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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: 7CFR1789]

[Page 1040-1045]
 
PART 1789--USE OF CONSULTANTS FUNDED BY BORROWERS

  Subpart A--Policy and Procedures With Respect to Consultant Services 
                      Funded by Borrowers--General

Sec.
1789.150  Purpose.
1789.151  Definitions.
1789.152  Policy.
1789.153  Borrower funding.
1789.154  Eligible borrowers.
1789.155  Approval criteria.
1789.156  Proposal procedure.
1789.157  Consultant contract.
1789.158  Implementation.
1789.159  Contract administration.
1789.160  Access to information.
1789.161  Conflicts of interest.
1789.162  Indemnification agreement.
1789.163  Waiver.
1789.164--1789.165  [Reserved]

             Subpart B--Escrow Account Funding and Payments

1789.166  Terms and conditions of funding agreement.
1789.167  Terms and conditions of escrow agreement.
1789.168--1789.175  [Reserved]

    Authority: 7 U.S.C. 901-950b; Pub. L. 103-354, 108 Stat. 3178 (7 
U.S.C. 6941 et seq.).

    Source: 61 FR 48606, Sept. 16, 1996, unless otherwise noted.

  Subpart A--Policy and Procedures With Respect to Consultant Services 
                      Funded by Borrowers--General

Sec. 1789.150  Purpose.

    This **part** sets forth policies and the procedures for implementing 
subsection (c) of section 18 of the Rural Electrification Act of 1936, 
as amended (7 U.S.C. 901 et seq.)(RE Act) which authorizes the Rural 
Utilities Service (RUS) to use the services of Consultants funded by the 
Borrowers to facilitate timely action on Applications by Borrowers for 
financial assistance and other approvals.

Sec. 1789.151  Definitions.

    As used in this **part**:
    Administrator means the Administrator of the Rural Utilities Service 
(RUS).
    Application means a request for financial assistance under the RE 
Act or such other approvals as may be required of the RUS pursuant to 
the terms of outstanding loan or security instruments or otherwise.
    Borrower means any organization which has an outstanding loan(s) 
made or guaranteed by RUS or its predecessor agency, the Rural 
Electrification Administration (REA) under the RE Act or any 
organization which has submitted or submits an Application before RUS.
    Consultant means a person or firm which has been retained pursuant 
to this subpart under a contract to provide financial, legal, 
engineering, environmental, or other technical advice and services.
    Consultant Contract means a contract for the performance of 
consulting services for RUS, to be paid using funds

[[Page 1041]]

provided by a Borrower, which may be in the form of a Retainer Contract, 
purchase order, or other form as may be appropriate.
    Escrow Account means an account established pursuant to 
Sec. 1789.158.
    Escrow Agreement means an agreement, between a Borrower, a 
Consultant and a Third-party Commercial Institution, meeting the 
requirements of Sec. 1789.167.
    Final Invoice means the closing Invoice prepared for a given Task 
Order.
    Financial Consultant means a Consultant retained pursuant to this 
**part** to provide financial advisory services.
    Funding Agreement means an agreement, between a Borrower and a 
Consultant, providing for the Borrower to fund the costs of a Task Order 
and otherwise meeting the requirements of Sec. 1789.166.
    Indemnification Agreement means an agreement by a Borrower meeting 
the requirements of Sec. 1789.162.
    Invoice means an invoice prepared by a Consultant pursuant to the 
terms of a Consultant Contract.
    Legal Consultant means any Consultant retained pursuant to this **part** 
to provide legal services to RUS.
    Notice of Proposal to Fund means a notice meeting the requirements 
of Sec. 1789.156 provided to RUS by the Borrower.
    Organizational conflict of interest means that because of other 
activities or relationships with other persons, a person is unable or 
potentially unable to render impartial assistance or advice to the 
Government, or the person's objectivity in performing the contract work 
is or might be otherwise impaired, or a person has an unfair competitive 
advantage.
    Retainer Contract means a Consultant Contract providing for a 
minimum required payment to a Consultant irrespective of whether 
services are utilized by RUS thereunder.
    Task Order means a written request for consultant services pursuant 
to the terms of a Consultant Contract.
    Third-party Commercial Institution means a commercial financial 
institution mutually acceptable to the Borrower and the Consultant.

Sec. 1789.152  Policy.

