR will be responsible for initiating, maintaining and
supervising all safety precautions and programs in connection with the
WORK. The CONTRACTOR will take all necessary precautions for the safety
of, will provide the necessary precautions for the safety of, and will
provide the necessary protection to prevent damage, injury or loss to
all employees on the WORK and other persons who may be affected thereby,
all the WORK and all materials or equipment to be incorporated therein,
whether in storage on or off the site, and other property at the site or
adjacent thereto, including trees, shrubs, lawns, walks, pavements,
roadways, structures and utilities not designated for removal,
relocation or replacement in the course of construction.

11.2 The CONTRACTOR will comply with all applicable laws, ordinances,
rules, regulations and orders of any public body having jurisdiction.
The CONTRACTOR will erect and maintain, as required by the conditions
and progress of the WORK, all necessary safeguards for safety and
protection. The CONTRACTOR will notify owners of adjacent utilities when
prosecution of the WORK may affect them. The CONTRACTOR will remedy all
damage, injury or loss to any property caused, directly or indirectly,
in whole or part, by the CONTRACTOR, any SUBCONTRACTOR or anyone
directly or indirectly employed by any of them or anyone directly or
indirectly employed by any of them or anyone of whose acts any of them
be liable, except damage or loss attributable to the fault of the
CONTRACT DOCUMENTS or to the acts or omissions of the OWNER, of the
ENGINEER or anyone employed by either of them or anyone for whose acts
either of them may be liable, and not attributable, directly or
indirectly, in whole or in part, to the fault or negligence of the
CONTRACTOR.

11.3 In emergencies affecting the safety of persons or the WORK or
property at the site or adjacent thereto, the CONTRACTOR, without
special instructions or authorization from the ENGINEER or OWNER, shall
act to prevent threatened damage, injury or loss. The CONTRACTOR will
give the ENGINEER prompt WRITTEN NOTICE of any significant changes in
the WORK or deviations from the CONTRACT DOCUMENTS caused thereby, and a
CHANGE ORDER shall thereupon be issued covering the changes and
deviations involved.

12\. SUPERVISION BY CONTRACTOR

12.1 The CONTRACTOR will supervise and direct the WORK. He will be
solely responsible for the means, methods, techniques, sequences and
procedures of

RD Instruction 1942-A

(Guide 19 - Attachment 9) (Page 9)

construction. The CONTRACTOR will employ and maintain on the WORK a
qualified supervisor or superintendent who shall have been designated in
writing by the CONTRACTOR as the CONTRACTOR\'S representative at the
site. The supervisor shall have full authority to act on behalf of the
CONTRACTOR and all communications given to the supervisor shall be as
binding as if given to the CONTRACTOR. The supervisor shall be present
on the site at all times as required to perform adequate supervision and
coordination of the WORK.

13\. CHANGES IN THE WORK

13.1 The OWNER may at any time, as the need arises, order changes within
the scope of the WORK without invalidating the Agreement. If such
changes increase or decrease the amount due under the CONTRACT
DOCUMENTS, or in the time required for performance of the WORK, an
equitable adjustment shall be authorized by CHANGE ORDER.

13.2 The ENGINEER, also, may at any time, by issuing a FIELD ORDER, make
changes in the details of the WORK. The CONTRACTOR shall proceed with
the performance of any changes in the WORK so ordered by the ENGINEER
unless the CONTRACTOR believes that such FIELD ORDER entitles the
CONTRACTOR to a change in CONTRACT PRICE or TIME, or both, in which
event the CONTRACTOR shall give the ENGINEER WRITTEN NOTICE thereof
within seven (7) days after the receipt of the ordered change.
Thereafter the CONTRACTOR shall document the basis for the change in
CONTRACT PRICE or TIME within thirty (30) days. The CONTRACTOR shall not
execute such changes pending the receipt of an executed CHANGE ORDER or
further instruction from the OWNER.

14\. CHANGES IN CONTRACT PRICE

14.1 The CONTRACT PRICE may be changed only by a CHANGE ORDER. The value
of any WORK covered by a CHANGE ORDER or of any claim for increase or
decrease in the CONTRACT PRICE shall be determined by one or more of the
following methods in the order of precedence listed below:

a\. Unit prices previously approved.

b\. An agreed lump sum.

15\. TIME FOR COMPLETION AND LIQUIDATED DAMAGES

15.1 The date of beginning and the time for completion of the WORK are
essential conditions of the CONTRACT DOCUMENTS and the WORK embraced
shall be commenced

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RD Instruction 1942-A

(Guide 19 - Attachment 9) (Page 10)

on a date specified in the NOTICE TO PROCEED.

15.2 The CONTRACTOR will proceed with the WORK at such rate of progress
to insure full completion within the CONTRACT TIME. It is expressly
understood and agreed, by and between the CONTRACTOR and the OWNER, that
the CONTRACT TIME for the completion of the WORK described herein is a
reasonable time, taking into consideration the average climatic and
economic conditions and other factors prevailing in the locality of the
WORK.

15.3 If the CONTRACTOR shall fail to complete the WORK within the
CONTRACT TIME, or extension of time granted by the OWNER, then the
CONTRACTOR will pay to the OWNER the amount for liquidated damages as
specified in the BID for each calendar day that the CONTRACTOR shall be
in default after the time stipulated in the CONTRACT DOCUMENTS.

15.4 The CONTRACTOR shall not be charged with liquidated damages or any
excess cost when the delay in completion of the WORK is due to the
following and the CONTRACTOR has promptly given WRITTEN NOTICE of such
delay to the OWNER or ENGINEER.

15.4.1 To any preference, priority or allocation order duly issued by
the OWNER.

15.4.2 To unforeseeable causes beyond the control and without the fault
or negligence of the CONTRACTOR, including but not restricted to, acts
of God, or of the public enemy, acts of the OWNER, acts of another
CONTRACTOR in the performance of a contract with the OWNER, fires,
floods, epidemics, quarantine restrictions, strikes, freight embargoes,
and abnormal and unforeseeable weather; and

15.4.3 To any delays of SUBCONTRACTORS occasioned by any of the causes
specified in paragraphs 15.4.1 and 15.4.2 of this article.

16\. CORRECTION OF WORK

16.1 The CONTRACTOR shall promptly remove from the premises all WORK
rejected by the ENGINEER for failure to comply with the CONTRACT
DOCUMENTS, whether incorporated in the construction or not, and the
CONTRACTOR shall promptly replace and reexecute the WORK in accordance
with the CONTRACT DOCUMENTS and without expense to the OWNER and shall
bear the expense of making good all WORK of other CONTRACTORS destroyed
or damaged by such removal or replacement.

16.2 All removal and replacement WORK shall be done at the CONTRACTOR\'S
expense. If the CONTRACTOR does not take action to remove such rejected
WORK within ten (10) days after receipt of WRITTEN NOTICE, the OWNER may
remove such

RD Instruction 1942-A

(Guide 19 - Attachment 9) (Page 11)

WORK and store the materials at the expense of the CONTRACTOR.

17\. SUBSURFACE CONDITIONS

17.1 The CONTRACTOR shall promptly, and before such conditions are
disturbed, except in the event of an emergency, notify the OWNER by
WRITTEN NOTICE of:

17.1.1 Subsurface or latent physical conditions at the site differing
materially from those indicated in the CONTRACT DOCUMENTS; or

17.1.2 Unknown physical conditions at the site, of an unusual nature,
differing materially from those ordinarily encountered and generally
recognized as inherent in WORK of the character provided for in the
CONTRACT DOCUMENTS.

17.2 The OWNER shall promptly investigate the conditions, and if it is
found that such conditions do so materially differ and cause an increase
or decrease in the cost of, or in the time required for, performance of
the WORK, an equitable adjustment shall be made and the CONTRACT
DOCUMENTS shall be modified by a CHANGE ORDER. Any claim of the
CONTRACTOR for adjustment hereunder shall not be allowed unless the
required WRITTEN NOTICE has been given; provided that the OWNER may, if
the OWNER determines the facts so justify, consider and adjust any such
claims asserted before the date of final payment.

18\. SUSPENSION OF WORK, TERMINATION, AND DELAY

18.1 The OWNER may suspend the WORK or any portion thereof for a period
of not more than ninety days or such further time as agreed upon by the
CONTRACTOR, by WRITTEN NOTICE to the CONTRACTOR and the ENGINEER which
shall fix the date on which WORK shall be resumed. The CONTRACTOR will
resume that WORK on the date so fixed. The CONTRACTOR will be allowed an
increase in the CONTRACT PRICE or an extension of the CONTRACT TIME, or
both, directly attributable to any suspension.

18.2 If the CONTRACTOR is adjudged a bankrupt or insolvent, or makes a
general assignment for the benefit of its creditors, or if a trustee or
receiver is appointed for the CONTRACTOR or for any of its property, or
if CONTRACTOR files a petition to take advantage of any debtor\'s act,
or to reorganize under the bankruptcy or applicable laws, or repeatedly
fails to supply sufficient skilled workmen or suitable materials or
equipment, or repeatedly fails to make prompt payments to SUBCONTRACTORS
or for labor, materials or equipment or disregards laws, ordinances,
rules, regulations or orders of any public body having jurisdiction of
the WORK or disregards the authority of the ENGINEER, or otherwise
violates any provision of the CONTRACT DOCUMENTS, then the OWNER may,
without prejudice to any other right or remedy and after giving the

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RD Instruction 1942-A

(Guide 19 - Attachment 9) (Page 12)

CONTRACTOR and its surety a minimum of ten (10) days from delivery of a
WRITTEN NOTICE, terminate the services of the CONTRACTOR and take
possession of the PROJECT and of all materials, equipment, tools,
construction equipment and machinery thereon owned by the CONTRACTOR,
and finish the WORK by whatever method the OWNER may deem expedient. In
such case the CONTRACTOR shall not be entitled to receive any further
payment until the WORK is finished. If the unpaid balance of the
CONTRACT PRICE exceeds the direct and indirect costs of completing the
PROJECT, including compensation for additional professional services,
such excess SHALL BE PAID TO THE CONTRACTOR. If such costs exceed such
unpaid balance, the CONTRACTOR will pay the difference to the OWNER.
Such costs incurred by the OWNER will be determined by the ENGINEER and
incorporated in a CHANGE ORDER.

18.3 Where the CONTRACTOR\'S services have been so terminated by the
OWNER, said termination shall not affect any right of the OWNER against
the CONTRACTOR then existing or which may thereafter accrue. Any
retention or payment of monies by the OWNER due the CONTRACTOR will not
release the CONTRACTOR from compliance with the CONTRACT DOCUMENTS.

18.4 After ten (10) days from delivery of a WRITTEN NOTICE to the
CONTRACTOR and the ENGINEER, the OWNER may, without cause and without
prejudice to any other right or remedy, elect to abandon the PROJECT and
terminate the CONTRACT. In such case the CONTRACTOR shall be paid for
all WORK executed and any expense sustained plus reasonable profit.

18.5 If, through no act or fault of the CONTRACTOR, the WORK is
suspended for a period of more than ninety (90) days by the OWNER or
under an order of court or other public authority, or the ENGINEER fails
to act on any request for payment within thirty (30) days after it is
submitted, or the OWNER fails to pay the CONTRACTOR substantially the
sum approved by the ENGINEER or awarded by arbitrators within thirty
(30) days of its approval and presentation, then the CONTRACTOR may,
after ten (10) days from delivery of a WRITTEN NOTICE to the OWNER and
the ENGINEER terminate the CONTRACT and recover from the OWNER payment
for all WORK executed and all expenses sustained. In addition and in
lieu of terminating the CONTRACT, if the ENGINEER has failed to act on a
request for payment or if the OWNER has failed to make any payment as
aforesaid, the CONTRACTOR may upon ten (10) days written notice to the
OWNER and the ENGINEER stop the WORK until paid all amounts then due, in
which event and upon resumption of the WORK CHANGE ORDERS shall be
issued for adjusting the CONTRACT PRICE or extending the CONTRACT TIME
or both to compensate for the costs and delays attributable to the
stoppage of the WORK.

