7 Cfr 1739-a

25787

Rules and Regulations

Federal Register
Vol. 78, No. 86
Friday, May 3, 2013

This section of the FEDERAL REGISTER
contains regulatory documents having general
applicability and legal effect, most of which
are keyed to and codified in the Code of
Federal Regulations, which is published under
50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by
the Superintendent of Documents. Prices of
new books are listed in the first FEDERAL
REGISTER issue of each week.

Unfunded Mandates

The Catalog of Federal Domestic
Assistance (CFDA) Program number
assigned to the Community Connect
Grant Program is 10.863. The Catalog is
available on the Internet at http://
www.cfda.gov.

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

Executive Order 12372

Rural Utilities Service

This program is not subject to the
requirements of Executive Order 12372,
‘‘Intergovernmental Review of Federal
Programs,’’ as implemented under
USDA’s regulations at 7 CFR part 3015.

7 CFR Part 1739

Executive Order 12988

DEPARTMENT OF AGRICULTURE

RIN 0572–AC30

Community Connect Broadband Grant
Program
Rural Utilities Service, USDA.
Final rule.

AGENCY:
ACTION:

SUMMARY: The Rural Utilities Service
(RUS), a Rural Development agency of
the United States Department of
Agriculture (USDA), hereinafter referred
to as RUS or the Agency, amends its
regulations for the Community-Oriented
Connectivity Broadband Grant Program
(Community Connect Grant Program).
The purpose of this regulatory change is
to provide the Agency the ability to
target limited resources to geographical
as well as technological areas of need.
This rule is not applicable to
Community Connect grant applications
filed for funding prior to the publication
of a Notice of Funds Availability
(NOFA) under this regulation.
DATES: This rule is effective June 3,
2013.
FOR FURTHER INFORMATION CONTACT:

Kenneth Kuchno, Director, Broadband
Division, USDA Rural Utilities Service,
STOP 1599, 1400 Independence Avenue
SW., Washington, DC 20250–1599,
Telephone (202) 690–4673, Facsimile
(202) 690–4389. Email address:
[email protected].
SUPPLEMENTARY INFORMATION:
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Catalog of Federal Domestic Assistance

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 (OMB).

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This rule has been reviewed under
Executive Order 12988, Civil Justice
Reform. The Agency has determined
that this rule meets the applicable
standards provided in section 3 of the
Executive Order. In addition, all state
and local laws and regulations that are
in conflict with this rule will be
preempted. No retroactive effect will be
given to this rule and, in accordance
with section 212(e) of the Department of
Agriculture Reorganization Act of 1994
(7 U.S.C. 6912(e)), administrative appeal
procedures, must be exhausted before
an action against the Department or its
agencies may be initiated.
Executive Order 13132, Federalism
The policies contained in this rule do
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. Nor does this rule
impose substantial direct compliance
costs on state and local governments.
Therefore, consultation with states is
not required.
Regulatory Flexibility Certification
Pursuant to 5 U.S.C. 553(a) (2), this
rule related to grants is exempt from the
rulemaking requirements of the
Administrative Procedure Act (5 U.S.C.
551 et seq.), including the requirement
to provide prior notice and an
opportunity for public comment.
Because this rule is not subject to a
requirement to provide prior notice and
an opportunity for public comment
pursuant to 5 U.S.C. 553, or any other
law, the analytical requirements of the
Regulatory Flexibility Act (5 U.S.C. 601
et seq.) are inapplicable.

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Environmental Impact Statement
This rule has been examined under
Agency environmental regulations at 7
CFR part 1794. The Administrator has
determined that this action 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.
Paperwork Reduction Act of 1995
This rule contains no new reporting
or recordkeeping burdens under OMB
control number 0572–0127 that would
require approval under the Paperwork
Reduction Act of 1995 (44 U.S.C.
Chapter 35).
E-Government Act Compliance
Rural Development is committed to
the E-Government Act, which requires
Government agencies in general to
provide the public the option of
submitting information or transacting
business electronically to the maximum
extent possible.
Executive Order 13175
Executive Order 13175 imposes
requirements on Rural Development in
the development of regulatory policies
that have tribal implications or preempt
tribal laws. Rural Development
determined that this rule may have a
substantial direct effect on one or more
Indian tribe(s) or on either the
relationship or the distribution of
powers and responsibilities between the
Federal Government and Indian tribes.
Therefore, on January 16, 2013, Rural
Development highlighted the
Community Connect Grant Program
(along with the Distance Learning and
Telemedicine Grant Program) during its
quarterly Tribal Consultation webinar
and teleconference. Forty eight
individuals participated in the event, of
which 24 represented Tribes or Tribal

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Telecommunication companies. Many
comments received during the event
were positive comments regarding the
new Proposed Funded Service Territory
process, Broadband Service and
Broadband Grant Speeds being
determined and updated through the
NOFA process and the ability to use
operating funds as match. It was asked
that further consideration be given to
carefully determine what services
existing providers might be providing
across Tribal lands and that Tribal
sovereignty be factored in to the
application process and scoring criteria.
The teleconference was recorded and
the recording and the transcript have
become part of USDA Rural
Development’s Tribal Consultation
record. Please contact Rural
Development’s Native American
Coordinator at (720) 544–2911 or
[email protected] for more
information regarding this Tribal
Consultation or USDA Rural
Development’s Tribal Consultation
process in general.
Background/Overview
The Rural Utilities Service, a Rural
Development agency of the United
States Department of Agriculture (the
Agency) works to improve the quality of
life in rural America by providing
investment capital, in the form of loans
and grants, for the deployment of rural
telecommunications, broadband,
electric, water and environmental
infrastructure. Financial assistance is
provided to rural utilities;
municipalities; commercial
corporations; limited liability
companies; public utility districts;
Indian tribes; and cooperative,
nonprofit, limited-dividend, or mutual
associations. In order to achieve the goal
of increasing economic opportunity in
rural America, the Agency finances
infrastructure that enables access to
seamless, nation-wide
telecommunications and broadband
networks. With access to the same
advanced telecommunications networks
of its urban counterparts, especially
broadband networks designed to
accommodate distance learning,
telework, e-government and
telemedicine, rural America will see
improving educational opportunities,
health care, economies, safety and
security, and ultimately higher
employment. Of particular concern to
the Agency are communities where
broadband service is not available and
where population densities are such
that the cost of deployment to them is
so high that build-out of infrastructure
is unlikely. The Agency is committed to
helping rural communities gain access

