(a) The standard RUS Telecommunications Loan Documents contain provisions regarding procurement of materials and equipment and construction of telecommunications facilities by telecommunications borrowers. This part implements certain of the provisions by setting forth requirements and procedures. Borrowers shall follow these requirements and procedures whenever using loan funds to purchase materials and equipment or perform construction, unless they have received the Administrator's written approval to do otherwise.

(b) The typical procedure followed in constructing a project financed by an RUS loan begins with the prospective borrower obtaining the necessary preloan engineering and developing a complete loan application, including an LD (See 7 CFR part 1737). If a loan is approved and all prerequisites to advance of funds are satisfied, the borrower may proceed with the purchase and installation of materials and equipment and the construction of telephone facilities pursuant to this part 1753. Subpart A describes

(1) RUS's general requirements with respect to steps to be taken after the loan is approved and before construction begins (See § 1753.3),

(2) RUS requirements with respect to methods of construction (See §§ 1753.5 and 1753.6),

(3) RUS requirements regarding sealed competitive bidding and negotiated bidding of construction contracts (See §§ 1753.6 and 1753.9),

(4) RUS standards for materials, equipment, and construction financed with loan funds (See § 1753.7), and

(5) RUS requirements for subcontracts and contract amendments covering construction financed with loan funds (See §§ 1753.10 and 1753.12).

(c) Each borrower is responsible for the construction of its facilities and for the procurement of materials and equipment that are best suited to its needs.

(d) If contracts, P&S, or other methods of procurement are subject to RUS approval pursuant to the provisions of the loan contract, as implemented by this part, RUS will review the documents or proposals submitted and notify the borrower in writing of approval or disapproval. RUS may withhold approval if, in RUS's judgment:

(1) The P&S or contract will not accomplish loan purposes.

(2) Provisions of the P&S or contract will add unnecessary expense to the project.

(3) The proposal, method of procurement, or P&S do not conform to RUS engineering criteria or construction standards, or if they present unacceptable loan security risks to RUS.

(4) The P&S or contract have been modified.

(e) The requirements and procedures covering procurement of architectural and engineering services are described in subpart B of this part.

(f) Single copies of RUS forms cited in this part are available from Administrative Services Division, Rural Utilities Service, United States Department of Agriculture, Washington, DC 20250-1500. These RUS forms may be reproduced.

For the purpose of this part 1753:

Alternate— A solicitation for a bid adjustment for a specified deviation from the Plans and Specifications.

Architect— A person registered as an architect in the state where construction is performed, or a person on the borrower's staff, approved by RUS, authorized to perform architectural services.

Bid guarantee— A bid bond or certified check required of contractors bidding on construction work to ensure that the bidder, if successful, will furnish a satisfactory performance bond ensuring completion of work.

Central office building— The facility housing the central office equipment.

Central office equipment— Switching and signaling equipment that performs call origination and completion functions for subscribers.

Closeout documents— The documents required to certify satisfactory completion of all obligations under a contract or force account proposal.

Construction— Purchase and installation of telecommunications facilities in a borrower's system using loan funds.

Contract—“Contract” means collectively the Seller's Proposal, Seller's Technical Proposal including any general or feature descriptions, equipment lists, Seller's responses to the Buyer's specifications and Performance Requirements, the Buyer's Acceptance, Articles I through X herein, the Performance Requirements, and the Contractor's Bond when required by the Buyer.

Contract construction— Construction and installations performed using an RUS contract form. See 7 CFR 1755.93.

Engineer— A person registered as an engineer in the state where construction is performed, or a person on the borrower's staff, approved by RUS, authorized to perform engineering services.

FAP (force account proposal)—The borrower's detailed plans submitted to RUS for force account construction.

Force account construction—Construction performed by the borrower's employees under an RUS approved FAP, with the borrower furnishing all materials, equipment, tools, and transportation.

FRS—RUS Form 481 (OMB control number 0572-0023), Financial Requirement Statement.

GFR—RUS General Field Representative.

Installation—The act of setting up or placing in position equipment for service or use in the borrower's system.

Interim construction—The purchase of equipment or the conduct of construction under an RUS-approved plan of interim financing. See 7 CFR part 1737.

Interim financing—Funding for a project which RUS has acknowledged may be included in a loan, should said loan be approved, but for which RUS loan funds have not yet been made available.

