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[Code of Federal Regulations]
[Title 7, Volume 11, Parts 1600 to 1899]
[Revised as of January 1, 2000]
From the U.S. Government Printing Office via GPO Access
[CITE: 7CFR1726]

[Page 250-277]
 
PART 1726--ELECTRIC SYSTEM CONSTRUCTION POLICIES AND PROCEDURES

                           Subpart A--General

Sec.
1726.1--1726.9  [Reserved]
1726.10  Introduction.
1726.11  Purpose.
1726.12  Applicability.
1726.13  Waivers.
1726.14  Definitions.
1726.15  ``Buy American''.
1726.16  Debarment and suspension.
1726.17  Restrictions on lobbying.
1726.18  Preloan contracting.
1726.19  Use of competitive procurement.
1726.20  Standards and specifications.
1726.21  New materials.
1726.22  Methods of construction.
1726.23  Qualification of bidders.
1726.24  Standard forms of contracts for borrowers.
1726.25  Subcontracts.
1726.26  Interest on overdue accounts.
1726.27  Contractor's bonds.
1726.28--1726.34  [Reserved]
1726.35  Submission of documents to RUS.
1726.36  Documents subject to RUS approval.
1726.37  OMB control number.
1726.38--1726.49  [Reserved]

                   Subpart B--Distribution Facilities

1726.50  Distribution line materials and equipment.
1726.51  Distribution line construction.
1726.52--1726.74  [Reserved]

            Subpart C--Substation and Transmission Facilities

1726.75  General.
1726.76  Substation and transmission line materials and equipment.
1726.77  Substation and transmission line construction.
1726.78--1726.124  [Reserved]

                    Subpart D--Generation Facilities

1726.125  Generating plant facilities.
1726.126--1726.149  [Reserved]

                          Subpart E--Buildings

1726.150  Headquarters buildings.
1726.151--1726.174  [Reserved]

                        Subpart F--General Plant

1726.175  General plant materials.
1726.176  Communications and control facilities.
1726.177--1726.199  [Reserved]

                    Subpart G--Procurement Procedures

1726.200  General requirements.
1726.201  Formal competitive bidding.
1726.202  Informal competitive bidding.
1726.203  Multiparty negotiation.
1726.204  Multiparty unit price quotations.
1726.205  Multiparty lump sum quotations.
1726.206--1726.249  [Reserved]

         Subpart H--Modifications to RUS Standard Contract Forms

1726.250  General.
1726.251  Prior approved contract modification related to price 
          escalation on transmission equipment, generation equipment, 
          and generation construction contracts.
1726.252  Prior approved contract modification related to liability for 
          special and consequential damages.
1726.253  Prior approved contract modification related to alternative 
          bid provision for payment to contractor for bulk purchase of 
          materials.
1726.254  Prior approved contract modifications related to RUS approval 
          of contracts and amendments and modified bidding requirements.
1726.255  Prior approved contract modifications related to 
          indemnification.
1726.256--1726.299  [Reserved]

                      Subpart I--RUS Standard Forms

1726.300  Standard forms of contracts for borrowers.
1726.301  Borrower contractual obligations.
1726.302  Notice and publication of listed contract forms.
1726.303  Promulgation of new or revised contract forms.
1726.304  List of electric program standard contract forms.
1726.305--1726.399  [Reserved]

                      Subpart J--Contract Closeout

1726.400  Final contract amendment.
1726.401  Material contract closeout.
1726.402  Equipment contract closeout.
1726.403  Project construction contract closeout.
1726.404  Non-site specific construction contract closeout.

[[Page 251]]

1726.405  Inventory of work orders (RUS Form 219).

    Authority: 7 U.S.C. 901 et seq., 1921 et seq., 6941 et seq.

    Source: 60 FR 10155, Feb. 23, 1995, unless otherwise noted.

                           Subpart A--General

Secs. 1726.1--1726.9  [Reserved]

Sec. 1726.10  Introduction.

    The policies, procedures and requirements included in this **part** are 
intended to implement provisions of the standard form of loan documents 
between the Rural Utilities Service (RUS) and its electric borrowers. 
Unless prior written approval is received from RUS, borrowers are 
required to comply with RUS policies and procedures as a condition to 
RUS providing loans, loan guarantees, or reimbursement of general funds 
for the construction and improvement of electric facilities. 
Requirements relating to RUS approval of plans and specifications, 
duties and responsibilities of the engineer and architect, and 
engineering and architectural services contracts, are contained in other 
RUS regulations. The terms ``RUS form'', ``RUS standard form'', ``RUS 
specification'', ``and RUS bulletin'' have the same meanings as the 
terms ``REA form'', ``REA standard form'', ``REA specification'', ``and 
REA bulletin'', respectively, unless otherwise noted.

Sec. 1726.11  Purpose.

    Each borrower is responsible for the planning, design, construction, 
operation and maintenance of its electric system. RUS, as a secured 
lender, has a legitimate interest in accomplishing RUS's programmatic 
objectives, and in assuring that the costs of construction, materials, 
and equipment are reasonable and economical and that the property 
securing the loans is constructed adequately to serve the purposes for 
which it is intended.

Sec. 1726.12  Applicability.

    The requirements of this **part** apply to the procurement of materials 
and equipment for use by electric borrowers in their electric systems 
and to the construction of their electric systems if such materials, 
equipment, and construction are financed, in whole or in **part**, with 
loans made or guaranteed by RUS, including reimbursable projects. In 
order for general fund expenditures for procurement or construction to 
be eligible for reimbursement from loan funds, the borrower must comply 
with the procedures required by this **part**. In the case of jointly owned 
projects, RUS will determine on a case by case basis the applicability 
of the requirements of this **part**.

Sec. 1726.13  Waivers.

    The Administrator may waive, for good cause on a case by case basis, 
certain requirements and procedures of this **part**. RUS reserves the 
right, as a condition of providing loans, loan guarantees, or other 
assistance, to require any borrower to make any specification, contract, 
or contract amendment subject to the approval of the Administrator.

Sec. 1726.14  Definitions.

    Terms used in this **part** have the meanings set forth in 7 CFR 1710.2. 
References to specific RUS forms and other RUS documents, and to 
specific sections or lines of such forms and documents, shall include 
the corresponding forms, documents, sections and lines in any subsequent 
revisions of these forms and documents. In addition to the terms defined 
in 7 CFR 1710.2, the following terms have the following meanings for the 
purposes of this **part**:
    Approval of proposed construction means RUS approval of a 
construction work plan or other appropriate engineering study and RUS 
approval, for purposes of system financing, of the completion of all 
appropriate requirements of **part** 1794 of this chapter.
    Architect means a registered or licensed person employed by the 
borrower to provide architectural services for a project and duly 
authorized assistants and representatives.
    Bona fide bid means a bid which is submitted by a contractor on the 
borrower's list of qualified bidders for the specific contract, prior to 
bid opening.
    ``Buy American'' certificate means a certification that the 
contractor has

[[Page 252]]

complied with the ``Buy American'' requirement (see Sec. 1726.15).
    Competitive procurement means procurement of goods or services based 
on lowest evaluated bid for similar products or services when three or 
more bids are received.
    Construction unit means a specifically defined portion of a 
construction project containing materials, labor, or both, for purposes 
of bidding and payment.
    Contracting committee means the committee consisting of three to 
five members representing the borrower's management and board of 
directors and the engineer. The contracting committee represents the 
borrower during contract clarifying discussions or negotiations under 
informal competitive bidding or multiparty negotiation, respectively.
    Encumbrance means the process of approval for advance of loans funds 
by RUS.
    Engineer means a registered or licensed person, who may be a staff 
employee or an outside consultant, to provide engineering services and 
duly authorized assistants and representatives.
    Equipment means a major component of an electric system, e.g., a 
substation transformer, heat exchanger or a transmission structure.
    Force account construction means construction performed by the 
borrower's employees.
    Formal competitive bidding means the competitive procurement 
procedure wherein bidders submit sealed proposals for furnishing the 
goods or services stipulated in the specification. Bids are publicly 
opened and read at a predetermined time and place. If a contract is 
awarded, it must be to the lowest evaluated responsive bidder (see 
Sec. 1726.201).
    Goods or services means materials, equipment, or construction, or 
any combination thereof.
    Informal competitive bidding means the competitive procurement 
procedure which provides for private opening of bids and allows 
clarifying discussions between the contracting committee and the 
bidders. During the clarifying discussions any exceptions to the bid 
documents must be eliminated, or the bid rejected, so that the contract 
is awarded to the lowest evaluated responsive bidder (see 
Sec. 1726.202).
    Material means miscellaneous hardware which is combined with 
equipment to form an electric system, e.g., poles, insulators, or 
conductors.
    Minor error or irregularity means a defect or variation in a bid 
that is a matter of form and not of substance. Errors or irregularities 
are ``minor'' if they can be corrected or waived without being 
prejudicial to other bidders and when they do not affect the price, 
quantity, quality, or timeliness of construction. A minor error or 
irregularity is not an exception for purposes of determining whether a 
bid is responsive.
    Minor modification or improvement means a project where the cost is 
less than $50,000, exclusive of the cost of owner furnished materials.
    Multiparty lump sum quotations means the procurement of goods or 
services on a lump sum basis, based on the lowest evaluated offering, 
when three or more offers are received. (See Sec. 1726.205).
    Multiparty negotiation means the procurement procedure where three 
or more bids are received and provides for negotiations between the 
contracting committee and each bidder to determine the bid which is in 
the borrower's best interest (see Sec. 1726.203).
    Multiparty unit price quotations means the procurement of goods or 
services on a unit price basis, based on the lowest evaluated offering, 
when three or more offers are received (See Sec. 1726.204).
    Net utility plant (NUP) means **Part** C, Line 5 of RUS Form 7 for 
distribution borrowers or Section B, Line 5 of RUS Form 12a for power 
supply borrowers for the immediately preceding calendar year.
    Procurement method means a procedure, including, but not limited to, 
those in subpart G of this **part**, that a borrower uses to obtain goods 
and services.
    Owner furnished materials means materials or equipment or both 
supplied by the borrower for installation by the contractor.
    Responsive bid means a bid with no exceptions or non-minor errors or

[[Page 253]]

irregularities on any technical requirement or in the contract terms and 
conditions.
    RUS approval means written approval by the Administrator or a 
representative with delegated authority. RUS approval must be in 
writing, except in emergency situations where RUS approval may be given 
over the telephone followed by a confirming letter.
    Unit prices means individual prices for specific construction units 
defined in accordance with RUS approved units specified in RUS standard 
contract forms.

Sec. 1726.15  ``Buy American''.

    The borrower must ensure that all materials and equipment financed 
with loans made or guaranteed by RUS complies with the ``Buy American'' 
provisions of the Rural Electrification Act of 1938 (7 U.S.C. 903 note), 
as amended by the North American Free Trade Agreement Implementation Act 
(107 Stat 2129). When a ``Buy American'' certificate is required by this 
**part**, this must be on RUS Form 213.

Sec. 1726.16  Debarment and suspension.

    Borrowers are required to comply with certain requirements on 
debarment and suspension in connection with procurement activities as 
set forth in **part** 3017 of this title, particularly with respect to lower 
tier transactions, e.g., procurement contracts for goods or services.

Sec. 1726.17  Restrictions on lobbying.

    Borrowers are required to comply with certain restrictions and 
requirements in connection with procurement activities as set forth in 
**part** 3018 of this title.

Sec. 1726.18  Preloan contracting.

    Borrowers must consult with RUS prior to entering into any contract 
for material, equipment, or construction if a construction work plan, 
general funds, loan or loan guarantee for the proposed work has not been 
approved. While the RUS staff will work with the borrower in such 
circumstances, nothing contained in this **part** is to be construed as 
authorizing borrowers to enter into any contract before the availability 
of funds has been ascertained by the borrower and all the requirements 
of **part** 1794 of this chapter, Environmental Policies and Procedures for 
Electric and Telephone Borrowers, have been fulfilled.

Sec. 1726.19  Use of competitive procurement.

    RUS borrowers' procurement is not subject to the provisions of the 
Federal Acquisition Regulation (48 CFR chapter 1); however, since 
borrowers receive the benefit of Federal financial assistance borrowers 
must use competitive procurement to the greatest extent practical. The 
borrower must use competitive procurement for obtaining all goods or 
services when a RUS loan or loan guarantee is involved except:
    (a) As specifically provided for in subparts B through F of this 
**part**; or
    (b) A waiver is granted.

