UNITED STATES DEPARTMENT OF AGRICULTURE 

Rural Utilities Service 

BULLETIN 1726-601

RD-GD-2013-73

SUBJECT: Electric System Construction Policies and Procedures - Interpretations

TO: RUS Electric Borrowers and RUS Electric Staff

EFFECTIVE DATE: Date of Approval 

OFFICE OF PRIMARY INTEREST: Electric Staff Division

INSTRUCTIONS: This supersedes RUS Bulletin 1726-601, dated July 27, 2004. File with

7 CFR 1726. 

AVAILABILITY: This bulletin can be accessed via the internet at

http://www.rurdev.usda.gov/RDU_Bulletins_Electric.html. 

PURPOSE: The purpose of this bulletin is to clarify certain requirements of 7 CFR 1726, 

Electric System Construction Policies and Procedures. This revision includes additional 

interpretations. 

10/28/13

Date

Assistant Administrator

Electric Program

Disclaimer: The contents of this guidance document does not have the force and effect of law and is not 

meant to bind the public in any way. This document is intended only to provide clarity to the public 

regarding existing requirements under the law or agency policies.
Bulletin 1726-601

Page 2

TABLE OF CONTENTS

1 GENERAL.......................................................................................................................3

2 QUESTIONS AND ANSWERS - BIDDING .................................................................3

3 QUESTIONS AND ANSWERS - FORMS.....................................................................5

4 QUESTIONS AND ANSWERS - MISCELLANEOUS.................................................7

Exhibits

Exhibit A: Summary of RUS Electric Contracting Procedures

INDEX:

CONTRACTS:

Electric System Construction

PROCUREMENT:

Electric System Procurement and Construction

ABBREVIATIONS

CFR Code of Federal Regulations

NUP Net Utility Plant

RUS Rural Utilities Service
Bulletin 1726-601

Page 3

1 GENERAL

a The purpose of this bulletin is to clarify certain requirements of 7 CFR 1726, 

Electric System Construction Policies and Procedures.

b This bulletin contains no new requirements and is intended only to clarify the 

requirements of 7 CFR 1726, not to modify nor to amend those requirements. In 

the event of conflict, the requirements of 7 CFR 1726 shall govern.

c As indicated in 7 CFR 1726.12, 7 CFR 1726 applies only to projects that are 

“...financed, in whole or in part, with loans made or guaranteed by RUS, 

including reimbursable projects.” Other borrower projects are not subject to the 

requirements of 7 CFR 1726.

d Some borrowers have expressed concern about using calendar year limits, since 

one or two large procurements could consume the entire limit, and very small 

procurements thereafter would be subject to more stringent requirements. This 

situation is inherent in any calendar year limit. RUS expects each borrower to 

manage its procurement program by using competitive procurement procedures 

(e.g., formal competitive bidding) or contract forms not subject to the calendar 

year limit for large procurements and prudently utilizing the flexibility provided 

by 7 CFR 1726 for smaller procurements so that the calendar year limits are not 

exceeded.

e Exhibit A is a summary of the RUS electric contracting procedures in 

7 CFR 1726. Since this summary does not include all applicable requirements, 

7 CFR 1726 should always be consulted for detailed requirements.

2 QUESTIONS AND ANSWERS – BIDDING

a Question: Are the “borrower responsibility” limits in 7 CFR 1726.51(b)(1) 

(distribution line construction) and 7 CFR 1726.77(b)(1) (substation and 

transmission line construction) separate individual limits or do they constitute a 

single limit?

Answer: Each of the limits in 7 CFR 1726 is a separate individual limit which is 

not tied to the other limits.

b Question: Please clarify the exact determination of the dollar amounts and 

timing of contracts to be applied to the various yearly limits.

Answer: There are several references in 7 CFR 1726 to calendar year limits. For 

example, 7 CFR 1726.51(b)(1) states: 

“It is the responsibility of each borrower to determine the 

procurement method that best meets its needs to award contracts in 

amounts of up to a cumulative total of $750,000 or one percent of 

NUP, whichever is greater, per calendar year of distribution line 
Bulletin 1726-601

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construction (including minor modifications or improvements), 

exclusive of the cost of owner furnished materials and equipment.”

The dollar amount of each negotiated contract to be used in determining 

compliance with the cumulative yearly limits is the maximum contract price less 

the cost of owner furnished materials and equipment, if any, included in that 

amount. The maximum contract price is the amount entered in Article III, 

Section 1.b. of RUS Form 790, “Electric System Construction Contract –

Non-Site Specific Construction,” or the equivalent amount in other contract 

forms. The date to be used to determine the applicable calendar year is the date of 

contract, i.e., the date entered in the Acceptance section of RUS Form 790, or the 

equivalent date in other contract forms.

Since the calendar year limits relate to the use of a particular contract form or 

bidding procedure, the key element of the requirement is the award of contracts. 

