\[Code of Federal Regulations\]

\[Title 7, Volume 11, Parts 1500 to 1899\]

\[Revised as of January 1, 1997\]

From the U.S. Government Printing Office via GPO Access

\[CITE: 7CFR1789\]

\[Page 1168-1173\]

TITLE 7\--AGRICULTURE

PART 1789\--USE OF CONSULTANTS FUNDED BY BORROWERS

Subpart A\--Policy and Procedures With Respect to Consultant Services

Funded by Borrowers\--General

Sec.

1789.150 Purpose.

1789.151 Definitions.

1789.152 Policy.

1789.153 Borrower funding.

1789.154 Eligible borrowers.

1789.155 Approval criteria.

1789.156 Proposal procedure.

1789.157 Consultant contract.

1789.158 Implementation.

1789.159 Contract administration.

1789.160 Access to information.

1789.161 Conflicts of interest.

1789.162 Indemnification agreement.

1789.163 Waiver.

1789.164\--1789.165 \[Reserved\]

Subpart B\--Escrow Account Funding and Payments

1789.166 Terms and conditions of funding agreement.

1789.167 Terms and conditions of escrow agreement.

1789.168\--1789.175 \[Reserved\]

Authority: 7 U.S.C. 901-950b; Pub. L. 103-354, 108 Stat. 3178 (7

U.S.C. 6941 et seq.).

Source: 61 FR 48606, Sept. 16, 1996, unless otherwise noted.

Subpart A\--Policy and Procedures With Respect to Consultant Services

Funded by Borrowers\--General

Sec. 1789.150 Purpose.

This part sets forth policies and the procedures for implementing

subsection (c) of section 18 of the Rural Electrification Act of 1936,

as amended (7 U.S.C. 901 et seq.)(RE Act) which authorizes the Rural

Utilities Service (RUS) to use the services of Consultants funded by the

Borrowers to facilitate timely action on Applications by Borrowers for

financial assistance and other approvals.

Sec. 1789.151 Definitions.

As used in this part:

Administrator means the Administrator of the Rural Utilities Service

(RUS).

Application means a request for financial assistance under the RE

Act or such other approvals as may be required of the RUS pursuant to

the terms of outstanding loan or security instruments or otherwise.

Borrower means any organization which has an outstanding loan(s)

made or guaranteed by RUS or its predecessor agency, the Rural

Electrification Administration (REA) under the RE Act or any

organization which has submitted or submits an Application before RUS.

Consultant means a person or firm which has been retained pursuant

to

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this subpart under a contract to provide financial, legal, engineering,

environmental, or other technical advice and services.

Consultant Contract means a contract for the performance of

consulting services for RUS, to be paid using funds provided by a

Borrower, which may be in the form of a Retainer Contract, purchase

order, or other form as may be appropriate.

Escrow Account means an account established pursuant to

Sec. 1789.158.

Escrow Agreement means an agreement, between a Borrower, a

Consultant and a Third-party Commercial Institution, meeting the

requirements of Sec. 1789.167.

Final Invoice means the closing Invoice prepared for a given Task

Order.

Financial Consultant means a Consultant retained pursuant to this

part to provide financial advisory services.

Funding Agreement means an agreement, between a Borrower and a

Consultant, providing for the Borrower to fund the costs of a Task Order

and otherwise meeting the requirements of Sec. 1789.166.

Indemnification Agreement means an agreement by a Borrower meeting

the requirements of Sec. 1789.162.

Invoice means an invoice prepared by a Consultant pursuant to the

terms of a Consultant Contract.

Legal Consultant means any Consultant retained pursuant to this part

to provide legal services to RUS.

Notice of Proposal to Fund means a notice meeting the requirements

of Sec. 1789.156 provided to RUS by the Borrower.

Organizational conflict of interest means that because of other

activities or relationships with other persons, a person is unable or

potentially unable to render impartial assistance or advice to the

Government, or the person\'s objectivity in performing the contract work

is or might be otherwise impaired, or a person has an unfair competitive

advantage.

Retainer Contract means a Consultant Contract providing for a

minimum required payment to a Consultant irrespective of whether

services are utilized by RUS thereunder.

Task Order means a written request for consultant services pursuant

to the terms of a Consultant Contract.

Third-party Commercial Institution means a commercial financial

institution mutually acceptable to the Borrower and the Consultant.

Sec. 1789.152 Policy.

\(a\) As provided in this subpart, RUS may, at its discretion, use the

services of Consultants funded by a Borrower where such services will

facilitate timely action on an Application by such Borrower for

financial assistance or other approvals. Such Consultants may provide

financial, legal, engineering, environmental or other technical advice

and services in connection with the review of an Application.