Sec. 1726.20  Standards and specifications.

    All materials, equipment, and construction must meet the minimum 
requirements of all applicable RUS standards and specifications. (See 
**Part** 1728, Electric Standards and Specifications for Materials and 
Construction, of this chapter, which is applicable regardless of the 
source of funding.) The materials and equipment must be year 2000 
compliant, as defined in 7 CFR 1710.112 (c).

[60 FR 10155, Feb. 23, 1995, as amended at 63 FR 51793, Sept. 29, 1998]

Sec. 1726.21  New materials.

    The borrower shall purchase only new materials and equipment unless 
otherwise approved by RUS, on a case by case basis, prior to the 
purchase.

Sec. 1726.22  Methods of construction.

    The borrower is generally responsible for determining whether 
construction will be by contract or force account. If construction is by 
contract, the borrower must determine whether materials will be supplied 
by the contractor or will be furnished by the borrower. RUS reserves the 
right to require contract construction in lieu of force account 
construction on a case by case basis.

[[Page 254]]

Sec. 1726.23  Qualification of bidders.

    (a) Qualified bidder list (QBL). The borrower shall (acting through 
its engineer, if applicable) review the qualifications of prospective 
bidders for contract construction and for material and equipment 
procurement, and select firms qualified for inclusion on the borrower's 
list of qualified bidders for each contract. (See also Sec. 1726.16 and 
Sec. 1726.17.) A bid may not be solicited from a prospective bidder or 
opened by the borrower unless that bidder has been determined to be a 
qualified bidder for the contract. When preparing the QBL, in addition 
to the actual experience of the borrower, if any, in dealing with a 
prospective bidder, the borrower may solicit information from that 
bidder or from other parties with firsthand experience regarding the 
firm's capabilities and experience. It is also important to consider the 
firm's performance record, safety record, and similar factors in 
determining whether to include that firm on the QBL, since the borrower 
may not evaluate these factors when evaluating a bid from a qualified 
and invited bidder.
    (b) Conflict of interest. If there is a relationship between the 
borrower or engineer and a prospective bidder which might cause the 
borrower or engineer to have or appear to have a conflict of interest, 
that prospective bidder shall not be included on the QBL unless the 
engineer discloses the nature of the relationship to the borrower. In 
the case of the borrower, if its employees or directors have a 
relationship with a prospective bidder, the prospective bidder shall not 
be included on the qualified bidders list unless the nature of the 
relationship is disclosed to the board of directors, and the board of 
directors specifically approves the inclusion of that bidder in light of 
the potential for a conflict of interest.

Sec. 1726.24  Standard forms of contracts for borrowers.

    (a) General. The standard loan agreement between RUS and the 
borrowers provides that, in accordance with applicable RUS regulations 
in this chapter, the borrower shall use standard forms of contracts 
promulgated by RUS for construction, procurement, engineering services, 
and architectural services financed by a loan made or guaranteed by RUS. 
This **part** implements these provisions of the RUS loan agreement. 
Subparts A through H and J of this **part** prescribe when and how borrowers 
are required to use RUS standard forms of contracts in procurement and 
construction. Subpart I of this **part** prescribes the procedures that RUS 
follows in promulgating standard contract forms and identifies those 
contract forms that borrowers are required to use for procurement and 
construction.
    (b) Amendments to contracts--(1) Contract forms. The borrower must 
use RUS Form 180, Construction Contract Amendment, for any change or 
addition in a distribution line construction contract. The borrower must 
use RUS Form 238, Construction or Equipment Contract Amendment, for any 
change or addition in any other contract for construction, or for 
materials or equipment.
    (2) Special considerations. Each time an amendment to a construction 
contract is executed, the borrower must ensure that contractor's bond is 
adequate, that all necessary licenses and permits have been obtained, 
and that any environmental requirements associated with the proposed 
construction have been met.
    (3) Amendment approval requirements. (i) If a RUS approved form of 
contract is required by this **part**, an amendment must not alter the terms 
and conditions of the RUS approved form of contract without prior RUS 
approval.
    (ii) The borrower must make a contract amendment subject to RUS 
approval if the underlying contract was made subject to RUS approval and 
the total amended contract price exceeds 120 percent of the original 
contract price (excluding any escalation provision contained in the 
contract).
    (iii) Contract amendments, except as provided in paragraph 
(b)(3)(ii) of this section, are not subject to RUS approval and need not 
be submitted to RUS unless specifically requested by RUS on a case by 
case basis.

[60 FR 10155, Feb. 23, 1995, as amended at 63 FR 58286, Oct. 30, 1998]

[[Page 255]]

Sec. 1726.25  Subcontracts.

    The contractor or supplier may use RUS Form 282, Subcontract, for 
subcontracts on construction, material or equipment contracts. 
Subcontracts are not subject to RUS approval and need not be submitted 
to RUS unless specifically requested by RUS on a case by case basis.

Sec. 1726.26  Interest on overdue accounts.

    Certain RUS contract forms contain a provision concerning payment of 
interest on overdue accounts. Prior to issuing the invitation to 
bidders, the borrower must insert an interest rate equal to the lowest 
``Prime Rate'' listed in the ``Money Rates'' section of the Wall Street 
Journal on the date such invitation to bid is issued. If no prime rate 
is published on that date, the last such rate published prior to that 
date must be used. The rate must not, however, exceed the maximum rate 
allowed by any applicable state law.

[63 FR 58286, Oct. 30, 1998]

Sec. 1726.27  Contractor's bonds.

    (a) RUS Form 168b, Contractor's Bond, shall be used when a 
contractor's bond is required by RUS Forms 200, 201, 203, 257, 764, 786, 
790, 792, 830, or 831 unless the contractor's surety has accepted a 
Small Business Administration guarantee and the contract is for $1 
million or less.
    (b) RUS Form 168c, Contractor's Bond, shall be used when a 
contractor's bond is required by RUS Form 200, 201, 203, 257, 764, 786, 
790, 792, 830, or 831 and the contractor's surety has accepted a Small 
Business Administration guarantee and the contract is for $1 million or 
less.
    (c) Surety companies providing contractor's bonds shall be listed as 
acceptable sureties in the U.S. Department of the Treasury Circular No. 
570, Companies Holding Certificates of Authority as Acceptable Sureties 
on Federal Bonds and as Acceptable Reinsuring Companies. Copies of the 
circular and interim changes may be obtained directly from the 
Government Printing Office (202) 512-1800. Interim changes are published 
in the Federal Register as they occur. The list is also available 
through the Internet at http://www.fms.treas.gov/c570/index.html and on 
the Department of the Treasury's computerized public bulletin board at 
(202) 874-6887.

[63 FR 58286, Oct. 30, 1998]

Secs. 1726.28--1726.34  [Reserved]

Sec. 1726.35  Submission of documents to RUS.

    (a) Where to send documents. Documents required to be submitted to 
RUS under this **part** are to be sent to the office of the borrower's 
respective RUS Regional Director, the Power Supply Division Director, or 
such other office of RUS as designated by RUS (see **part** 1700 of this 
chapter.)
    (b) Borrower certification. When a borrower certification is 
required by this **part**, it must be made by the borrower's manager unless 
the board of directors specifically authorizes another person to make 
the required certification. In such case, a certified copy of the 
specific authorizing resolution must accompany the document or be on 
file with RUS.
    (c) Contracts requiring RUS approval. The borrower shall submit to 
RUS three copies of each contract that is subject to RUS approval under 
subparts B through F of this **part**. At least one copy of each contract 
must be an original signed in ink (i.e., no facsimile signature). Each 
contract submittal must be accompanied by:
    (1) A bid tabulation and evaluation and, if applicable, a written 
recommendation of the architect or engineer.
    (2) For awards made under the informal competitive bidding procedure 
or the multiparty negotiation procedure, a written recommendation of the 
contracting committee (See Secs. 1726.202 and 1726.203).
    (3) Three copies of an executed contractor's bond on RUS approved 
bond forms as required in the contract form (at least one copy of which 
must be an original signed in ink) and one copy of the bid bond or 
facsimile of the certified check.
    (4) A certification by the borrower or chairperson of the 
contracting committee, as applicable, that the appropriate bidding 
procedures were followed as required by this **part**.

[[Page 256]]

    (5) A certified copy of the board resolution awarding the contract.
    (6) Evidence of clear title to the site for substations and 
headquarters construction contracts, if not previously submitted.
    (7) Documentation that all reasonable measures were taken to assure 
competition if fewer than three bids were received.
    (d) Contract amendments requiring RUS approval. The borrower must 
submit to RUS three copies of each contract amendment (at least one copy 
of which must be an original signed in ink) which is subject to RUS 
approval under Sec. 1726.24(b). Each contract amendment submittal to RUS 
must be accompanied by:
    (1) A certified copy of the board resolution approving the 
amendment; and
    (2) A bond extension, where necessary.
    (e) Encumbrance of loan or loan guarantee funds. (1) For contracts 
subject to RUS approval, the submittals required under paragraph (c) of 
this section will initiate RUS action to encumber loan or loan guarantee 
funds for such contracts.
    (2) For contracts not subject to RUS approval (except for generation 
projects), loan or loan guarantee funds will normally be encumbered 
using RUS Form 219, Inventory of Work Orders, after closeout of the 
contracts. In cases where the borrower can show good cause for a need 
for immediate cash, the borrower may request encumbrance of loan or loan 
guarantee funds based on submittal of a copy of the executed contract, 
provided it meets all applicable RUS requirements.
    (3) For generation project contracts not subject to RUS approval, 
the borrower must submit to RUS the following documentation:
    (i) A brief description of the scope of the contract, including 
contract identification (name, number, etc.);
    (ii) Contract date;
    (iii) Contractor's name;
    (iv) Contract amount;
    (v) Bidding procedure used;
    (vi) Borrower certification that:
    (A) The board of directors approved the contract;
    (B) The bidding procedures and contract award for each contract were 
in conformance with the requirements of **Part** 1726, Electric System 
Construction Policies and Procedures;
    (C) If a RUS approved form of contract is required by this **part**, the 
terms and conditions of the RUS approved form of contract have not been 
altered;
    (D) If RUS has approved plans and specifications for the contract, 
the contract was awarded on the basis of those plans and specifications; 
and
    (E) No restriction has been placed on the borrower's right to assign 
the contract to RUS or its successors.
    (4) Contract amendments. (i) For amendments subject to RUS approval, 
the submittals required under paragraph (c) of this section will 
initiate RUS action to encumber loan or loan guarantee funds for 
contract amendments requiring RUS approval.
    (ii) For amendments not subject to RUS approval (except generation 
projects), loan or loan guarantee funds will normally be encumbered 
using RUS Form 219, Inventory of Work Orders, after closeout of the 
contracts. In cases where the borrower can justify a need for immediate 
cash, the borrower may request encumbrance of loan or loan guarantee 
funds based on submittal of a copy of the executed amendment, providing 
it meets all applicable RUS requirements.
    (iii) For each generation project contract amendment not subject to 
RUS approval, the borrower must submit to RUS the following information 
and documentation:
    (A) The contract name and number;
    (B) The amendment number;
    (C) The amendment date;
    (D) The dollar amount of the increase or the decrease of the 
amendment;
    (E) Borrower certification that:
    (1) The amendment was approved in accordance with the policy of the 
board of directors (the borrower must ensure that RUS has a certified 
copy of the board resolution establishing such policy);
    (2) If a RUS approved form of contract is required by this **part**, the 
terms and conditions of the RUS approved form of contract has not been 
altered; and

[[Page 257]]

    (3) No restriction has been placed on the borrower's right to assign 
the contract to RUS or its successors.

Sec. 1726.36  Documents subject to RUS approval.

    Unless otherwise indicated, the borrower shall make all contracts 
and amendments that are subject to RUS approval effective only upon RUS 
approval.

Sec. 1726.37  OMB control number.

    The collection of information requirements in this **part** have been 
approved by the Office of Management and Budget and assigned OMB control 
number 0572-0107.

Secs. 1726.38--1726.49  [Reserved]

                   Subpart B--Distribution Facilities

Sec. 1726.50  Distribution line materials and equipment.

