(a) This subpart implements and explains the provisions of the Loan Documents setting forth the requirements and the procedures to be followed by borrowers in purchasing and installing special equipment financed with loan funds.

(b) Terms used in this subpart are defined in § 1753.2 and Equipment Contract, RUS Contract Form 395 (RUS Contract Form 395).

(c) Borrowers must obtain RUS review and approval of the LD for their telephone systems. Applications of equipment not included in an approved LD must conform to the modernization plan as required by 7 CFR part 1751, subpart B, and must be submitted to RUS for review and approval.

(d) RUS Contract Form 395 and applicable specifications shall be used for the purchase of special equipment for major construction on a furnish-and-install basis, as well as on a furnish-only basis.

(e) The procedures provided in subpart I, if applicable, or a FAP approved by RUS may be used for the installation of special equipment purchased with a RUS Contract Form 395 contract not including installation.

(f) For special equipment purchases for minor construction, the borrower may at its option use the Methods of Minor Construction procedures contained in subpart I or the purchase procedures contained in this subpart H.

(g) Some types of special equipment contain software. RUS Contract Form 395 indicates whether the equipment contains software and whether the software contract stipulations are applicable.

[81 FR 71584, Oct. 18, 2016]

(a) Equipment Contract, RUS Contract Form 395 shall be used to purchase equipment on a furnish-and-install basis, as well as on a furnish-only basis.

(b) The equipment specifications must accompany the equipment contract form and each specification consists of performance specifications, installation requirements (if applicable), and application engineering requirements.

[81 FR 71584, Oct. 18, 2016]

(a) General. (1) Equipment purchases are categorized as initial equipment purchase, equipment additions to existing systems and new system additions.

(i) An initial equipment purchase is a first time purchase by a borrower of a complete system of special equipment.

(ii) Equipment additions to existing systems are additions of components to complete operating systems to increase system capacity that require components made by the manufacturer of the existing system.

(iii) New system additions are purchases of complete systems of special equipment when the purpose can be accomplished either with equipment of the same type and manufacture as other complete operating systems in the borrower's system, or with complete systems of special equipment from other manufacturers.

(iv) Where equipment is obtained under a Equipment Contract, RUS Contract Form 395 (RUS Contract Form 395) without installation, the borrower shall require the supplier to provide a detailed proposed bonding and grounding plan and detailed installation information. The installation information is to enable acceptance testing by the borrower upon completion of the installation.

(2) For initial equipment purchases that qualify as major construction, the borrower shall obtain proposals from at least three suppliers of equipment of different manufacturers.

(3) For equipment additions to increase the capacity of existing systems, the borrower may negotiate for equipment of a specific type and manufacture. RUS approval to negotiate in this instance is not required if these additions were specifically described in the LD approved by RUS

(4) For new system additions, the borrower may request RUS approval to negotiate for additional equipment for the purpose of standardization on a system basis, provided RUS approved the procurement method used for the initial equipment purchase. RUS approval to negotiate must be obtained before release of the P&S to the seller.

(5) RUS will not approve negotiation with a seller of non-domestic equipment for the purpose of standardization, because such a purchase does not meet the “Buy American” provision.

(6) RUS recommends, but does not require, that borrowers include installation by the seller for initial installations of special equipment that qualify as major construction.

(7) Special equipment may be installed by the borrower if it has qualified personnel and test equipment available to install the equipment and make the required acceptance tests, and written approval is given by RUS.

(8) Installations, whether by the borrower or the seller, must meet the installation requirements of RUS Contract Form 395specifications. A copy of the acceptance tests results must be attached to the closeout documents or work order summary.

(9) The specifications for the various applications of equipment is prepared by the RUS borrower's engineer and based on generally accepted engineering considerations and practices found in the Telecommunications Industry.

(10) The borrower must obtain authorization from the Federal Communications Commission (FCC) to construct and operate radio transmitting equipment. Evidence of FCC authorization is required for RUS contract approval. Where required, the borrower must obtain approval of state regulatory bodies regarding tariffs and related matters.