\(b\) With the approval of RUS, a Borrower may fund the cost of

consulting services in connection with the review by RUS of an

Application by such Borrower. Such funding shall be provided pursuant to

the terms of a Funding Agreement between the Borrower and the Consultant

designated by RUS.

\(c\) RUS may not, without the consent of the Borrower, require, as a

condition of processing any Application for approval, that the Borrower

agree to pay the costs of a Consultant hired to provide services to RUS.

\(d\) The government shall retain sole discretion in the selection of

Consultants to provide services to RUS and the form of contract

utilized. RUS may either use the services of one or more Consultants

retained under Retainer Contracts or the government may elect to retain

a Consultant not otherwise on retainer. The government shall have sole

discretion to prescribe terms and conditions of Consultant Contracts.

The Borrower may bring considerations to the attention of the government

which the Borrower deems pertinent to the selection process.

\(e\) RUS shall retain sole discretion as to whether to further pursue

use of an outside consultant for the relevant application in the event

the Borrower does not enter into the agreements referenced in

Sec. 1789.158(c)(3)(iii) within 60 days of the government providing to

the Borrower the information set forth in Sec. 1789.158(c)(3).

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Sec. 1789.153 Borrower funding.

Borrowers shall use their general funds for the purposes of funding

consultant services hereunder. Borrowers may not use the proceeds of

loans made or guaranteed under the RE Act for costs incurred by

Borrowers pursuant to the funding of consultant services for RUS.

Sec. 1789.154 Eligible borrowers.

All Borrowers are eligible to fund consultant services under this

part.

Sec. 1789.155 Approval criteria.

RUS will consider approving the use of consultant services funded by

a Borrower on a case by case basis taking into account, among other

matters, the following:

\(a\) Whether such services are required to facilitate timely action

on a Borrower\'s Application. RUS shall determine what represents timely

action with respect to each Application considering, among other

matters, the review period normally required for such projects by RUS

and other lenders and the consequences to the Borrower of adjusting the

review period.

\(b\) The availability of staff resources, the priorities of other

projects then before RUS, and the efficiencies to be realized from the

use of consultant services.

\(c\) Whether it is in the best interest of RUS to use Borrower-funded

Consultants. Certain types of projects, such as those involving issues

of program-wide significance, may not be well suited for the use of

Borrower funded Consultants.

Sec. 1789.156 Proposal procedure.

\(a\) In the event RUS determines that consideration should be given

to the use of a Borrower-funded consultant in connection with the review

of an Application, the RUS Regional Director or the Director of the

Power Supply Division, as appropriate, will discuss with the Borrower

the nature of the Application and the projected review period required

of RUS. If RUS concludes that the projected review period will not

result in timely action on the Application, and after being so notified

in writing by RUS the Borrower wishes to fund consultant services to

facilitate RUS review, the Borrower shall submit to the same Director a

funding proposal. The proposal shall set forth the following:

\(1\) Identification in the heading or caption as a Notice of Proposal

to Fund Consulting Services;

\(2\) Borrower\'s REA/RUS designation;

\(3\) Borrower\'s legal name and address;

\(4\) A description of the Application, critical issues and concerns

relating to the Application, time deadlines, and the consequences of any

delays in RUS review;

\(5\) A description of the consulting service(s) that would facilitate

timely RUS review of the Application; and

\(6\) Such additional documents and information as RUS may request.

\(b\) RUS will review the Notice of Proposal to Fund and any

additional information RUS deems relevant in determining whether to

proceed with procuring Borrower funded Consultants. If RUS proposes to

utilize Legal Consultants, RUS must obtain the concurrence of the Office

of General Counsel (OGC) of the Department of Agriculture. RUS will

notify the Borrower in writing of its determination.

Sec. 1789.157 Consultant contract.

\(a\) The Federal Acquisition Regulation (FAR), 48 CFR Ch. 1, and the

Agriculture Acquisition Regulation (AGAR), 48 CFR Ch. 4, shall apply to

all Consultant Contracts entered into pursuant to this part except as

provided in this section.

\(1\) Contracts for Legal Consultants shall provide for a technical

representative from OGC.

\(2\) All Consultant Contracts shall provide for an escrow account

funding mechanism pursuant to this part and for the government\'s sole

discretion in determining whether payments are to be made from the

Escrow Account to the Consultant.