It is not related to actual payments under the contract nor to the length of the 

contract period.

c Question: Is there a limit on the number of contracts or the dollar amount of 

work that may be bid under Formal Competitive Bidding?

Answer: There is no limit on Formal Competitive Bidding. RUS encourages the 

use of Formal Competitive Bidding to the greatest extent practical.

d Question: What procedure should be followed if fewer than three bids are 

received under Multiparty Unit Price Quotations or Multiparty Lump Sum 

Quotations?

Answer: Follow the same procedure used for Formal Competitive Bidding under 

7 CFR 1726.201(f)(1), i.e., the borrower must determine and document that all 

reasonable measures have been taken to assure competition prior to awarding the 

contract. The borrower may, however, elect to reject all bids, make changes in 

the specification or the qualified bidders list or both, and invite new bids.

e Question: If both RUS financed construction and non-financed work are included 

in the same contract, does the entire amount of the contract apply to the bidding 

limits of 7 CFR 1726 or just the financed portion?

Answer: There are two different relevant scenarios:

(1) If a project or group of related projects are partly financed by RUS (e.g., 

the borrower receives a substantial contribution in aid of construction), the 

entire contract amount is applied to the limits of 7 CFR 1726, as indicated 

by 7 CFR 1726.12, which states that 7 CFR 1726 applies to any project 

that is “...financed, in whole or in part, with loans made or guaranteed by 

RUS, including reimbursable projects” (emphasis added.) Financed by 

RUS includes concurrent supplemental loans and reimbursement of 

general funds.
Bulletin 1726-601

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(2) If the contract includes distinctly separate projects (e.g., right-of-way 

clearing for new construction and reclearing for maintenance) and each 

type of work is accounted for separately, then the portion of the contract 

not financed by RUS would not be applied to the bidding limits of 

7 CFR 1726. This applies only when separate, unrelated projects are 

included under the same contract. The borrower may also use two 

separate contracts for the two different projects/types of work.

3 QUESTIONS AND ANSWERS – FORMS

a Question: Is RUS Form 198, “Equipment Contract,” required for the purchase of 

materials of $500,000 or more?

Answer: No. 7 CFR 1726.50(a) and 7 CFR 1726.76(a) require the use of 

RUS Form 198 for equipment purchases of more than $1,000,000, but materials

in any amounts may be purchased using RUS Form 198, purchase order, or other 

written agreement. (See 7 CFR 1726.14 for the definitions of equipment and 

materials.)

b Question: 7 CFR 1726.51(a)(1)(iii) allows the use of RUS Form 790 “Electric 

System Construction Contract – Non-Site Specific Construction,” up to certain 

calendar year limits. Do executed contracts using this form count against the 

cumulative calendar year bidding limits?

Answer: The type of form used is not related to the cumulative calendar year 

bidding limits. The bidding limits relate to the bidding procedure used. For 

example, if an RUS Form 790 is used with Formal Competitive Bidding, such a 

contract would fall under 7 CFR 1726.51(b)(3) and would not apply to the 

cumulative totals stipulated under 7 CFR 1726.51(b)(1) (borrower responsibility) 

or 7 CFR 1726.51(b)(2) (multiparty unit price quotations). Conversely, the value 

of a non-competitively awarded contract, e.g., a negotiated contract, would apply 

to the cumulative total stipulated under 7 CFR 1726.51(b)(1), even if an RUS 

standard contract RUS Form 790 is used.

c Question: 7 CFR 1726.51(a)(1) allows the use of RUS Form 790, “Electric 

System Construction Contract – Non-Site Specific Construction,” under certain 

circumstances. Must this form be used or is an RUS Form 830, Electric System 

Construction Contract – Project Construction, acceptable?

Answer: The borrower may choose to use an RUS Form 830 for any distribution 

line construction.

d Question: Can the RUS Form 790, “Electric System Construction Contract –

Non-Site Specific Construction,” be used for a “labor only” contract?

Answer: Yes, under certain circumstances. See RUS letter dated April 14, 2004, 

“Permitted Modification of RUS Form 790,” to all electric borrowers, which is 

summarized as follows: If RUS Form 790 is used as a “labor only” contract, i.e., 

the borrower supplies all materials and equipment, and the contract is to be 

accounted for under RUS Bulletin 1767B-2, “Work Order Procedures – Electric 
Bulletin 1726-601

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Program,” a borrower may choose to eliminate the cost of owner furnished 

materials from the unit prices, and modify RUS Form 790 as follows:

(1) Notice & Instructions to Bidders, Item 2 – Delete this item.

(2) Proposal, Article I, Section 3, Paragraph 2 – Delete the first three 

sentences of Paragraph 2. The remaining text of Paragraph 2 is retained so 

that it reads:

Materials, if any, not required for the project, which have been furnished to the 

Bidder by the Owner or delivery of which has been accepted by the Bidder on 

behalf of the Owner, shall be returned to the Owner by the Bidder upon 

completion of construction of the project. The value of all materials not 

installed in the project nor returned to the Owner shall be deducted from the 

final payment to the Bidder.