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to affordable, reliable, advanced
communications services, comparable to
those available throughout the rest of
the United States, to provide a healthy,
safe and prosperous place to live and
work.
The Community Connect Grant
Program was started as a Pilot Program.
After administering the program as a
pilot program for two years, the Agency
proposed rules for the program and on
July 28, 2004, the program was formally
implemented. The regulations were
amended to clarify, among other things,
which rural communities are eligible
under the program. The main purpose of
this grant program is the construction of
broadband facilities in areas where no
broadband exists today with a
secondary benefit of providing for a
community center that provides free
broadband service to all critical
community facilities in the proposed
funded service area for a two year
period.
Discussion of Changes
The new rule addresses several areas
to streamline and improve the program
for applicants and the Agency, with the
goal of bringing broadband to unserved
communities. The new rules provide
flexibility to address the dynamic
broadband needs of rural Americans
and enhance the Agency’s ability to
target funds to areas where they are
needed the most. The new rules also
seek to make the application process
easier for applicants and evaluators. For
example, a single concise project
summary and map can be used to
inform USDA Rural Development State
Directors of pending applications within
their states as well as the general public.
Major changes include:
1. Proposed Funded Service Territory.
Since its inception, the Community
Connect Grant Program only permitted
applicants to use grant funds to serve a
single community which included a
place recognized by the census or the
Rand McNallyTM Atlas. This approach,
while administratively simple did not
accommodate some of the most rural
communities which are not census
designated places or recognized by a
commercial Atlas. It also precluded
applicants from developing new service
territories in a logical and cost effective
manner to maximize the benefit of the
grant. The new rule will allow
applicants to define their proposed
funded service area by utilizing the web
based RUS mapping tool. By allowing
an applicant the ability to define the
exact service area, it is important to note
that all premises in the service area
must be offered service at the
Broadband Grant Speed. The NOFA will

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set the minimum and maximum dollar
amounts per application.
2. Matching Fund Simplification. The
current program requires applicants to
provide a match equal to 15 percent of
the requested funding to be used only
for eligible grant purposes. The new rule
maintains the current program’s 15
percent matching requirement but
clarifies that the match must be in cash
and can also be used to fund operations
of the project. This change gives
applicants new flexibility on the use of
matching funds and is administratively
simpler for applicants, reviewers and
the Agency. Clarifying that the match
must be in cash available at closing, the
new rule removes uncertainty related to
valuing and qualifying in-kind
contributions. Notwithstanding the 15
percent match, all applicants must be
able to demonstrate that they have
sufficient resources to construct,
manage and sustain the project through
and beyond completion.
3. Scoring Simplification. The current
program scores and ranks applications
on three criteria: (a) Rurality; (b)
economic need; and (c) benefits. The
metrics used for economic need
(Median Household Income) and
rurality (census and Rand McNallyTM) at
times did not fully accommodate
situations where there was a high need
for assistance. The criteria may not have
adequately measured need, for example,
in a small community with substantial
unemployment and a high cost of living,
or in a community that was so small,
rural and remote that the community
was not recognized as a census
designated place; or a community which
is small and with very low-income, but
in a county which as a whole has a high
median household income. The new
criteria focuses on ranking completed
applications based on the community
connectivity benefits of the project to
the proposed funded service area. In
making a final selection among and
between applications with comparable
rankings, the Administrator will take
into consideration: (a) Service provided
to communities in persistent poverty
counties; (b) service provided to
communities in out-migration
communities; (c) the rurality of the
proposed funded service area; (d) the
speed of service provided by the project;
(e) service to substantially underserved
trust areas; (f) services provided to
persons with disabilities; and (g) any
other socio-economic factors that may
be described in the NOFA to
differentiate and rank applications.
Summary of Comments
In its Proposed Rule, published in the
Federal Register on November 16, 2012,

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(77 FR 68705), the agency requested
comments regarding proposed changes
to the Community Connect Grant
Program. The agency received eighteen
sets of comments from the following
organization/individuals:
• North-central Alabama Regional
Council of Governments
• National Telecommunications
Cooperative Association
• County of Nelson
• Hospital Sisters Health System
• National Association of
Telecommunications Officers and
Advisors
• Camino Fiber Network Cooperative,
Inc.
• Plumas-Sierra Rural Electric
Cooperative
• Palau National Communications
Corporation
• jean public
• Puerto Rico Broadband Task Force
• Rural Wisconsin Health Cooperative
• W. Metts Engineering Company, Inc.
• Telecommunications Board of Puerto
Rico
• Wireless Internet Service Providers
Association
• Mescalero Apache Telecom, Inc.
• BEK Communications Cooperative
• Gila River Indian Community and
Gila River Telecommunications, Inc.
• Associated Communications and
Research Services
These comments have been
summarized and are addressed below:

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Matching Funds
Comment: Several respondents took
issue with eliminating the ability to use
in-kind items to satisfy the matching
requirement and requiring that the 15
percent match be satisfied by having
cash on hand at the closing of the
award. In addition, several respondents
requested the elimination of the
matching requirement. Some
respondents asserted that by eliminating
the use of in-kind items many potential
applicants would not be able to raise the
cash requirement and therefore would
become ineligible for the program.
Others commented that under certain
circumstances the matching
requirement should be waived all
together.
Response: It should be noted that
although in-kind items to satisfy the
matching requirement will no longer be
accepted, the purposes of the match
have been expanded to allow the
matching funds to be used for operating
expenses as well as for funding eligible
purposes. By allowing the matching
funds to be used for operating expenses,
the Agency is recognizing that
applicants need to fund the expenses of
day to day operations and this change

