SUPPLEMENTARY INFORMATION:

Executive Order 12866

This rule has been determined to be not significant for purposes of Executive Order 12866 and, therefore, has not been reviewed by the Office of Management and Budget.

Executive Order 12988

This final rule has been reviewed under Executive Order 12988, Civil Justice Reform. RUS has determined that this rule meets the applicable standards in § 3 of the Executive Order. In addition, all state and local laws and regulations that conflict with this final rule will be preempted; no retroactive effect will be given to the final rule; and in accordance with § 212(e) of the Department of Agriculture Reorganization Act of 1994 (7 U.S.C. 6912(e)), administrative appeal procedures, if any, must be exhausted before litigation against the Department or its agencies may be initiated.

Regulatory Flexibility Act Certification

It has been determined that the Regulatory Flexibility Act is not applicable to this rule since the Agency is not required by 5 U.S.C. 551 et seq, or any other provision of law to publish a notice of proposed rulemaking with respect to the subject matter of this rule.

Information Collection and Recordkeeping Requirements

This rule contains no additional reporting or recordkeeping burdens under Office of Management and Budget (OMB) control numbers 0572-0107 and 0572-0118 that would require approval under the Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35).

Executive Order 13132

This rule will not have any substantial direct effect on states, on the relationship between the national government and the states, or on the distribution of power and responsibilities among the various levels of government. Under Executive Order 13132, this rule does not have sufficient federalism implications requiring the preparation of a Federalism Assessment.

Catalog of Federal Domestic Assistance

The program described by this rule is listed in the Catalog of Federal Domestic Assistance Programs under number 10.850, Rural Electrification Loans and Loan Guarantees. This catalog is available on the Internet and the General Services Administration's (GSA) free CFDA Web site at http://www.cfda.gov.

Executive Order 12372

This rule is not subject to the provisions of Executive Order 12372, “Intergovernmental Review of Federal Programs,” as implemented under USDA's regulations at 7 CFR part 3015.

Executive Order 13175, Consultation and Coordination With Indian Tribal Governments

Over the last year, the Agency has conducted extensive tribal consultations related to the implementation of the Substantially Underserved Trust Area (SUTA) provisions of the 2008 Farm Bill. During those consultations all RUS programs were discussed. A specific regulation on SUTA is being prepared.

The policies contained in this rule do not impose substantial unreimbursed compliance costs on Indian Tribal governments or have tribal implications that preempt tribal law.

Unfunded Mandates

This rule contains no Federal mandates (under the regulatory provisions of Title II of the Unfunded Mandates Reform Act of 1995) for State, local, and tribal governments for the private sector. Thus, this rule is not subject to the requirements of §§ 202 and 205 of the Unfunded Mandates Reform Act of 1995.

National Environmental Policy Act Certification

This rule has been examined under RUS environmental regulations at 7 CFR part 1794. The Administrator has determined that this rule is not a major Federal action significantly affecting the environment. Therefore, in accordance with the National Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq.), an Environmental Impact Statement or Assessment is not required.

E-Government Act Compliance

RUS is committed to complying with the E-Government Act, to promote the use of the Internet and other information technologies to provide increased opportunities for citizen access to Government information and services, and for other purposes.

Background

The Rural Electrification Act of 1936 (7 U.S.C. 901-950b (REAct)), as amended, establishes the authority for RUS to provide loans and loan guarantees to eligible entities for furnishing electric service to rural areas. The standard loan agreement between RUS and its electric borrowers provides that, in accordance with applicable RUS regulations, the borrower shall use standard forms of contracts promulgated by RUS for construction, procurement, engineering services and architectural services for transactions above the established threshold dollar levels (“threshold levels”).

Electric borrowers are also expected to obtain RUS approvals for procuring materials, equipment and contracting services for use in the electric systems where the contract amount exceeds specified threshold levels.

Threshold levels that apply to contracts entered into by borrowers ( printed page 3071) were initially established to capture significant transactions that could adversely affect RUS loan security. The threshold levels were most recently revised in 1995. Cost increases and inflation over time have greatly increased the need for more approvals than is consistent with the earlier threshold levels. The result has been increased delay to the borrowers in receiving RUS approvals and increased workloads at RUS. Inflation is not the only relevant variable in the RUS proposal to modify the threshold levels. In this rule RUS has also considered the level of sophistication in borrowers' operations, RUS staff constraints and competing priorities within RUS. The need to adjust the threshold levels is a result of these considerations.