    (a) As provided in this subpart, RUS may, at its discretion, use the 
services of Consultants funded by a Borrower where such services will 
facilitate timely action on an Application by such Borrower for 
financial assistance or other approvals. Such Consultants may provide 
financial, legal, engineering, environmental or other technical advice 
and services in connection with the review of an Application.
    (b) With the approval of RUS, a Borrower may fund the cost of 
consulting services in connection with the review by RUS of an 
Application by such Borrower. Such funding shall be provided pursuant to 
the terms of a Funding Agreement between the Borrower and the Consultant 
designated by RUS.
    (c) RUS may not, without the consent of the Borrower, require, as a 
condition of processing any Application for approval, that the Borrower 
agree to pay the costs of a Consultant hired to provide services to RUS.
    (d) The government shall retain sole discretion in the selection of 
Consultants to provide services to RUS and the form of contract 
utilized. RUS may either use the services of one or more Consultants 
retained under Retainer Contracts or the government may elect to retain 
a Consultant not otherwise on retainer. The government shall have sole 
discretion to prescribe terms and conditions of Consultant Contracts. 
The Borrower may bring considerations to the attention of the government 
which the Borrower deems pertinent to the selection process.
    (e) RUS shall retain sole discretion as to whether to further pursue 
use of an outside consultant for the relevant application in the event 
the Borrower does not enter into the agreements referenced in 
Sec. 1789.158(c)(3)(iii) within 60 days of the government providing to 
the Borrower the information set forth in Sec. 1789.158(c)(3).

Sec. 1789.153  Borrower funding.

    Borrowers shall use their general funds for the purposes of funding 
consultant services hereunder. Borrowers may not use the proceeds of 
loans made or guaranteed under the RE Act for costs incurred by 
Borrowers pursuant

[[Page 1042]]

to the funding of consultant services for RUS.

Sec. 1789.154  Eligible borrowers.

    All Borrowers are eligible to fund consultant services under this 
**part**.

Sec. 1789.155  Approval criteria.

    RUS will consider approving the use of consultant services funded by 
a Borrower on a case by case basis taking into account, among other 
matters, the following:
    (a) Whether such services are required to facilitate timely action 
on a Borrower's Application. RUS shall determine what represents timely 
action with respect to each Application considering, among other 
matters, the review period normally required for such projects by RUS 
and other lenders and the consequences to the Borrower of adjusting the 
review period.
    (b) The availability of staff resources, the priorities of other 
projects then before RUS, and the efficiencies to be realized from the 
use of consultant services.
    (c) Whether it is in the best interest of RUS to use Borrower-funded 
Consultants. Certain types of projects, such as those involving issues 
of program-wide significance, may not be well suited for the use of 
Borrower funded Consultants.

Sec. 1789.156  Proposal procedure.

    (a) In the event RUS determines that consideration should be given 
to the use of a Borrower-funded consultant in connection with the review 
of an Application, the RUS Regional Director or the Director of the 
Power Supply Division, as appropriate, will discuss with the Borrower 
the nature of the Application and the projected review period required 
of RUS. If RUS concludes that the projected review period will not 
result in timely action on the Application, and after being so notified 
in writing by RUS the Borrower wishes to fund consultant services to 
facilitate RUS review, the Borrower shall submit to the same Director a 
funding proposal. The proposal shall set forth the following:
    (1) Identification in the heading or caption as a Notice of Proposal 
to Fund Consulting Services;
    (2) Borrower's REA/RUS designation;
    (3) Borrower's legal name and address;
    (4) A description of the Application, critical issues and concerns 
relating to the Application, time deadlines, and the consequences of any 
delays in RUS review;
    (5) A description of the consulting service(s) that would facilitate 
timely RUS review of the Application; and
    (6) Such additional documents and information as RUS may request.
    (b) RUS will review the Notice of Proposal to Fund and any 
additional information RUS deems relevant in determining whether to 
proceed with procuring Borrower funded Consultants. If RUS proposes to 
utilize Legal Consultants, RUS must obtain the concurrence of the Office 
of General Counsel (OGC) of the Department of Agriculture. RUS will 
notify the Borrower in writing of its determination.

Sec. 1789.157  Consultant contract.

    (a) The Federal Acquisition Regulation (FAR), 48 CFR Ch. 1, and the 
Agriculture Acquisition Regulation (AGAR), 48 CFR Ch. 4, shall apply to 
all Consultant Contracts entered into pursuant to this **part** except as 
provided in this section.
    (1) Contracts for Legal Consultants shall provide for a technical 
representative from OGC.
    (2) All Consultant Contracts shall provide for an escrow account 
funding mechanism pursuant to this **part** and for the government's sole 
discretion in determining whether payments are to be made from the 
Escrow Account to the Consultant.
    (3) All Consultant Contracts shall provide that payment of all 
obligations for work performed thereunder must be satisfied by amounts 
available in the Escrow Account; with the exception of the annual 
retainer fee, if any, Consultants shall not be entitled to any payments 
from the government.
    (b) The provisions of paragraph (a) of this section shall be given 
prominent emphasis in requests for proposals issued under this **part**.