(b) Procurement procedures—(1) General. The following are the procurement procedure steps required for the purchase of special equipment by borrowers.

(2) Initial equipment purchase. (i) The borrower prepares P&S and, for projects estimated to exceed $500,000 or 25% of the loan, whichever is less, sends two copies to GFR for approval.

(ii) For projects estimated to exceed $500,000 or 25% of the loan, whichever is less, RUS will either approve P&S in writing or notify the borrower of the reasons for withholding approval.

(iii) For projects estimated to cost less than $500,000 or 25% of the loan, whichever is less, the borrower may proceed with procurement upon completion of the P&S.

(iv) If the borrower has employed full competitive bidding in the selection, a contract may be executed with the successful bidder and the borrower may proceed to paragraph (b)(2)(vi) of this section.

(v) If the borrower did not follow a fully competitive bidding process as described in § 1753.8, the selection, along with a summary of all proposals and an engineer's recommendation, shall be sent to RUS. RUS shall approve the proposal selection in writing or notify the borrower of any reason for withholding approval.

(vi) The borrower sends three executed contracts including specifications to RUS for approval.

(vii) After RUS approval of the contract, one copy will be returned to the borrower and one copy will be sent to the seller.

(3) Equipment additions to existing systems. Purchase procedures for equipment additions to existing systems are the same as for initial system purchase except that the borrower may negotiate for equipment of a specific type and manufacture instead of obtaining proposals from three or more sellers.

(4) New system additions. (i) The borrower prepares the P&S and, if the project is estimated to exceed $500,000 or 25% of the loan, whichever is less, sends two copies to the GFR for approval. The borrower may request RUS approval to negotiate for the purpose of standardization on a system basis prior to preparing the P&S.

(ii) RUS notifies the borrower in writing as to whether the borrower may negotiate for specific equipment. If P&S were required to be submitted to RUS under paragraph (b)(4)(i) of this section, RUS notifies the borrower in writing of P&S approval (or notifies the borrower of the reasons for withholding approval).

(iii) The remainder of the purchase procedure for new system additions is the same as for initial equipment purchase.

(c) Contract amendments. (1) The general requirements for contract amendments are set forth in § 1753.11.

(2) The borrower shall prepare any required amendments to the special equipment contract, arrange for the execution by all parties, and submit these amendments to RUS in accordance with § 1753.11(d). RUS Form 238, Construction or Equipment Contract Amendment, shall be used for this purpose.

(d) Closeout procedures—(1) Acceptance tests for RUS Contract Form 395 with installation. (i) Immediately upon completion of the installation and alignment of the equipment, the borrower shall arrange with the contractor's installer and the GFR for acceptance tests.

(ii) The borrower shall obtain from the contractor, in writing, the results of all inspections and tests made by the contractor as required in the specifications. The borrower will analyze the test results and determine whether the performance of the equipment meets the contract specifications.

(2) Acceptance tests for RUS Contract Form 395 without installation. (Upon completion of the installation and alignment of the equipment (under this contract the installation alignment will be by other than the seller) the borrower shall perform all the inspections and tests outlined in the specifications.

(3) Closeout documents. When the acceptance tests have been completed and all deficiencies have been corrected, the borrower:

(i) Assembles and distributes the documents listed in the following table that are required for the closeout of the equipment contract. The documents listed for RUS shall be retained by the borrower for inspection by RUS for at least two years from the date of the engineer's contract closeout certification.

(ii) Obtains certifications from the engineer that the project and all required documentation are satisfactory and complete. Requirements for this contract closeout certification are contained in § 1753.18.

(iii) Submits copies of the engineer's certifications to RUS with the FRS requesting the remaining funds on the contract.

(iv) Makes final payment in accordance with the payment terms of the contract.

[54 FR 39267, Sept. 25, 1989. Redesignated at 55 FR 39397, Sept. 27, 1990, as amended at 59 FR 43718, Aug. 25, 1994; 64 FR 16611, Apr. 6, 1999; 81 FR 71584, Oct. 18, 2016]