\(3\) All Consultant Contracts shall provide that payment of all

obligations for work performed thereunder must be satisfied by amounts

available in the Escrow Account; with the exception of the annual

retainer fee, if any, Consultants shall not be entitled to any payments

from the government.

\[\[Page 1171\]\]

\(b\) The provisions of paragraph (a) of this section shall be given

prominent emphasis in requests for proposals issued under this part.

Sec. 1789.158 Implementation.

\(a\) Upon making a determination to go forward with Borrower funding

for consulting services, RUS shall initiate a procurement request for a

Consultant to provide the services. The government may either contract

with a Consultant on a case by case basis or elect to use a Consultant

pursuant to an outstanding Retainer Contract. The Borrower will not be

informed of the Consultant selected until such time as the government

provides the information set forth in paragraph (c)(3) of this section.

\(b\) If the government determines to contract with a Consultant on a

case by case basis, the government shall notify the Borrower of the

applicable procedures.

\(c\) If the government determines to contract with a Consultant under

an outstanding Retainer Contract, the following procedures will normally

apply:

\(1\) Pursuant to the terms of the contract, the government will

prepare a draft Task Order requesting consultant services in connection

with the review of the Borrower\'s Application. The draft Task Order

shall set forth for the Consultant\'s review and acceptance, a

description of the services to be provided and applicable time frames

for the provision of such services.

\(2\) The government will request that the Consultant:

\(i\) Notify the government as to the acceptability of the form and

substance of the draft Task Order;

\(ii\) Notify the government as to its ability to provide a

satisfactory conflict of interest certification consistent with the

requirements of the FAR (48 CFR ch. 1); and

\(iii\) Provide a cost estimate for the draft Task Order.

\(3\) When the government is satisfied with the response(s) received

pursuant to paragraph (c)(2) of this section, the government shall

promptly provide to the Borrower:

\(i\) A copy of the draft Task Order identifying the Consultant;

\(ii\) The Consultant\'s cost estimate for the draft Task Order; and

\(iii\) Contract information required to enable the Borrower to

develop a Funding Agreement, an Escrow Agreement and an Indemnification

Agreement (the \`\`agreements\'\').

\(4\) The Borrower shall develop and submit to the government for

approval executed originals of:

\(i\) The agreements; and

\(ii\) A certified copy of a resolution of the board of directors

authorizing the Borrower to enter into the agreements and to take such

other action as is necessary to effect the purposes of the agreements.

\(5\) Upon receiving written RUS approval of the agreements and the

form and substance of the board resolution, the Borrower shall:

\(i\) Establish and fund the Escrow Account; and

\(ii\) Provide written notice to the government of the Escrow Account

number, the funding thereof, and such other information as required

pursuant to the agreements.

\(6\) After the Borrower has funded the Escrow Account, the government

shall issue Task Order(s) for consultant services in accordance with the

terms and conditions of the applicable Retainer Contract.

Sec. 1789.159 Contract administration.

The government shall be solely responsible for the administration of

a Consulting Contract and shall have complete control over the scope of

the Consultant\'s work, the timetable for performance, the standards to

be applied in determining the acceptability of deliverables and the

approval of payment of Invoices.

Sec. 1789.160 Access to information.

The Borrower shall not have rights in nor right of access to the

work product of the Consultant. All analyses, studies, opinions,

memoranda, and other documents and information provided by the

Consultant pursuant to a Consulting Contract may be released and made

available to the Borrower only with the approval of RUS. This section

does not restrict release of information

\[\[Page 1172\]\]

by RUS pursuant to the Freedom of Information Act (5 U.S.C. 552(a)(2))

or other legal process.

Sec. 1789.161 Conflicts of interest.

