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IN REPLYREFRE TO:

D-5200

WTR-4.OO

BUREAU OF RECLAMATION

Washington, D.C. 20240

BUREAIJ OF

OF~IZIAL flL: CC?y

b~ECE~VEO United States Department ofthe Interior

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SEP 111997 ‘~ ~ii~v~~zzz

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MEMORANDUM

To: Regional Director PN, MP, LC, UC, GP

Attention:I PN-1000, PN-3300, MP-100, MP-440, LC-1000, LC-4450,

UC-100, UC-446, GP-lOOO, -

From: Eluid L. Martinez

Commissioner

Subject: Policy for Terms of Contract

By memorandum dated May 19, 1993, subject, upolicy for Terms of Contracts,” the Bureau of

Reclamation (Reclamation) adopted the policy that the maximum term for new or renewed

long-term contracts executed pursuant to Reclamation law shall be 25 years. The

memorandum states that the purpose is “to better protect the interests ofthe United States

while still adequately meeting the needs of water users, and to provide more operational

flexibility and improved project efficiency.” Exceptions to the maximum 25-year term are

provided in the memorandum. These exceptions are: (1) where the law under which the

contract is executed e4licitly requires a term longer than 25 years, and (2) a strong

justification can be provided to the Commissioner in which case an exception may be granted.

With respect to exception no. 2 above, no guidance for variance from the policy was provided.

For this reason, I directed my staffto perform an analysis ofthe policy and, if appropriate, to

develop such guidance.

The followingjustifications for variance are oftwo kinds. The firstrecognizes a category of

non-water-related contracts which have no effect on operational flexibility or improved project

efficiency. Since the 1993 memorandum, in practice, the maximum term ofthese contracts

has been 25 years, and payment capacity has been used to determine if a repayment term less

than 25 years should be applied. The justification requirement provided herein will also

address use of payment capacity to justify a repayment term longer than 25 years.

The next justification applies to water-related contracting activities and requires a

demonstration that thisjustification can be met before a variance can be granted.

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Justification for Variance

Non-Water-Related Contracts

The length ofthe repayment period for non-water-related contracts, such as contracts for

repayment of obligations incurred under the Reclamation Safety of Dams Act, the

Rehabilitation and Betterment Act, the Drainage and Minor Construction Act, and the Small

Reclamation Projects Act, will be based on capture of full payment capac.ity. The 1993 policy

memorandum sets a maximum term of 25 years. The existing practice that ifpayment capacity

is sufficient to pay in less than 25 years, the lesser repayment period will be:utilized shall

continue. If payment capacity identifies a longer term of contract is justified, and there are no

other appropriate sources of district funds to repay the obligation, then a longer term of

contract will be granted. Variance for such contracts must be supported by a basis of

negotiation submitted for Commissioner approval.

Water-Related Contracts

ConLracting entities should demonstrate that to effectively implement measures to improve

project efficiency and/or operational flexibility, a contract for greater than 25 years would be

required. The contracting entities must commit in the contract to undertake such measures.

Detailed supporting documentation should be submitted for consideration. Such measures may

include, among others, initiatives to effect water conservation, initiatives to facilitate water

transfers, enhancement of instream flows, recreation, flood control, water reuse, desalination,

protection of Indian trust assets, land resource management, fish and wildlife conservation and

enhancement, and water quality protection and improvement.

Regions’ bases of negotiation must contain for consideration an analysis ofthe financial

advantages to the United States for either entering a contract term for longer than 25 years or

entering a contract term for 25 years or less. This analysis should include whether the United

States will be better or worse offin present value terms.

This memorandum does not repeal the existing policy establishing a 25-year maximum term of

contract. It provides criteria for Reclamation to use in determining if a variance isjustified as

provided in the 1993 policy memorandum.

cc: Manager, Portland OR, Attention: LCA-lOOO

Manager, Yakima WA, Attention: UCA-lOOO
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Manager, Boise ID, Attention: SRA-1000

Manager, Grand’ Coulee WA, Attention: GCP-1000

Manager, Folsom CA, Attention: CC-lOO

Manager, Fresno CA, Attention: SCC-100

Manager, Shasta Lake CA, Attention: NC-100

Manager, Klamath Falls OR, Attention: KO-100

Manager, Carson City NV, Attention: LO-iQO

Manager, Sacramento CA, Attention: CVO-100

Manager, Phoenix AZ, Attention: PxAO-lOOO

Manager, Yuma AZ, Attention: YAO-1000

Manager, Boulder City NV, Attention: LCDFO-lOOO

Manager, Boulder City NV, Attention: BCOO-1000

Manager, Temecula CA, Attention: SCAO-lOOO

Manager, Albuquerque NM, Attention: ALB-lOO

Manager, Grand Junction CO, Attention: WCN-CDeAngelis

Manager, Provo UT, Attention: PRO-iQO

Manager, Farmington NM, Attention: FCO-lOO

Manager, Salt Lake City UT, Attention: UC-600

Manager, Billings MT, Attention: MT-lOO

Manager, Grand Island NE, Attention: NK-AM

Manager, Loveland CO, Attention: EC-100

Manager, Mills WY, Attention: WY-lOO

Manager, Oklahoma City OK, Attention: TX-lOO

Manager, Bismarck ND, Attention: DK-lOO