    (a) Contract forms. (1) The borrower shall use RUS Form 198, 
Equipment Contract, for purchases of equipment where the total cost of 
the contract is $500,000 or more.
    (2) The borrower may, in its discretion, use RUS Form 173, Materials 
Contract, RUS Form 198, Equipment Contract, or a written purchase order 
for purchases of equipment of less than $500,000 and for all materials.
    (b) Standards and specifications. Distribution line materials and 
equipment must meet the minimum requirements of RUS standards as 
determined in accordance with the provisions of **part** 1728 of this 
chapter, Electric Standards and Specifications for Materials and 
Construction. The borrower must obtain RUS approval prior to purchasing 
any unlisted distribution line material or equipment of the types listed 
in accordance with the provisions of **part** 1728 of this chapter.
    (c) Procurement procedures. It is the responsibility of each 
borrower to determine the procurement method that best meets its needs 
for the purchase of material and equipment to be used in distribution 
line construction.
    (d) Contract approval. Contracts for purchases of distribution line 
materials and equipment are not subject to RUS approval and need not be 
submitted to RUS unless specifically requested by RUS on a case by case 
basis.

Sec. 1726.51  Distribution line construction.

    (a) Contract forms. The borrower must use RUS Form 201, 790, 792, or 
830, as outlined in this paragraph (a), for distribution line 
construction, except for minor modifications or improvements.
    (1) The borrower may use RUS Form 790, Distribution Line Extension 
Construction Contract (Labor and Materials), or RUS Form 792, 
Distribution Line Extension Construction Contract (Labor only) under the 
following circumstances:
    (i) For contracts for which the borrower supplies all materials and 
equipment; or
    (ii) For non-site specific construction contracts accounted for 
under the work order procedure; or
    (iii) If neither paragraph (a)(1)(i) or (a)(1)(ii) of this section 
are applicable, the borrower may use RUS Form 790 or 792 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
    (2) The borrower must use RUS Form 830, Electric System Construction 
Contract (Labor and Materials), for all other distribution line 
construction. Where distribution lines are being constructed incidental 
to transmission line construction, the borrower must use RUS Form 831, 
Electric Transmission Construction Contract.
    (3) The borrower must use RUS Form 201, Right-of-Way Clearing 
Contract, for new distribution line construction right-of-way clearing 
when done separately from work performed under RUS Form 830.
    (b) Procurement procedures. (1) 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 $250,000 or 
one percent of NUP, whichever is greater, per calendar year of 
distribution line construction (including minor modifications or 
improvements), exclusive of the cost of owner furnished materials and 
equipment.

[[Page 258]]

    (2) In addition to the cumulative total stipulated in paragraph 
(b)(1) of this section, a borrower may use Multiparty Unit Price 
Quotations to award contracts in amounts of up to a cumulative total of 
$350,000 or 1.5 percent of NUP, whichever is greater, per calendar year 
of distribution line construction (including minor modifications or 
improvements), exclusive of the cost of owner furnished materials and 
equipment.
    (3) The borrower shall use formal competitive bidding for all other 
distribution line contract construction. The amount of contracts bid 
using the formal competitive bidding procedure do not apply to the 
cumulative total stipulated in paragraph (b)(1) of this section.
    (4) An amendment which increases the scope of the contract by adding 
a project is not considered competitively bid, therefore, the amount of 
that amendment does apply to the cumulative total stipulated in 
paragraph (b)(1) of this section.
    (c) Contract approval. Contracts for distribution line construction 
are not subject to RUS approval and need not be submitted to RUS unless 
specifically requested by RUS on a case by case basis.

Secs. 1726.52--1726.74  [Reserved]

            Subpart C--Substation and Transmission Facilities

Sec. 1726.75  General.

    As used in this **part**, ``substations'' includes substations, 
switching stations, metering points, and similar facilities.

Sec. 1726.76  Substation and transmission line materials and equipment.

    (a) Contract forms. (1) The borrower must use RUS Form 198, 
Equipment Contract, for purchases of equipment where the total cost of 
the contract is $500,000 or more.
    (2) The borrower may, in its discretion, use RUS Form 173, Materials 
Contract, RUS Form 198, Equipment Contract, or a written purchase order 
for purchases of equipment of less than $500,000 and for all materials.
    (b) Standards and specifications. Substation and transmission line 
materials and equipment must meet the minimum requirements of RUS 
standards as determined in accordance with the provisions of **part** 1728 
of this chapter, Electric Standards and Specifications for Materials and 
Construction. The borrower must obtain RUS approval prior to purchasing 
of any unlisted substation or transmission line material or equipment of 
the types listed in accordance with the provisions of **part** 1728 of this 
chapter.
    (c) Procurement procedures. It is the responsibility of each 
borrower to determine the procurement method that best meets its needs 
for purchase of material and equipment to be used in substation and 
transmission line construction.
    (d) Contract approval. Contracts for purchases of substation and 
transmission line materials and equipment are not subject to RUS 
approval and need not be submitted to RUS unless specifically requested 
by RUS on a case by case basis.

Sec. 1726.77  Substation and transmission line construction.

    (a) Contract forms. (1) The borrower must use RUS Form 764, 
Substation Erection Contract, for construction of substations, except 
for minor modifications or improvements. The borrower must use RUS Form 
831, Electric Transmission Construction Contract for projects where 
substations are incidental to transmission line construction and are to 
be constructed under the same contract.
    (2) The borrower must use RUS Form 831, Electric Transmission 
Construction Contract, for construction of transmission lines (except 
for minor modifications or improvements).
    (3) The borrower must use RUS Form 203, Transmission System Right-
of-Way Clearing Contract, for new transmission line construction right-
of-way clearing when right-of-way clearing is performed separately from 
work performed under RUS Form 831.
    (b) Procurement procedures. (1) It is the responsibility of each 
borrower to determine the procurement method that best meets its needs 
to award contracts not requiring RUS approval in

[[Page 259]]

amounts of up to a cumulative total of $250,000 or one percent of NUP 
(not to exceed $2,000,000), whichever is greater, per calendar year of 
substation and transmission line construction (including minor 
modifications or improvements), exclusive of the cost of owner furnished 
materials and equipment.
    (2) The borrower shall use formal competitive bidding for all other 
contract construction, including all contracts requiring RUS approval. 
The amount of contracts bid using the formal competitive bidding 
procedure do not apply to the cumulative total stipulated in paragraph 
(b)(1) of this section.
    (3) An amendment which increases the scope of the contract by adding 
a project is not considered competitively bid, therefore, the amount of 
that amendment does apply to the cumulative total stipulated in 
paragraph (b)(1) of this section.
    (c) Contract approval. Individual contracts in amounts of $250,000 
or more or one percent of NUP (not to exceed $500,000 for distribution 
borrowers or $1,500,000 for power supply borrowers), whichever is 
greater, exclusive of the cost of owner furnished materials and 
equipment, are subject to RUS approval.

Secs. 1726.78--1726.124  [Reserved]

                    Subpart D--Generation Facilities

Sec. 1726.125  Generating plant facilities.

    This section covers the construction of all portions of a generating 
plant, including plant buildings and the generator step-up transformer. 
Generally, the transmission switchyard will be covered under this 
section during initial construction of the plant. Subpart C of this **part** 
covers subsequent modifications to transmission switchyards. Warehouses 
and equipment service type buildings are covered under subpart E of this 
**part**.
    (a) Contract forms. (1) The borrower must use RUS Form 198, 
Equipment Contract, for the purchase of generating plant equipment in 
the amount of $1,500,000 or more and for any generating plant equipment 
contract requiring RUS approval.
    (2) The borrower must use RUS Form 200, Construction Contract--
Generating, for generating project construction contracts in the amount 
of $1,500,000 or more and for any generating project construction 
contract requiring RUS approval.
    (3) The borrower may, in its discretion, use other contract or 
written purchase order forms for those contracts in amounts of less than 
$1,500,000 and that do not require RUS approval.
    (b) Plans and specifications. The borrower shall obtain RUS approval 
of the plans and specifications for generating plant equipment prior to 
issuing invitations to bid for any contract subject to RUS approval as 
determined under this subpart and for any contract for generating plant 
equipment or construction which will cost $1,500,000 or more. Plans and 
specifications for other equipment and construction contracts do not 
require RUS approval and need not be submitted to RUS unless 
specifically requested by RUS on a case by case basis.
    (c) Procurement procedures. (1) It is the responsibility of each 
borrower to determine the procurement method that best meets its needs 
to award contracts in amounts of less than $1,500,000 each.
    (2) If the amount of the contract is $1,500,000 or more or if the 
contract requires RUS approval, the borrower must use formal or informal 
competitive bidding to award the contract.
    (3) Where formal or informal competitive bidding is not applicable, 
or does not result in a responsive bid, multiparty negotiation may be 
used only after RUS approval is obtained.
    (d) Contract approval. During the early stages of generating plant 
design or project design, RUS will, in consultation with the borrower 
and its consulting engineer, identify the specific contracts which 
require RUS approval based on information supplied in the plant design 
manual. The following are typical contracts for each type of generating 
project which will require RUS approval. Although engineering services 
are not covered by this **part**, they are listed in this paragraph (d) to 
emphasize that RUS approval is required for all major generating station

[[Page 260]]

engineering service contracts in accordance with applicable RUS rules. 
For types of projects not shown, such as nuclear and alternate energy 
projects, RUS will identify the specific contracts which will require 
RUS approval on a case by case basis.
    (1) Fossil generating stations. Engineering services, steam 
generator, turbine generator, flue gas desulfurization system, 
particulate removal system, electric wiring and control systems, 
mechanical equipment installation (including turbine installation and 
plant piping), power plant building (foundation and superstructure), 
site preparation, coal unloading and handling facilities, main step-up 
substation, cooling towers, and dams or reservoirs.
    (2) Diesel and combustion turbine plants. Engineering services, 
prime mover and generator, building (foundation and superstructure), and 
electrical control systems.
    (3) Hydro installations. Engineering services, turbine/generator, 
civil works and powerhouse construction, electrical control system, and 
mechanical installation.

Secs. 1726.126--1726.149  [Reserved]

                          Subpart E--Buildings

Sec. 1726.150  Headquarters buildings.

    This section includes headquarters buildings such as warehouses and 
equipment service type buildings. Generating plant buildings are covered 
under subpart D of this **part**.
    (a) Contract forms. The borrower must use RUS Form 257, Contract to 
Construct Buildings, for all contracts for construction of new 
headquarters facilities, and additions to, or modifications of existing 
headquarters facilities (except for minor modifications or 
improvements).
    (b) Procurement procedures. A borrower may use Multiparty Lump Sum 
Quotations to award contracts in amounts of up to a cumulative total of 
$250,000 or one percent of NUP (not to exceed $1,000,000), whichever is 
greater, per calendar year of headquarters construction (including minor 
modifications or improvements.) The borrower must use formal competitive 
bidding for all other headquarters contract construction.
    (c) Contract approval. Contracts for headquarters construction are 
not subject to RUS approval and need not be submitted to RUS unless 
specifically requested by RUS on a case by case basis.

Secs. 1726.151--1726.174  [Reserved]

                        Subpart F--General Plant

Sec. 1726.175  General plant materials.

    This section covers items such as office furniture and equipment; 
transportation equipment and accessories, including mobile radio 
systems, stores and shop equipment, laboratory equipment, tools and test 
equipment.
    (a) Contract forms. The borrower may, in its discretion, use RUS 
Form 173, Material Contract, RUS Form 198, Equipment Contract, or a 
written purchase order.
    (b) Procurement procedures. It is the responsibility of each 
borrower to determine the procurement method that best meets its needs 
for purchase of general plant material and equipment.
    (c) Contract approval. Contracts for the purchase of general plant 
items are not subject to RUS approval and need not be submitted to RUS 
unless specifically requested by RUS on a case by case basis.

Sec. 1726.176  Communications and control facilities.

    This section covers the purchase of microwave and power line carrier 
communications systems, load control, and supervisory control and data 
acquisition (SCADA) systems. Mobile radio systems are covered as general 
plant materials in Sec. 1726.175.
    (a) Power line carrier systems. Power line carrier equipment will 
frequently be purchased as **part** of a substation and will be included in 
the complete substation plans and specifications. When purchased in this 
manner, the requirements of subpart C of this **part**, Substation and 
Transmission Facilities, will apply. If obtained under a contract for 
only a power line carrier system, the requirements of paragraph (b) of 
this section apply.