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in the program will give them credit for
funds that are expended in this way. It
must be recognized that for projects to
succeed, a certain amount of cash
reserves must be available to cover
expenses and by requiring a cash match,
these expenses can be covered while
satisfying the matching requirements.
Community Center
Comment: One respondent stated that
the requirement to provide free service
at the Broadband Grant Speed for two
years at the community center was not
clearly defined. Another respondent had
concerns with where the community
center would be located under the new
rules and suggested keeping the Census
Designated Place or Rand McNally
community a service area requirement.
Response: Although the Agency
believes that the requirement for free
service at the community center is well
defined in the regulation, we will
provide a more detailed description of
the requirement in the Community
Connect Application Guide that will be
made available to all applicants when
the next grant window is opened for
accepting applications. In the early days
of the Community Connect Program, the
proposed service area could only consist
of a single Census Designated Place.
Unfortunately, this left many rural areas
unable to qualify for a grant and the
Agency implemented the ability of an
applicant to use a community that was
designated in a Rand McNally Atlas.
Although using the Atlas made many
more rural communities eligible for the
grant, it still did not solve the problem.
With the revised regulation, an
applicant now has the ability to
designate any eligible area as their
proposed service area with the
requirement that the community center
must be located in the proposed service
area. A community center is an
important part of the Program and
although its physical location is left up
to the applicant as long as it stays in the
proposed service area, the intent is that
the applicant will place the center in the
most easily accessible location to benefit
as many residents as possible.
Area Eligibility
Comment: One respondent was
concerned that if middle mile facilities
exist in a certain area and are providing
service to anchor institutions that the
area in question may be ineligible for
the grant funds. Another respondent
commented that because broadband
service can vary from resident to
resident in an area as well as within a
community that the requirement that
the proposed service area have no
broadband service be eliminated. Other

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respondents commented that using a
census designated place or Rand
McNally community makes places like
Puerto Rico or Palau ineligible.
Response: If an area only has middle
mile facilities available and service is
not provided to residents and
businesses in this area, the area is still
eligible for grant funds. This also is the
case if a business in an area has a T1
line from the local exchange carrier. For
an area to be ineligible for
consideration, businesses and residents
in that area must have the ability to
receive broadband service. Although the
Agency realizes that an existing service
provider for reasons of their own may
not provide ubiquitous coverage in an
area, if broadband service is available in
an area, then that area is ineligible. The
Community Connect Grant Program was
implemented to get broadband service
to areas without any type of broadband
service and once this is accomplished
we can then concentrate on filling in the
holes that may exist in certain cases.
Under the new regulation it is no longer
a requirement that the proposed service
area be a census designated place or a
Rand McNally community. The new
requirement is to identify the proposed
service on the RUS mapping tool and
places like Puerto Rico and Palau
should no longer experience the issues
they had in the past.
Application Requirements
Comment: Several respondents stated
that the requirements for completing a
grant application were too onerous and
that this would deter potential
applicants from submitting an
application.
Response: The application process is
intended to be a business plan that an
applicant will follow if awarded a grant.
To ensure that the requested amount of
the grant is not too much or too little,
we require that a detailed project budget
be developed. To ensure that the project
is sustainable, we require that projected
financial statements along with an
engineering design be submitted. The
Agency recognizes that the application
process takes some effort but for
successful projects to be funded this is
the minimum amount of information
that must be submitted.
Service to Hospitals and Clinics
Comment: A couple of the
respondents indicated that rural
hospitals and clinics should receive the
same two years of free service at the
Broadband Grant Speed that the
community center receives.
Response: As long as the rural
hospital or clinic is open to the public,
then these facilities are considered

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Critical Community Facilities and all
Critical Community Facilities in the
proposed service area must be offered
free service at the Broadband Grant
Speed for two years.
Medically Underserved Areas
Comment: A number of respondents
encouraged the use of other federal
designations such as Medically
Underserved Areas/Populations (MUA/
P) and Health Professional Shortage
Areas (HPSA) as eligibility criteria
stating that these designations indicate
the rural areas with the greatest health
care needs and that broadband service
helps alleviate these shortages.
Response: Although the Agency
recognizes that a number of rural areas
lack the necessary medical care and is
directly addressing these issues with the
Distance Learning and Telemedicine
Grant Program, the Community Connect
Grant Program was designed to bring
broadband service to any area that is not
currently receiving it. There are many
different types of needs in rural areas
and the Community Connect Grant
Program was designed to place all
applicants on a level playing field.
Eligible Grant Purposes
Comment: One respondent requested
that technical assistance for the
retention of consultants and experts for
economic research, engineering,
business planning and community
outreach be made an eligible purpose.
Response: The Agency agrees that due
diligence must be performed in
completing the grant application/
business plan but is looking for the
applicant to fund this due diligence
demonstrating a commitment to make
the project successful. There are many
different items that could be considered
in providing funding to implement a
broadband system and unfortunately
funding is limited and certain items had
to be eliminated from eligibility.

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Scoring
Comment: One respondent
recommended that higher scores be
given for applicants that received
funding under the American Recovery
and Reinvestment Act (ARRA). Another
respondent commented that the scoring
criteria for receiving points for past
experience in managing a broadband
system should be enhanced. In addition
to the above comments, a number of
respondents also commented that the
scoring was too subjective and that
additional credit should be given to
applicants that exceed the minimum
requirements for receiving a grant such
as providing voice or video services.

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Response: Under the ARRA programs
that provided funding for providing
broadband service, thousands of
applications were received. Due to the
amount of funding that was made
available; many of the ARRA
applications could not be funded simply
because there were not enough funds.
To provide added scoring to a
Community Connect applicant because
they received an ARRA award would
not be fair to the other ARRA applicants
that did not receive an award. In
addition, there are many existing
companies that are providing services in
rural areas that did not apply for ARRA
funds and these companies should not
be penalized for that decision. The
scoring criteria for management
experience adequately describes the
requirements for receiving points.
However, we agree that the criteria
could be better explained and the
associated application guide for the
program will be enhanced to provide a
clearer understanding of the evidence
that needs to be submitted to receive
points. Also, the scoring criteria was
developed to allow the applicant and
the Agency the most flexibility in
determining the score the applications
should receive and although we have
used more objective scoring criteria in
the past, we believe that the criteria now
contained in the regulation captures the
needs of the proposed service area. We
also believe that the criteria will allow
the best applications to be chosen.
Although other services such as voice
and video provide customers with
additional choices, the purpose of the
Community Connect Grant Program is to
deliver broadband service to unserved
areas and adding emphasis to providing
other services will take away from this
purpose.
Need for Program
Comment: One respondent
commented that the Community
Connect Program should not be funded
because it was unfair to provide funding
to rural areas that have low populations
instead of areas in cities that have much
greater populations.
Response: Although the Agency
agrees that there are areas within large
cities that do not have access to
broadband, the requirements of the
program limit the funding to rural areas.
Without funding from the Community
Connect Grant Program, some areas
would have no chance of ever receiving
broadband service.
Broadband Grant Speed
Comment: One respondent
recommended that the definitions for
Broadband Service and for the