18.6 If the performance of all or any portion of the WORK is suspended,

delayed, or interrupted as a result of a failure of the OWNER or
ENGINEER to act within the time specified in the CONTRACT DOCUMENTS, or
if no time is specified, within a reasonable time, an adjustment in the
CONTRACT PRICE or

RD Instruction 1933-A

§1933.20 (a) (Guide 19 - Attachment 9) (Page 13)

an extension of the CONTRACT TIME, or both, shall be made by CHANGE
ORDER to compensate the CONTRACTOR for the costs and delays necessarily
caused by the failure of the OWNER or ENGINEER.

19\. PAYMENT TO CONTRACTOR

19.1 At least ten (10) days before each progress payment falls due (but
not more often than once a month), the CONTRACTOR will submit to the
ENGINEER a partial payment estimate filled out and signed by the
CONTRACTOR covering the WORK performed during the period covered by the
partial payment estimate and supported by such data as the ENGINEER may
reasonably require. If payment is requested on the basis of materials
and equipment not incorporated in the WORK but delivered and suitably
stored at or near the site, the partial payment estimate shall also be
accompanied by such supporting data, satisfactory to the OWNER, as will
establish the OWNER\'S title to the material and equipment and protect
the OWNER\'S interest therein, including applicable insurance. The
ENGINEER will, within ten (10) days after receipt of each partial
payment estimate, either indicate in writing approval of payment, and
present the partial payment estimate to the OWNER, or return the partial
payment estimate to the CONTRACTOR indicating in writing the reasons for
refusing to approve payment. In the latter case, the CONTRACTOR may make
the necessary corrections and resubmit the partial payment estimate. The
OWNER will, within ten (10) days of presentation of an approved partial
payment estimate, pay the CONTRACTOR a progress payment on the basis of
the approved partial payment estimate less the retainage. The retainage
shall be an amount equal to 10% of said estimate until 50% of the work
has been completed. At 50% completion, further partial payments shall be
made in full to the CONTRACTOR and no additional amounts may be retained
unless the ENGINEER certifies that the job is not proceeding
satisfactorily, but amounts previously retained shall not be paid to the
CONTRACTOR. At 50% completion or any time thereafter when the progress
of the WORK is not satisfactory, additional amounts may be retained but
in no event shall the total retainage be more than 10% of the value of
the work completed. Upon substantial completion of the work, any amount
retained may be paid to the CONTRACTOR. When the WORK has been
substantially completed except for WORK which cannot be completed
because of weather conditions, lack of materials or other reasons which
in the judgment of the OWNER are valid reasons for noncompletion, the
OWNER may make additional payments, retaining at all times an amount
sufficient to cover the estimated cost of the WORK still to be
completed.

19.2 The request for payment may also include an allowance for the cost
of such major materials and equipment which are suitably stored either
at or near the site.

19.3 Prior to SUBSTANTIAL COMPLETION, the OWNER, with the approval of
the ENGINEER and with the concurrence of the CONTRACTOR, may use any
completed or substantially completed portions of the WORK. Such use
shall not constitute an acceptance of such portions of the WORK.

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RD Instruction 1942-A

(Guide 19 - Attachment 9) (Page 14)

19.4 The OWNER shall have the right to enter the premises for the
purpose of doing work not covered by the CONTRACT DOCUMENTS. This
provision shall not be construed as relieving the CONTRACTOR of the sole
responsibility for the care and protection of the WORK, or the
restoration of any damaged WORK except such as may be caused by agents
or employees of the OWNER.

19.5 Upon completion and acceptance of the WORK, the ENGINEER shall
issue a certificate attached to the final payment request that the WORK
has been accepted under the conditions of the CONTRACT DOCUMENTS. The
entire balance found to be due the CONTRACTOR, including the retained
percentages, but except such sums as may be lawfully retained by the
OWNER, shall be paid to the CONTRACTOR within thirty (30) days of
completion and acceptance of the WORK.

19.6 The CONTRACTOR will indemnify and save the OWNER or the OWNER\'S
agents harmless from all claims growing out of the lawful demand of
SUBCONTRACTORS, laborers, workmen, mechanics, materialmen, and
furnishers of machinery and parts thereof, equipment, tools, and all
supplies, incurred in the furtherance of the performance of the WORK.
The CONTRACTOR shall, at the OWNER\'S request, furnish satisfactory
evidence that all obligations of the nature designated above have been
paid, discharged, or waived. If the CONTRACTOR fails to do so the OWNER
may, after having notified the CONTRACTOR, either pay unpaid bills or
withhold from the CONTRACTOR\'S unpaid compensation a sum of money
deemed reasonably sufficient to pay any and all such lawful claims until
satisfactory evidence is furnished that all liabilities have been fully
discharged whereupon payment to the CONTRACTOR shall be resumed in
accordance with the terms of the CONTRACT DOCUMENTS, but in no event
shall the provisions of this sentence be construed to impose any
obligations upon the OWNER to either the CONTRACTOR, the CONTRACTOR\'S
Surety, or any third party. In paying any unpaid bills of the
CONTRACTOR, any payment so made by the OWNER shall be considered as a
payment made under the CONTRACT DOCUMENTS by the OWNER to the CONTRACTOR
and the OWNER shall not be liable to the CONTRACTOR for any such
payments made in good faith.

19.7 If the OWNER fails to make payment thirty (30) days after approval
by the ENGINEER, in addition to other remedies available to the
CONTRACTOR, there shall be added to each such payment interest at the
maximum legal rate commencing on the first day after said payment is due
and continuing until the payment is received by the CONTRACTOR.

20\. ACCEPTANCE OF FINAL PAYMENT AS RELEASE

20.1 The acceptance by the CONTRACTOR of final payment shall be and
shall operate as a release to the OWNER of all claims and all liability
to the CONTRACTOR other than claims in stated amounts as may be
specifically excepted by the CONTRACTOR for all things done or furnished
in connection with

RD Instruction 1942-A

(Guide 19 - Attachment 9) (Page 15)

this WORK and for every act and neglect of the OWNER and others relating
to or arising out of this WORK. Any payment, however, final or
otherwise, shall not release the CONTRACTOR or its sureties from any
obligations under the CONTRACT DOCUMENTS or the Performance and Payment
BONDS.

21\. INSURANCE

21.1 The CONTRACTOR shall purchase and maintain such insurance as will
protect it from claims set forth below which may arise out of, or result
from, the CONTRACTOR\'S execution of the WORK, whether such execution be
by the CONTRACTOR, any SUBCONTRACTOR, or by anyone directly or
indirectly employed by any of them, or by anyone for whose acts any of
them may be liable:

21.1.1 Claims under workmen\'s compensation, disability benefit and
other similar employee benefit acts;

21.1.2 Claims for damages because of bodily injury, occupational
sickness or disease, or death of employees;

21.1.3 Claims for damages because of bodily injury, sickness or disease,
or death of any person other than employees;

21.1.4 Claims for damages insured by usual personal injury liability
coverage which are sustained (1) by any person as a result of an offense
directly or indirectly related to the employment of such person by the
CONTRACTOR, or (2) by any other person; and

21.1.5 Claims for damages because of injury to or destruction of
tangible property, including loss of use resulting therefrom.

21.2 Certificates of Insurance acceptable to the OWNER shall be filed
with the OWNER prior to commencement of the WORK. These Certificates
shall contain a provision that coverages afforded under the policies
will not be canceled unless at least fifteen (15) days prior WRITTEN
NOTICE has been given to the OWNER.

21.3 The CONTRACTOR shall procure and maintain, at the CONTRACTOR\'S own
expense, during the CONTRACT TIME, Liability insurance as hereinafter
specified:

21.3.1 CONTRACTOR\'S General Public Liability and Property Damage
Insurance including vehicle coverage issued to the CONTRACTOR and
protecting the CONTRACTOR from all claims for personal injury, including
death, and all claims for destruction of or damage to property, arising
out of or in connection with any operations under the CONTRACT
DOCUMENTS, whether such operations be by the CONTRACTOR or by any
SUBCONTRACTOR employed by the CONTRACTOR or anyone directly

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RD Instruction 1942-A

(Guide 19 - Attachment 9) (Page 16)

or indirectly employed by the CONTRACTOR or by a SUBCONTRACTOR employed
by the CONTRACTOR. Insurance shall be written with a limit of liability
of not less than \$500,000 for all damages arising out of bodily injury,
including death, at any time resulting therefrom, sustained by any one
person in any one accident; and a limit of liability of not less than
\$500,000 aggregate for any such damages sustained by two or more
persons in any one accident. Insurance shall be written with a limit of
liability of not less than \$200,000 for all property damage sustained
by any one person in any one accident; and a limit of liability of not
less than \$200,000 aggregate for any such damage sustained by two or
more persons in any one accident.

21.3.2 The CONTRACTOR shall acquire and maintain, if applicable, Fire
and Extended Coverage insurance upon the PROJECT to the full insurable
value thereof for the benefit of the OWNER, the CONTRACTOR, and
SUBCONTRACTORS as their interest may appear. This provision shall in no
way release the CONTRACTOR or CONTRACTOR\'S surety from obligations
under the CONTRACT DOCUMENTS to fully complete the PROJECT.

21.4 The CONTRACTOR shall procure and maintain, at the CONTRACTOR\'S own
expense, during the CONTRACT TIME, in accordance with the provisions of
the laws of the state in which the WORK is performed, Workmen\'s
Compensation Insurance, including occupational disease provisions, for
all of the CONTRACTOR\'S employees at the site of the PROJECT and in
case any WORK is sublet, the CONTRACTOR shall require such SUBCONTRACTOR
similarly to provide Workmen\'s Compensation Insurance, including
occupational disease provisions for all of the latter\'s employees
unless such employees are covered by the protection afforded by the
CONTRACTOR. In case any class of employees engaged in hazardous work
under this contract at the site of the PROJECT is not protected under
Workmen\'s Compensation statue, the CONTRACTOR shall provide, and shall
cause each SUBCONTRACTOR to provide, adequate and suitable insurance for
the protection of its employees not otherwise protected.

21.5 The CONTRACTOR shall secure, if applicable, \"All Risk\" type
Builder\'s Risk Insurance for WORK to be performed. Unless specifically
authorized by the OWNER, the amount of such insurance shall not be less
than the CONTRACT PRICE totaled in the BID. The policy shall cover not
less than the losses due to fire, explosion, hail, lightning, vandalism,
malicious mischief, wind, collapse, riot, aircraft, and smoke during the
CONTRACT TIME, and until the WORK is accepted by the OWNER. The policy
shall name as the insured the CONTRACTOR, and the OWNER.

22\. CONTRACT SECURITY

22.1 The CONTRACTOR shall within ten (10) days after the receipt of the
NOTICE OF AWARD furnish the OWNER with a Performance BOND and a Payment
BOND in penal sums equal to the amount of the CONTRACT PRICE,
conditioned upon the performance

RD Instruction 1942-A

(Guide 19 - Attachment 9) (Page 17)

by the CONTRACTOR of all undertakings, covenants, terms, conditions and
agreements of the CONTRACT DOCUMENTS, and upon the prompt payment by the
CONTRACTOR to all persons supplying labor and materials in the
prosecution of the WORK provided by the CONTRACT DOCUMENTS. Such BONDS
shall be executed by the CONTRACTOR and a corporate bonding company
licensed to transact such business in the state in which the WORK is to
be performed and named on the current list of \"Surety Companies
Acceptable on Federal Bonds\" as published in the Treasury Department
Circular Number 570. The expense of these BONDS shall be borne by the
CONTRACTOR. If at any time a surety on any such BOND is declared a
bankrupt or loses its right to do business in the state in which the
WORK is to be performed or is removed from the list of Surety Companies
accepted on Federal Bonds, CONTRACTOR shall within ten (10) days after
notice from the OWNER to do so, substitute an acceptable BOND (or BONDS)
in such form and sum and signed by such other surety or sureties as may
be satisfactory to the OWNER. The premiums on such BOND shall be paid by
the CONTRACTOR. No further payment shall be deemed due nor shall be made
until the new surety or sureties shall have furnished an acceptable BOND
to the OWNER.