[[Page 261]]

    (b) Load control systems, communications systems, and SCADA 
systems--(1) Contract forms. The borrower must use RUS Form 786, 
Electric System Communication and Control Equipment Contract. This form 
may be modified to be a ``purchase only'' contract form.
    (2) Procurement procedures. (i) It is the responsibility of each 
borrower to determine the procurement method that best meets its needs 
to award contracts not requiring RUS approval in amounts of up to a 
cumulative total of $250,000 or one percent of NUP (not to exceed 
$2,000,000), whichever is greater, per calendar year of communications 
and control facilities construction (including minor modifications or 
improvements.), exclusive of the cost of owner furnished materials and 
equipment.
    (ii) The borrower must use multiparty negotiation for all other 
communications and control facilities contract construction, including 
all contracts requiring RUS approval. The amount of contracts bid using 
the multiparty negotiation procedure do not apply to the cumulative 
total stipulated in paragraph (b)(2)(i) of this section.
    (iii) An amendment which increases the scope by adding a project is 
not considered competitively bid, therefore, the amount of that 
amendment does apply to the cumulative total stipulated in paragraph 
(b)(2)(i) of this section.
    (3) Contract approval. Individual contracts in amounts of $250,000 
or more or one percent of NUP (not to exceed $500,000 for distribution 
borrowers or $1,500,000 for power supply borrowers), whichever is 
greater, exclusive of the cost of owner furnished materials and 
equipment, are subject to RUS approval.

Secs. 1726.177--1726.199  [Reserved]

                    Subpart G--Procurement Procedures

Sec. 1726.200  General requirements.

    The borrower must use the procedures described in this subpart where 
such procedures are required under subparts B through F of this **part**. 
The borrower must ensure that arrangements prior to announcement of the 
award of the contract are such that all bidders are treated fairly and 
no bidder is given an unfair advantage over other bidders.

Sec. 1726.201  Formal competitive bidding.

    Formal competitive bidding is used for distribution, transmission, 
and headquarters facilities, and may be used for generation facilities. 
The borrower must use the following procedure for formal competitive 
bidding:
    (a) Selection of qualified bidders. The borrower (acting through its 
engineer, if applicable) will compile a list of qualified bidders for 
each proposed contract. The borrower will send invitations to bid only 
to persons or organizations on its QBL for the specific project (see 
Sec. 1726.23).
    (b) Invitations to bid. The borrower (acting through its engineer, 
if applicable) is responsible for sending out invitations to prospective 
bidders, informing them of scheduled bid openings and taking any other 
action necessary to procure full, free and competitive bidding. The 
borrower should send out a sufficient number of invitations in order to 
assure adequate competition and so that at least three bids will be 
received. Subject to the foregoing criteria, the determination of how 
many and which bidders will be permitted to bid will be the 
responsibility of the borrower.
    (c) Evaluation basis. Any factors, other than lowest dollar amount 
of the bid, which are to be considered in evaluating the proposals of 
qualified bidders (e.g., power consumption, losses, etc.) must be stated 
in the ``Notice and Instructions to Bidders.'' The borrower will not 
evaluate a bidder's performance record, safety record, and similar 
factors when evaluating a bid from a qualified and invited bidder. Such 
factors are to be considered when determining whether to include a 
particular bidder on the qualified bidders list.
    (d) Handling of bids received. The borrower or the engineer, as 
applicable, will indicate, in writing, the date and time of receipt by 
the borrower or the engineer on the outside envelope of each bid and all 
letters and other transmittals amending or modifying

[[Page 262]]

the bids. Any bid received at the designated location after the time 
specified must be returned to the bidder unopened.
    (e) Bid openings. Bid openings are generally conducted by the 
engineer in the presence of bidders and a representative of the borrower 
and the borrower's attorney. Each bona fide bid must be opened publicly 
and reviewed for any irregularities, errors, or exceptions. It must be 
verified that any addendum or supplement to the specification has been 
acknowledged by the bidder. The adequacy of bid bonds or certified 
checks must be verified at this time.
    (f) Conditions affecting acceptability of bids. The borrower must 
take the following specified action if any of the following exist:
    (1) Fewer than three bona fide bids received. If fewer than three 
bona fide bids are received for the contract project, the borrower must 
determine that all reasonable measures have been taken to assure 
competition prior to awarding the contract. This determination must be 
documented and such documentation submitted to RUS where required by 
subpart A of this **part**. 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.
    (2) Significant error or ambiguity in the specification. If a 
significant error or ambiguity in the specification is found which could 
result in the bidders having varying interpretations of the requirements 
of the bid, the borrower must either issue an addendum to each 
prospective bidder correcting the error or ambiguity before bids are 
received, or reject all bids and correct the specification. If a 
significant error or ambiguity in the specification is discovered after 
the bids are opened, the borrower must reject all bids, correct the 
specification and invite new bids.
    (3) Minor errors or omissions in the specification. If minor errors 
or omissions in the specification are found, the borrower must issue an 
addendum to each prospective bidder correcting the error or omission 
prior to opening any bids. After bid opening, the error or omission must 
be corrected in the executed contract.
    (4) Minor errors or irregularities in bid. The borrower may waive 
minor errors or irregularities in any bid, if the borrower determines 
that such minor errors or irregularities were made through inadvertence. 
Any such minor errors or irregularities so waived must be corrected on 
the bid in which they occur prior to the acceptance thereof by the 
borrower.
    (5) Non-minor error or irregularity in bid. If a bid contains a non-
minor error or irregularity, the bid must be rejected and the bid price 
must not be disclosed.
    (6) Unbalanced bid. If a bid contains disproportionate prices 
between labor and materials or between various construction units, the 
borrower may reject the bid.
    (7) No acceptable price quoted. If none of the bidders quote an 
acceptable price, the borrower may reject all bids.
    (g) Evaluating bids. The borrower (acting through the engineer, if 
applicable) must conduct the evaluation of bids on the basis of the 
criteria set out in the ``Notice and Instructions to Bidders.'' The 
contract, if awarded, must be awarded to the bidder with the lowest 
evaluated responsive bid.
    (h) Announcement of bids. If possible, the borrower will announce 
bids at the bid opening. However, where extensive evaluation is 
required, the borrower may elect to adjourn and make formal written 
announcement to all bidders at a later time. Any discrepancy in a 
rejected bid must be indicated in the bid announcement.
    (i) Award of contract. Upon completion of the bid evaluations and 
based upon the findings and recommendations of the borrower's management 
and engineer, the borrower's board of directors will either:
    (1) Resolve to award the contract to the lowest evaluated responsive 
bidder; or
    (2) Reject all bids.
    (j) Certification by the borrower and its engineer. The borrower 
shall certify and the engineer shall certify as follows: ``The 
procedures for formal competitive bidding, as described in 7 CFR 
1726.201, were followed in awarding this contract.'' The certification 
executed by and on behalf of the borrower and its engineer shall be 
submitted to RUS

[[Page 263]]

in writing where required by subpart A of this **part**.

Sec. 1726.202  Informal competitive bidding.

    Informal competitive bidding may be used for equipment purchases and 
generation construction. The borrower must use the following procedure 
for informal competitive bidding:
    (a) Selection of qualified bidders. The borrower (acting through its 
engineer, if applicable) will compile a list of qualified bidders for 
each proposed contract. The borrower will send invitations to bid only 
to persons or organizations on its qualified bidder list for the 
specific project (see Sec. 1726.23).
    (b) Invitations to bid. The borrower (acting through its engineer, 
if applicable) is responsible for sending out invitations to prospective 
bidders, informing them of scheduled bid openings and any other action 
necessary to procure full, free and competitive bidding. In any event, 
however, sufficient invitations need to be sent out to assure 
competition and that at least three bids will be received. Subject to 
the criteria in the preceding sentence, the determination of how many 
and which bidders will be permitted to bid will be the responsibility of 
the borrower.
    (c) Notice and instructions to bidders. The borrower must indicate 
in the ``Notice and Instructions to Bidders'' section of the bid 
documents that bids will be opened privately. The borrower may elect to 
conduct clarifying discussions with the bidders. If such clarifying 
discussions are held, at least the three apparent low evaluated bidders 
must be given an equal opportunity to resolve any questions related to 
the substance of the bidder's proposal and to arrive at a final price 
for a responsive bid.
    (d) Evaluation basis. Any factors, other than lowest dollar amount 
of the bid, which are to be considered in evaluating the proposals of 
qualified bidders (e.g., power consumption, losses, etc.) must be stated 
in the ``Notice and Instructions to Bidders.'' The borrower will not 
evaluate a bidder's performance record, safety record, and similar 
factors when evaluating a bid from a qualified and invited bidder. Such 
factors are to be considered when determining whether to include a 
particular bidder on the qualified bidders list.
    (e) Handling of bids received. The borrower or the engineer, as 
applicable, will indicate, in writing, the date and time of receipt by 
the borrower or the engineer on the outside envelope of each bid and all 
letters and other transmittals amending or modifying the bids. Any bid 
received at the designated location after the time specified must be 
returned to the bidder unopened.
    (f) Bid opening. The contracting committee will conduct the bid 
opening in private. The contracting committee will open each bona fide 
bid which has been received prior to the deadline, and review it for any 
irregularities, errors, or exceptions. It must be verified that any 
addendum to the specification has been acknowledged by each bidder. The 
adequacy of bid bonds or certified checks must also be verified.
    (g) Conditions affecting acceptability of bids. The borrower must 
take the following specified action if any of the following exist:
    (1) Fewer than three bona fide bids received. If fewer than three 
bona fide bids are received for the contract project, the borrower must 
determine that all reasonable measures have been taken to assure 
competition prior to awarding the contract. This determination must be 
documented and such documentation submitted to RUS where required by 
subpart A of this **part**. 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.
    (2) Significant error or ambiguity in the specification. If a 
significant error or ambiguity in the specification is found which could 
result in the bidders having varying interpretations of the requirements 
of the bid, the borrower must either issue an addendum to each 
prospective bidder correcting the error or ambiguity before bids are 
received, or reject all bids and correct the specification. If a 
significant error or ambiguity in the specification is discovered after 
the bids are opened, the borrower must reject all bids, correct the 
specification and invite new bids.
    (h) Clarification of proposals. The contracting committee may elect 
not to

[[Page 264]]

hold any clarifying discussions and recommend awarding the contract to 
the low responsive bidder. Otherwise, the contracting committee must 
give at least each of the three apparent lowest evaluated bidders an 
equal opportunity to participate in discussions for the purpose of 
resolving questions regarding the specification and contract terms and 
to arrive at a final price. Neither prices of other bids nor relative 
ranking of any bidder are to be revealed under any circumstances. Such 
discussions may be held by telephone or similar means provided at least 
each of the three apparent lowest evaluated bidders have an equal 
opportunity to participate. Upon completion of the clarifying 
discussions, the contracting committee will determine the lowest 
evaluated responsive bid. If no bids are responsive after the 
contracting committee has completed clarifying discussions, no contract 
award can be made under the informal bidding procedure.
    (i) Award of the contract. Upon completion of the bid evaluations, 
the contracting committee will promptly report all findings and 
recommendations to the borrower's board of directors. The board will 
either:
    (1) Resolve to award the contract to the lowest evaluated responsive 
bidder; or
    (2) Reject all bids.
    (j) Certifications by the contracting committee. The chairperson of 
the contracting committee shall certify as follows: ``The procedures for 
informal competitive bidding as described in 7 CFR 1726.202 were 
followed in awarding this contract.'' The certification executed by the 
chairperson of the contracting committee shall be submitted to RUS in 
writing where required by subpart A of this **part**.

Sec. 1726.203  Multiparty negotiation.