Labor and materials—All the labor and materials required for construction.

LD (loan design)—Supporting data for a loan application. See 7 CFR part 1737.

Loan—Any loan made or guaranteed by RUS. See 7 CFR part 1735.

Loan funds—Funds provided by RUS through direct or guaranteed loans. See 7 CFR part 1744 subpart C.

Loan purposes—The high level objectives of the loan are to fund the construction. These purposes are first stated in the characteristics letter described in 7 CFR 1737.80, which is sent to the applicant to offer a loan after RUS has completed its preloan studies.

Major construction—A telecommunications plant project estimated to cost more than $250,000, including all labor and materials.

Minor construction—A telecommunications plant project estimated to cost $250,000 or less, including all labor and materials.

Minor errors or irregularities—A defect or variation in a seller's 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. Unless otherwise noted, the borrower determines whether an error or irregularity is “minor.”

Modernization plan—A State plan, which has been approved by RUS, for improving the telecommunications network of those Telecommunications Providers covered by the plan. A Modernization Plan must conform to the provisions of 7 CFR part 1751, subpart B.

Negotiation—Any form of purchasing or contracting other than sealed competitive bidding. Any contract awarded without using the sealed competitive bidding procedure is a negotiated contract.

Outside plant—The facilities that conduct electrical or optical signals between the central office and the subscriber's network interface or between central offices.

Performance bond—A surety bond on a form satisfactory to RUS guaranteeing the contractor's faithful performance of a contract.

P&S (plans and specifications)—An RUS contract form, the appropriate specifications, and such additional information and documents needed to provide a clear, accurate, and complete understanding of the installations to be made or construction to be performed.

Project—“Project” means any equipment, including but not limited to switching, routing, access, video, and/or transport equipment, which will be used in the delivery of voice, video, or data services, which are listed under Column 2, “Equipment,” in Schedule 1 hereto. A Project will have a single delivery and completion schedule listed under Column 7 and Column 8. The Contract may consist of one or more Projects.

Responsive bid—A bid that complies with the requirements of the plans and specifications.

RUS—the Rural Utilities Service, an agency of the United States Department of Agriculture established pursuant to Section 232 of the Federal Crop Insurance and Reform and Department of Agriculture Reorganization Act of 1994 (Pub. L. 103-354, 108 Stat. 3178), successor to Rural Electrification Administration with respect to administering certain electric and telecommunications program. See 7 CFR 1700.1.

Sealed competitive bidding—A method of contracting that employs sealed competitive bids, public opening of bids, and award of the contract to the bidder submitting the lowest responsive bid. See § 1753.8.

Single source negotiation—Negotiating with a single source (contractor or seller).

Special equipment—Equipment used primarily for the transmission and enhancement of voice, data, carrier, radio and light signals, and other equipment and facilities, including incidental cable and other transmission equipment.

Subcontract—A secondary contract undertaking some of the obligations of a primary contract. Under all RUS forms of contract, the primary contractor bears full responsibility for the performance of the subcontractor.

Unbalanced bid—A bid which contains pricing for a task or material that is significantly higher or lower than pricing for similar tasks or materials.

Work order construction—Minor construction performed by the borrower's employees, pursuant to its work order procedure, with the borrower furnishing all materials, equipment, tools, and transportation.

(a) Advance RUS approval must be obtained for any construction that does not conform to RUS standards and specifications or the approved LD, such as construction of extensions to serve subscribers in areas not included in the LD (See 7 CFR part 1737). For loans approved after RUS approval of the modernization plan in the borrower's state, the proposed construction must conform to the modernization plan, as required by 7 CFR part 1751, subpart B. To obtain approval, the borrower shall submit a written proposal containing:

(1) A description of the work, indicating any deviations from the approved LD or RUS standards and specifications.

(2) An engineering study covering the deviations if there are changes in the design.

(3) A cost estimate for labor, engineering, materials, and overheads.

(4) If applicable, a brief analysis from the borrower demonstrating that the proposed changes conform to the modernization plan.

(b) Before any construction, including interim construction, is initiated, the GFR shall meet with the borrower to review the LD to determine if any significant changes have occurred since its approval by RUS. It is important that the design and construction of the proposed facilities be based on the latest information on subscriber needs.

(c) If the borrower and GFR agree that there have been no significant changes, the borrower may proceed.