23\. ASSIGNMENTS

23.1 Neither the CONTRACTOR nor the OWNER shall sell, transfer, assign,
or otherwise dispose of the Contract or any portion thereof, or of any
right, title or interest therein, or any obligations thereunder, without
written consent of the other party.

24\. INDEMNIFICATION

24.1 The CONTRACTOR will indemnify and hold harmless the OWNER and the
ENGINEER and their agents and employees from and against all claims,
damages, losses and expenses including attorney\'s fees arising out of
or resulting from the performance of the WORK, provided that any such
claims, damage, loss or expense is attributable to bodily injury,
sickness, disease or death, or to injury to or destruction of tangible
property including the loss of use resulting therefrom; and is caused in
whole or in part by any negligent or willful act or omission of the
CONTRACTOR, and SUBCONTRACTOR, anyone directly or indirectly employed by
any of them or anyone for whose acts any of them may be liable.

24.2 In any and all claims against the OWNER or the ENGINEER, or any of
their agents or employees, by any employee of the CONTRACTOR, any
SUBCONTRACTOR, anyone directly or indirectly employed by any of them, or
anyone for whose acts any of them may be liable, the indemnification
obligation shall not be limited in any way by any limitation on the
amount or type of damages, compensation or benefits payable by or for
the CONTRACTOR or any SUBCONTRACTOR under workmen\'s compensation acts,
disability benefit acts or other employee benefits acts.

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RD Instruction 1942-A

(Guide 19 - Attachment 9) (Page 18)

24.3 The obligation of the CONTRACTOR under this paragraph shall not
extend to the liability of the ENGINEER, its agents or employees arising
out of the preparation or approval of maps, DRAWINGS, opinions, reports,
surveys, CHANGE ORDERS, designs or SPECIFICATIONS.

25\. SEPARATE CONTRACTS

25.1 The OWNER reserves the right to let other contracts in connection
with this PROJECT. The CONTRACTOR shall afford other CONTRACTORS
reasonable opportunity for the introduction and storage of their
materials and the execution of their WORK, and shall poorly connect and
coordinate the WORK with theirs. If the proper execution or results of
any part of the CONTRACTOR\'S WORK depends upon the WORK of any other
CONTRACTOR, the CONTRACTOR shall inspect and promptly report to the
ENGINEER any defects in such WORK that render it unsuitable for such
proper execution and results.

25.2 The OWNER may perform additional WORK related to the PROJECT or the
OWNER may let other contracts containing provisions similar to these.
The CONTRACTOR will afford the other CONTRACTORS who are parties to such
Contracts (or the OWNER, if the OWNER is performing the additional WORK)
reasonable opportunity for the introduction and storage of materials and
equipment and the execution of WORK, and shall properly connect and
coordinate the WORK with theirs.

25.3 If the performance of additional WORK by other CONTRACTORS or the
OWNER is not noted in the CONTRACT DOCUMENTS prior to the execution of
the CONTRACT, written notice thereof shall be given to the CONTRACTOR
prior to starting any such additional WORK. If the CONTRACTOR believes
that the performance of such additional WORK by the OWNER or others
involves it in additional expense or entitles it to an extension of the
CONTRACT TIME, the CONTRACTOR may make a claim thereof as provided in
Sections 14 and 15.

26\. SUBCONTRACTING

26.1 The CONTRACTOR may utilize the services of specialty SUBCONTRACTS
on those parts of the WORK which, under normal contracting practices,
are performed by specialty SUBCONTRACTORS.

26.2 The CONTRACTOR shall not award WORK to SUBCONTRACTOR(s), in excess
of fifty (50%) percent of the CONTRACT PRICE, without prior written
approval of the OWNER.

RD Instruction 1942-A

(Guide 19 - Attachment 9) (Page 19)

(Revision 1)

26.3 The CONTRACTOR shall be fully responsible to the OWNER for the acts
and omissions of its SUBCONTRACTORS, and of persons either directly or
indirectly employed by them, as the CONTRACTOR is for the acts and
omissions of persons directly employed by the CONTRACTOR.

26.4 The CONTRACTOR shall cause appropriate provisions to be inserted in
all subcontracts relative to the WORK to bind SUBCONTRACTORS to the
CONTRACTOR by the terms of the CONTRACT DOCUMENTS insofar as applicable
to the WORK of SUBCONTRACTORS and to give the CONTRACTOR the same power
as regards terminating any subcontract that the OWNER may exercise over
the CONTRACTOR under any provision of the CONTRACT DOCUMENTS.

26.5 Nothing contained in this CONTRACT shall create any contractual
relationship between any SUBCONTRACTOR and the OWNER. (Revised 2-16-83,
PN 869.)

27\. ENGINEER\'S AUTHORITY

27.1 The ENGINEER shall act as the OWNER\'S representative during the
construction period, shall decide questions which may arise as to
quality and acceptability of materials furnished and WORK performed, and
shall interpret the intent of the CONTRACT DOCUMENTS in a fair and
unbiased manner. The ENGINEER will make visits to the site and determine
if the WORK is proceeding in accordance with the CONTRACT DOCUMENTS.

27.2 The CONTRACTOR will be held strictly to the intent of the CONTRACT
DOCUMENTS in regard to the quality of materials, workmanship, and
execution of the WORK. Inspections may be made at the factory or
fabrication plant of the source of material supply.

27.3 The ENGINEER will not be responsible for the construction means,
controls, techniques, sequences, procedures, or construction safety.

27.4 The ENGINEER shall promptly make decisions relative to
interpretation of the CONTRACT DOCUMENTS.

28\. LAND AND RIGHTS-OF-WAY

28.1 Prior to issuance of NOTICE TO PROCEED, the OWNER shall obtain all
land and rights-of-way necessary for carrying out and for the completion
of the WORK to be performed pursuant to the CONTRACT DOCUMENTS, unless
otherwise mutually agreed.

28.2 The OWNER shall provide to the CONTRACTOR information which
delineates and describes the lands owned and rights-of-way acquired.

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RD Instruction 1942-A

(Guide 19 - Attachment 9) (Page 20)

(Revision 1)

28.3 The CONTRACTOR shall provide at its own expense and without
liability to the OWNER any additional land and access thereto that the
CONTRACTOR may desire for temporary construction facilities, or for
storage of materials.

29\. GUARANTEE

29.1 The CONTRACTOR shall guarantee all materials and equipment
furnished and WORK performed for a period of one (1) year from the date
of SUBSTANTIAL COMPLETION. The CONTRACTOR warrants and guarantees for a
period of one (1) year from the date of SUBSTANTIAL COMPLETION of the
system that the completed system is free from all defects due to faulty
materials or workmanship and the CONTRACTOR shall promptly make such
corrections as may be necessary by reason of such defects including the
repairs of any damage to other parts of the system resulting from such
defects. The OWNER will give notice of observed defects with reasonable
promptness. In the event that the CONTRACTOR should fail to make such
repairs, adjustments, or other WORK that may be made necessary by such
defects, the OWNER may do so and charge the CONTRACTOR the cost thereby
incurred. The Performance BOND shall remain in full force and effect
through the guarantee period.

30\. ARBITRATION BY MUTUAL AGREEMENT (Revised 2-16-83, PN 869.)

30.1 All claims, disputes, and other matters in question arising out of,
or relating to, the CONTRACT DOCUMENTS or the breach thereof, except for
claims which have been waived by making an acceptance of final payment
as provided by Section 20, may be decided by arbitration if the parties
mutually agree. Any agreement to arbitrate shall be specifically
enforceable under the prevailing arbitration law. The award rendered by
the arbitrators shall be final, and judgment may be entered upon it in
any court having jurisdiction thereof. (Revised 2-16-83, PN 869.)

30.2 Notice of the request for arbitration shall be filed in writing
with the other party to the CONTRACT DOCUMENTS and a copy shall be filed
with the ENGINEER. Request for arbitration shall in no event be made on
any claim, dispute, or other matter in question which would be barred by
the applicable statute of limitations. (Revised 2-16-83, PN 869.)

30.3 The CONTRACTOR will carry on the WORK and maintain the progress
schedule during any arbitration proceedings, unless otherwise mutually
agreed in writing.

31\. TAXES

31.1 The CONTRACTOR will pay all sales, consumer, use, and other similar
taxes required by the laws of the place where the WORK is performed.

## oOo 

RD Instruction 1942-A

(Guide 19 - Attachment 9) (Page 21)

(Added 09-16-92, PN 191)

32\. ENVIRONMENTAL REQUIREMENTS (Added 09-16-92, PN 191.)

The CONTRACTOR, when constructing a project involving trenching and/or
other related earth excavation, shall comply with the following
environmental constraints.

32.1 WETLANDS - The CONTRACTOR, when disposing of excess, spoil, or
other construction materials on public or private property, WILL NOT
FILL IN or otherwise CONVERT WETLANDS.

32.2 FLOODPLAINS - The CONTRACTOR, when disposing of excess, spoil, or
other construction materials on public or private property, WILL NOT
FILL IN or otherwise CONVERT 100 YEAR FLOODPLAIN areas delineated on the
latest FEMA Floodplain Maps.

32.3 HISTORIC PRESERVATION - Any excavation by the Contractor that
uncovers an historical or archaeological artifact shall be immediately
reported to the PROJECT ENGINEER and a representative of Rural
Development. Construction shall be temporarily halted pending the
notification process and further directions issued by Rural Development
after consultation with the State Historic Preservation Officer (SHPO).

32.4 ENDANGERED SPECIES - The CONTRACTOR shall comply with the
Endangered Species Act, which provides for the protection of endangered
and/or threatened species and critical habitat. Should any evidence of
the presence of endangered and/or threatened species or their critical
habitat be brought to the attention of the CONTRACTOR, the CONTRACTOR
will immediately report this evidence to the PROJECT ENGINEER and a
representative of Rural Development. Construction shall be temporarily
halted pending the notification process and further directions issued by
Rural Development after consultation with the U.S. Fish and Wildlife
Service.

## oOo

(1-15-79) SPECIAL PN

Guide 20 and 21 not automated see manual

(Guide 22) RD Instruction 1942-A

DELINQUENT ACCOUNTS

POSITIVE ACTION PLAN

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Name of Borrower Case State County

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_

Type of Loan Insured /\_/

\_\_

Guaranteed /\_/

\_\_

Direct /\_/

Initial Rural Development Debt Unpaid Balance Amt. Delinquent Amt.
Annual pmt Amt. Paid

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

[OTHER DEBTS OWED]{.underline}

[To Whom Owed]{.underline} [Amount]{.underline} [Amount
Del.]{.underline} [Purpose of Debt]{.underline} [How Secure]{.underline}

\_\_\_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Reason for Delinquency (Explain):

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

[Option(s) Selection to Remove Delinquency - (Specify Completion Dates
for Goals)]{.underline}\_\_

1\.

2\.

3\.

(1-15-79) SPECIAL PN

RD Instruction 1942-A

(Guide 22) (Page 2)

Acknowledgement of the adoption of the positive action plan by:

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_

Borrower Date Rural Development Date

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

[Progress Made Toward Accomplishing Goals: (Give Details & Revised
Completion Date)]{.underline}

1\.

2\.

3\.

4\.

## oOo

(Guide 24) RD Instruction 1942-A

## Minimum Suggested

## Contents of Management Agreements

1\. Manage and operate the project subject to the operating and
employment procedures adopted by the owner.