The standard for determining organizational conflicts of interest

shall be as set forth in the FAR subpart 9.5 (48 CFR part 9, subpart

9.5); however, the identification of the existence of an organizational

conflict of interest may be made by either the Administrator or the

cognizant Contracting Officer. In the event an organizational conflict

of interest is determined to exist, the cognizant Contracting Officer

shall take the actions prescribed at FAR 9.504 (48 CFR 9.504) to attempt

to avoid, neutralize or mitigate the conflict. Should these actions be

deemed by the Administrator and the Contracting Officer to adequately

resolve the conflict, the contracting action with the offeror/contractor

may proceed. Should the Administrator or the Contracting Officer

determine that an organizational conflict of interest still exists such

that contract award or other contracting action cannot be taken (award

of task/delivery order, etc.) the offeror/contractor shall be so

informed by the Contracting Officer and be provided a reasonable

opportunity to respond in accordance with FAR 9.504(e) (48 CFR

9.504(e)). After considering the contractor\'s response, if it is found

by both the Administrator and Contracting Officer to remedy the conflict

of interest, the contracting action may proceed. If the Administrator

and Contracting Officer determine that the contractor\'s response does

not resolve the conflict of interest, yet continuing with the

contracting action with the offeror/contractor in question is considered

in the best interest of the United States, a waiver in accordance with

FAR 9.503 (48 CFR 9.503) may be executed. This waiver shall be submitted

under the Contracting Officer\'s signature and approved by the

Administrator. The Administrator has been delegated Head of Contracting

Activity authority by the USDA Senior Procurement Executive solely for

the purpose of waiver approval.

Sec. 1789.162 Indemnification agreement.

As a condition of approving Borrower funding, the government will

require the Borrower to enter into an Indemnification Agreement, in form

and substance satisfactory to RUS, providing that the Borrower will

indemnify and hold harmless the government and any officers, agents or

employees of the government from any and all liability, including costs,

fees, and settlements arising out of, or in any way connected with the

payment of the Consultant\'s fee pursuant to the Consultant Contract.
The

Indemnification Agreement may recognize, as a condition of liability

thereunder, the rights of the borrower to prompt notice, to use of

counsel of its own choosing, and to participation in any settlement of a

claim against which indemnification is sought.

Sec. 1789.163 Waiver.

RUS may waive any requirement or procedure of this subpart by

determining that its application in a particular situation would not be

in the government\'s interest, except that certain provision that the

subject contracts are subject to the provisions of the FAR (48 CFR ch.

1\) and AGAR (48 CFR ch. 4).

Secs. 1789.164\--1789.165 \[Reserved\]

Subpart B\--Escrow Account Funding and Payments

Sec. 1789.166 Terms and conditions of funding agreement.

Funding Agreements between the Borrower and a Consultant shall be in

form and substance satisfactory to RUS and provide for, among other

matters, the following:

\(a\) Specific reference by number to the applicable Consulting

Contract entered into between the government and the Consultant;

\(b\) Specific reference by number to the applicable Task Order (where

applicable);

\(c\) A brief description of the Application;

\(d\) A requirement that Invoices make specific reference to:

\(1\) The applicable contract and Task Order(s); and

\[\[Page 1173\]\]

\(2\) The Escrow Account from which payment is to be made;

\(e\) A requirement that the Final Invoice for a Task Order be clearly

identified as such;

\(f\) A description of the services to be provided by the Consultant

to RUS and the applicable time frames for the provision of such

services;

\(g\) Agreement that the Borrower shall pay for the Consultant

services provided to RUS under the applicable contract through an Escrow

Account established pursuant to an Escrow Agreement, the Consultant

shall not provide services to RUS under the applicable contract unless

there are sufficient funds in the Escrow Account to pay for such

services, the Consultant shall seek compensation for services provided

under the applicable contract from, and only from, funds made available

through the Escrow Account, and the Consultant must submit all Invoices

to the government for approval.

\(h\) A form of Escrow Agreement satisfactory to the Borrower,

Consultant and the designated Third-party Commercial Institution;

\(i\) A schedule setting forth when and in what amounts the Borrower

shall fund the Escrow Account;

\(j\) Acknowledgment by the Consultant of the Indemnification

Agreement provided by the Borrower to the government; and

\(k\) The Funding Agreement shall not be effective unless and until

approved in writing by RUS.

Sec. 1789.167 Terms and conditions of escrow agreement.

Escrow Agreements between and among the Borrower, Consultant and

Third-party Commercial Institution shall be in form and substance

satisfactory to RUS and provide for, among other matters, the following:

\(a\) Specific reference by number to the applicable contract for

services;

\(b\) Specific reference by number to the applicable Task Order;

\(c\) Specific reference by number to the Escrow Account into which

funds are to be deposited;

\(d\) Invoices to specifically identify the applicable contract and

Task Order(s);

\(e\) Funds to be held in the Escrow Account by the escrow agent until

paid to the Consultant pursuant to the government\'s authorization;

\(f\) The Escrow Account to be closed and all remaining funds remitted

to the Borrower after payment of the Final Invoice, unless otherwise

directed by the government;

\(g\) The government, the Consultant and the Borrower to have the

right to be informed, in a timely manner and in such form as they may

reasonably request, as to the status of and activity in the Escrow

Account; and

\(h\) The Escrow Agreement shall not be effective unless and until

approved in writing by RUS.

Secs. 1789.168\--1789.175 \[Reserved\]