(d) If the GFR finds that the LD is no longer satisfactory, the borrower shall prepare an amendment to the LD incorporating the necessary revisions (See 7 CFR part 1737). The borrower must obtain RUS approval of the LD amendment before proceeding with engineering activities on any project to be financed with loan funds.

RUS's general requirements for construction are set forth in this subpart A. Additional requirements and procedures for different types of major construction are presented in subparts D, E, F, G, and H (OMB control number 0572-0062). The requirements and procedures for minor construction are presented in subpart I. Borrowers may, at their option, follow the procedures in subparts D, E, F, G, and H for any minor construction.

(a) All major construction projects financed by loan funds shall be performed pursuant to a contract approved by RUS and awarded through sealed competitive bidding unless

(1) A specific exception is granted in subparts D, E, F, G, or H, or

(2) Written RUS approval is obtained.

(b) Contract construction. (1) RUS approval of the borrower's award of the contract is not required if the contractor is selected through sealed competitive bidding, the bid amount is $500,000 or less and the contractor is not a company or organization affiliated with the borrower. This does not relieve the borrower of the requirements of bidding or bid evaluation set contained in this part.

(2) RUS approval of the borrower's award of the contract is required for all other competitively-bid and for negotiated major construction contracts.

(3) The requirements and procedures for sealed competitive bidding are presented in § 1753.8(a). The requirements and procedures for negotiation are presented in § 1753.8(b).

(c) Force account construction. To obtain RUS approval of the force account method for major construction the borrower must demonstrate its ability to perform major construction based on past force account construction which fully met RUS construction standards and was as cost-effective as contract construction in the area. If the borrower has no record of past performance to support its request, but has adequate equipment and experienced personnel to perform the proposed construction, RUS may approve a small trial project. The requirements and procedures for force account construction are presented in subparts D, E, G, and H.

(a) Materials, equipment, and construction financed with loan funds must meet the standards and specifications established by RUS in 7 CFR 1755.97 which lists the RUS Bulletins containing the standards and specifications for telephone facilities.

(b) The borrower may use RUS loan funds to finance nonstandard construction materials or equipment only if approved by RUS in writing prior to purchase or commencement of construction.

(c) Only new materials and equipment may be financed with loan funds, unless otherwise approved by RUS. The materials and equipment must be year 2000 compliant, as defined in 7 CFR 1735.22(e).

(d) All materials and equipment financed with loan funds are subject to the “Buy American” provision (7 U.S.C. 901 et seq. as amended in 1938).

(e) All software, software systems, and firmware financed with loan funds must be year 2000 compliant, as defined in 7 CFR 1732.22(e).

(a) The P&S consist of an RUS contract form, the appropriate RUS specifications, and such additional information and documents needed to provide a clear, accurate, and complete understanding of what is included in the construction.

(b) 7 CFR 1755.93 provides a list of the RUS forms of telecommunications contracts for use in purchasing telephone materials and equipment and for constructing telephone facilities with loan funds. Also listed is the source where copies may be obtained.

(c) The appropriate standards and specifications listed in 7 CFR part 1755 shall be included in the P&S. When RUS has not prepared standards and specifications, the borrower shall use all appropriate project specific engineering requirements and specifications prepared by the borrower's engineer. The specifications prepared by the borrower's engineer and based on appropriate project specific engineering requirements shall be subject to review and approval by RUS for all major construction, including major projects which would be exempted from RUS approval under paragraph (e) of this section.

(d) The P&S shall be based on the LD approved by RUS. Section 1753.3 presents the requirements and procedures for obtaining RUS approval for construction that does not conform to the LD approved by RUS.

(e) RUS approval of P&S is required for construction that is estimated to cost over $500,000 or 25% of the total loan, whichever is less, and for all building construction. P&S for all other construction are exempt from RUS review and approval except that, at the time of contract approval, RUS will examine the plans and specifications for conformity with the loan purposes and to determine that they comply with other requirements of this part.

(f) RUS will approve only contracts that will provide for at least the following requirements.

(1) Equal employment opportunity provision. If this provision is not already in the contract, RUS Contract Form 270, Equal Opportunity Addendum, shall be attached and made a part of the contract.

(2) Liquidated damages provision. (i) If not covered by the contract, an appropriate liquidated damages provision, in a form prescribed by RUS, shall be included and made a part of the contract

(ii) The liquidated damages must be based upon the borrower's best estimate of the damages it would incur as a result of the contractor's default.