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Broadband Grant Speed be set at 3
megabits per second downstream and
768 kilobits upstream while another
respondent recommended that the
Broadband Grant Speed be set 25
megabits down and 5 megabits up. In
addition, another respondent
recommended keeping the definition of
broadband service at the existing level
of 200 kilobits in both the upstream/
downstream directions.
Response: As explained in the
proposed regulation, the definitions for
Broadband Service and the Broadband
Grant Speed will be set in the Notice of
Funds Availability (NOFA) that will be
published annually. The Agency
appreciates the recommendations
submitted by the respondents and they
will be taken into consideration when
the NOFA is prepared. Although the
200/200 kilobit definition of broadband
service has worked well for the program
in the past and has identified areas that
have no access to broadband service,
this definition has become obsolete as
technology has progressed. To ensure
that rural areas have a level of
broadband service that will promote
economic development and provide
residents and businesses with the
speeds they need in today’s world, the
Agency developed the concept of the
Broadband Grant Speed. The Broadband
Grant Speed will be determined in a
NOFA that announces the opening of
the window for submitting applications
and will be set at the level that is
needed to ensure that rural America is
not being left behind.
Native American Applicants
Comment: One respondent requested
that applications submitted by a Tribal
entity not have to define their service
and that funds be awarded to the Tribal
leadership to use to provide broadband
service anywhere on the respective
reservation where broadband service
does not exist.
Response: The Proposed Funded
Service Area process along with the web
based RUS mapping tool will allow
Tribes (and all applicants) to
geographically establish the Proposed
Funded Service Area. This could
include an entire Reservation (if the
entire Reservation is unserved or the
portions of a Reservation that are
unserved. As this is a nation-wide,
competitive grant program it is not
practical for any applicant to not be
required to define its service area.
Construction and Advance Procedures
Comment: One respondent requested
that formal construction and advance
procedures be implemented for the
Community Connect Grant Program.

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Response: Formal construction
procedures can provide a level of
guidance that could benefit the
applicants. The Agency strongly
recommends that standard procedures
such as those required for other RUS
programs be followed. The types of
procedures required by our other
programs which can result in awards in
the tens of millions of dollars could be
so overwhelming to some of the small
operations that routinely apply for the
grants that those entities would elect not
to apply. These same entities go to some
of the most remote unserved areas and
the Agency does not want to deter them
from applying for a grant by making the
construction requirements too onerous.
We will assist all awardees in
construction of their systems and make
available to them the construction
procedures from our other programs.
Although the advance of funds
procedures differs from the other RUS
programs, the advance procedures used
for the Community Connect Grant
Program are sufficient and there is no
need to revise this process.

Comment: One respondent
commented that the regulation was
unclear if mobile carriers providing 3G
or 4G met the definition of broadband
service for service area eligibility and
for providing service at the Broadband
Grant Speed.
Response: The regulation
differentiates between fixed and mobile
service. Annually, a NOFA (which
announces the opening of an
application window) may set the
requirements for fixed and mobile
broadband service at different speeds.
This is a clear indication that mobile
broadband service can meet both the
definition for Broadband Service that is
used for determining if an area is
eligible to receive a grant and the
definition for Broadband Grant Speed
which is the required speed that an
awardee of a grant must provide to all
residents and businesses in the
proposed service area.

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List of Subjects in 7 CFR Part 1739
Broadband; Grant programs—
Communications; Rural Areas;
Telecommunications; and Telephone.
For reasons set forth in the preamble,
the Rural Utilities Service amends
Chapter XVII of title 7 of the Code of
Federal Regulations by revising part
1739 to read as follows:

■

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Subpart A—Community Connect Grant
Program
Secs.
1739.1 Purpose.
1739.2 Funding availability and application
dates and submission.
1739.3 Definitions.
1739.4–1739.8 [Reserved]
1739.9 USDA Rural Development State
Director notification.
1739.10 Eligible applicant.
1739.11 Eligible Community Connect
Competetive Grant Project.
1739.12 Eligible grant purposes.
1739.13 Ineligible grant purposes
1739.14 Matching contributions.
1739.15 Completed application.
1739.16 Review of grant applications.
1739.17 Scoring of applications.
1739.18 Grant documents.
1739.19 Reporting and oversight
requirements.
1739.20 Audit requirements.
1739.21 OMB control number.
Subpart B [Reserved]
Authority: Title III, Pub. L. 108–199, 118
Stat. 3.

Subpart A—Community Connect Grant
Program

Mobile Broadband Service

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PROGRAM

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§ 1739.1

Purpose.

(a) The provision of broadband
service is vital to the economic
development, education, health, and
safety of rural Americans. The purpose
of the Community Connect Grant
Program is to provide financial
assistance in the form of grants to
eligible applicants that will provide, on
a ‘‘community-oriented connectivity’’
basis, broadband service that fosters
economic growth and delivers enhanced
educational, health care, and public
safety benefits. The Agency will give
priority to rural areas that have the
greatest need for broadband services,
based on the criteria contained herein
and in the Notice of Funds Availability
(hereinafter referred to as NOFA)
published in the Federal Register.
(b) Grant authority will be used for
the deployment of service to all
premises in eligible rural areas at the
Broadband Grant Speed on a
‘‘community-oriented connectivity’’
basis. In addition to providing service to
all premises the ‘‘community-oriented
connectivity’’ concept will stimulate
practical, everyday uses and
applications of broadband by cultivating
the deployment of new broadband
services that improve economic
development and provide enhanced
educational and health care
opportunities in rural areas. Such an
approach will also give rural

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25791

communities the opportunity to benefit
from the advanced technologies that are
necessary to achieve these goals.
§ 1739.2 Funding availability and
application dates and submission.