    Multiparty negotiation may only be used where permitted under 
subpart F of this **part** or where prior RUS approval has been obtained. 
The borrower must use the following procedure for multiparty 
negotiation:
    (a) Selection of qualified bidders. The borrower (acting through its 
engineer, if applicable) will compile a list of qualified bidders for 
each proposed contract. The borrower will send invitations to bid only 
to persons or organizations on its qualified bidder list for the 
specific project (see Sec. 1726.23).
    (b) Invitations to bid. The borrower (acting through its engineer, 
if applicable) is responsible for sending out invitations to prospective 
bidders, informing them of scheduled bid openings and any other action 
necessary to procure full, free and competitive bidding. In any event, 
however, sufficient invitations need to be sent out to assure 
competition and so that at least three bids will be received. Subject to 
the criteria in the preceding sentence, the determination of how many 
and which bidders will be permitted to bid will be the responsibility of 
the borrower.
    (c) Notice and instructions to bidders. The borrower must indicate 
in the ``Notice and Instructions to Bidders'' section of the bid 
documents that bids will be opened privately. The borrower may elect to 
conduct negotiations with the bidders. If such negotiations are held, at 
least the three apparent low evaluated bidders must be given an equal 
opportunity to resolve any questions related to the substance of the 
bidder's proposal and to arrive at a final price.
    (d) Evaluation basis. Any factors, other than lowest dollar amount 
of the bid, which are to be considered in evaluating the proposals of 
qualified bidders (e.g., power consumption, losses, etc.) must be stated 
in the ``Notice and Instructions to Bidders.'' The borrower will not 
evaluate a bidder's performance record, safety record, and similar 
factors when evaluating a bid from a qualified and invited bidder. Such 
factors are to be considered when determining whether to include a 
particular bidder on the qualified bidders list.
    (e) Handling of bids received. The borrower or the engineer, as 
applicable, will indicate, in writing, the date and time of receipt by 
the borrower or the engineer on the outside envelope of each bid and all 
letters and other transmittals amending or modifying the bids. Any bid 
received at the designated location after the time specified must be 
returned to the bidder unopened.
    (f) Bid opening. The contracting committee will conduct the bid 
opening in

[[Page 265]]

private. The contracting committee will open each bona fide bid which 
has been received prior to the deadline, and review it for any 
irregularities, errors, or exceptions. It must be verified that any 
addendum to the specification has been acknowledged by each bidder. The 
adequacy of bid bonds or certified checks must also be verified.
    (g) Conditions affecting acceptability of bids. The borrower must 
take the following specified action if any of the following exist:
    (1) Fewer than three bona fide bids received. If fewer than three 
bona fide bids are received for the contract project, the borrower must 
determine that all reasonable measures have been taken to assure 
competition prior to awarding the contract. This determination must be 
documented and such documentation submitted to RUS where required by 
subpart A of this **part**. 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.
    (2) Significant error or ambiguity in the specification. If a 
significant error or ambiguity in the specification is found which could 
result in the bidders having varying interpretations of the requirements 
of the bid, the borrower must either issue an addendum to each 
prospective bidder correcting the error or ambiguity before bids are 
received, or reject all bids and correct the specification. If a 
significant error or ambiguity in the specification is discovered after 
the bids are opened, the borrower must reject all bids, correct the 
specification and invite new bids.
    (h) Negotiations. The contracting committee may elect not to hold 
any negotiations and recommend award of the contract. Otherwise, the 
contracting committee must give at least each of the three apparent 
lowest evaluated bidders an equal opportunity to participate in 
negotiations for the purpose of resolving questions regarding the 
specification and contract terms and to arrive at a final price. Neither 
prices of other bids nor relative ranking of any bidder are to be 
revealed under any circumstances. Such discussions may be held by 
telephone or similar means provided at least each of the three apparent 
lowest evaluated bidders have an equal opportunity to participate. Upon 
completion of the negotiations, the contracting committee will determine 
the bid that is in the borrower's best interest.
    (i) Award of the contract. Upon completion of the bid evaluations, 
the contracting committee will promptly report all findings and 
recommendations to the borrower's board of directors. The board will 
either:
    (1) Resolve to award the contract to the selected bidder; or
    (2) Reject all bids.
    (j) Certifications by the contracting committee. The chairperson of 
the contracting committee shall certify as follows: ``The procedures for 
multiparty negotiation as described in 7 CFR 1726.203 were followed in 
awarding this contract.'' The certification executed by the chairperson 
of the contracting committee shall be submitted to RUS in writing where 
required by subpart A of this **part**.

Sec. 1726.204  Multiparty unit price quotations.

    The borrower or its engineer must contact a sufficient number of 
suppliers or contractors to assure competition and so that at least 
three bids will be received. On the basis of written unit price 
quotations, the borrower will select the supplier or contractor based on 
the lowest evaluated cost.

Sec. 1726.205  Multiparty lump sum quotations.

    The borrower or its engineer must contact a sufficient number of 
suppliers or contractors to assure competition and so that at least 
three bids will be received. On the basis of written lump sum 
quotations, the borrower will select the supplier or contractor based on 
the lowest evaluated cost.

Secs. 1726.206--1726.249  [Reserved]

         Subpart H--Modifications to RUS Standard Contract Forms

Sec. 1726.250  General.

    RUS provides standard contract forms for procurement of materials, 
equipment, and construction, for contract amendments and subcontracts, 
and various related forms for use by

[[Page 266]]

RUS borrowers. See Sec. 1726.300 for a listing of these forms and how to 
obtain them. The standard contract forms shall be used by the borrowers 
in accordance with the provisions of this **part**. RUS will give prior 
approval to certain modifications to these forms without changing the 
applicable requirements for RUS approval. Such approved modifications 
are set forth in this subpart. These are the only modifications given 
prior RUS approval.

Sec. 1726.251  Prior approved contract modification related to price 
          escalation on transmission equipment, generation equipment, 
          and generation construction contracts.

    (a) General. Where the borrower encounters reluctance among 
manufacturers, suppliers, and contractors to bid a firm price on 
transmission equipment or generation equipment, materials or 
construction, modifications may be made in the RUS standard form of 
contracts. These modifications, if applicable, may include, as an 
alternative to the standard form, provisions for adjusting a base price 
either upward or downward as determined by changes in specified indexes 
between the time of the bid and the time the work is performed or 
materials are procured by the contractor for such work. A large number 
of labor and materials indexes are published monthly by the Bureau of 
Labor Statistics (BLS). The borrower (acting through its engineer, if 
applicable) will select the indexes for the particular item to be used 
in the price adjustment clause. Suppliers' corporate indexes may not be 
used. Labor and materials indexes are reported in the BLS's monthly 
publications entitled ``Employment and Earnings'' and ``Producer Prices 
and Price Indexes.'' These publications may be ordered through the 
Superintendent of Documents, U.S. Government Printing Office, 
Washington, DC 20402, or any of the BLS regional offices.
    (b) Material and equipment contracts. The approved provisions needed 
to reflect the modifications to provide for price escalation in the 
material or equipment contract forms for generation facilities are as 
follows:
    (1) Insert new paragraphs in the Notice and Instructions to Bidders 
as follows:

    ``Proposals are invited on the basis of firm prices (or prices with 
a stated maximum percentage escalation) or on the basis of nonfirm 
prices to be adjusted as provided for below or on both bases. The owner 
may award the contract on either basis.
    Nonfirm prices. The prices are subject to adjustment upward or 
downward based on change in the Bureau of Labor Statistics labor and 
material indexes.
    A proportion of ____ percent [the borrower will enter the 
appropriate percentage amount] of the contract price shall be deemed to 
represent labor cost and shall be adjusted based on changes in the 
Bureau of Labor Statistics, Average Hourly Earnings Rate____ [the 
borrower will enter the appropriate BLS index] from the month in which 
the bids are opened to the month in which the labor is incorporated in 
the equipment or materials. The adjustment for labor costs shall be 
obtained by applying the percentage of increase or decrease in such 
index, calculated to the nearest one-tenth of one percent, to the 
percentage of the contract prices deemed to represent labor costs. A 
portion of ____ percent [the borrower will enter the appropriate 
percentage amount] of the contract price shall be deemed to represent 
material costs and shall be adjusted based on changes in the Bureau of 
Labor Statistics, material index ____ [the borrower will enter the 
appropriate BLS index] for the period and in a manner similar to the 
labor cost adjustment.''

    (2) Insert the following in the contract documents under the 
``Proposal'' section:

``Firm Price $________
Nonfirm Price $________''

    (3) For equipment that uses a large quantity of insulating oil, the 
borrower may insert the following in the contract documents under the 
``Proposal'' section:

    ``The price for insulating oil shall be adjusted upward or downward 
based on the change in the Bureau of Labor Statistics Refined Petroleum 
Rate (057) from the month in which the bids are opened to the month in 
which the oil is purchased by the equipment supplier. Contracts shall be 
evaluated based on an estimated cost of ____ cents per gallon [the 
borrower will enter the appropriate cost] for oil. Such adjustment, if 
any, shall not change the contract amount for purpose of applying any 
other adjustments to the contract prices.''

    (c) Construction contracts. The approved provisions needed to 
reflect the modifications to provide for price escalation in the 
construction contract

[[Page 267]]

forms for generation facilities are as follows:
    (1) Insert new paragraphs in the ``Notice and Instructions'' to 
Bidders as follows:

    ``Proposals are invited on the basis of firm prices (or prices with 
a stated maximum percentage escalation) or on the basis of nonfirm 
prices to be adjusted as provided for below or on both bases. The owner 
may award the contract on either basis.
    Nonfirm Prices--The prices are subject to adjustment upward or 
downward based on changes in the Bureau of Labor Statistics labor and 
material indexes.
    A proportion of ____ percent [the borrower will enter the 
appropriate percentage amount] of the contract price shall be deemed to 
represent shop labor costs and shall be adjusted based on changes in the 
Bureau of Labor Statistics, Average Hourly Earnings Rate ____ [the 
borrower will enter the appropriate BLS index] from the month in which 
bids are opened to the month in which the work is accomplished. The 
adjustment for shop labor costs shall be obtained by applying the 
percentage increase or decrease in such index, to the percentage of each 
partial payment deemed to represent shop labor costs. A portion of ____ 
percent [the borrower will enter the appropriate percentage amount] of 
the contract prices shall be deemed to represent material costs and 
shall be adjusted based on changes in the Bureau of Labor Statistics, 
Producer Price Index, ____ [the borrower will enter the appropriate BLS 
index] for the period and in a manner similar to the shop labor costs 
adjustment. A portion of ____ percent [the borrower will enter the 
appropriate percentage amount] of the contract price shall be deemed to 
represent field labor costs and shall be adjusted based on changes in 
the Bureau of Labor Statistics, Average Hourly Earnings Rate ____ [the 
borrower will enter the appropriate BLS index], for the period and in a 
manner similar to the shop labor costs adjustment.''

    (2) Insert the following in the contract documents under the 
``Proposal'' section:

``Firm Price $________
Nonfirm Price $________''

Sec. 1726.252  Prior approved contract modification related to liability 
          for special and consequential damages.

    This section applies only to transmission equipment purchases and 
generation contracts. Where the borrower anticipates difficulty in 
obtaining responsive bids on RUS standard contract forms due to a lack 
of limitation with respect to special and consequential damages, and 
where the borrower believes that such a modification will encourage 
competition through the receipt of an alternative bid which limits the 
bidder's liability for special and consequential damages, the borrower 
may make the following approved phrase modifications in the RUS standard 
contract form on which the borrower solicits bids:
    (a) Insert new paragraphs in the ``Notice and Instructions to 
Bidders'' as follows:

    ``Proposals are invited on the basis of alternative Liability 
Clauses Numbers 1 and 2. The Owner will determine on which Liability 
Clause basis the award will be made. Any other liability clauses in the 
proposal or any other modifications will be considered not responsive 
and unacceptable. These Liability Clauses are defined as follows:
    Liability Clause Number 1. This will include unmodified all of the 
standard terms and conditions of the form of contract furnished by the 
Owner and attached hereto.
    Liability Clause Number 2. This will include the following 
paragraph, in addition to all of the standard terms and conditions, 
otherwise unmodified, of the form of contract furnished by the Owner and 
attached hereto:
    `Except for the Seller's willful delay or refusal to perform the 
contract in accordance with its terms, the Seller's liability to the 
Owner for special or consequential damages on account of breach of this 
contract shall not exceed in total an amount equal to ____ percent [the 
borrower will insert an appropriate percentage between 0 and 100 
percent, inclusive] of the contract price.'''

    (b) Insert the following in the contract documents under the 
``Proposal'' section:

``Price $ (Based on Liability Clause 1)________
Price $ (Based on Liability Clause 2)________''

    (c) Insert the following in the acceptance section of the standard 
contract form:

    ``This contract is based on Liability Clause Number________.''