2\. Operate facility based on the annual budget and fee schedule adopted
by the owner.

3\. Set out the handling of funds. All reserve, depreciation, debt
payment, and surplus funds should be transferred to the owner on at
least a monthly basis.

4\. Provide for monthly and annual reports to the owner covering
appropriate financial and operational statistics and inspection of books
and records by owner and government.

5\. Set out the responsibilities for maintenance and amounts of
insurance and bonds.

6\. Provide for reasonable limits on expenditures for emergency repairs
to the facility.

7\. Set out the term of the agreement and compensation of the manager
including specific positions included in that fee.

8\. Set out the remedies for default of the agreement.

9\. Require operation in accordance with all Federal, State and local
government requirements.

10\. For health facilities, require compliance with appropriate
third-party requirements such as Medicare-Medicaid.

11\. Require the manager to comply with all requirements related to the
Federal financial assistance as if it were the recipient of the
assistance.

12\. Set out responsibilities for obtaining and maintaining all
necessary licenses, certifications, and accreditations as may be
necessary to operate, maintain, or manage the project.

## oOo

(1-15-79) SPECIAL PN

(Guide 25) RD Instruction 1942-A

## Joint Policy Statement

## Between

## The Environmental Protection Agency and Rural Development

The Safe Drinking Water Act (SDWA) was passed on December 16, 1974, to
provide for the safety of drinking water supplies throughout the United
States by establishing and enforcing national drinking water standards.
Congress authorized the Environmental Protection Agency (EPA) to support
State and local community drinking water programs by providing financial
and technical assistance to undertake research and study efforts. The
SDWA, however, did not provide any funds for construction of new water
treatment systems or upgrading existing treatment systems to meet the
National Interim Primary Drinking Water Regulations.

The National Interim Primary Drinking Water Regulations were published
in the Federal Register on December 24, 1975, and became effective on
June 24, 1977. The regulations set limits for bacteriology, turbidity
and chemical contaminants in finished water. These regulations or
equivalent State regulations are applicable to all public water systems
defined as one that provides piped water for human consumption and has
at least 15 service connections or serves at least 25 people a day for
at least 60 days out of the year. There are approximately 50,000 such
community water systems in the United States. EPA estimates that some
12,000 community water systems will need additional treatment of some
type to meet the current water standards. The majority of these systems
are located in small and/or rural communities and thus could qualify for
financial assistance through Rural Development of the U.S. Department of
Agriculture.

The Rural Development program of loans and grants is designed to assist
in the development of water and waste disposal facilities serving rural
areas consisting of open country or cities and towns having a population
not in excess of 10,000 inhabitants. The Rural Development can provide
assistance to a wide range of community based organizations operated on
a not-for-profit basis, such as districts, authorities, associations,
and Indian tribes that are unable to obtain credit elsewhere at
reasonable rates and terms to construct, enlarge, extend, or otherwise
improve community water facilities. This may include the extension of
existing facilities to provide additional customers with an adequate
supply of safe drinking water.

Rural Development and EPA have agreed to adopt the following policy
statements as part of the priority system used to determine where, when,
and how loans and/or grants are made to eligible communities under 7 CFR
Parts 1823 and 1933:

(1-15-79) SPECIAL PN

RD Instruction 1942-A

(Guide 25) (Page 2)

Subpart A - Community Facility Loans or Subpart P - Development Grants
for Community Domestic Water and Waste Disposal Systems.

1\. Improvements or additions to water treatment systems needed to

meet the requirements of the Safe Drinking Water Act will be accorded
priority in determining the commitment of available funds.

2\. The quality of drinking water for projects financed in whole or

in part by Rural Development must meet the applicable primary drinking
water regulations after completion of any proposed improvements. In
those States where primary enforcement responsibility bas been assumed
by the State, a certification by the State will be required at the time
the final design plans and specifications are reviewed. In all other
States, such certification will be made by the consulting engineer and
will accompany the final assign plans and specifications when submitted
to the appropriate State regulatory agency for review.

Signed:

Environmental Protection Agency Rural Development

[/s/ Thomas C. Jorling]{.underline}\_\_\_\_\_\_\_\_\_\_\_\_\_\_ [/s/
Gordon Cavanaugh]{.underline}\_\_\_\_\_\_\_\_\_

Thomas C. Jorling Gordon Cavanaugh

Assistant Administrator for Administrator

Water and Hazardous Materials

[7/23/78]{.underline}\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
[7/13/78\_]{.underline}\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Date Date

## o0o 

(Guide 26 - Part I) (Page 1) RD Instruction 1942-A

## Community Programs

## Project Selection Criteria

Project Score\_\_\_\_\_\_\_\_\_

Name of Applicant
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Case
Number:\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_ \_\_

Project Type /\_/ Water and Waste Disposal (WWD) /\_/Community
Facilities (CF)

State \_\_\_\_\_\_\_\_\_\_ County \_\_\_\_\_\_\_\_\_\_\_\_\_\_
Congressional District No.\_\_\_\_\_\_

Loan \$\_\_\_\_\_\_\_\_\_\_ Grant \$\_\_\_\_\_\_\_\_\_\_\_ Initial or
Subsequent \_\_\_\_\_\_\_\_\_\_\_\_\_

Amount of previous Rural Development funding for this project: loan
\$\_\_\_\_, grant \$\_\_\_.

Anticipated interest level: Poverty\_\_\_\_, Intermediate\_\_\_\_,
Market \_\_\_\_\_\_.

Brief description of the proposed facility
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

[Priorities]{.underline} [Points]{.underline}

A. [Population priorities]{.underline}. The priorities in this

section apply to both Water and Waste Disposal and

Community Facilities preapplications

1\. Proposed project is located in a rural

community having a population not in

excess of 2,500. 25

2\. Proposed project is located in a rural

community having a population not in

excess of 5,500. 20

(Do not award points under this priority

if points were awarded under Priority A-1).

B. [Health priorities]{.underline}.

1\. Water and Waste Disposal preapplication only -

a\. Proposed project is needed to alleviate

the sudden unexpected diminution or

deterioration of a water supply, or

to meet health or sanitary standards

which pertain to a community\'s water

supply. 25

(10-19-88) SPECIAL PN

RD Instruction 1942-A

(Guide 26 - Part I) (Page 2)

[Priorities]{.underline} [Points]{.underline}

b\. Proposed project is required to correct

an inadequate waste disposal system due

to unexpected occurrences, or to meet

health or sanitary standards which pertain

to a community\'s waste disposal systems. 25

2\. Community Facilities preapplication only-

Proposed project is required either to correct

a health or sanitary problem, or to meet a

health or sanitary standard. 25

C. [Income priorities]{.underline}. The priorities in this section apply
to both Water and Waste Disposal and Community Facilities
preapplications. The median income of the population to be served by the
proposed facility is:

1\. Less than the poverty line for a family of

four as defined in section 673(2) of the

Community Services Block Grant Act (42 U.S.C.

9902(2), or less than 80% of the statewide

nonmetropolitan median household income. 25

2\. Equal to or more than the poverty line and

between 80% and 100%, inclusive, of the State\'s

nonmetropolitan median household income. 20

D. [Other factors]{.underline}.

1\. Water and Waste Disposal preapplications

only - The proposed project will: merge

ownership, management, and operation of

smaller facilities providing for more

sufficient management and economical service;

and/or enlarge, extend, or otherwise modify

existing facilities to provide service to

additional rural residents. 10

2\. Community Facilities preapplication only - The

purpose of the proposed project is to construct,

enlarge, extend or otherwise improve the

following types of facilities. (Select only

the factor most applicable to the proposed

project.)

a\. Public safety. 10

(Guide 26 - Part I) (Page 3) RD Instruction 1942-A

[Priorities]{.underline} [Points]{.underline}

b\. Health care. 5

(Do not award points under this priority

if points were awarded under priority B-2.)

3\. Water and Waste Disposal and Community Facilities

preapplications -

a\. Applicant is a public body or Indian tribe. 5

b\. Project is located in a \"truly rural area\"

as described in Section 1942.17(c)(l). 10

c\. Amount of joint financing committed to the

project is:

i\. 20% or more private, local or State funds. 10

ii\. 5% - 19% private, local or State funds. 5

E. State Director\'s discretionary points. (Up to 15).

Give written justification. \_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Chief, Community (and Business) Programs Date

Directions: Complete the information requested on Page 1. In paragraphs

A-D circle the points for those priorities which apply to and

are met by the preapplication under consideration. Determine

and justify the number of discretionary points, if any, to be

awarded in paragraph E and add up the total number of points

scored.

## oOo

(10-19-88) SPECIAL PN

(Guide 26 - Part II) (Page 1) RD Instruction 1942-A

TO: Administrator, Rural Development

Washington, DC 20250

Attention: \_\_\_\_\_\_\_ Water and Waste Disposal Division

\_\_\_\_\_\_\_ Community Facilities Division

State:\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Name of
Applicant:\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

A. Amount of additional funds requested: Loan \$\_\_\_\_\_\_\_\_ Grant
\$\_\_\_\_\_\_\_

B. Are funds being requested for an approved project that has

encountered cost overruns due to high bids or unexpected construction
problems that cannot be reduced by negotiation, redesign or other means?
\_\_\_\_\_ yes \_\_\_\_\_no

C. State the priority of this project in relation to all others for

which requests are pending in the National Office. (Attach a revised
priority listing for previously submitted projects if
necessary.)\_\_\_\_\_\_\_\_\_\_\_\_\_

D. Is this project ready for obligation? \_\_\_\_ yes \_\_\_\_\_no.

If no, give estimated date project will be ready for obligation of

funds.\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

E. Has the appropriate environmental review, including the public notice

requirements for a Class II action, been completed for the project?
\_\_\_\_\_\_ yes\_\_\_\_\_\_no.

F. If other funds are involved in this project, have they been

committed? \_\_\_\_\_\_ yes \_\_\_\_\_no.

G. Has all of the State\'s fund allocation been obligated? \_\_\_yes

\_\_\_\_no. If no, attach specific explanation of plans to use funds.
Include a list of projects and planned dates of obligation.

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

State Director Date

Directions: To request an additional allocation of funds from the
National

Office Reserve, State Offices should complete this Part of

Guide 26, attach it to the front of a completed copy of Part I

and submit both to the National Office.

## oOo

(10-19-88) SPECIAL PN

RD Instruction 1942-A

Guide 27

(INSTRUCTION SHEET ONLY - NOT TO BE INCLUDED AS PART OF THE CONTRACT
DOCUMENTS)

This Guide modifies selected documents published by the American
Institute of Architects (AIA) to conform with USDA/Rural Development /
Rural Housing Service (RHS) regulations and policy. The AIA documents,
as modified by this Guide, may be used on RHS financed building
construction projects such as those administered under this subpart. The
AIA documents must be used in accordance with current copyright rules.

The need to witness the agreements will depend upon State and local
requirements for validation of the document. Where appropriate, a copy
of the resolution authorizing the individual to act on behalf of the
firm or entity should be attached to the agreement.

Questions regarding the use of these documents should be referred to the
RHS National Office Program Support Staff.

Attachments:

1\. Attachment to AIA DOCUMENT B141-1997, *Standard Form of Agreement
Between Owner and Architect With Standard Form of Architect's Services.*
(See note below.)

2\. Attachment to AIA DOCUMENT A701-1997, *Instructions to Bidders.*

3\. Attachment to AIA DOCUMENT A101-1997, *Standard Form of Agreement
Between Owner and Contractor.*

4\. Attachment to AIA Document A201-1997*, General Conditions of the
Contract for Construction.*

5\. Attachment to AIA Document A201/SC-1990*, Federal Supplementary
Conditions of the Contract for Construction*.

(NOTE: The AIA Document B141-1997 has two parts: the *Standard Form of
Agreement Between Owner and Architect* and the *Standard Form of
Architect's Services: Design and Contract Administration*. A contract
for architectural services is not complete unless both parts of AIA
Document B141 are included. Both portions of the document have signature
areas that must be signed by the parties involved.)