(3) Insurance and bond requirements. (i) The insurance provision shall provide coverage as required by 7 CFR 1788.

(ii) A contractor's bond shall be furnished as required by 7 CFR part 1788.

(iii) The borrower is responsible for ensuring that its contractor complies with the insurance and bond requirements.

(a) Sealed, competitive bidding—(1) Bid opening date. The borrower is responsible for scheduling the bid opening date. If RUS review of P&S is required by § 1753.7, the borrower shall wait until approval has been received before setting the date. In setting the date, sufficient time should be allowed for the bidders to examine the project site and prepare their bids. The borrower shall notify GFR of the bid date and invite GFR to attend.

(2) Invitations to bid. The borrower is responsible for sending invitations to prospective bidders and taking any other action necessary to procure full, free, and competitive bidding. The borrower should obtain from its engineer a list of prospective bidders and a recommendation indicating which bidders are considered qualified. The minimum number of contractors to be invited to bid on contracts for various types of facilities is set forth in subparts D, E, F, or H.

(3) Qualifying bidders. If the notice and instructions to bidders require that bidders show evidence of meeting certain requirements, the borrower shall qualify bidders before issuing P&S to them. Procedures for qualifying bidders are contained in subparts D, E, and F.

(4) Receipt of bids. The borrower shall write on the outside envelope of any bid or bid amendment, the date and time the bid was received. Any bid received from an unqualified bidder or after the time specified for opening shall be returned promptly to the bidder unopened.

(5) Procedure when fewer than three bids are received. If fewer than three valid bids are received, the borrower shall consult with RUS to determine whether the bids are to be opened or returned unopened. RUS requires that the project be rebid if fewer than three bids are received and RUS determines that one or more other bidders with an express interest in bidding is available and could meet the bid requirements, but was not invited to bid. RUS shall also require rebidding if it is found that qualified bidders were discouraged from bidding by unreasonable bid requirements (such as late notification to bidders) or if the borrower fails to follow the bid procedure.

(6) Conduct of bid openings. The borrower shall conduct bid openings open to the public. The borrower should be able to contact its attorney for immediate consultation.

(7) Review of bids. The borrower shall review all bids prior to reading any bid results to determine that:

(i) The bid guarantees are adequate.

(ii) All minor errors or irregularities made through inadvertence are corrected or waived. Failing this, the bid shall be rejected as nonresponsive.

(iii) In the event of non-minor errors or irregularities, the bid is rejected and the bid price not disclosed.

(8) Reading of bids. Bid prices shall not be read until the borrower has reviewed all bids to determine if there are any minor errors or irregularities that may affect the recommendation as to award. These shall be made public at the same time the bid price is announced.

(9) Evaluating bids. The borrower shall consider the same alternates in all bids in determining the low bid.

(10) Rejection. The borrower shall reject:

(i) All bids if quoted prices are not acceptable or if the specifications were ambiguous and resulted in bidders having different interpretations of the requirements.

(ii) Any bid that is not responsive, or is incomplete, or submitted by an unqualified bidder, or unbalanced between labor and materials or other respects.

(11) Award of contract. (i) The borrower shall obtain from the engineer the determination of the lowest responsive bid, a tabulation of all bids and the engineer's recommendation for award of the contract. Contract award is subject to RUS approval if either the cost of the project is over $500,000 or the contract is with an organization affiliated with the borrower. Contract award of all other projects is not subject to RUS approval.

(ii) If an award is made, the borrower shall award the contract to the lowest responsive bidder. The borrower may award the contract immediately upon determination of the lowest responsive bidder if the following conditions are met:

(A) The project is included in an approved loan and adequate funds were budgeted in the loan and are available.

(B) All applicable RUS procedures were followed, including those in the Notice and Instructions to Bid in the standard forms of contract.

(iii) If RUS approval of the award of contract is required under this paragraph (a)(11), the borrower shall send to RUS for consideration of approval of the award:

(A) Two copies of the low bid.

(B) The engineer's recommendation and the tabulation of all bids.

(C) Evidence of acceptance of the low bid by the borrower, such as:

(1) Certified copy of board resolution or

(2) letter or telegram to RUS signed by a properly authorized corporate official.