(3) Certain other provisions in the RUS Form 790 relating to contractor 

furnished materials become inapplicable, since contractor furnished 

materials are outside the scope of a “labor only” contract. Such provisions 

may be deleted if desired for clarification.

e Question: Can forms designed for Formal Competitive Bidding (i.e., public bid 

opening) be used where the bids are opened in private?

Answer: Where the bidding procedures permitted in 7 CFR 1726 envision private 

bid opening (e.g., Multiparty Unit Price Quotations, Informal Competitive 

Bidding, etc.), borrowers may modify the standard contract forms to reflect 

private bid opening.

f Question: Can RUS Form 790, “Electric System Construction Contract –

Non-Site Specific Construction,” be used for distribution line project 

construction?

Answer: RUS Form 790 may sometimes be used for distribution project 

construction in lieu of RUS Form 830, “Electric System Construction Contract –

Project Construction,” but only under the circumstances indicated in §7 CFR 

1726.51(a)(1), which include: (i) Contracts for which the borrower supplies all 

materials and equipment; or (ii) Non-site specific construction contracts 

accounted for under the work order procedure; or (iii) If neither paragraph (i) nor 

(ii) are applicable, the borrower may use RUS Form 790 for contracts, up to a 

cumulative total of $250,000 or one percent of NUP, whichever is greater, per 

calendar year of distribution line construction, exclusive of the cost of owner 

furnished materials and equipment.

g Question: Can specifications and other conditions be added to RUS standard 

contract forms?

Answer: Generally, it is acceptable to add specifications and other conditions to 

supplement any of the RUS contract forms, provided the added material does not 

have any terms or conditions that conflict with the RUS form. A provision should 

be included stating that if there is a conflict between the added material and the 
Bulletin 1726-601

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RUS form, the RUS form governs. Changes made to the RUS contract form itself 

generally require RUS approval. Also note that, if the contract requires RUS 

approval, the associated terms and conditions must be approved by RUS prior to 

issue for bid.

4 QUESTIONS AND ANSWERS – MISCELLANEOUS

a Question: What constitutes a calendar year? Answer: A calendar year runs 

from January 1 to December 31.

b Question: It appears that some of the limits in 7 CFR 1726 relate to cumulative 

calendar year amounts and some relate to individual contracts. Is this correct? 

Answer: Yes. The cumulative calendar year limits relate exclusively to the type 

of bidding procedure required or, in one case, permitting the use of 

RUS Form 790, “Electric System Construction Contract – Non-Site Specific 

Construction.” Other limits in 7 CFR 1726 relate to individual contracts, 

including RUS approval of contracts, minor modifications or improvements, and 

the use of most contract forms.

c Question: How does “minor modification and improvement,” as used in 

7 CFR 1726, relate to “minor project” as used in 7 CFR 1721, subpart A, 

Advance of Funds?

Answer: There is no connection between the two terms. The term “minor 

modifications and improvements” refers to individual projects costing $150,000 

or less and is used only in 7 CFR 1726 and only to determine if a particular 

contract form is required.
This summary does not include all requirements. See 7 CFR 1726 for detailed requirements.

SUMMARY OF RUS ELECTRIC CONTRACTING PROCEDURES

Bidding Procedure

Formal Informal

Facility or Borrower Multiparty Competitive Competitive Multiparty Contract

Contract Type Responsibility Quotations Bidding Bidding Negotiation Approval

Distribution Line ≤$750,000 ≤$1,000,000 All Other N/A N/A N/A

Construction or 1% of or 1.5% of

NUP/CY NUP/CY

(Unit Price)

Substation and ≤$750,000 or N/A All Other N/A N/A ≥$750,000 or

Transmission Line 1% of NUP/CY 1% of NUP/

Construction (NTE $5,000,000) Contract (NTE 

$1,500,000 for 

Dist;

$4,500,000 for PS)

Generation <$5,000,000 N/A Yes Yes RUS Approval Specific

Equipment and Required Contracts

Construction

Buildings N/A ≤$750,000 All Other N/A N/A N/A

or 1% of NUP/CY

(NTE $5,000,000)

(Lump Sum)

Communications ≤$750,000 or N/A N/A N/A All Other ≥$750,000 or

and Control 1% of NUP/CY 1% of NUP/

(NTE $5,000,000) Contract (NTE 

$1,500,000 for

Dist;

$4,500,000 for PS)

Note: All limits are exclusive of the cost of owner furnished materials

Abbreviations: CY - Calendar Year Dist - Distribution Borrower N/A - Not Applicable

NTE - Not To Exceed NUP - Net Utility Plant PS - Power Supply Borrower

Bulletin 1726-601

Exhibit A

Page 1