## oOo

(08-26-98) PN 296

RD Instruction 1942-A

Guide 27

Attachment 1

Page 1

ATTACHMENT TO AIA DOCUMENT B141-1997, *Standard Form of Agreement
Between Owner and Architect With Standard Form of Architect's Services*

The provisions of this Attachment shall delete, modify and supplement
the provisions contained in the \"*Standard Form of Agreement Between
Owner and Architect With Standard Form of Architect's Services*," AIA
Document B141-1997 Edition. The provisions contained in this Attachment
will supersede any conflicting provisions of the AIA Document. The term
\"Agency," as used in this Attachment, shall mean the United States of
America, acting through the United States Department of Agriculture.

ARTICLE 1.2, RESPONSIBILITIES OF THE PARTIES

1.2.2 Add the following subparagraph to paragraph 1.2.2:

> 1.2.2.8 The Owner shall provide the Architect with Agency standard
> Construction Contract Document Guides.

ARTICLE 1.3, TERMS AND CONDITIONS

1.3.5.2 Delete the words \"unless the parties mutually agree otherwise\"
and substitute the words \"if the parties mutually agree\" in the first
sentence of subparagraph 1.3.5.2.

1.3.7.1 Delete subparagraph 1.3.7.1 and substitute the following:

> 1.3.7.1 This Agreement shall be governed by the law of the Project
> location.

1.3.7.4 Delete subparagraph 1.3.7.4.

1.3.7 Add the following subparagraphs to paragraph 1.3.7:

> 1.3.7.10 This Agreement shall not become effective until concurred
> with in writing by the Agency. Such concurrence shall be evidenced by
> the signature of a duly authorized representative of the Agency in the
> space provided at the end of the Agency Attachment to this Agreement.
> The concurrence so evidenced by the Agency shall in no way commit the
> Agency to render financial assistance to the Owner and is without
> liability to the Agency for any payment hereunder, but in the event
> such assistance is provided, the concurrence shall signify the
> provisions of this Agreement are consistent with the requirements of
> the Agency.

(08-26-98) PN 296

RD Instruction 1942-A

Guide 27

Attachment 1

Page 2

> 1.3.7.11 If applicable, the Architect shall comply with section 319 of
> Public Law 101-121, as supplemented by the Department of Agriculture
> regulations (7 C.F.R. part 3018). This law pertains to restrictions on
> lobbying and applies to the recipients of contracts and subcontracts
> that exceed \$100,000 at any tier under a Federal loan that exceeds
> \$150,000 or a Federal grant that exceeds \$100,000. If applicable,
> the Architect must complete a certification form on lobbying
> activities related to a specific Federal loan or grant that is a
> funding source for this Contract. The certification and disclosure
> forms shall be provided by the Owner.
>
> 1.3.7.12 The Architect agrees to abide by the requirements of 7 C.F.R.
> part 3017, which pertains to the debarment or suspension of a person
> from participating in a Federal program or activity. If the total
> compensation described in Article 1.5 exceeds \$25,000, the Architect
> shall complete the relevant certification form provided by the Owner.

1.3.8.2 Delete the second sentence in subparagraph 1.3.8.2 and
substitute the following:

> When the Project is resumed, the Architect\'s compensation may be
> equitably adjusted, as mutually agreed, to provide for expenses
> incurred in the interruption and resumption of the Architect\'s
> services.

1.3.8.7 Insert the words \"as mutually agreed\" after \"Termination
Expenses\" in subparagraph 1.3.8.7.

1.3.9.1 Delete the words \"and for Reimbursable Expenses incurred," and
add the following sentences to subparagraph 1.3.9.1:

> Compensation computed in Paragraph 1.5.1 shall include all
> transportation, travel, communications, and fees that are required in
> connection with the Project. They shall also include the reproduction,
> postage and handling of Drawings, Specifications and other documents.

1.3.9.2 Delete subparagraph 1.3.9.2.

1.3.9.3 Delete the words \"of Reimbursable Expenses," and add the words
\"and the Agency\" after the words \"Owner\'s authorized
representative\" in subparagraph 1.3.9.3.

> RD Instruction 1942-A
>
> Guide 27
>
> Attachment 1
>
> Page 3

ARTICLE 1.4, SCOPE OF SERVICES AND OTHER SPECIAL TERMS AND CONDITIONS

1.4.1 Delete the word \"both\" from the end of the second sentence and
conclude the sentence with \"Owner, Architect and Agency.\"

1.4.2 Add the following subparagraph:

1.4.2.1 This Agreement is modified and supplemented by

RD Instruction 1942-A, Guide 27, Attachment 1.

ARTICLE 1.5, COMPENSATION

1.5.4 Delete paragraph 1.5.4.

1.5.5 Delete paragraph 1.5.5.

ARTICLE 2.1, PROJECT ADMINISTRATION SERVICES

2.1.5 Add the words \"and concurrence by the Agency\" after approval by
the Owner\" in paragraph 2.1.5.

2.1 Add the following Paragraph to ARTICLE 2.1:

> 2.1.8 The Architect shall consult with the Agency Architect or
> Engineer about the Agency's requirements and procedures.

ARTICLE 2.3, EVALUATION AND PLANNING SERVICES

2.3 Add the following paragraphs to article 2.3:

> 2.3.4 The Architect shall submit \_\_\_\_ copies of the Preliminary
> Architectural Feasibility Report following Agency Instructions and
> Guides.
>
> 2.3.5 When the Owner has accepted the Preliminary Architectural
> Feasibility Report in writing and the Agency has concurred, the
> Architect may be authorized to proceed with developing the design.

(08-26-98) PN 296

RD Instruction 1942-A

Guide 27

Attachment 1

Page 4

ARTICLE 2.4, DESIGN SERVICES

2.4.4 Add the following subparagraphs to paragraph 2.4.4:

> 2.4.4.3 Prior to advertisement for bids, the Architect shall provide a
> maximum of \_\_\_\_ sets of Construction Contract Documents for use by
> the Owner, Agency and the appropriate Federal, State and local
> agencies that must approve the Project. The cost of such Construction
> Contract Documents shall be included in the compensation paid to the
> Architect, notwithstanding subparagraph 1.3.9.2. Construction Contract
> Documents shall be subject to Agency concurrence in writing prior to
> advertisement for bids. The Architect shall furnish additional copies
> of the Construction Contract Documents as requested by prospective
> bidders, material suppliers, and other interested parties, but may
> charge them a refundable deposit fee for the reasonable cost of such
> copies.
>
> 2.4.4.4 Upon award of the construction contract, the Architect shall
> furnish the Owner \_\_\_\_\_ sets of Construction Contract Documents
> for execution. The cost of these sets shall be included in the
> compensation to the Architect.

ARTICLE 2.6, CONTRACT ADMINISTRATION SERVICES

2.6.1.3 Delete the first sentence of subparagraph 2.6.1.3 and substitute
as follows.

> The Architect shall be a representative of and shall advise and
> consult with the Owner during construction until final payment is due
> to the Contractor, and at the Owner\'s direction during the period of
> correction of the Work described in the Contract for Construction. The
> Architect shall be available to furnish architectural services and
> consultations necessary to correct unforeseen construction defects
> normally encountered during this period. The Architect shall assist
> the Owner in performing a review of the Project during the 11th month
> after the date of Substantial Completion.

2.6.1.8 Delete the words, \"and shall not be liable for results of
interpretations or decisions so rendered in good faith\" in the last
sentence of subparagraph 2.6.1.8.

RD Instruction 1942-A

Guide 27

Attachment 1

Page 5

2.6.1 Add the following subparagraphs to paragraph 2.6.1:

> 2.6.1.10 The Architect shall conduct on-site progress meetings no less
> than once a month during the periods of active construction. These
> meetings should be held with the Contractor, affected Sub-contractors,
> Project Representative, Owner, representatives of the Owner, and other
> interested parties as appropriate, to review and discuss the
> Contractor\'s application for payment, work progress schedule,
> construction problems or disputes, and other appropriate matters.
>
> 2.6.1.11 The Architect shall participate in the Preconstruction
> Conference prior to Owner issuing the Notice to Proceed.

2.6.2.1 Add the following sentences to subparagraph 2.6.2.1:

> Such visits to the site shall be documented in writing on standard
> inspection report forms with copies furnished to the Owner, Contractor
> and Agency. Visits to the site shall be in accordance with Agency
> requirements and procedures.

2.6.2 Add the following subparagraph to paragraph 2.6.2:

> 2.6.2.6 The Architect shall advise the Owner of required tests,
> inspections and reports, shall furnish coordination of such tests and
> inspections, and shall advise the Owner and Agency of the results of
> same. Copies of test results shall be furnished to the Owner,
> Contractor, and Agency, as appropriate.

2.6.3 Add the following subparagraph to paragraph 2.6.3:

> 2.6.3.4 The Architect shall obtain Agency concurrence on all
> Certificates of Payment before payment is made.

2.6.5.1 Add the following sentences to subparagraph 2.6.5.1:

> Preparation of Change Orders which do not substantially affect the
> project shall be included in the compensation computed in paragraph
> 1.5.1. The Architect shall obtain Agency concurrence in writing for
> Change Orders prior to the performance of the Work.

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RD Instruction 1942-A

Guide 27

Attachment 1

Page 6

2.6.6.1 Delete subparagraph 2.6.6.1 and substitute the following:

> 2.6.6.1 The Architect shall conduct an inspection prior to the
> issuance of the Certificate of Substantial Completion and shall submit
> a written report to the Owner, Agency and the Contractor about Work to
> be completed prior to final acceptance. Said inspection and
> Certificate of Substantial Completion shall be provided by the
> Architect for each Prime Contractor as appropriate. Such services
> shall be coordinated with the Agency. Prior to submitting the final
> Certificate for Payment, the Architect shall conduct an inspection,
> submit a Statement of Completion, receive and forward to the Owner,
> for the Owner\'s review and records, written warranties and related
> documents required by the Contract Documents and assembled by the
> Contractor.

ARTICLE 2.8, SCHEDULE OF SERVICES

2.8.3 Insert the word "Architect" under the heading "Responsibility" for
line items .16, .17, and .20 in the chart.

2.8.3 Add the following subparagraphs to paragraph 2.8.3 under the
heading "Description of Services." below the chart:

> 2.8.3.a The Architect shall provide a detailed cost estimate based on
> Construction Contract Documents.
>
> 2.8.3.b If full time representation at the site is required, the
> Architect shall provide one or more Project Representatives to assist
> in carrying out such additional on-site responsibilities. The
> selection and compensation of the Project Representative must be
> concurred with in writing by Agency.
>
> 2.8.3.c \_\_\_\_\_ sets of Record Drawings shall be provided to the
> Owner.

SIGNATURE BLOCK:

Delete the signature blocks on pages 1-12 and 2-12 of this Agreement and
substitute the block on the following page in both locations:

RD Instruction 1942-A

Guide 27

Attachment 1

Page 7

IN WITNESS WHEREOF, the parties hereto have executed, or caused to be
executed by their duly authorized officials, this Agreement in duplicate
on the respective dates indicated below:

OWNER:

ATTEST: \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ By
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Type Name \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ Type Name
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Title \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ Title
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Date \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ Date
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

ARCHITECT:

ATTEST: \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ By
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Type Name \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ Type Name
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Title \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ Title
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Date \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ Date
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

AGENCY CONCURRENCE:

By \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Type Name \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Title \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Date \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

## o0o

## 

## 

## 

## 

## (08-26-98) PN 296 

RD Instruction 1942-A

Guide 27

Attachment 2

Page 1

ATTACHMENT TO AIA DOCUMENT A701-1997, *Instructions to Bidders*

The provisions of this Attachment shall delete, modify and supplement
the provisions contained in the \"*Instructions to Bidders*," AIA
Document A701-1997 Edition. The provisions contained in this Attachment
will supersede any conflicting provisions of the AIA Document. The term
\"Agency," as used in this Attachment, shall mean the United States of
America, acting through the United States Department of Agriculture.

