Rd instruction 1924-a table of Contents




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66

(Revision 2)


RD Instruction 1924-A

§1924.13 (e)(2)(viii) (Con.)

(B) Prior to final payment to anyone required to cost certify, Rural Development must be provided with a certification and a trade-item breakdown showing the actual cost compared to the estimated cost furnished in accordance with paragraph (e)(2)(i)(G) of this section. Form RD 1924-13 is the form of comparative breakdown that must be used, and contains the certification required of the applicant/owner-builder prior to final payment. The amounts for builder's general overhead, general requirements, and builder's profit shall not exceed the amounts represented on the estimate of cost breakdown provided in accordance with paragraph (e)(2)(i)(G) of this section for the owner-builder or any subcontractor, material supplier, or equipment lessor having or sharing an identity of interest with the applicant/owner-builder. Final payment to the owner-builder will be adjusted, if necessary, to assure that the amounts shown on the certificate of actual cost do not exceed the amounts represented on the cost breakdown. Any funds remaining as a result of hard cost savings will be applied to the account as an extra payment or used for eligible loan purposes approved by Rural Development as long as the improvements are genuinely needed and will enhance marketability of the project. All increases or decreases of 15 percent or more in line item costs will require documentation as to the reason for the increases or decreases. The State Director may require documentation for increases or decreases of less than 15 percent, if he/she determines it necessary. This information will be required with the cost certification.
(C) Subcontracting development work.
(1) Owner-builders will not be allowed to obtain a profit and overhead unless they are performing actual construction. "Actual construction" means "work" as defined in AIA documents: "... labor, materials, equipment, and services provided by the contractor to fulfill the contractor's obligations." Under this definition, owner-builders who choose to subcontract out construction of the project to another contractor will not obtain a builder's fee (general overhead and profit) when:

67

(Revision 2)


(05-12-87) SPECIAL PN

RD Instruction 1924-A

§1924.13 (e)(2)(viii)(C)(1) (Con.)

(i) More than 50 percent of the total cost of the building construction is subcontracted to one subcontractor, material supplier, or equipment lessor, and/or


(ii) Seventy-five percent or more with three or fewer subcontractors, material suppliers, and/or equipment lessors.
(2) Note: If two or more subcontractors have common ownership, they are considered as one subcontractor.
(3) How to apply rule:
(i) The 50 percent rule will apply when division of the amount of the largest subcontract by the total amount of the building cost results in more than 50 percent.
(ii) The 75 percent rule will apply when division of the sum of the amounts of the three largest subcontracts by the total building cost results in 75 percent or more.
(D) Qualified contracting entities. Contractors, subcontractors, material suppliers, and any other individual or organization sharing an identity of interest and providing materials or services for the project must certify that it is a viable, ongoing trade or business qualified and properly licensed to undertake the work for which it intends to contract. Form RD 1944-31 will be prepared and executed by the contracting entities. The form provides notification to the entities of the penalty, under law, for erroneously certifying to the statements contained therein. Debarment actions will be instituted against entities who fail to disclose an identity of interest in accordance with the provisions of RD Instruction 1940-M (available in any Rural Development office).
(ix) Requests for payment for work performed by the owner-builder method, shall be submitted to the Rural Development District Director for review and approval prior to each advance of funds in order to insure that funds are used for authorized purposes. Requests for payment shall be made on Form RD 1924-18 or other professionally recognized form containing the following certifications to Rural Development:

68

(Revision 2)



RD Instruction 1924-A

§1924.13 (e)(2)(ix) (Con.)

The undersigned certifies that the work has been carefully inspected and to the best of their knowledge and belief, the quantities shown in this estimate are correct and the work has been performed in accordance with the contract documents.
_____________________________

(Name of Architect)

By: _____________________________

_____________________________

(Title) (Date)
Approved by Owner's Representative:

By: _____________________________


_____________________________

(Title)
Accepted by Rural Development Representative:

By: _____________________________
_____________________________

(Title)
The review and acceptance of partial payment estimates by Rural Development does not attest to the correctness of the quantities shown or that the work has been performed in accordance with the plans and specifications.


______________________________________________________
(A) If interim financing is available at reasonable rates and terms for the construction period, such financing shall be obtained. Exhibit B of Subpart E of Part 1944 of this chapter shall be used to inform the interim lender that Rural Development will not close its loan

69

(Added 03-16-94, SPECIAL PN)


(05-12-87) SPECIAL PN

RD Instruction 1924-A

§1924.13 (e)(2)(ix)(A) (Con.)

until the project is complete, ready for occupancy, evidence is furnished indicating that all bills have been paid for work completed on the project, all inspections have been completed and all required approvals have been obtained from any governmental authorities having jurisdiction over the project. Upon presentation of proper payment estimates containing an estimate of the value of work in place which has been prepared and executed by the owner-builder, certified by the applicant's architect, and accepted by Rural Development, the interim lender may advance construction funds in accordance with the provisions of this section. It is suggested that the partial payment not exceed 90 percent of the value of work in place and material suitably stored on site. (Revised 2-25-88, SPECIAL PN.)


(B) If interim financing is not available, partial payments not to exceed 90 percent of the value of work in place and materials suitably stored on site may be made to the owner-builder for that portion of the estimated cost of development guaranteed by a letter of credit or deposits meeting the requirements of §1924.6 (a)(3)(iii)(A), (B), or (C) of this subpart. Partial payments may not exceed 60 percent of the value of work in place in all other cases. The determination of the value of work in place will be based upon an application for payment containing an estimate of the value of work in place which has been prepared and executed by the owner-builder, certified by the borrower's architect, and accepted by Rural Development. Prior to receiving the first partial payment, the owner-builder must submit a schedule or prices or values of the various trades or phases of the work aggregating the total development cost of the project as required in §1924.13 (e)(2)(i)(G) and (H) of this subpart. Each application for payment must be based upon this schedule, and show the total amount owed and paid to date for materials and labor procured in connection with the project. With each application for payment, the owner-builder must also submit evidence showing how the requested partial payment is to be applied, evidence showing that previous partial payments were properly applied, and a signed statement from the applicant's attorney, title insurance company, or local official in charge of recording


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