Sec. 1789.158  Implementation.

    (a) Upon making a determination to go forward with Borrower funding 
for

[[Page 1043]]

consulting services, RUS shall initiate a procurement request for a 
Consultant to provide the services. The government may either contract 
with a Consultant on a case by case basis or elect to use a Consultant 
pursuant to an outstanding Retainer Contract. The Borrower will not be 
informed of the Consultant selected until such time as the government 
provides the information set forth in paragraph (c)(3) of this section.
    (b) If the government determines to contract with a Consultant on a 
case by case basis, the government shall notify the Borrower of the 
applicable procedures.
    (c) If the government determines to contract with a Consultant under 
an outstanding Retainer Contract, the following procedures will normally 
apply:
    (1) Pursuant to the terms of the contract, the government will 
prepare a draft Task Order requesting consultant services in connection 
with the review of the Borrower's Application. The draft Task Order 
shall set forth for the Consultant's review and acceptance, a 
description of the services to be provided and applicable time frames 
for the provision of such services.
    (2) The government will request that the Consultant:
    (i) Notify the government as to the acceptability of the form and 
substance of the draft Task Order;
    (ii) Notify the government as to its ability to provide a 
satisfactory conflict of interest certification consistent with the 
requirements of the FAR (48 CFR ch. 1); and
    (iii) Provide a cost estimate for the draft Task Order.
    (3) When the government is satisfied with the response(s) received 
pursuant to paragraph (c)(2) of this section, the government shall 
promptly provide to the Borrower:
    (i) A copy of the draft Task Order identifying the Consultant;
    (ii) The Consultant's cost estimate for the draft Task Order; and
    (iii) Contract information required to enable the Borrower to 
develop a Funding Agreement, an Escrow Agreement and an Indemnification 
Agreement (the ``agreements'').
    (4) The Borrower shall develop and submit to the government for 
approval executed originals of:
    (i) The agreements; and
    (ii) A certified copy of a resolution of the board of directors 
authorizing the Borrower to enter into the agreements and to take such 
other action as is necessary to effect the purposes of the agreements.
    (5) Upon receiving written RUS approval of the agreements and the 
form and substance of the board resolution, the Borrower shall:
    (i) Establish and fund the Escrow Account; and
    (ii) Provide written notice to the government of the Escrow Account 
number, the funding thereof, and such other information as required 
pursuant to the agreements.
    (6) After the Borrower has funded the Escrow Account, the government 
shall issue Task Order(s) for consultant services in accordance with the 
terms and conditions of the applicable Retainer Contract.

Sec. 1789.159  Contract administration.

    The government shall be solely responsible for the administration of 
a Consulting Contract and shall have complete control over the scope of 
the Consultant's work, the timetable for performance, the standards to 
be applied in determining the acceptability of deliverables and the 
approval of payment of Invoices.

Sec. 1789.160  Access to information.

    The Borrower shall not have rights in nor right of access to the 
work product of the Consultant. All analyses, studies, opinions, 
memoranda, and other documents and information provided by the 
Consultant pursuant to a Consulting Contract may be released and made 
available to the Borrower only with the approval of RUS. This section 
does not restrict release of information by RUS pursuant to the Freedom 
of Information Act (5 U.S.C. 552(a)(2)) or other legal process.

Sec. 1789.161  Conflicts of interest.

    The standard for determining organizational conflicts of interest 
shall be as set forth in the FAR subpart 9.5 (48 CFR **part** 9, subpart 
9.5); however, the

[[Page 1044]]

identification of the existence of an organizational conflict of 
interest may be made by either the Administrator or the cognizant 
Contracting Officer. In the event an organizational conflict of interest 
is determined to exist, the cognizant Contracting Officer shall take the 
actions prescribed at FAR 9.504 (48 CFR 9.504) to attempt to avoid, 
neutralize or mitigate the conflict. Should these actions be deemed by 
the Administrator and the Contracting Officer to adequately resolve the 
conflict, the contracting action with the offeror/contractor may 
proceed. Should the Administrator or the Contracting Officer determine 
that an organizational conflict of interest still exists such that 
contract award or other contracting action cannot be taken (award of 
task/delivery order, etc.) the offeror/contractor shall be so informed 
by the Contracting Officer and be provided a reasonable opportunity to 
respond in accordance with FAR 9.504(e) (48 CFR 9.504(e)). After 
considering the contractor's response, if it is found by both the 
Administrator and Contracting Officer to remedy the conflict of 
interest, the contracting action may proceed. If the Administrator and 
Contracting Officer determine that the contractor's response does not 
resolve the conflict of interest, yet continuing with the contracting 
action with the offeror/contractor in question is considered in the best 
interest of the United States, a waiver in accordance with FAR 9.503 (48 
CFR 9.503) may be executed. This waiver shall be submitted under the 
Contracting Officer's signature and approved by the Administrator. The 
Administrator has been delegated Head of Contracting Activity authority 
by the USDA Senior Procurement Executive solely for the purpose of 
waiver approval.