ARTICLE 2, BIDDER\'S REPRESENTATIONS

2.1 Add the following subparagraph to paragraph 2.1:

> 2.1.5 This Bid has been arrived at independently, without
> consultation, communication, or agreement as to any matter relating to
> this Bid, with any other Bidder or with any competitor.

ARTICLE 4, BIDDING PROCEDURES

4.1.1 Add the following sentence to subparagraph 4.1.1:

> Only one copy of the Bid is to be submitted.

4.2.1 Delete subparagraph 4.2.1 and substitute the following:

> 4.2.1 Each Bid must be accompanied by a Bid Bond payable to the Owner
> for five percent of the total amount of the Bid.

4.2.2 Delete Subparagraph 4.2.2 and substitute the following:

> 4.2.2 The Bid Bond shall be written on a form identical to that
> included in the Bidding Documents, and the attorney-in-fact who
> executes the Bid Bond on behalf of the surety shall affix to the Bid
> Bond a certified and current copy of the power of attorney.

4.2.3 Add the words \"payment and performance\" before the word
\"bonds\"; and add

the following to subparagraph 4.2.3:

> As soon as the Bid prices have been compared, the Owner will return
> the Bid Bonds of all except the three lowest responsible Bidders. When
> the Agreement is executed, the Bid Bonds of the two remaining
> unsuccessful Bidders will be returned.

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RD Instruction 1942-A

Guide 27

Attachment 2

Page 2

4.2 Add the following subparagraph to paragraph 4.2:

> 4.2.4 If a Bidder refuses to execute the Agreement or obtain the
> Performance and Payment Bonds within the agreed time, the Owner may
> consider the Bidder in default, in which case the Bid Bond
> accompanying the Bid shall become the property of the Owner.

4.3 Add the following subparagraphs to paragraph 4.3:

> 4.3.5 All applicable laws, ordinances, and the rules and regulations
> of all authorities having jurisdiction over construction of the
> Project, shall apply to the Contract throughout.
>
> 4.3.6 The Bidder agrees to abide by the requirements of Executive
> Order 11246, specifically including the provisions of the Equal
> Opportunity Clause and the Standard Federal Equal Employment
> Construction Contract Specifications set forth in the Supplementary
> Conditions.
>
> 4.3.7 The Bidder agrees to abide by the requirements of section 319 of
> Public Law 101-121, which pertains to lobbying activities and applies
> to recipients of contracts or subcontracts that exceed \$100,000 at
> any tier under a Federal loan that exceeds \$150,000 or a Federal
> grant that exceeds \$100,000. Each Bid shall be accompanied by a
> completed lobbying certification form identical to that included in
> the Bidding Documents.
>
> 4.3.8 The Bidder agrees to abide by the requirements under 7 C.F.R.
> part 3017, which pertains to the debarment or suspension of a person
> from participating in a Federal program or activity. Each Bid
> exceeding \$25,000 shall be accompanied by a relevant completed
> certification form identical to that included in the Bidding
> Documents.

4.4.1 Delete subparagraph 4.4.1 and substitute the following:

> 4.4.1 No Bidder may withdraw, modify or cancel a Bid within 60
> calendar days after the actual date of the opening thereof. Should
> there be reasons why the Contract cannot be awarded within the
> specified period, the time may be extended by mutual agreement between
> the Owner and the Bidder, and the concurrence of the Agency.

4.4.4 Delete the words \", if required,\" from Subparagraph 4.4.4.

RD Instruction 1942-A

Guide 27

Attachment 2

Page 3

ARTICLE 5, CONSIDERATION OF BIDS

5.3.2 Delete subparagraph 5.3.2 and substitute the following:

> 5.3.2 The Owner shall have the right to accept Alternates in the
> sequence or combinations listed and to determine the low Bidder on the
> basis of the sum of the Base Bid and the Alternates accepted.

ARTICLE 7, PERFORMANCE BOND AND PAYMENT BOND

7.1.1 Delete subparagraph 7.1.1 and substitute the following:

> 7.1.1 Prior to execution of the Contract, the Bidder shall furnish
> Bonds covering the faithful performance of the Contract and the
> payment of all obligations arising thereunder. Both Bonds shall be
> separately written, each in the amount of the Contract Sum. The cost
> shall be included in the Bid.

7.1.2 Delete subparagraph 7.1.2 and substitute the following:

> 7.1.2 Surety companies executing Bonds must hold a certificate of
> authority as a acceptable surety on Federal Bonds as listed in
> Treasury Circular 570, as amended, and be authorized to transact
> business in the State where the Project is located.

7.1.3 Delete subparagraph 7.1.3.

7.2.1 Delete subparagraph 7.2.1 and substitute the following:

> 7.2.1 The Bidder to whom the Contract is awarded will be required to
> execute the Agreement and obtain Performance and Payment Bonds within
> ten (10) calendar days from the date when the Notice of Award is
> delivered to the Bidder. The Notice shall be accompanied by the
> necessary Agreement and Bond forms.

7.2.2 Delete subparagraph 7.2.2 and substitute the following:

> 7.2.2 The Bonds shall be written on forms identical to those included
> in the Bidding Documents.

(Note: Any additional provisions that are necessary to remain effective
after execution of the Contract for Construction will be inserted here
and continue in the same format.)

o0o

(08-26-98) PN 296

RD Instruction 1942-A

Guide 27

Attachment 3

Page 1

ATTACHMENT TO AIA DOCUMENT A101-1997, *Standard Form of Agreement
Between Owner and Contractor*

The provisions of this Attachment shall delete, modify and supplement
the provisions contained in the "*Standard Form of Agreement Between
Owner and Contractor*," AIA Document A101-1997 Edition. The provisions
contained in this Attachment shall supersede any conflicting provisions
of the AIA Document. The term \"Agency,\" as used in this Attachment,
shall mean the United States of America, acting through the United
States Department of Agriculture.

ARTICLE 3, DATE OF COMMENCEMENT AND SUBSTANTIAL COMPLETION

3.1 Delete paragraph 3.1 and substitute the following:

> 3.1 The date of commencement shall be contained in by the Notice to
> Proceed.

3.3 Add the following sentences to paragraph 3.3

> If the Work is not substantially complete on or before this date, or
> within this period of time, or extension thereof granted by the Owner,
> the Owner will sustain damage that will be impracticable and extremely
> difficult to quantify in the event of and by reason of such delays.
> The Contractor shall pay to the Owner liquidated damages in the sum of
> \$\_\_\_\_\_\_ for each calendar day of delay. Any sums that may be
> due the Owner as liquidated damages may be deducted from any monies
> due or to become due the Contractor under the Contract or may be
> collected from the Contractor\'s surety.

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RD Instruction 1942-A

Guide 27

Attachment 3

Page 2

ARTICLE 5, PAYMENTS

5.1.6 Insert \"ten\" and \"10\" in the appropriate spaces in
subparagraphs 5.1.6.1 and 5.1.6.2.

5.1.8 Insert the following sentences in subparagraph 5.1.8:

> The amount retained shall be 10% of the value of Work until 50% of the
> Work has been completed. At 50% completion, further partial payments
> shall be made in full to the Contractor and no additional amounts may
> be retained unless the Architect certifies that the Work is not
> proceeding
>
> satisfactorily, but amounts previously retained shall not be paid to
> the Contractor. At 50% completion or any time thereafter when the
> progress of the Work is not satisfactory, additional amounts may be
> retained but in no event shall the total retainage be more than 10% of
> the value of Work completed.

ARTICLE 7, MISCELLANEOUS PROVISIONS

7.6 Add the following subparagraph to article 7.6:

> 7.6.1 This Agreement shall not become effective until concurred in
> writing by the Agency. Such concurrence shall be evidenced by the
> signature of a duly authorized representative of the Agency in the
> space provided at the end of the Agency Attachment to this Agreement.
> The concurrence so evidenced by the Agency shall in no way commit the
> Agency to render financial assistance to the Owner and is without
> liability to the Agency for any payment hereunder, but in the event
> such assistance is provided, the concurrence shall signify the
> provisions of this Agreement are consistent with Agency requirements.

RD Instruction 1942-A

Guide 27

Attachment 3

Page 3

ARTICLE 8, ENUMERATION OF CONTRACT DOCUMENTS

The following Documents should be referenced, if applicable:

Subparagraph 8.1.3:

> Attachment to the *Standard Form of Agreement Between Owner and*
>
> *Contractor* (RD Instruction 1942-A, Guide 27, Attachment 3)
>
> *General Conditions of the Contract for Construction*, AIA A201-1997
>
> Attachment to the *General Conditions of the Contract for
> Construction*
>
> (RD Instruction 1942-A, Guide 27, Attachment 4)
>
> *Federal Supplementary Conditions of the Contract for Construction*
> (AIA
>
> Document A201/SC)
>
> Attachment to *the Federal Supplementary Conditions of the Contract
> for*
>
> *Construction* (RD Instruction 1942-A, Guide 27, Attachment 5)
>
> Special Conditions

Subparagraph 8.1.7:

Invitation for Bids (Form RD 1924-5)

*Instructions to Bidders* (AIA Document A701)

Supplementary Instructions to Bidders (RD Instruction 1942-A, Guide 27,

Attachment 2)

Bid Form

Bid Bond

Compliance Statement (Form RD 400-6)

Payment Bond

Performance Bond

Certification Regarding Debarment, Suspension, Ineligibility and

Voluntary Exclusion - Lower Tier Covered Transactions (Form AD 1048)

Disclosure of Lobbying Activities (SF-LLL)

Certification for Contracts, Grants and Loans (RD Instruction 1940-Q,

Exhibit A-1)

SIGNATURE BLOCK:

Delete the signature block on page 7 of this Agreement and substitute
the block on the following page:

(08-26-98) PN 296

RD Instruction 1942-A

Guide 27

Attachment 3

Page 4

IN WITNESS WHEREOF, the parties hereto have executed, or caused to be
executed by their duly authorized officials, this Agreement in duplicate
on the respective dates indicated below:

OWNER:

ATTEST: \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ By
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Type Name \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ Type Name
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Title \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ Title
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Date \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ Date
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

CONTRACTOR:

ATTEST: \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ By
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Type Name \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ Type Name
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Title \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ Title
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Date \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ Date
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

AGENCY CONCURRENCE:

By \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Type Name \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Title \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Date \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

o0o

RD Instruction 1942-A

Guide 27

Attachment 4

Page 1

ATTACHMENT TO AIA DOCUMENT A201-1997*, General Conditions of the
Contract for Construction*

The provisions of this Attachment shall delete, modify and supplement
the provisions contained in the \"*General Conditions of the Contract
for Construction*," AIA Document A201-1997 Edition. The provisions
contained in this Attachment will supersede any conflicting provisions
of the AIA Document. The term \"Agency," as used in this Attachment,
shall mean the United States of America, acting through the United
States Department of Agriculture.

ARTICLE 1, GENERAL PROVISIONS

1.2 Add the following subparagraph to paragraph 1.2:

> 1.2.4 Concurrence in the Contract by the Agency is required before the
> contract is effective.

ARTICLE 2, OWNER

2.2.5 Delete subparagraph 2.2.5 and substitute the following:

> 2.2.5 The Contractor will be furnished, free of charge, \_\_\_\_
> copies of the Drawings and Project Manuals necessary for execution of
> the Work. Additional copies will be available from the Architect at
> the cost of reproduction and handling.

ARTICLE 4, ADMINISTRATION OF THE CONTRACT

4.1.1 Delete the last sentence of subparagraph 4.1.1 and substitute the

> following:
>
> The term \"Architect\" means the Architect, or the Engineer when the
> nature of the Work is within the authority granted engineers by the
> State licensure law, or an authorized representative of the Architect
> or Engineer.