(a) The Agency will periodically
publish, (usually on an annual basis) in
the Federal Register, a NOFA that will
set forth the total amount of funding
available; the maximum and minimum
funding for each grant; funding priority;
the application submission dates; and
the appropriate addresses and agency
contact information. The NOFA will
also outline and explain the procedures
for submission of applications,
including electronic submissions. The
Agency may publish more than one
NOFA should additional funding
become available.
(b) Notwithstanding paragraph (a) of
this section, the Agency may, in
response to a surplus of qualified
eligible applications which could not be
funded from the previous fiscal year,
decline to publish a NOFA for the
following fiscal year and fund said
applications without further public
notice.
§ 1739.3

Definitions.

As used in this subpart:
Agency or RUS shall mean the Rural
Utilities Service, which administers the
United States Department of Agriculture
(USDA) Rural Development Utilities
Programs.
Broadband Grant Speed means the
minimum bandwidth described in the
NOFA that an applicant must propose to
deliver to every customer in the
proposed funded service area in order
for the Agency to approve a broadband
grant. The Broadband Grant Speed may
be different for fixed and mobile
broadband services and from the
minimum rate of data transmission
required to determine the availability of
broadband service when qualifying a
service area.
Broadband service means any
terrestrial technology having the
capacity to provide transmission
facilities that enable subscribers of the
service to originate and receive highquality voice, data, graphics, and video
at the minimum rate of data
transmission described in the NOFA.
The broadband service speed may be
different from the broadband grant
speed for the Community Connect
program.
Community Center means a building
within the Proposed Funded Service
Area that provides access to the public,
or a section of a public building with at
least two (2) Computer Access Points
and wireless access, that is used for the

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purposes of providing free access to
and/or instruction in the use of
broadband Internet service, and is of the
appropriate size to accommodate this
purpose. The community center must be
open and accessible to area residents
before, during, and after normal working
hours and on Saturdays or Sunday.
Computer Access Point means a new
computer terminal with access to
service at the Broadband Grant Speed.
Critical Community Facilities means
the Community Center; any public
school, public education center, public
library, public medical clinic, public
hospital, community college, public
university; or law enforcement, fire or
ambulance station in the Proposed
Funded Service Area.
Eligible applicant shall have the
meaning as set forth in § 1739.10.
Eligible grant purposes shall have the
meaning as set forth in § 1739.12.
Matching contribution means the
applicant’s qualified contribution to the
Project, as outlined in § 1739.14 of this
part.
Project means the delivery of service
at the Broadband Grant Speed financed
by the grant and Matching Contribution
for the Proposed Funded Service Area.
Proposed Funded Service Area
(PFSA) means the contiguous
geographic area within an eligible Rural
Area or eligible Rural Areas, in which
the applicant proposes to provide
service at the Broadband Grant Speed.
Rural area means any area, as
confirmed by the latest decennial
census of the Bureau of the Census,
which is not located within:
(1) A city, town, or incorporated area
that has a population of greater than
20,000 inhabitants; or
(2) An urbanized area contiguous and
adjacent to a city or town that has a
population of greater than 50,000
inhabitants. For purposes of the
definition of rural area, an urbanized
area means a densely populated
territory as defined in the latest
decennial census of the U.S. Census
Bureau.
§§ 1739.4–1739.8

[Reserved]

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§ 1735.9 USDA Rural Development State
Director notification.

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Eligible applicant.

To be eligible for a Community
Connect competitive grant, the
applicant must:
(a) Be legally organized as an
incorporated organization, an Indian
tribe or tribal organization, as defined in
25 U.S.C. 450b(e), a state or local unit
of government, or other legal entity,
including cooperatives or private
corporations or limited liability
companies organized on a for-profit or
not-for-profit basis.
(b) Have the legal capacity and
authority to own and operate the
broadband facilities as proposed in its
application, to enter into contracts and
to otherwise comply with applicable
federal statutes and regulations.
(c) As required by the Office of
Management and Budget (OMB), all
applicants for grants must supply a Dun
and Bradstreet Data Universal
Numbering System (DUNS) number
when applying. The Standard Form 424
(SF–424) contains a field for you to use
when supplying your DUNS number.
Obtaining a DUNS number costs
nothing and requires a short telephone
call to Dun and Bradstreet. Please see
http://www.grants.gov/applicants/
request_duns_number.jsp for more
information on how to obtain a DUNS
number or how to verify your
organization’s number.
(d) Register in the System for Award
Management (SAM) (formerly Central
Contractor Registry (CCR)).
(1) In accordance with 2 CFR part 25,
applicants, whether applying
electronically or by paper, must be
registered in the SAM prior to
submitting an application. Applicants
may register for the SAM at https://
www.sam.gov/.
(2) The SAM registration must remain
active, with current information, at all
times during which an entity has an
application under consideration by an
agency or has an active Federal Award.
To remain registered in the SAM
database after the initial registration, the
applicant is required to review and
update, on an annual basis from the date
of initial registration or subsequent
updates, its information in the SAM
database to ensure it is current, accurate
and complete.
§ 1739.11 Eligible Community Connect
Competitive Grant Project.

Applicants shall complete a
notification form which will be a public
document that the RUS provides to
USDA Rural Development State
Directors and others in the state(s) of the
PFSA. The notification shall include a
brief project description and the
location of the PFSA.

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§ 1739.10

To be eligible for a Community
Connect competitive grant, the Project
must:
(a) Serve a PFSA in which Broadband
Service does not currently exist;
(b) Offer service at the Broadband
Grant Speed to all residential and
business customers within the PFSA ;

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(c) Offer free service at the Broadband
Grant Speed to all Critical Community
Facilities located within the PFSA for at
least 2 years starting from the time
service becomes available to each
Critical Community Facility;
(d) Provide a Community Center with
at least two (2) Computer Access Points
and wireless access at the Broadband
Grant Speed, free of all charges to all
users for at least 2 years; and
(e) Not overlap with the service areas
of current RUS borrowers and grantees.
§ 1739.12

Eligible grant purposes.