Sec. 1789.162  Indemnification agreement.

    As a condition of approving Borrower funding, the government will 
require the Borrower to enter into an Indemnification Agreement, in form 
and substance satisfactory to RUS, providing that the Borrower will 
indemnify and hold harmless the government and any officers, agents or 
employees of the government from any and all liability, including costs, 
fees, and settlements arising out of, or in any way connected with the 
payment of the Consultant's fee pursuant to the Consultant Contract. The 
Indemnification Agreement may recognize, as a condition of liability 
thereunder, the rights of the borrower to prompt notice, to use of 
counsel of its own choosing, and to participation in any settlement of a 
claim against which indemnification is sought.

Sec. 1789.163  Waiver.

    RUS may waive any requirement or procedure of this subpart by 
determining that its application in a particular situation would not be 
in the government's interest, except that certain provision that the 
subject contracts are subject to the provisions of the FAR (48 CFR ch. 
1) and AGAR (48 CFR ch. 4).

Secs. 1789.164--1789.165  [Reserved]

             Subpart B--Escrow Account Funding and Payments

Sec. 1789.166  Terms and conditions of funding agreement.

    Funding Agreements between the Borrower and a Consultant shall be in 
form and substance satisfactory to RUS and provide for, among other 
matters, the following:
    (a) Specific reference by number to the applicable Consulting 
Contract entered into between the government and the Consultant;
    (b) Specific reference by number to the applicable Task Order (where 
applicable);
    (c) A brief description of the Application;
    (d) A requirement that Invoices make specific reference to:
    (1) The applicable contract and Task Order(s); and
    (2) The Escrow Account from which payment is to be made;
    (e) A requirement that the Final Invoice for a Task Order be clearly 
identified as such;
    (f) A description of the services to be provided by the Consultant 
to RUS and the applicable time frames for the provision of such 
services;
    (g) Agreement that the Borrower shall pay for the Consultant 
services

[[Page 1045]]

provided to RUS under the applicable contract through an Escrow Account 
established pursuant to an Escrow Agreement, the Consultant shall not 
provide services to RUS under the applicable contract unless there are 
sufficient funds in the Escrow Account to pay for such services, the 
Consultant shall seek compensation for services provided under the 
applicable contract from, and only from, funds made available through 
the Escrow Account, and the Consultant must submit all Invoices to the 
government for approval.
    (h) A form of Escrow Agreement satisfactory to the Borrower, 
Consultant and the designated Third-party Commercial Institution;
    (i) A schedule setting forth when and in what amounts the Borrower 
shall fund the Escrow Account;
    (j) Acknowledgment by the Consultant of the Indemnification 
Agreement provided by the Borrower to the government; and
    (k) The Funding Agreement shall not be effective unless and until 
approved in writing by RUS.

Sec. 1789.167  Terms and conditions of escrow agreement.

    Escrow Agreements between and among the Borrower, Consultant and 
Third-party Commercial Institution shall be in form and substance 
satisfactory to RUS and provide for, among other matters, the following:
    (a) Specific reference by number to the applicable contract for 
services;
    (b) Specific reference by number to the applicable Task Order;
    (c) Specific reference by number to the Escrow Account into which 
funds are to be deposited;
    (d) Invoices to specifically identify the applicable contract and 
Task Order(s);
    (e) Funds to be held in the Escrow Account by the escrow agent until 
paid to the Consultant pursuant to the government's authorization;
    (f) The Escrow Account to be closed and all remaining funds remitted 
to the Borrower after payment of the Final Invoice, unless otherwise 
directed by the government;
    (g) The government, the Consultant and the Borrower to have the 
right to be informed, in a timely manner and in such form as they may 
reasonably request, as to the status of and activity in the Escrow 
Account; and
    (h) The Escrow Agreement shall not be effective unless and until 
approved in writing by RUS.

Secs. 1789.168--1789.175  [Reserved]
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