4.2.12 Delete the words \"and will not be liable for results of

> interpretations or decisions so rendered in good faith\" in the last
> sentence of subparagraph 4.2.12.

4.4.5 Add after the word \"but", the words \"may be\" in the second
sentence

> of subparagraph 4.4.5.

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RD Instruction 1942-A

Guide 27

Attachment 4

Page 2

4.6.1 Replace the word \"shall\" with the word \"may\" in the first and
second

> sentences of subparagraph 4.6.1.

4.6.2 Delete subparagraph 4.6.2 and substitute the following:

> 4.6.2 The arbitration provisions in this subparagraph may be initiated
> by either party to this Contract by filing with the other party and
> the Architect a written request for arbitration. The other party may
> accept or reject the request by filing a written answering statement
> with the requesting party and the Architect within fourteen (14)
> calendar days of the receipt of such request. If the request is
> accepted the provisions of this section shall apply. If the request is
> rejected or an answering statement is not filed within the fourteen
> (14) day period, the provisions in this subparagraph will not apply.
>
> 4.6.2.1 Within fourteen (14) calendar days or any mutually agreeable
> time period thereafter, each party to this Contract will appoint one
> arbitrator. Within fourteen (14) calendar days or any mutually
> agreeable time period thereafter, the two arbitrators will select a
> third arbitrator. Failure to appoint an arbitrator within the mutually
> agreeable time periods will terminate further actions under this
> subparagraph.
>
> 4.6.2.2 The arbitrators will select a hearing location as close to the
> Owner\'s locale as possible.
>
> 4.6.2.3 The procedure for conducting the hearings will follow the
> Construction Industry Arbitration Rules of the American Arbitration
> Association.

4.6.3 Replace the word \"demand\" with the word \"request\" in the first

sentence of subparagraph 4.6.3.

4.6.5 Replace the word \"demand\" with the word \"request\" in the first

sentence of subparagraph 4.6.5.

ARTICLE 7, CHANGES IN THE WORK

7.1.2 Insert the words \", Agency" after the word \"Owner\" in
subparagraph

7.1.2.

RD Instruction 1942-A

Guide 27

Attachment 4

Page 3

7.2.1 Delete subparagraph 7.2.1 and substitute the following:

> 7.2.1 A change order is a written order to the Contractor utilizing
> Form RD 1924-7, \"Contract Change Order,\" signed by the Owner,
> Architect, Contractor, and the Agency representative. It is issued
> after the execution of the Contract, authorizing a change in the Work
> or an adjustment in the Contract Sum or the Contract Time. The
> Contract Sum and the Contract Time may be changed only by Change
> Order. The Contractor\'s signing of the change order indicates
> complete agreement therein. When the Contract Sum is based on unit
> price, a unit bid quantity may be increased or decreased by a maximum
> of twenty percent (20%) without invalidating the unit price.

7.3.1 Add the following sentence to subparagraph 7.3.1.

> A Construction Change Directive may be used only for a change in
> response to an emergency, as described in Paragraph 10.6.

7.3.3 Delete subparagraph 7.3.3.

7.3.4 Delete subparagraph 7.3.4.

7.3.6 Delete Subparagraph 7.3.6.

ARTICLE 8, TIME

8.2 Add the following subparagraph to paragraph 8.2:

> 8.2.4 The Notice to Proceed shall be issued within twenty (20)
> calendar days of the execution of the Agreement by the Owner. Should
> there be reasons why the Notice to Proceed cannot be issued within
> such period, the time may be extended by mutual agreement of the Owner
> and Contractor, with the concurrence of the Agency. If the Notice to
> Proceed has not been issued within the twenty (20) calendar day period
> or within the period mutually agreed, the Contractor may terminate the
> Agreement without further liability on the part of either party.

8.3 Add the following subparagraph to paragraph 8.3:

> 8.3.4 As outlined in article 3 of the Agreement, the Contractor agrees
> to pay liquidated damages to the Owner for each calendar day the
> Contractor shall be in default.

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RD Instruction 1942-A

Guide 27

Attachment 4

Page 4

ARTICLE 9, PAYMENTS AND COMPLETION

9.3.1.1 Add the following sentence to clause 9.3.1.1:

> Work performed and materials supplied under a Change Order may be
> included for payment only after the Change Order has been approved by
> all appropriate parties, including the Agency.

9.4.1 Replace the word \"seven\" with the word \"ten (10)\" in the first

sentence; and add the words, \"using AIA Documents 702, \'Application

and Certificate for Payment\' or Form RD 1924-18, \'Partial Payment

Estimate\',\" after \"Certificate for Payment\" in Subparagraph 9.4.1.

9.6 Add the following subparagraph to paragraph 9.6:

> 9.6.8 No progress payments will be made that deplete the retainage,
> nor place in escrow any funds that are required for retainage, nor
> invest the retainage for the benefit of the Contractor.

9.7.1 Replace the word \"seven\" with the word \"ten (10)\" in the first

sentence, second and third lines of subparagraph 9.7.1.

9.8.4 Add the words \", in collaboration with the Agency Architect or

> Engineer,\" after \"prepare\" in the first sentence of subparagraph
>
> 9.8.4.

9.8.5 Delete subparagraph 9.8.5 and substitute the following:

> 9.8.5 When the Work has been substantially completed, except for the
> Work which cannot be completed because of weather conditions, lack of
> materials or other reasons, which, in the judgment of the Owner, are
> valid reasons for non-completion, the Owner may make additional
> payments, retaining at all times an amount sufficient to cover the
> estimated cost of the Work still to be completed.

RD Instruction 1942-A

Guide 27

Attachment 4

> Page 5

9.9.1 Delete subparagraph 9.9.1 and substitute the following:

> 9.9.1 The Contractor agrees to the use and occupancy of a portion or
> unit of the Project before formal acceptance by the Owner under the
> following conditions:
>
> 9.9.1.1 A Certificate of Substantial Completion shall be prepared and
> executed as provided in subparagraph 9.8.4, except that when, in the
> opinion of the Architect, the Contractor is chargeable with
> unwarranted delay in completing the Work or the Contract requirements,
> the signature of the Contractor will not be required. The Certificate
> of Substantial Completion shall be accompanied by copies of
> Contractor's insurance policies, written endorsements of the
> Contractor\'s insurance carrier, and the surety permitting occupancy
> by the Owner during the remaining period of the Project Work.
> Occupancy and use by the Owner shall not commence until authorized by
> public authorities having jurisdiction over the Work.
>
> 9.9.1.2 Occupancy by the Owner shall not be construed by the
> Contractor as being an acceptance of that part of the Project to be
> occupied.
>
> 9.9.1.3 the Contractor shall not be held responsible for any damage to
> the occupied part of the Project resulting from the Owner\'s
> occupancy.
>
> 9.9.1.4 Occupancy by the Owner shall not be deemed to constitute a
> waiver of existing claims in behalf of the Owner or Contractor against
> each other.
>
> 9.9.1.5 If the Project consists of more than one building, and one of
> the buildings is to be occupied, the Owner, prior to occupancy of that
> building, shall secure permanent property insurance on the building to
> be occupied and necessary permits which may be required for use and
> occupancy.

9.9.2 Delete subparagraph 9.9.2 and substitute the following:

> 9.9.2 With the exception of clause 9.9.1.5, use and occupancy by the
> Owner prior to Project acceptance does not relieve the Contractor of
> the responsibility to maintain all insurance and bonds required of the
> Contractor under the Contract Documents until the Project is completed
> and accepted by the Owner.

9.9.3 Delete subparagraph 9.9.3.

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RD Instruction 1942-A

Guide 27

Attachment 4

Page 6

9.10.2 Delete the second and third sentences of subparagraph 9.10.2.

ARTICLE 11, INSURANCE AND BONDS

11.1.2 Replace the words \"the Contract Documents\" with the words

\"subparagraph 11.1.4 of the Attachment to the Federal Supplementary

Conditions of the Contract for Construction\" in the first sentence of

subparagraph 11.1.2.

11.4.2 Replace the word \"Owner\" with \"Contractor\" in the first
sentence of

> subparagraph 11.4.2.

11.4.3 Delete the last sentence in subparagraph 11.4.3.

11.4.5 Delete subparagraph 11.4.5.

11.4.7 Delete subparagraph 11.4.7.

11.5.1 Delete subparagraph 11.5.1 and substitute the following:

> 11.5.1 The Contractor shall furnish the Owner Bonds covering faithful
> performance of the Contract and payment of obligations arising
> thereunder within ten (10) calendar days after receipt of the Notice
> of Award. The surety company executing the Bonds must hold a
> certificate of authority as an acceptable surety on Federal Bonds as
> listed in Treasury Circular 570, as amended, and be authorized to
> transact business in the State where the Project is located. The Bonds
> (using the forms included in the Bidding Documents) shall each be
> equal to the amount of the Contract Sum. The cost of these Bonds shall
> be included in the Contract Sum.
>
> 11.5.1.1 The Contractor shall require the attorney-in-fact who
> executes the required Bonds on behalf of the surety to affix thereto a
> certified and current power of attorney.
>
> 11.5.1.2 If at any time a surety on any such Bond is declared bankrupt
> or loses its right to do business in the State in which the Work is to
> be performed or is removed from the list of surety companies accepted
> on Federal Bonds, the Contractor shall within ten (10) calendar days
> after notice from the Owner to do so, substitute an acceptable Bond in
> such form and sum and signed by such other surety or sureties as may
> be satisfactory to the Owner. The premiums of such Bond shall be paid
> by the Contractor. No further payment shall be deemed due nor shall be
> made until the new surety or sureties shall have furnished an
> acceptable Bond to the Owner.

RD Instruction 1942-A

Guide 27

Attachment 4

Page 7

ARTICLE 13, MISCELLANEOUS PROVISIONS

13.5 Add the following subparagraph to Paragraph 13.5:

> 13.5.7 The Contractor shall reimburse the Owner for services provided
> by the Architect in connection with evaluating substitutions proposed
> by the Contractor and making subsequent revisions to Drawings,
> Specifications and other documentation resulting therefrom.

13 Add the following paragraphs to article 13:

> 13.8 EQUAL OPPORTUNITY REQUIREMENTS
>
> Non-discrimination in Employment by Federally Assisted Construction
> Contractors, by Executive Order 11246.
>
> 13.8.1 This section summarizes Executive Order 11246, as amended,
> which prohibits employment discrimination and requires employers
> holding non-exempt Federal contracts and subcontracts and
> federally-assisted construction contracts and subcontracts in excess
> of \$10,000 to take affirmative action to ensure equal employment
> opportunity without regard to race, color, religion, sex, or national
> origin. The Executive Order requires, as a condition for the approval
> of any federally assisted construction contract, that the applicant
> incorporate nondiscrimination and affirmative action clauses into its
> non-exempt federally assisted construction contracts.
>
> 13.8.2 Executive Order 11246, as amended, is administered and enforced
> by the Office of Federal Contract Compliance Programs (OFCCP), an
> agency in the U.S. Department of Labor\'s Employment Standards
> Administration. OFCCP has issued regulations at 41 C.F.R. chapter 60
> implementing the Executive Order. The regulations at 41 C.F.R. part
> 60-4 establish the procedures which the Agency, as an administering
> agency, must follow when making grants, contracts, loans, insurance or
> guarantees involving federally assisted construction which is not
> exempt from the requirements of Executive Order 11246. The regulations
> which apply to Federal or federally assisted construction contractors
> also are published at 41 C.F.R. part 60-4.