    (d) In RUS Form 200, the word ``Bidder'' would replace the word 
``Seller'' in the Liability Clause in paragraph (a) of this section.

[[Page 268]]

Sec. 1726.253  Prior approved contract modification related to 
          alternative bid provision for payment to contractor for bulk 
          purchase of materials.

    When construction is to be performed over an extended period of 
time, but large quantities of material are to be purchased by the 
contractor at the beginning of the project (e.g., cable for URD 
installations), the borrower may allow alternative bids providing for 
payment to the contractor of 90 percent of the cost of such materials 
within 30 days of delivery of those materials at the job site. The 
borrower will retain the right to award the contract with or without the 
alternative payment provision, however, the contract still must be 
awarded on the basis of the lowest evaluated responsive bid for the 
alternative accepted.

Sec. 1726.254  Prior approved contract modifications related to RUS 
          approval of contracts and amendments and modified bidding 
          requirements.

    It will be necessary for borrowers to make certain modifications to 
various RUS contract forms to implement the provisions of this **part**. If 
a RUS approved form of contract is required to be used by this **part** and 
private bid opening is permitted by this **part**, the ``Notice and 
Instructions to Bidders'' of the contract form may be modified 
accordingly. Other modifications are needed to indicate that certain 
provisions related to RUS approval are not applicable under specified 
circumstances. These modifications are as follows:
    (a) RUS Form 173 Materials Contract. No modifications.
    (b) RUS Form 180 Construction Contract Amendment. No modifications.
    (c) RUS Form 198 Equipment Contract. For contracts NOT requiring 
approval of the Administrator (in accordance with subparts B through F 
of this **part**) the applicable modifications are as follows:
    (1) Change Section 5(e) of the ``Equipment Contract'' to read as 
follows:

    ``(e) Each and all of the covenants and agreements herein contained 
shall extend to and be binding upon the successors and assigns of the 
parties hereto provided, however, the Seller shall not assign this 
contract or any **part** hereof without approval in writing of the 
Purchaser, and further the Seller shall not enter into any contract with 
any person, firm or corporation for the performance of the Seller's 
obligations hereunder, or any **part** thereof, without the approval in 
writing of the Purchaser.''

    (2) Delete Section 5(f) of the ``Equipment Contract.''
    (d) RUS Form 200 Construction Contract--Generating. For contracts 
Not requiring approval of the Administrator (in accordance with subparts 
B through F of this **part**) the applicable modifications are as follows:
    (1) Contractor's Proposal, Article II, Section 3(a), Sentence 2. 
Delete the words ``and the Administrator.''
    (2) Contractor's Proposal, Article II, Section 3(d), Sentence 2. 
Delete the words ``and approved by the Administrator \1\'' and the 
associated footnote.
    (3) Contractor's Proposal, Article VI, Section 7. Change to read as 
follows:

    ``Nonassignment of Contract. Except as provided in Section 8 of this 
Article, the Bidder will not assign this Contract, or any interest in 
any funds that may become due hereunder, or enter into any contract with 
any person, firm or corporation, for the performance of the Bidder's 
obligations hereunder, or any **part** hereof without the approval in 
writing of the Owner and the Surety or Sureties, if any.''

    (4) Contractor's Proposal, Article VI. Delete Section 10.
    (5) Acceptance. Delete the words ``Subject to the approval of the 
Administrator.''
    (e) RUS Form 201 Right-of-Way Clearing Contract. No modifications.
    (f) RUS Form 203 Transmission System Right-of-Way Clearing Contract. 
For contracts Not requiring approval of the Administrator (in accordance 
with subparts B through F of this **part**) the applicable modifications are 
as follows.
    (1) Notice and Instructions to Bidders, Section 8. Delete the words 
``and such acceptance has been approved by the Administrator.''
    (2) Contractor's Proposal, Article II, Section 1(a). Replace the 
word ``Administrator'' with the word ``Owner'' in two places in the 
referenced section.
    (3) Contractor's Proposal, Article II, Section 3(d), Sentence 1. 
Delete the words ``and with the approval of the Administrator\1\'' and 
the associated footnote.

[[Page 269]]

    (4) Contractor's Proposal, Article II, Section 3(d), Sentence 3. 
Delete the words ``and approved by the Administrator\2\'' and the 
associated footnote.
    (5) Contractor's Proposal, Article III, Section 1. Delete the words 
``and the Administrator'' in five places in the referenced section.
    (6) Contractor's Proposal, Article III, Section 1(b). Replace the 
word ``Administrator'' with the word ``Owner.''
    (7) Contractor's Proposal, Article III, Section 1(e). Replace the 
word ``Administrator'' with the word ``Owner.''
    (8) Contractor's Proposal, Article VI, Section 1(d). Delete the 
words ``and the Administrator.''
    (9) Contractor's Proposal, Article VI. Delete Section 10.
    (10) Acceptance. Delete the words ``Subject to the approval of the 
Administrator.''
    (g) RUS Form 238 Construction or Equipment Contract Amendment. If 
the contract amendment does not require RUS approval, in accordance with 
Sec. 1726.24(b), the borrower may delete from RUS Form 238 the following 
sentence:

    ``(The Administrator of RUS is hereby authorized to approve this 
amendment either in whole or in **part** and to delete such items as do not 
meet his approval.)''

    (h) RUS Form 257 Contract to Construct Buildings. No modifications.
    (i) RUS Form 282 Subcontracts. The applicable modifications are as 
follows:
    (1) Section 6, line 3. Delete the words ``and the Administrator of 
the Rural Utilities Service (hereinafter called the Administrator).''
    (2) Section 7, line 2. Change Section 7, line 2 to read as follows:

``approved in writing by the Owner and the Surety, if any; provided, * * 
          *''

    (3) Section 7, line 3. Delete the words ``and the Administrator.''
    (j) RUS Form 764 Substation and Switching Station Erection Contract. 
For contracts NOT requiring approval of the Administrator (in accordance 
with subparts B through F of this **part**) the applicable modifications are 
as follows:
    (1) Notice and Instructions to Bidders, Section 10. Delete the words 
``and such acceptance has been approved by the Administrator.''
    (2) Contractor's Proposal, Article II, Section 1.a. Replace the word 
``Administrator'' with the word ``Owner'' in two places in the 
referenced section.
    (3) Contractor's Proposal, Article II, Section 1.d, Sentence 1. 
Delete the words ``and with the approval of the Administrator \1\'' and 
the associated footnote.
    (4) Contractor's Proposal, Article II, Section 1.d, Sentence 2. 
Delete the words ``and approved by the Administrator \2\'' and the 
associated footnote.
    (5) Contractor's Proposal, Article III, Section 1. Delete the words 
``and the Administrator'' in five places in the referenced section.
    (6) Contractor's Proposal, Article III, Section 1.b. Replace the 
word ``Administrator'' with the word ``Owner.''
    (7) Contractor's Proposal, Article III, Section 1.e. Replace the 
word ``Administrator'' with the word ``Owner.''
    (8) Contractor's Proposal, Article VI, Section 1.e. Delete the words 
``and the Administrator.''
    (9) Contractor's Proposal, Article VI. Delete Section 10.
    (10) Acceptance. Delete the words ``Subject to the approval of the 
Administrator.''
    (k) RUS Form 786 Electric System Communications and Control 
Equipment Contract (including installation). For contracts NOT requiring 
approval of the Administrator (in accordance with subparts B through F 
of this **part**) the applicable modifications are as follows:
    (1) Article I, Section 2. Delete the words ``subject to the approval 
of the Administrator \1\'' and ``and approved by the Administrator \2\'' 
and the associated footnotes.
    (2) Article II, Section 1, Sentence 2. Replace the word 
``Administrator'' with ``Purchaser.''
    (3) Article II, Section 5. Delete the words ``subject to the 
approval of the Administrator \3\'' and ``subject to the approval of the 
Administrator \4\'' and the associated footnotes.
    (4) Article III, Section 2, Sentence 3. Replace the words ``if the 
Administrator shall so approve'' with the words ``if the Purchaser shall 
so approve.''
    (5) Article VI. Delete Section 7.
    (6) Acceptance. Delete the words ``Subject to the approval of the 
Administrator.''

[[Page 270]]

    (l) RUS Form 790 Distribution Line Extension Construction Contract 
(Labor and Materials). No modifications.
    (m) RUS Form 792 Distribution Line Extension Construction Contract 
(Labor Only). No modifications.
    (n) RUS Form 830 Electric System Construction Contract. No 
modifications.
    (o) RUS Form 831 Electric Transmission Construction Contract. For 
contracts NOT requiring approval of the Administrator (in accordance 
with subparts B through F of this **part**) the applicable modifications are 
as follows:
    (1) Notice and Instructions to Bidders, Section 10. Delete the words 
``and such acceptance has been approved by the Administrator.''
    (2) Contractor's Proposal, Article II, Section 1.d. Delete the words 
``with the approval of the Administrator \1\'' and ``and approved by the 
Administrator \2\'' and the associated footnotes.
    (3) Contractor's Proposal, Article II, Section 4.a. Delete the words 
``and approved by the Administrator \3\'' and the associated footnote.
    (4) Contractor's Proposal, Article III, Section 1.a. Sentence 4. 
Delete the words ``and the Administrator.''
    (5) Contractor's Proposal, Article III, Section 1.b. Replace the 
word ``Administrator'' with the word ``Owner.''
    (6) Contractor's Proposal, Article III, Section 1.c. Delete the 
words ``and the Administrator'' in four places in the referenced 
section.
    (7) Contractor's Proposal, Article III, Section 1.e. Replace the 
word ``Administrator'' with the word ``Owner.''
    (8) Contractor's Proposal, Article VI, Section 1.e. Delete the words 
``and the Administrator.''
    (9) Contractor's Proposal, Article VI. Delete Section 11.
    (10) Acceptance. Delete the words ``Subject to the approval of the 
Administrator.''

Sec. 1726.255  Prior approved contract modifications related to 
          indemnification.

    (a) As an alternative to the indemnification provision required in 
RUS standard construction contract forms in those jurisdictions 
requiring specific language concerning the requirement that the 
indemnitor indemnify the indemnitee for the indemnitee's own negligence, 
the borrower may add the words ``otherwise this provision shall apply to 
any alleged negligence or condition caused by the Owner'' so that the 
first paragraph reads as follows:

    ``i. To the maximum extent permitted by law, Bidder shall defend, 
indemnify, and hold harmless Owner and Owner's directors, officers, and 
employees from all claims, causes of action, losses, liabilities, and 
expenses (including reasonable attorney's fees) for personal loss, 
injury, or death to persons (including but not limited to Bidder's 
employees) and loss, damage to or destruction of Owner's property or the 
property of any other person or entity (including but not limited to 
Bidder's property) in any manner arising out of or connected with the 
Contract, or the materials or equipment supplied or services performed 
by Bidder, its subcontractors and suppliers of any tier. But nothing 
herein shall be construed as making Bidder liable for any injury, death, 
loss, damage, or destruction caused by the sole negligence of Owner, 
otherwise this provision shall apply to any negligence or condition 
caused by the Owner.''

    (b) As an alternative to the indemnification provision required in 
RUS standard construction contract forms in those jurisdictions that 
have a legal prohibition against one party indemnifying another for the 
other's negligence, the borrower may replace the words ``defend, 
indemnify, and hold harmless'' with the words `` shall pay on behalf 
of'' so that the first paragraph reads as follows:

    ``i. To the maximum extent permitted by law, Bidder shall pay on 
behalf of Owner and Owner's directors, officers, and employees from all 
claims, causes of action, losses, liabilities, and expenses (including 
reasonable attorney's fees) for personal loss, injury, or death to 
persons (including but not limited to Bidder's employees) and loss, 
damage to or destruction of Owner's property or the property of any 
other person or entity (including but not limited to Bidder's property) 
in any manner arising out of or connected with the Contract, or the 
materials or equipment supplied or services performed by Bidder, its 
subcontractors and suppliers of any tier. But nothing herein shall be 
construed as making Bidder liable for any injury, death, loss, damage, 
or destruction caused by the sole negligence of Owner, otherwise this 
provision shall apply to any negligence or condition caused by the 
Owner.''