In response to borrowers' requests and mindful of the directives in Executive Order 13563 of January 18, 2011, to determine if any regulations should be modified to make agencies' regulations less burdensome in achieving their objectives, RUS undertook an examination of certain thresholds used in determining when the use of prescribed forms and approvals would apply. RUS examined the number of contracts it reviewed over the last several years. RUS also reviewed the rate of inflation factors published in the Handy-Whitman Index of Public Utility Construction Costs in order to adjust for inflation occurring after the existing requirements were established.

As a result of this review, RUS determined that although it remains necessary and appropriate to continue these requirements as one means of oversight of its borrowers' financial and operational activities, the existing threshold levels should be raised. Raising these threshold levels will reduce the volume of contracts that borrowers will be required to submit for RUS approvals. Doing so will reduce the paperwork burdens on borrowers and the administrative burdens on RUS.

RUS is revising these threshold levels an average of 300 percent. RUS estimates that the revision will reduce the volume of contracts it receives pursuant to these requirements by 50 percent.

The Agency published a proposed rule on May 17, 2011, at 76 FR 28333 proposing to amend the contract threshold requirements.

Discussion of Comments and Changes

RUS received two submissions electronically on this proposed rule by the July 18, 2011, comment deadline. The first submission was received from the National Rural Electric Cooperative Association (NRECA). The submission is summarized below with the Agency's responses as follows:

Issue 1: Commenter proposed that the amounts in the proposed regulation be established as a “base case,” and escalated annually using the Handy Whitman Index of Public Utility Construction Costs.

Response: The Agency does not concur at this time. The Agency believes that the threshold limits set forth are appropriate at this time. The Agency may re-evaluate the threshold limits at a later date.

Issue 2: Commenter proposed a clarifying change that a statement be added to the regulation that a borrower's voluntary use of an RUS form contract when not required by this proposed regulation does not subject the contract to RUS review and approval.

Response: Agency concurs. A clarifying statement is not needed if the RUS form contract is not required.

Issue 3: Commenter proposed allowing a borrower to seek RUS' prior permission to use negotiated bidding in the case where the formal or informal competitive bidding required in 7 CFR 1726.125(b)(2) is not practical.

Response: Agency does not concur. The current rule allows “multiparty negotiations” to be used in 7 CFR 1726.125 (b)(3), which is similar to the comment received to allow “negotiated bidding.”

The second submission was received from Tri-State Generation and Transmission Association, Inc. (Tri-State). Tri-State stated in their submission that “The proposed rules will increase Tri-State efficiency and reduce burdens on Tri-State.” Tri-State also said in their submission that “RUS should adopt the Proposed Rules.”

Response: Agency concurs. The proposed regulation will increase efficiency and reduce burdens on all RUS borrowers.

For reasons set forth in the preamble, RUS amends chapter XVII of title 7 of the Code of Federal Regulations as follows:

1. The authority citation for part 1724 continues to read as follows:

Authority: 7 U.S.C. 901 et seq., 1921 et seq., 6941 et seq.

2. Section 1724.54 is amended by revising paragraph (e)(2) and paragraph (g)(2) to read as follows:

3. The authority citation for part 1726 continues to read as follows:

Authority: 7 U.S.C. 901 et seq., 1921 et seq., 6941 et seq.

4. Section 1726.14 is amended by revising the definition of “minor modification or improvement” to read as follows:

5. Section 1726.50 is amended by revising paragraph (a) to read as follows:

6. Section 1726.51 is amended by revising paragraphs (a)(1), (b)(1) and (b)(2) to read as follows:

7. Section 1726.76 is amended by revising paragraph (a) to read as follows:

8. Section 1726.77 is amended by revising paragraphs (b)(1) and (c) to read as follows:

9. Section 1726.125 is amended by revising paragraphs (a), (b)(1), and (b)(2) to read as follows:

10. Section 1726.150 is amended by revising paragraph (b) to read as follows:

11. Section 1726.176 is amended by revising paragraphs (b)(2)(i) and (b)(3) to read as follows: