Rd instruction 1924-a table of Contents




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25


(5-12-87) SPECIAL PN

RD Instruction 1924-A

§1924.6 (a) (12) (v) (Con.)

(B) When the structure will be covered by an insured 10-year warranty, the insurer's construction inspector must provide Rural Development with any available copies of instruction reports showing percentage of completion immediately after the inspections are completed. To make partial payments when copies of inspection reports are not available, the responsible Rural Development official will make the inspections or will be guided by the provisions of §1924.6 (a) (12) (v) (C) of this subpart. If further assistance is deemed necessary to justify partial payments, the Rural Development official may make onsite inspections or require additional information.


(C) Based upon an application for payment containing an estimate of the value of work in place which has been prepared by the contractor and accepted by the borrower and Rural Development. When the contract provides for partial payments for materials satisfactorily stored at the site, the application for payment may include these item. Prior to receiving the first partial payment, the contractor should be required to submit a list of major subcontractors and suppliers and a schedule of prices or values of the various phases of the work aggregating the total sum of the contract such as excavation, foundations, framing, roofing, siding, mill work, painting, plumbing, heating, electric wiring, etc., made out in such form as agreed upon by the borrower, Rural Development, and the contractor. In applying for payments, the contractor should submit a statement based upon this schedule. See Exhibit A of this subpart for guidance in reviewing the contractor's schedule of prices and estimating the value of the work in place.
(vi) Final payment.
(A) When the structure will be covered by an insured 10-year warranty, the insurer must provide an insured 10-year warranty policy (or a binder if the policy is not available) before final payment is made to the builder.


26

RD Instruction 1924-A

§1924.6 (a) (12) (vi) (Con.)

(B) Final payment of the amount due on the contract or disbursal of the Rural Development loan funds where an interim loan was used will be made only upon completion of the entire contract, final inspection by Rural Development, acceptance of the work by Rural Development and the borrower, issuance of any and all final permits and approvals for the use and occupancy of the structure by any applicable state and local governmental authorities, and compliance by the contractor with all terms and conditions of the contract. In the event the work of construction is delayed or interrupted by reason of fire, flood, unusually stormy weather, war, riot, strike, an order, requisition or regulation of any governmental body (excluding delays related to possible defects in the contractor's performance and excluding delays caused by the necessity of securing building permits or any required inspection procedures corrected therewith) or other contingencies reasonably unforeseeable and beyond the reasonable control of the contractor, then with the written consent of Rural Development, the date of completion of the work may be extended by the owner by the period of such delay, provided that the contractor shall give the owner and Rural Development written notice within 72 hours of the occurrence of the event causing the delay or interruption.


(C) Prior to making final payment on the contract when a surety bond is nor used or disbursing the Rural Development loan funds when an interim loan was used, Rural Development will be provided with a Form RD 1924-9, "Certificate of Contractor's Release," and Form RD 1924-10, "Release by Claimants," executed by all persons who furnished materials or labor in connection with the contract. The borrower should furnish the contractor with a copy of the "Release by Claimants" form at the beginning of the work in order that the contractor may obtain these releases as the work progresses.
(1) If such releases cannot be obtained, the funds may be disbursed provided all the following can be met:
(i) Release statements to the extent possible are obtained;
(ii) The interests of Rural Development can be adequately protected and its security position is not impaired; and

27


(5-12-87) SPECIAL PN

RD instruction 1924-A

§1924.6 (a) (12) (vi) (C) ( 1 ) (Con.)

(iii) Adequate provisions are made for handling the unpaid account by withholding or escrowing sufficient funds to pay any such clams or obtaining a release bond.


(2) The State Director may issue a State Supplement which will:
(i) Not require the use of Form RD 1924-10. If, under existing state statures, the furnishing of labor and materials gives no right to a lien against the property, or
(ii) Provide an alternative method to protect against mechanic's and materialmen's liens. In this case, the use of Form RD 1924-10 is optional.
(b) Borrower method. The borrower method means performance of work by or under the direction of the borrower, using one or more of the ways specified in this paragraph. Development work may be performed by the borrower method only when it is not practicable to do the work by the contract method; the borrower possesses or arranges through an approved self-help plan for the necessary skill and managerial ability to complete the work satisfactorily; such work will not interfere seriously with the borrower's farming operation or work schedule, and the County Office caseload will permit a County Supervisor to properly advise the borrower and inspect the work.
(1) Ways of performing the work. The borrower will:
(i) Purchase the material and equipment and do the work.
(ii) Utilize lump-sum, agreements for (A) minor items or minor portions of items of development, the total cost of which does not exceed $5,000 per agreement, such as labor, material, or labor and material for small service buildings, repair jobs, or land development; or (B) material and equipment which involve a single trade and will be installed by the seller, such as the purchase and installation of heating facilities, electric wiring, wells, painting, liming, or sodding. All agreements will be in writing, however, the County Supervisor may make an exception to this requirement when the agreement involves a relatively small amount.
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