    (c) If the alternative indemnification provision in paragraph (a) or 
(b) of this section is chosen by the borrower, the

[[Page 271]]

language of paragraph (a) or (b) of this section would be inserted in 
lieu of subsection (i) of the section indicated in the RUS standard 
construction contract forms as follows:

----------------------------------------------------------------------------------------------------------------
           RUS form No.                             Title                           Desiganted section
----------------------------------------------------------------------------------------------------------------
200...............................  Construction Contract--Generating...  Article IV, Section 1(c).
201...............................  Right-of-Way Clearing Contract......  Article IV, Section 1(e).
203...............................  Transmission System Right-of-Way      Article IV, Section 1(f).
                                     Clearing Contract.
257...............................  Contract to Construct Buildings.....  Article IV, Section 1(b).
764...............................  Substation and Switching Station      Article IV, Section 1(f).
                                     Erection Contract.
786...............................  Electric System Communications and    Article IV, Section 1(c).
                                     Control Equipment Line.
790...............................  Distribution Line Extension           Article IV, Section 1(f).
                                     Construction Contract (labor &
                                     materials).
792...............................  Distribution Line Extension           Article IV, Section 1(f).
                                     Construction Contract (labor only).
830...............................  Electric System Construction          Article IV, Section 1(f).
                                     Contract (labor & material).
831...............................  Electric Transmission Construction    Article IV, Section 1(f).
                                     Contract (labor & material).
----------------------------------------------------------------------------------------------------------------

    (d) In RUS Forms 201, 790, and 792, the word ``Contractor'' would 
replace the word ``Bidder'' in the alternative indemnification clause in 
paragraph (a) or (b) of this section.
    (e) In RUS Form 786, the word ``Seller'' would replace the word 
``Bidder'' and the word ``Purchaser'' would replace the word ``Owner'' 
in the alternative indemnification clause in paragraph (a) or (b) of 
this section.

Secs. 1726.256--1726.299  [Reserved]

                      Subpart I--RUS Standard Forms

Sec. 1726.300  Standard forms of contracts for borrowers.

    (a) General. The standard loan agreement between RUS and its 
borrowers provides that, in accordance with applicable RUS regulations 
in this chapter, the borrower shall use standard forms of contract 
promulgated by RUS for construction, procurement, engineering services, 
and architectural services financed by a loan made or guaranteed by RUS. 
(See section 5.16 of appendix A to subpart C of **part** 1718 of this 
chapter.) This subpart prescribes RUS procedures in promulgating 
standard contract forms and identifies those forms that borrowers are 
required to use.
    (b) Contract forms. RUS promulgates standard contract forms, 
identified in the List of Required Contract Forms, Sec. 1726.304(c), 
that borrowers are required to use in accordance with the provisions of 
this **part**. In addition, RUS promulgates standard contract forms 
contained in Sec. 1726.304(d) that the borrowers may but are not 
required to use in the construction of their electric systems. Borrowers 
are not required to use these guidance contract forms in the absence of 
an agreement to do so.

[63 FR 58286, Oct. 30, 1998]

Sec. 1726.301  Borrower contractual obligations.

    (a) Loan agreement. As a condition of a loan or loan guarantee under 
the Rural Electrification Act, borrowers are normally required to enter 
into RUS loan agreements pursuant to which the borrower agrees to use 
RUS standard forms of contracts for construction, procurement, 
engineering services and architectural services financed in whole or in 
**part** by the RUS loan. Normally, this obligation is contained in section 
5.16 of the loan contract. To comply with the provisions of the loan 
agreements as implemented by this **part**, borrowers must use those forms 
of contract (hereinafter sometimes called ``listed contract forms'') 
identified in the List of Required Contract Forms, Sec. 1724.304(c).
    (b) Compliance. If a borrower is required by this **part** or by the 
loan agreement to use a listed contract form, the borrower shall use the 
listed contracts in the format available from RUS or GPO. The forms 
shall not be retyped, changed, modified, or altered in any manner not 
specifically authorized in this **part** or approved by RUS in writing. Any 
modifications approved by RUS must be clearly shown so as to indicate 
the difference from the listed contract form. Electronic reproduction is 
not acceptable except where indicated in Sec. 1726.304(c).

[[Page 272]]

    (c) Amendment. Where a borrower has entered into a contract in the 
form required by this **part**, no change may be made in the terms of the 
contract, by amendment, waiver or otherwise, without the prior written 
approval of RUS.
    (d) Waiver. RUS may waive for good cause, on a case by case basis, 
the requirements imposed on a borrower pursuant to this **part**. Borrowers 
seeking a waiver by RUS must provide RUS with a written request 
explaining the need for the waiver. Waiver requests should be made prior 
to issuing the bid package to bidders.
    (e) Violations. A failure on the **part** of the borrower to use listed 
contracts as prescribed in this **part** is a violation of the terms of its 
loan agreement with RUS and RUS may exercise any and all remedies 
available under the terms of the agreement or otherwise.

[63 FR 58286, Oct. 30, 1998]

Sec. 1726.302  Notice and publication of listed contract forms.

    (a) Notice. Upon initially entering into a loan agreement with RUS, 
borrowers will be provided with all listed contract forms. Thereafter, 
new or revised listed contract forms promulgated by RUS, including RUS 
approved exceptions and alternatives, will be sent by regular or 
electronic mail to the address of the borrower as identified in its loan 
agreement with RUS.
    (b) Availability. Listed contract forms are available from either 
RUS or the Government Printing Office (GPO), as indicated in 
Sec. 1726.304. Interested parties may obtain the forms from: Rural 
Utilities Service, Program Development and Regulatory Analysis, U.S. 
Department of Agriculture, Stop 1522, 1400 Independence Avenue, SW., 
Washington DC 20250-1522, telephone number (202) 720-8674, or the 
Superintendent of Documents, P.O. Box 371954, Pittsburgh, Pennsylvania 
15250-7954, telephone number (202) 512-1800. The listed contract forms 
can be found in Sec. 1724.304(c), List of Required Contract Forms.

[63 FR 58287, Oct. 30, 1998]

Sec. 1726.303  Promulgation of new or revised contract forms.

    RUS may, from time to time, undertake to promulgate new contract 
forms or revise or eliminate existing contract forms. In so doing, RUS 
shall publish notice of rulemaking in the Federal Register announcing, 
as appropriate, a revision in, or a proposal to amend Sec. 1726.304, 
List of Electric Program Standard Contract Forms. The amendment may 
change the existing identification of a listed contract form; for 
example, changing the issuance date of a listed contract form or by 
identifying a new required contract form. The notice of rulemaking will 
describe the new standard contract form or the substantive change in the 
listed contract form, as the case may be, and the issues involved. The 
standard contract form or relevant portions thereof may be appended to 
the supplementary information section of the notice of rulemaking. As 
appropriate, the document shall provide an opportunity for interested 
persons to provide comments. A copy of each such Federal Register 
document will be sent by regular or electronic mail to all borrowers.

[63 FR 58287, Oct. 30, 1998]

Sec. 1726.304  List of electric program standard contract forms.

    (a) General. This section contains a list of RUS electric program 
standard contract forms. Paragraph (c) of this section contains the list 
of required contract forms, i.e., those forms of contracts that 
borrowers are required to use by the terms of their RUS loan agreements 
as implemented by the provisions of this **part**. Paragraph (d) of this 
section sets forth the list of guidance contract forms, i.e., those 
forms of contracts provided as guidance to borrowers in the construction 
of their systems. See Sec. 1726.302(b) for availability of these forms.
    (b) Issuance date. Where required by this **part** to use a standard 
form of contract in connection with RUS financing, the borrower shall 
use that form identified by issuance date in the List

[[Page 273]]

of Required Contract Forms in paragraph (c) of this section, as most 
recently published as of the date the borrower issues the bid package to 
bidders.
    (c) List of required contract forms. (1) RUS Form 168b, Rev. 2-95, 
Contractor's Bond. This form is used to obtain a surety bond and is 
included in RUS Forms 200, 201, 203, 257, 764, 786, 790, 792, 830, and 
831.
    (2) RUS Form 168c, Rev. 2-95, Contractor's Bond (less than $1 
million). This form is used in lieu of RUS Form 168b to obtain a surety 
bond when contractor's surety has accepted a Small Business 
Administration guarantee. This form is available from RUS.
    (3) RUS Form 180, Rev. 2-95, Construction Contract Amendment. This 
form is used to amend distribution line construction contracts. This 
form is available from RUS.
    (4) RUS Form 181, Rev. 2-95, Certificate of Completion, Contract 
Construction for Buildings. This form is used for the closeout of RUS 
Form 257. This form is available from RUS.
    (5) RUS Form 187, Rev. 2-95, Certificate of Completion, Contract 
Construction. This form is used for the closeout of and is included in 
RUS Forms 200, 203, 764, 786, 830, and 831.
    (6) RUS Form 198, Rev. 2-95, Equipment Contract. This form is used 
for equipment purchases. This form is available from RUS.
    (7) RUS Form 200, Rev. 2-95, Construction Contract--Generating. This 
form is used for generating plant construction or for the furnishing and 
installation of major items of equipment. This form is available from 
RUS.
    (8) RUS Form 201, Rev. 2-95, Right-of-Way Clearing Contract. This 
form is used for distribution line right-of-way clearing work which is 
to be performed separate from line construction. This form is available 
from RUS.
    (9) RUS Form 203, Rev. 2-95, Transmission System Right-of-Way 
Clearing Contract. This form is used for transmission right-of-way 
clearing work which is to be performed separate from line construction. 
This form is available from RUS.
    (10) RUS Form 213, Rev. 2-95, Certificate (``Buy American''). This 
form is used to document compliance with the ``Buy American'' 
requirement. This form is available from RUS.
    (11) RUS Form 224, Rev. 2-95, Waiver and Release of Lien. This form 
is used for the closeout of and is included in RUS Forms 200, 203, 764, 
786, 830, and 831.
    (12) RUS Form 231, Rev. 2-95, Certificate of Contractor. This form 
is used for the closeout of and is included in RUS Forms 200, 203, 764, 
786, 830, and 831.
    (13) RUS Form 238, Rev. 2-95, Construction or Equipment Contract 
Amendment. This form is used to amend contracts except distribution line 
construction contracts. This form is available from RUS.
    (14) RUS Form 251, Rev. 2-95, Material Receipt. This form is used to 
document receipt of owner furnished materials and is included in RUS 
Forms 764, 830, and 831. Electronic reproduction is acceptable for RUS 
Form 251.
    (15) RUS Form 254, Rev. 2-95, Construction Inventory. This form is 
used for the closeout of RUS Forms 203, 764, 830, and 831. This form is 
available from RUS. Electronic reproduction is acceptable for RUS Form 
254.
    (16) RUS Form 257, Rev. 2-95, Contract to Construct Buildings. This 
form is used to construct headquarters buildings and other structure 
construction. This form is available from GPO.
    (17) RUS Form 307, Rev. 2-95, Bid Bond. This form is used to obtain 
a bid bond and is included in RUS Forms 200, 203, 257, 764, 830, and 
831.
    (18) RUS Form 764, Rev. 2-95, Substation and Switching Station 
Erection Contract. This form is used to construct substations and 
switching stations. This form is available from RUS.
    (19) RUS Form 786, Rev. 2-95, Electric System Communications and 
Control Equipment Contract. This form is used for delivery and 
installation of equipment for system communications. This form is 
available from RUS.
    (20) RUS Form 790, Rev. 2-95, Distribution Line Extension 
Construction Contract (Labor and Materials). This form is used for 
limited distribution construction accounted for under work order 
procedure. This form is available from GPO.
    (21) RUS Form 792, Rev. 2-95, Distribution Line Extension 
Construction

[[Page 274]]

Contract (Labor Only). This form is used for limited distribution 
construction accounted for under work order procedure. This form is 
available from GPO.
    (22) RUS Form 792b, Rev. 2-95, Certificate of Construction and 
Indemnity Agreement. This form is used for the closeout of and is 
included in RUS Forms 201, 790, 792.
    (23) RUS Form 792c, Rev. 2-95, Supplemental Contract for Additional 
Project. This form is used to amend other contracts and is included in 
RUS Forms 201, 790, 792.
    (24) RUS Form 830, Rev. 2-95, Electric System Construction Contract 
(Labor and Materials). This form is used for distribution and 
transmission line project construction. This form is available from GPO.
    (25) RUS Form 831, Rev. 2-95, Electric Transmission Construction 
Contract (Labor and Materials). This form is used for transmission line 
project construction. This form is available from GPO.
    (d) List of guidance contract forms. (1) RUS Form 172, Rev. 9-58, 
Certificate of Inspection, Contract Construction. This form is used to 
notify RUS that construction is ready for inspection. This form is 
available from RUS.
    (2) RUS Form 173, Rev. 3-55, Materials Contract. This form is used 
for distribution, transmission, and general plant material purchases. 
This form is available from RUS.
    (3) RUS Form 274, Rev. 6-81, Bidder's Qualifications. This form is 
used to document bidder's qualifications. This form is available from 
RUS.
    (4) RUS Form 282, Rev. 11-53, Subcontract. This form is used for 
subcontracting. This form is available from RUS.
    (5) RUS Form 458, Rev. 3-55, Materials Contract. This form is used 
to obtain generation plant material and equipment purchases not 
requiring acceptance tests at the project site. This form is available 
from RUS.