Grant funds may be used to finance
the following:
(a) The construction, acquisition, or
leasing of facilities, including spectrum,
land or buildings, used to deploy
service at the Broadband Grant Speed to
all residential and business customers
located within the PFSA and all
participating Critical Community
Facilities, including funding for up to
ten Computer Access Points to be used
in the Community Center. Buildings
constructed with grants funds must
reside on property owned by the
awardee. Leasing costs will only be
covered through the advance of funds
period included in the award
documents;
(b) The improvement, expansion,
construction, or acquisition of a
Community Center and provision of
Computer Access Points. Grant funds
for the Community Center will be
limited to ten percent of the requested
grant amount. If a community center is
constructed with grant funds, the center
must reside on property owned by the
awardee;
(c) The cost of providing the
necessary bandwidth for service free of
charge to the Critical Community
Facilities for 2 years.
§ 1739.13

Ineligible grant purposes.

Operating expenses not specifically
permitted in § 1739.12.
§ 1739.14

Matching contributions.

(a) At the time of closing of the award,
the awardee must contribute or
demonstrate available cash reserves in
an account(s) of the awardee equal to at
least 15% of the grant. Matching
contributions must be used solely for
the Project and shall not include any
financial assistance from federal sources
unless there is a federal statutory
exception specifically authorizing the
federal financial assistance to be
considered as such. An applicant must
provide evidence of its ability to comply
with this requirement in its application.
(b) At the end of every calendar
quarter, the award must submit a

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Federal Register / Vol. 78, No. 86 / Friday, May 3, 2013 / Rules and Regulations
schedule to RUS that identifies how the
match contribution was used to support
the project until the total contribution is
expended.

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§ 1739.15

Completed application.

Applications should be prepared in
conformance with the provisions of this
part and all applicable USDA
regulations, including 7 CFR parts 3015,
3016, and 3019. Applicants must also
conform to the requirements of the
individual NOFA to be published when
funds are available for the program and
are advised to use the Agency’s
Application Guide for this program,
found at the Agency’s Web site.
Applicants must submit one paper copy
and one electronic copy of the
application. The application guide
contains instructions and forms, as well
as other important information needed
to prepare an application and may be
updated periodically. Paper copies of
the application guide can be requested
by contacting the, Director, Broadband
Division at the following address: Stop
1599, South Agriculture Building, Room
2868, Washington, DC 20250.
Completed applications must include
the following documentation, studies,
reports and information, in form and
substance satisfactory to the Agency:
(a) An Application for Federal
Assistance. A completed Standard Form
424;
(b) An executive summary of the
Project. A general project overview that
addresses the following categories:
(1) A description of why the Project
is needed;
(2) A description of the applicant;
(3) An explanation of the total Project
costs;
(4) A general overview of the
broadband telecommunications system
to be developed, including the types of
equipment, technologies, and facilities
to be used;
(5) Documentation describing the
procedures used to determine the
unavailability of existing Broadband
Service; and
(6) A list of the Critical Community
Facilities that will take service from the
Applicant at the Broadband Grant
Speed, and evidence that any remaining
Critical Community Facility located in
the PFSA has rejected the offer;
(c) Scoring Criteria Documentation. A
narrative, with documentation where
necessary, addressing the elements
listed in the scoring criteria of
§ 1739.17;
(d) System design. A system design of
the Project that is economical and
practical, including a detailed
description of the facilities to be funded,
technical specifications, data rates, and

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costs. In addition, a network diagram
detailing the proposed system must be
provided. The system design must also
address the environmental requirements
specified in 7 CFR 1794;
(e) Service Area Demographics. The
following information about the PFSA:
(1) A map, submitted electronically
through RUS’ web-based Mapping Tool,
which identifies the Rural Area
boundaries of the PFSA; and
(2) The total population, number of
households, and number of businesses
located within the PFSA;
(f) Scope of work. A description of the
scope of work, which at a minimum
must include:
(1) The specific activities and services
to be performed under the Project;
(2) Who will carry out the activities
and services;
(3) A construction build-out schedule
and project milestones, showing the
time-frames for accomplishing the
Project objectives and activities on a
quarterly basis; and
(4) A budget for all capital and
administrative expenditures reflecting
the line item costs for Eligible Grant
Purposes and other sources of funds
necessary to complete the Project;
(g) Community-oriented connectivity
plan. A community-oriented
connectivity plan consisting of the
following:
(1) A listing of all participating
Critical Community Facilities to be
connected. The applicant must also
provide documentation that it has
consulted with the appropriate agent of
every Critical Community Facility in the
PFSA, and must provide statements
from each one as to its willingness to
participate, or not to participate, in the
proposed Project;
(2) A description of the services the
applicant will make available to local
residents and businesses; and
(3) A list of any other
telecommunications provider (including
interexchange carriers, cable television
operators, enhanced service providers,
wireless service providers and providers
of satellite services) that is participating
in the delivery of services and a
description of the consultations and the
anticipated role of such provider in the
Project;
(h) Financial information and
sustainability. A narrative description
demonstrating the sustainability of the
Project: from the commencement of
construction to completion, and beyond
the grant period; the sufficiency of
resources; how and when the matching
requirement is met; and the expertise
necessary to undertake and complete
the Project. The following financial
information is required:

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25793

(1) If the applicant is an existing
company, it must provide complete
copies of audited financial statements, if
available, for the two fiscal years
preceding the application submission. If
audited statements are unavailable, the
applicant must submit unaudited
financial statements for those fiscal
years. Applications from start-up
entities must, at minimum, provide an
opening balance sheet dated within 30
days of the application submission date;
and
(2) Annual financial projections in the
form of balance sheets, income
statements, and cash flow statements for
a forecast period of five years, which
prove the sustainability of the Project
for that period and beyond. These
projections must be inclusive of the
applicant’s existing operations and the
Project, and must be supported by a
detailed narrative that fully explains the
methodology and assumptions used to
develop the projections, including
details on the number of subscribers
projected to take the applicant’s
services. Applicants submitting
multiple applications for funding must
demonstrate that each Project is feasible
and sustainable on its own, funds are
available to cover each of the matching
requirements and that all Projects for
which funding is being requested are
financially feasible as a whole;
(i) Statement of experience. A
statement of experience which includes
information on the owners’ and
principal employees’ relevant work
experience that would ensure the
success of the Project. The applicant
must also provide a written narrative
demonstrating its capability and
experience, if any, in operating a
broadband telecommunications system;
(j) Legal authority. Evidence of the
applicant’s legal authority and
existence, and its ability to enter into a
grant agreement with the RUS, and to
perform the activities proposed under
the grant application;
(k) Additional funding. Evidence that
funding agreements have been attained,
if the Project requires funding
commitment(s) from sources other than
the grant. An applicant submitting
multiple applications for funding must
demonstrate its financial wherewithal to
support all applications, if accepted,
and that it can simultaneously complete
and operate all of the Projects under
consideration. Additionally,
commitments for outside funding must
be explicit that they will be available if
all applications are not funded;
(l) Federal compliance. Evidence of
compliance with other federal statutes
and regulations including, but not
limited to the following:

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(1) 7 CFR part 15, subpart A—
Nondiscrimination in Federally
Assisted Programs of the Department of
Agriculture—Effectuation of Title VI of
the Civil Rights Act of 1964;
(2) 7 CFR part 3015—Uniform Federal
Assistance Regulations;
(3) 2 CFR part 417—Nonprocurement
Debarment and Suspension;
(4) 7 CFR part 3018—New
Restrictions on Lobbying;
(5) 2 CFR part 421—Requirements for
Drug-Free Workplace (Financial
Assistance);
(6) Certification regarding
Architectural Barriers;
(7) Certification regarding Flood
Hazard Precautions;
(8) An environmental report/
questionare, in accordance with 7 CFR
part 1794;
(9) A certification that grant funds
will not be used to duplicate lines,
facilities, or systems providing
Broadband Service;
(10) Federal Obligation Certification
on Delinquent Debt; and
(11) Assurance Regarding Felony
Conviction or Tax Delinquent Status for
Corporate Applicants.

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§ 1739.16

Review of grant applications.

(a) All applications for grants must be
delivered to the Agency at the address
and by the date specified in the NOFA
(see § 1739.2) to be eligible for funding.
The Agency will review each
application for conformance with the
provisions of this part, and may contact
the applicant for clarification of
information in the application.
(b) Incomplete applications as of the
deadline for submission will not be
considered. If an application is
determined to be incomplete, the
applicant will be notified in writing and
the application will be returned with no
further action.
(c) If the Agency determines that the
Project is technically or financially
infeasible or unsustainable, the Agency
will notify the applicant, in writing, and
the application will be returned with no
further action.
(d) Applications conforming with this
part will be evaluated competitively by
the Agency and will be ranked in
accordance with § 1739.17. Applications
will then be awarded generally in rank
order until all grant funds are expended,
subject to paragraphs (e) and (f) of this
section.
(e) In addition to scoring, the Agency
may take geographic distribution into
consideration when making final award
determinations.
(f) An award may be made out of rank
order if a higher ranked application
would require an award that exceeded

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available funding or would consume a
disproportionate amount of funds
available relative to its ranking.
(g) The Agency reserves the right to
offer an applicant a lower amount than
proposed in the application.
§ 1739.17

Scoring of applications.

The ranking of the ‘‘communityoriented connectivity’’ benefits of the
Project will be based on documentation
in support of the need for services,
benefits derived from the proposed
services, characteristics of the PFSA,
local community involvement in
planning and implementation of the
Project, and the level of experience of
the management team. In ranking
applications the Agency will consider
the following criteria based on a scale of
100 possible points:
(a) An analysis of the challenges of
the following criteria, laid out on a
community-wide basis, and how the
Project proposes to address these issues
(up to 50 points):
(1) The economic characteristics;
(2) Educational challenges;
(3) Health care needs; and
(4) Public safety issues;
(b) The extent of the Project’s
planning, development, and support by
local residents, institutions, and Critical
Community Facilities. Documentation
must include evidence of communitywide involvement, as exemplified by
community meetings, public forums,
and surveys. In addition, applicants
should provide evidence of local
residents’ participation in the Project
planning and development (up to 40
points).
(c) The level of experience and past
success of operating broadband systems
for the management team. (up to 10
points)
(d) In making a final selection among
and between applications with
comparable rankings and geographic
distribution, the Administrator may take
into consideration the characteristics of
the PFSA. Only information provided in
the application will be considered.
Applicants should therefore specifically
address each of the following criteria to
differentiate their applications:
(1) Persistent poverty counties that
will be served within the PFSA;
(2) Out-migration Communities that
will be served within the PFSA;
(3) The rurality of the PFSA;
(4) The speed of service provided by
the project;
(5) Substantially underserved trust
areas that will be served within the
PFSA;
(6) Community members with
disabilities that will be served within
the PFSA; and

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(7) Any other additional factors that
may be outlined in the NOFA.
§ 1739.18

Grant documents.

The terms and conditions of grants
shall be set forth in grant documents
prepared by the Agency. The documents
shall require the applicant to own all
equipment and facilities financed by the
grant. Among other matters, the Agency
may prescribe conditions to the advance
of funds that address concerns regarding
the Project feasibility and sustainability.
The Agency may also prescribe terms
and conditions applicable to the
construction and operation of the
Project and the delivery of service at the
Broadband Grant Speed to eligible Rural
Areas, as well as other terms and
conditions applicable to the individual
Project. Dividend distributions will not
be allowed until all grant funds and
matching contributions have been
expended.
§ 1739.19 Reporting and oversight
requirements.

(a) A project performance activity
report will be required of all recipients
on an annual basis until the Project is
complete and the funds are expended by
the applicant. The reporting period will
start with the calendar year the award
is made and continue for every calendar
year through the term of the award. The
report must be submitted by January 31
of the following year of the reporting
period. Recipients are to submit an
original and one copy of all project
performance reports, including, but not
limited to, the following:
(1) A comparison of actual
accomplishments to the objectives
established for that period;
(2) A description of any problems,
delays, or adverse conditions which
have occurred, or are anticipated, and
which may affect the attainment of
overall Project objectives, prevent the
meeting of time schedules or objectives,
or preclude the attainment of particular
Project work elements during
established time periods. This
disclosure shall be accompanied by a
statement of the action taken or planned
to resolve the situation; and
(3) Objectives and timetable
established for the next reporting
period.
(b) A final project performance report
must be provided by the recipient. It
must provide an evaluation of the
success of the Project in meeting the
objectives of the program. The final
report may serve as the last annual
report.
(c) The Agency will monitor
recipients, as it determines necessary, to
assure that Projects are completed in