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Attachment 4

Page 8

> 13.8.3 OFCCP has established numerical goals for minority and female
> utilization in construction work. The goals are expressed in
> percentage terms for the contractor\'s aggregate workforce in each
> trade. OFCCP has set goals for minority utilization based on the
> percentage of minorities in the civilian labor force in the relevant
> area. There is a single nationwide goal of 6.9 percent for utilization
> of women. The goals apply to all construction work in the covered
> geographic area, whether or not it is federal, federally assisted or
> non-federal. A notice advises bidders of the applicable goals for the
> area where the project is to be located.
>
> 13.8.4 [Application]{.underline}. This section applies to all of a
> construction contractor\'s or subcontractor\'s employees who are
> engaged in on-site construction including those construction employees
> who work on a non-Federal or non-Federally assisted construction site.
>
> 13.8.4.1 Agency officials will notify the appropriate Regional
> Director of OFCCP that an Agency financed construction contract has
> been awarded, and that the equal opportunity clauses are included in
> the contract documents.
>
> 13.8.4.2 The Regional Director, OFCCP-DOL, will enforce the
> non-discrimination requirements of Executive Order 11246.
>
> 13.8.5 The prospective contractor or subcontractor must comply with
> the Immigration Reform and Control Act of 1986 by completing and
> retaining Form I-9, \"Employment Eligibility Verification,\" for
> employees hired. This form is available from the Immigration and
> Naturalization Service, and Department of Justice.
>
> 13.8.6 The prospective contractor or subcontractor must submit\
> Form RD 400-6, \"Compliance Statement,\" to the applicant and an
> Agency official as part of the bid package, prior to any contract bid
> negotiations and comply with the Executive Order 11246 as stated in
> the contract documents.
>
> 13.9 STATUTES
>
> 13.9.1 The contractor and each subcontractor shall comply with the
> following statutes (and the regulations issued pursuant thereto, which
> are incorporated herein by reference):
>
> 13.9.1.1 Clean Air Act (42 U.S.C. 7414), section 114, and the Water
> Pollution Control Act (33 U.S.C. 1813), section 308. Under Executive
> Order 11738 and Environmental Protection Agency (EPA) regulations 40
> C.F.R. part 15, all Contracts in excess of \$100,000 are required to
> comply with these Acts. The Acts require the Contractor to:

RD Instruction 1942-A

Guide 27

Attachment 4

Page 9

> 13.9.1.1.1 Notify the Owner of the receipt of any communication from
> EPA indicating that a facility to be utilized in the performance of
> the Contract is under consideration to be listed on the EPA list of
> Violating Facilities,
>
> 13.9.1.1.2 Certify that any facility to be utilized in the performance
> of any nonexempt contractor or subcontractor is not listed on the EPA
> list of Violating Facilities as of the date of the Contract Award.
>
> 13.9.1.1.3 Include or cause to be included the above criteria and
> requirements of clauses 13.9.1.1.1 and 13.9.1.1.2 in every nonexempt
> Subcontract, and that the Contractor will take such actions as the
> Agency may direct as a means of enforcing such provisions.
>
> 13.9.1.2 Restrictions on Lobbying (Public Law 101-121, section 319) as
> supplemented by Department of Agriculture regulations (7 C.F.R. part
> 3018). This Law applies to the recipients of contracts and
> subcontracts that exceed \$100,000 at any tier under a Federal loan
> that exceeds \$150,000 or a Federal grant that exceeds \$100,000. If
> applicable, the Contractor must complete a certification form on
> lobbying activities related to a specific Federal loan or grant that
> is a funding source for this Contract. The certification and
> disclosure forms shall be provided by the Owner.
>
> 13.9.1.3 Copeland Anti-Kickback Act (18 U.S.C. 874) as supplemented in
> Department of Labor regulations (29 C.F.R. part 3). This Act provides
> that each Contractor shall be prohibited from inducing, by any means,
> any person in connection with the construction to give up any part of
> the compensation to which the person is otherwise entitled.
>
> 13.10 RECORDS
>
> 13.10.1 If the Contract is based on a negotiated Bid, the Owner, the
> United States Department of Agriculture, the Comptroller General of
> the United States, or any of their duly authorized representatives,
> shall have access to any books, documents, papers, and records of the
> Contractor which are directly pertinent to a specific Federal loan
> program for the purpose of making audit, examination, excerpts, and
> transcriptions. The Contractor shall maintain records for at least
> three years after the Owner makes final payment and all other pending
> matters are closed.

(08-26-98) PN 296

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Guide 27

Attachment 4

Page 10

> 13.11 ENVIRONMENTAL REQUIREMENTS
>
> 13.11.1 Mitigation Measures - The contractor shall comply with
> applicable mitigation measures established in the environmental
> assessment for the project. These may be obtained from the Agency
> representative.
>
> 13.11.2 Endangered Species - The Contractor shall comply with the
> Endangered Species Act. Should any evidence of the presence of
> endangered or threatened species or their critical habitat be brought
> to the attention of the Contractor, the Contractor will immediately
> report this evidence to the Architect and the Agency representative.
> Construction shall be temporarily halted pending the notification
> process and further directions issued by the Agency after consultation
> with the U.S. Fish and Wildlife Service.
>
> 13.11.3 The Contractor, when constructing a Project involving
> trenching, excavating, or other earth moving activity, shall comply
> with the following environmental constraints:
>
> 13.11.3.1 Historic Preservation - Any excavation or other earth moving
> activity by the Contractor that uncovers a historical or
> archaeological artifact shall be immediately reported to the Architect
> and the Agency representative. Construction shall be temporarily
> halted pending the notification process and further directions issued
> by the Agency after consultation with the State Historic Preservation
> Officer or other appropriate historic preservation official.
>
> 13.11.3.2 Human Remains and Cultural Items - Any excavation or other
> earth moving activity by the Contractor that uncovers human remains or
> cultural items shall be immediately reported to the Architect and the
> Agency representative. Construction shall be temporarily halted
> pending the notification process and further directions issued by the
> Agency after consultation with the appropriate authorities.
>
> 13.11.3.3 Paleontology - Any excavation or other earth moving activity
> by the Contractor that uncovers a fossil or other paleontological
> materials that may have scientific significance shall be immediately
> reported to the Architect and the Agency representative. Construction
> shall be temporarily halted pending the notification process and
> further directions issued by the Agency after consultation with
> appropriate authorities.

RD Instruction 1942-A

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Attachment 4

Page 11

> 13.11.3.4 Wetlands - The Contractor, when disposing of excess, spoil,
> or other construction materials on public or private property, will
> not fill in wetlands.
>
> 13.11.3.5 Floodplains - The Contractor, when disposing of excess,
> spoil, or other construction materials on public or private property,
> will not fill in 100-year floodplain areas delineated on the latest
> Federal Emergency Management Administration floodplain maps.
>
> 13.11.4 Lead-Based Paint - The Contractor and Owner shall comply with
> applicable Agency requirements of the Lead-Based Paint Poisoning
> Prevention Act, as amended (42 U.S.C. 4821 et seq.), and the
> Residential Lead-Based Paint Hazard Reduction Act of 1992 (42 U.S.C.
> 4851 et seq.) for rehabilitation work on residential property built
> prior to 1978.
>
> 13.12 DEBARMENT AND SUSPENSION
>
> 13.12.1 The Contractor shall comply with the requirements of 7 C.F.R.
> part 3017, which pertains to the debarment or suspension of a person
> from participating in a Federal program or activity.

o0o

(08-26-98) PN 296

RD Instruction 1942-A

Guide 27

Attachment 5

Page 1

ATTACHMENT TO AIA DOCUMENT A201/SC-1999*, FEDERAL SUPPLEMENTARY
CONDITIONS OF THE CONTRACT FOR CONSTRUCTION*

The provisions of this Attachment shall delete, modify and supplement
the provisions contained in the *\"FEDERAL SUPPLEMENTARY CONDITIONS OF
THE CONTRACT FOR CONSTRUCTION*\", AIA Document A201/SC-1999 Edition. The
provisions contained in this Attachment will supersede any conflicting
provisions of the AIA Document. The term \"Agency\", as used in this
Attachment, shall mean the United States of America, acting through the
United States Department of Agriculture.

ARTICLE 11, INSURANCE AND BONDS

11.4 Paragraph 11.4, Property Insurance, shall be modified as described

in \"Option B\" of AIA Document A201/SC.

11.5.1 Delete the words "on Standard Form 25" from the first sentence

Replace the fourth sentence in its entirety with "The contractor shall

furnish a Payment Bond in an amount equal to one hundred percent (100%)

of the contract sum."

ARTICLE 15, MISCELLANEOUS SUPPLEMENTARY CONDITIONS

15.4 Delete paragraph 15.4.

15.6 Delete paragraph 15.6.

15.7 Delete paragraph 15.7.

15.8 Delete paragraph 15.8.

15.9 Delete paragraph 15.9.

15.11.1 Add the words \"as applicable,\" after the words \"through
15.16,\" in

the first sentence; and add the words \", as applicable\" at the end of

the last sentence of subparagraph 15.11.1.

15.12 Delete paragraph 15.12

15.13 Delete paragraph 15.13

15.14 Delete paragraph 15.14

15.15 Delete paragraph 15.15

o0o

(04-17-02) PN 344

Guide 13, Attachment 1: Page 5 and Guides 20 and 21 in PDF ONLY.

Exhibits A and B in PDF ONLY.

RD Instruction 1942-A

Automation Supplement

## [ENGINEERING FEE ANALYSIS]{.underline}

[Part 1: Overview of System]{.underline}

This program was designed by the Program Support Staff to aid State
Offices in tracking current trends in market rates for engineering fees
on water and waste disposal projects. This program may be used by the
State Office to produce graphs to be used in determining reasonable
engineering fee on proposed projects.

All necessary instructions and information will appear on the computer
screen as needed by the user. The system is menu driven to be user
friendly, and \"help\" is available throughout the system:

1\) an information option appears on menu, and

2\) each data entry field has \"help\" available on the type of data

to be entered in that field.

The system performs checks on the data entered and displays error
messages as necessary.

Although helpful, typing is not required to use this system. The system
is predominantly menu driven.

[Part 2: Data Guide]{.underline}

The information which may be stored in the Engineering Fee Analysis
System is organized into two separate data entry screens. The first
screen contains information on individual projects. The second screen
contains specifications for graph options.

Screen 1 -

The following information is required:

Project name

Bid opening date

Construction cost

Engineering fee

The system performs tests on required fields, and will not accept an
incomplete entry. All fields must be entered. The project\'s name must
be unique. In cases where the same name is used for multiple projects,
some convention (such as incorporating the town name, adding a number,
etc.) must be used to make each name unique. The name may not include
asterisks (\*), apostrophes (\'), or question marks (?).

(9-21-88) PN 96

RD Instruction 1942-A

Automation Supplement

Page 2

Screen 2 -

Screen 2, \"Graph Options\", contains data fields which may be changed
to control the range of the graph axes. The upper and lower limits can
be changed for both axes. The increments along both axes can also be
adjusted within specified limits.

[Part 3: Limitations of the System]{.underline}

The Engineering Fee Analysis System was designed for single user. Only
one user may access the data at a time: adding new projects, editing
existing projects, or producing graphs.

There is no limit on the number of projects which may be added to the
data base within the system. The only limit would be the storage
capacity of the minicomputer used (AT&T 3B2).

[Part 4: System Administration Information]{.underline}

This software was developed in accordance with the Software Development
Guide, and as such is located in the /usr/workaid directory. The shell
script which operates the software is /usr/workaid/bin/engfee file. All
other files are located in /usr/workaid/lib/engfee directory.

Root has write permissions in all these directories. The individual user
bas write permissions only in the lib directory, where data is stored.
The data entered on projects is located in the file

/usr/workaid/lib/engfee/EFw.tbl and EFs.tbl. The version number and date
of the software is stored in the file /usr/workaid/bin/engfee.

The Primary Office in developing this software was the Program Support
Staff. Technical Support was provided by the Program Support Staff,
Decision Support Branch. Enhancements will be incorporated in future
versions.

## oOo