(iv) If RUS approval of the award of contract is not required under this paragraph (a)(11), the borrower shall keep a file available for inspection by RUS. The file shall be kept for at least two years and shall include:

(A) One copy of all received bids.

(B) The engineer's recommendation and tabulation of all bids including “Buy American” evaluations, if any, and all other evaluations required by law.

(C) Evidence of acceptance of the low bid by the borrower, such as a copy of the board resolution certified by the Secretary of the board.

(12) Execution of contract. (i) The borrower shall submit to RUS three original counterparts of the contract executed by the contractor and borrower.

(ii) If RUS approves the contract, it shall return one copy to the borrower and send one copy to the contractor.

(b) Negotiated construction contracts. (1) For the construction of certain facilities the borrower may negotiate a contract rather than solicit sealed competitive bids. Refer to the appropriate subparts E, F, or H for specific requirements and procedures.

(2) For negotiated purchases, borrowers shall use RUS contract forms, standards, and specifications.

(3) For all contract forms except RUS Form 773:

(i) After a satisfactory negotiated proposal has been obtained, the borrower shall submit it to RUS for approval, along with the engineer's recommendation, and evidence of acceptance by the borrower.

(ii) If RUS approves the negotiated proposal, the borrower shall submit three copies of the contract, executed by the contractor and borrower, to RUS for approval.

(iii) If RUS approves the contract, RUS shall return one copy of the contract to the borrower and one copy to the contractor.

(4) For RUS Form 773, the borrower is responsible for negotiating a satisfactory proposal, executing contracts, and closing the contract. See subparts F and I of this part for requirements for major and minor construction, respectively, on Form 773.

(a) RUS construction contract Forms 257, 395, and 515, contain provisions for subcontracting. Reference should be made to the individual contracts for the amounts and conditions under which a contractor may subcontract work under the contract.

(b) RUS Form 282, Subcontract, shall be used for subcontracts under construction and installation contracts.

(1) Minor modifications or additions may be made to the subcontract form, as long as they do not change the intent of the primary contract. Any alterations to the subcontract shall be initialed and dated by the persons executing the subcontract.

(2) Subcontracts shall be prepared in quadruplicate and all copies executed by the contractor and subcontractor and consented to by the borrower and surety, if any.

(3) Four executed copies of the subcontract shall be forwarded to RUS for approval. Upon approval, one copy each will be sent to the borrower, contractor, and subcontractor.

(c) As stated in contract Forms 257, 395, and 515, the contractor shall bear full responsibility for the acts and omissions of the subcontractor and is not relieved of any obligations to the borrower and to the Government under the contract.

(d) As stated in the contract, construction shall not be performed by the subcontractor before approval of the subcontract by RUS.

The borrower shall conduct a conference, attended by the borrower, contractor, and resident engineer prior to the beginning of construction to provide an opportunity to discuss and agree on responsibilities, procedures, practices, and methods before the work begins. The borrower shall provide each participant with a copy of the conference results. The GFR shall be invited to attend this conference.

(a) The borrower must obtain RUS approval before execution of any amendment to a contract if

(1) The amendment alters the terms and conditions of the contract or changes the scope of the project covered by the contract regardless of the amount of the contract before amendment,

(2) The amendment increases the amount to be paid under the contract by 20% or more, or

(3) The amendment causes an unbonded contract to require a contractor's performance bond. This would occur when a contract that is executed in an amount below that requiring a performance bond by 7 CFR part 1788, subpart C, is amended to an amount above that amount.

(b) Advance RUS approval to execute other contract amendments is not required. These amendments may be submitted to RUS at any time prior to closeout. If a borrower wishes to receive an advance of funds based on an amended contract amount (i.e., amendments that increase a contract by less than 20%), the borrower may initiate an increase in the amount approved for advance by submitting three copies of the amendment to RUS for approval.

(c) For each amendment executed, the borrower shall make certain that:

(1) The contractor's bond covers the additional work to be performed. If the amendment by itself (or together with preceding amendments) increases the original contract price by 20% or more, a bond extension will be required to bring the penal sum of the bond to the total amended contract price.

(2) If an amendment covers construction in a county or state not included in the original contract, the borrower and contractor are licensed to do business in that location.

(d) Upon execution of any amendment that causes the amended contract amount to exceed the original contract amount by 20% or more, three copies of the amendment shall be submitted to RUS for approval.