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accordance with the approved scope of
work and that the grant is expended for
Eligible Grant Purposes.
(d) Recipients shall diligently monitor
performance to ensure that time
schedules are being met, projected work
within designated time periods is being
accomplished, and other performance
objectives are being achieved.
(e) The applicant must have the
necessary processes and systems in
place to comply with the reporting
requirements for first-tier sub-awards
and executive compensation under the
Federal Funding Accountability and
Transparency Act of 2006 in the event
the applicant receives funding unless
such applicant is exempt from such
reporting requirements pursuant to 2
CFR 170.110(b). The reporting
requirements under the Transparency
Act pursuant to 2 CFR part 170 are as
follows:
(1) First Tier Sub-Awards of $25,000
or more in non-Recovery Act funds
(unless they are exempt under 2 CFR
part 170) must be reported by the
Recipient to http://www.fsrs.gov no later
than the end of the month following the
month the obligation was made.
(2) The Total Compensation of the
Recipient’s Executives (5 most highly
compensated executives) must be
reported by the Recipient (if the
Recipient meets the criteria under 2 CFR
part 170) to http://www.sam.gov by the
end of the month following the month
in which the award was made.
(3) The Total Compensation of the
Subrecipient’s Executives (5 most
highly compensated executives) must be
reported by the Subrecipient (if the
Subrecipient meets the criteria under 2
CFR part 170) to the Recipient by the
end of the month following the month
in which the subaward was made.

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§ 1739.20

Audit requirements.

A grant recipient shall provide the
Agency with an audit for each year in
which a portion of the financial
assistance is expended, in accordance
with the following:
(a) If the recipient is a for-profit
entity, an existing Telecommunications
or Electric Borrower with the Agency, or
any other entity not covered by the
following paragraph, the recipient shall
provide an independent audit report in
accordance with 7 CFR part 1773,
‘‘Policy on Audits of the Agency’s
Borrowers.’’ Please note that the first
audit submitted to the Agency and all
subsequent audits must be comparative
audits as described in 7 CFR part 1773.
(b) If the recipient is a Tribal, State or
local government, or non-profit
organization, the recipient shall provide
an audit in accordance with OMB

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Circular A–133, ‘‘Audits of States, Local
Governments, and Non-Profit
Organizations.’’
§ 1739.21

OMB control number.

The information collection
requirements in this part are approved
by the Office of Management and
Budget (OMB) and assigned OMB
control number 0572–0127.
Subpart B [Reserved]
Dated: April 8, 2013.
John Charles Padalino,
Acting Administrator, Rural Utilities Service.
[FR Doc. 2013–10502 Filed 5–2–13; 8:45 am]
BILLING CODE P

DEPARTMENT OF ENERGY
10 CFR Part 719
48 CFR Parts 931, 952, and 970
RIN 1990–AA37

Contractor Legal Management
Requirements; Acquisition
Regulations
Office of General Counsel,
Department of Energy.
ACTION: Final rule.
AGENCY:

SUMMARY: The Department of Energy
revises existing regulations covering
contractor legal management
requirements. Conforming amendments
are also made to the Department of
Energy Acquisition Regulation (DEAR).
The regulations provide rules for
handling of legal matters and associated
costs by certain contractors whose
contracts exceed $100,000,000 as well
as legal counsel retained directly by the
Department for matters in which costs
exceed $100,000.
DATES: Effective date: July 2, 2013.
FOR FURTHER INFORMATION CONTACT: Mr.
Eric Mulch, Attorney-Adviser, U.S.
Department of Energy, Office of General
Counsel, 1000 Independence Avenue
SW., Washington, DC 20585–0121.
Telephone: (202) 287–5746. Email:
[email protected].
SUPPLEMENTARY INFORMATION:

Table of Contents
I. Background
II. Public Comments
III. Summary of Final Rule
IV. Procedural Requirements
A. Review Under Executive Orders 12866
and 13563
B. Review Under Executive Order 12988
C. Review Under the Regulatory Flexibility
Act
D. Review Under the Paperwork Reduction
Act

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25795

E. Review Under the National
Environmental Policy Act
F. Review Under Executive Order 13132
G. Review Under the Unfunded Mandates
Reform Act of 1995
H. Review Under the Treasury and General
Government Appropriations Act, 1999
I. Review Under Executive Order 13211
J. Review Under the Treasury and General
Government Appropriations Act, 2001
K. Congressional Notification

I. Background
The Department’s contracts that
include cost reimbursable elements
generally allow reimbursement of legal
costs, including the costs of litigation, if
the costs are reasonable and incurred in
accordance with the applicable cost
principles and contract clauses.
Consequently, the Department has an
ongoing obligation to monitor and
control the legal costs that it reimburses.
The Department has a long history of
overseeing aspects of its contractors’
management of legal matters and
associated costs. This practice was
formalized in 1994 when the
Department published an interim
Acquisition Letter as an interim policy
in the Federal Register on August 31,
1994 (59 FR 44981). The interim
Acquisition Letter was finalized as a
Policy Statement on April 3, 1996 (61
FR 14763). This Policy Statement was
followed by a formal rulemaking that
added part 719, Contractor Legal
Management Requirements, to Title 10
of the Code of Federal Regulations with
an effective date of April 23, 2001 (66
FR 4616, 66 FR 19717).
After a decade operating in
accordance with the 2001 rulemaking,
the Department determined that it
should review, update and revise the
rule. Therefore, it did so and issued the
results in a Notice of Proposed
Rulemaking (NOPR) on December 28,
2011 (76 FR 81408). The NOPR
requested public comments no later
than February 27, 2012. The public
comment period was reopened on
March 2, 2012 and extended until
March 16, 2012 (77 FR 12754).
Today’s final rule revises the current
contractor legal management
requirements found in part 719, in Title
10 of the Code of Federal Regulations.
The revisions reflect lessons learned by
the Department during the years since
implementing part 719. The part
establishes regulations to monitor and
control legal costs and to provide
guidance to aid contractors and the
Department in making determinations
regarding the reasonableness of outside
counsel costs, including the costs
associated with litigation. Today’s
amendments to part 719 and the
associated portions of the Department of

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