[63 FR 58287, Oct. 30, 1998]

Secs. 1726.305-1726.399  [Reserved]

                      Subpart J--Contract Closeout

Sec. 1726.400  Final contract amendment.

    As needed, a final contract amendment will be prepared and processed 
in accordance with Sec. 1726.24(b) prior to or in conjunction with the 
closeout of the contract.

Sec. 1726.401  Material contract closeout.

    This section is applicable to contracts executed on RUS Form 173.
    (a) Delivery inspection. The borrower (acting through its engineer, 
if applicable) will verify that all materials are delivered in proper 
quantities, in good condition, and in compliance with applicable 
specifications.
    (b) Closeout documents. The borrower (acting through its engineer, 
if applicable) will obtain from the supplier a ``Buy American'' 
certificate, RUS Form 213, any manufacturer's guarantee(s) and, if 
applicable, a copy of RUS Form 224, Waiver and Release of Lien. Closeout 
documents for materials contracts need not be submitted to RUS unless 
specifically requested by RUS on a case by case basis.
    (c) Final payment. Upon completion of the actions required under 
paragraphs (a) and (b) of this section, the borrower shall make final 
payment to the supplier in accordance with the provisions of the 
material contract or written purchase order.

Sec. 1726.402  Equipment contract closeout.

    This section is applicable to contracts executed on RUS Form 198.
    (a) Final inspection and testing of equipment. The borrower (acting 
through its engineer, if applicable) will perform the final inspection 
and testing of equipment as appropriate for the specific equipment. The 
borrower (acting through its engineer, if applicable) will schedule such 
inspection and testing at a time mutually agreeable to the borrower, 
engineer, and the supplier or manufacturer. Within thirty (30) days 
after completion of the inspection and testing, the borrower (acting 
through

[[Page 275]]

its engineer, if applicable) will prepare a report of the inspection and 
testing, obtain a copy of the report from the engineer, and submit a 
copy to the supplier or manufacturer. This report must include a 
detailed description of the methods of conducting the test(s), observed 
data, comparison of guaranteed and actual performance, and 
recommendations concerning acceptance. The borrower will obtain from the 
engineer a written certification stating that the equipment has been 
installed, placed in satisfactory operation and tested, and meets the 
contract requirements. Where more than one-hundred and eighty (180) days 
have elapsed since the delivery of the equipment and the equipment has 
not been installed or tested, the contract may be closed out upon 
certification by the engineer that the equipment has been inspected and 
appears to be in accordance with the contract requirements.
    (b) Closeout documents. (1) The borrower (acting through its 
engineer, if applicable) will obtain the following executed documents:
    (i) Certification by the project engineer in accordance with 
paragraph (a) of this section.
    (ii) All guarantees or warranties.
    (iii) A ``Buy American'' certificate, RUS Form 213, from the 
supplier or manufacturer.
    (2) Closeout documents for materials contracts need not be submitted 
to RUS unless specifically requested by RUS.
    (c) Final payment. Upon completion of the actions required under 
paragraphs (a) and (b) of this section, the borrower will make final 
payment to the supplier or manufacturer in accordance with the 
provisions of the equipment contract.

Sec. 1726.403  Project construction contract closeout.

    This section is applicable to contracts executed on RUS Forms 200, 
203, 257, 764, 786, 830, and 831.
    (a) Final test of equipment supplied under a construction contract. 
If equipment is supplied under a construction contract, the borrower 
(acting through its architect or engineer, if applicable) will perform 
the final inspection and testing of equipment as appropriate for the 
specific equipment. The borrower (acting through its architect or 
engineer, if applicable) will schedule such inspection and testing at a 
time mutually agreeable to the borrower, architect or engineer, and the 
contractor. Within thirty (30) days after completion of the inspection 
and testing, the borrower (acting through its architect or engineer, if 
applicable) will prepare a report of the inspection and testing, obtain 
a copy of the report from its architect or engineer, and submit a copy 
to the contractor. This report must include a detailed description of 
the methods of conducting the test(s), observed data, comparison of 
guaranteed and actual performance, and recommendations concerning 
acceptance. The borrower will obtain from its architect or engineer a 
written certification stating that the equipment has been installed, 
placed in satisfactory operation and tested, and meets the contract 
requirements. Where more than one-hundred and eighty (180) days have 
elapsed since the delivery of the equipment and the equipment has not 
been installed or tested, the contract may be closed out upon 
certification by its architect or engineer that the equipment has been 
inspected and appears to be in accordance with the contract 
requirements.
    (b) Final inspection of construction. The borrower will require the 
contractor to notify the architect or engineer when construction is 
complete. The borrower (acting through the architect or engineer, if 
applicable) will schedule such final inspection at a time mutually 
agreeable to the borrower, architect or engineer, contractor, and the 
respective RUS General Field Representative (GFR), if the GFR has 
notified the borrower or its architect or engineer of a desire to 
observe the final inspection. The borrower (acting through its architect 
or engineer, if applicable) will perform a final inspection of the 
construction and notify the contractor of any required changes or 
corrections.
    (c) Closeout documents. (1) Upon satisfactory completion of 
construction (including all changes and corrections by the contractor), 
the borrower (acting

[[Page 276]]

through its architect or engineer, if applicable) will obtain executed 
copies of the following documents:
    (i) RUS Form 181, Certificate of Completion, Contract Construction 
for Buildings (for contracts executed on RUS Form 257), or RUS Form 187, 
Certificate of Completion, Contract Construction (for contracts executed 
on all other forms under this section).
    (ii) RUS Form 213, ``Buy American'' certificate.
    (iii) RUS Form 224, Waiver and Release of Lien, from each 
manufacturer, supplier, and contractor which has furnished material or 
services or both in connection with the construction.
    (iv) RUS Form 231, Certificate of Contractor.
    (v) RUS Form 254, Construction Inventory, including all supporting 
documents, such as RUS Forms 254a-c, construction change orders, and 
amendments for contracts executed on RUS Forms 203, 764, 830 or 831.
    (vi) Certification by the project architect or engineer in 
accordance with Sec. 1726.403(a), if applicable.
    (vii) Final design documents, as outlined in **part** 1724 of this 
chapter.
    (2) Distribution of closeout documents. (i) The borrower will retain 
one copy of each of the documents identified in paragraph (c)(1) of this 
section in accordance with applicable RUS requirements regarding 
retention of records.
    (ii) For contracts subject to RUS approval, the borrower will submit 
the following closeout documents for RUS approval (through the GFR 
except for generation projects):
    (A) RUS Form 181, Certificate of Completion, Contract Construction 
for Buildings (for contracts executed on RUS Form 257), or RUS Form 187, 
Certificate of Completion, Contract Construction (for contracts executed 
on all other forms under this section).
    (B) RUS Form 231, Certificate of Contractor.
    (C) RUS Form 254, Construction Inventory, including all supporting 
documents, such as RUS Forms 254a-c and construction change orders, for 
contracts executed on RUS Forms 203, 764, or 831.
    (iii) For contracts not subject to RUS approval, the closeout is not 
subject to RUS approval. The borrower will send one copy of RUS Form 181 
or RUS Form 187 (as applicable) to RUS for information prior to or in 
conjunction with the applicable RUS Form 219, Inventory of Work Orders. 
The remaining closeout documents need not be sent to RUS unless 
specifically requested by RUS.
    (d) Final payment. (1) The borrower will make final payment to the 
contractor upon completion of approval of all closeout documents by the 
parties to the contract, in accordance with the terms of the 
construction contract.
    (2)(i) Upon receipt of final payment by the contractor, the borrower 
will obtain from the contractor a certification of receipt of final 
payment in the following form:

    ``The undersigned acknowledges receipt of the final contract payment 
of $____ as satisfaction in full of all claims of the undersigned under 
the construction contract between the undersigned and ____ (borrower), 
dated as amended, and as complete performance by the latter of all 
obligations to be performed by it pursuant thereto. The total amount 
received under this contract is shown above.''

    (ii) The certification in paragraph (d)(2)(i) of this section is to 
be executed for the contractor by: the sole owner, a partner, or an 
officer of the corporation. Where this certification is executed for the 
corporation by a person other than the president, a certified copy of 
the authorization from the corporate board must be included with the 
certification. This certification is not a replacement for itemized 
invoices.

Sec. 1726.404  Non-site specific construction contract closeout.

    This section is applicable to contracts executed on RUS Forms 201, 
790, and 792.
    (a) Final test of equipment supplied under a construction contract. 
If equipment is supplied under a construction contract, the borrower 
(acting through its engineer, if applicable) will perform the final 
inspection and testing of equipment as appropriate for the specific 
equipment. The borrower (acting through its engineer, if applicable) 
will schedule such inspection and testing at a time mutually agreeable 
to the borrower, its engineer, and the contractor.

[[Page 277]]

Within thirty (30) days after completion of the inspection and testing, 
the borrower (acting through its engineer, if applicable) will prepare a 
report of the inspection and testing, obtain a copy of the report from 
its engineer, and submit a copy to the contractor. This report must 
include a detailed description of the methods of conducting the test(s), 
observed data, comparison of guaranteed and actual performance, and 
recommendations concerning acceptance. The borrower will obtain from the 
engineer a written certification stating that the equipment has been 
installed, placed in satisfactory operation and tested, and meets the 
contract requirements. Where more than one-hundred and eighty (180) days 
have elapsed since the delivery of the equipment and the equipment has 
not been installed or tested, the contract may be closed out upon 
certification by the engineer that the equipment has been inspected and 
appears to be in accordance with the contract requirements.
    (b) Final inspection of construction. The borrower will require the 
contractor to notify its engineer when construction of a section of the 
project is complete. The borrower (acting through its engineer, if 
applicable) will schedule such final inspection at a time mutually 
agreeable to the borrower, its engineer, contractor, and the respective 
GFR, if the GFR has notified the borrower or its engineer of a desire to 
observe the final inspection. The borrower (acting through its engineer, 
if applicable) will perform a final inspection of the construction of 
that section of the project and notify the contractor of any required 
changes or corrections.
    (c) Closeout documents. (1) Upon satisfactory completion of 
construction of a section of the project (including all changes and 
corrections by the contractor), the borrower (acting through its 
engineer, if applicable) will obtain executed copies of the following 
documents:
    (i) RUS Form 792b, Certificate of Contractor and Indemnity Agreement
    (ii) RUS Form 213, ``Buy American'' certificate.
    (iii) Certification by the project engineer in accordance with 
paragraph (a) of this section, if applicable.
    (iv) Final design documents, as outlined in **part** 1724 of this 
chapter.
    (2) Distribution of closeout documents. (i) The borrower will retain 
one copy of each of the documents identified in paragraph (c)(1) of this 
section in accordance with applicable RUS requirements regarding 
retention of records.
    (ii) For contracts not subject to RUS approval, the closeout is not 
subject to RUS approval and the closeout documents need not be sent to 
RUS unless specifically requested by RUS.

Sec. 1726.405  Inventory of work orders (RUS Form 219).

    Upon completion of the contract closeout, the borrower shall 
complete RUS Form 219, Inventory of Work Orders, in accordance with **part** 
1717, Post-Loan Policies and Procedures Common to Insured and Guaranteed 
Electric Loans, of this chapter.
```