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CHAPTER 1. INTRODUCTION
1-1 PURPOSE OF THIS HANDBOOK
This handbook sets forth both required and recommended procurement practices applicable
to Public Housing Agencies (PHAs or agencies) for the operation, modernization, and
development of public housing. It incorporates changes in Federal laws, regulations, and
other instructions, especially the increase in the Federal small purchase threshold, and aligns
the Department’s guidance in support of asset management.
1-2 APPLICATION.
The instructions herein apply to all PHA procurement actions using Federal program grant
funds, regardless of agency size, for the operation, modernization, and development of
public housing. However, smaller PHAs will be governed mostly by the more streamlined
small purchase procedures discussed in Chapter 5. Indeed, even among the largest PHAs, a
majority of procurement actions may be conducted using small purchase procedures.
This handbook does not apply to:
• Tribally Designated Housing Entities (TDHEs) or to Indian Housing Authorities
(IHAs);
• The operation of the Section 8 Housing Choice Voucher Program, which is
exempted from 24 CFR 85.36 (see March 11, 1988, Federal Register, page 8050).
Procurement activities within the voucher program, therefore, are governed by
applicable state and local law (see Chapter 13 of this handbook). To the extent that
the PHA utilizes procurement practices for its voucher program that are different
from those required under 24 CFR 85.36, the PHA should incorporate those
differences in its procurement policy; or
• Income generated by the Central Office Cost Center through reasonable fee-for-
service arrangements under 24 part 990, e.g., management fees, bookkeeping fees,
asset management fees, etc. Such fee income is not considered Federal program
income and subject to 24 CFR part 85. Fee income is governed only by State and
local requirements, as applicable.
While this handbook is intended as the primary reference document for all PHA
procurement matters, no document can be all-inclusive. Where situations arise that have not
been addressed in this handbook, the PHA is urged to contact the local HUD field office.
On a more limited basis, additional procurement-related technical assistance is available
within HUD’s Office of the Chief Procurement Officer (OCPO)and its three field-based
Field Contracting Operations (Atlanta, Denver, and Philadelphia). Where necessary, the
local HUD field office representatives can facilitate access to these latter resources.
To distinguish between instructions in this handbook that are mandatory versus those that
are advisory, the following terms have the following meanings:
• “Shall” and “must,” mean that an action or item is mandatory and is required by
statute or regulation. Regulatory and statutory citations are provided throughout
this handbook.
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• “Should” and “may,” mean that the action or item serves to provide guidance
and/or best practices but is not mandatory.
1.3 Source Requirements
For administrative program purposes, PHAs are considered “local government(s)” and
public housing assistance in the form of Operating Fund or Capital Fund assistance (or other
grant assistance covered by 24 CFR Part 85) are considered a “Federal program grant
funds.” As such, PHAs are governed by Part 85 of Title 24 of the Code of Federal
Regulations (24 CFR Part 85), Administrative Requirements for Grants and Cooperative
Agreements to State, Local, and Federally Recognized Indian Tribal Governments. 24 CFR
Part 85 is also known as the “Common Rule” in that it applies to all state and local
government recipients of Federal housing assistance grants. Section 85.36 of this “Common
Rule” is the controlling regulation governing procurement activity. Among other items, 24
CFR 85.36 provides for full and open competition in all PHA procurement matters. The
standards provided in this handbook are basic principles that each grantee must adhere to
when it contracts for needed items using Federal program grant funds.
PHAs are also required to follow applicable State or local laws on procurement, depending
on their location. In some cases, the Federal standards are stricter than State or local law. In
such cases, the PHA must comply with the applicable Federal law and the rules in 24 CFR
85.36. If State or local law is stricter than Federal standards, then State or local law will
apply. Additional guidance on dealing with State and local regulations governing
procurement is covered in Chapter 13 of this handbook. Other regulations that affect
specific aspects of a PHA’s procurement program include:
• 24 CFR Part 135 – Economic Opportunities for Low- and Very Low-Income
Persons, which implements Section 3 of the Housing and Urban Development Act
of 1968
• 24 CFR 941, Subpart F – Public/Private Partnerships for the Mixed Finance
Development of Public Housing Units
• 24 CFR Part 943 – PHA Consortia and Joint Ventures
• 24 CFR Part 963 – Public Housing — Contracting with Resident Owned
Businesses
• 24 CFR Part 964 – Tenant Participation and Tenant Opportunities in Public
Housing
• 24 CFR Part 965 – PHA-Owned or Leased Projects – General Provisions (see
Subpart A on pre-emption of state prevailing wage requirements)
• 24 CFR Part 968 – Public Housing Modernization (see 968.110 on wage provisions
and 968.135 on contracting requirements)
• 24 CFR Part 990 – The Public Housing Operating Fund Program (see Section
990.170 on utilities)
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1-4 Consistency with Good Business Practices
The fundamental goal of a PHA’s procurement system should be to satisfy end users in
terms of cost, quality, and timeliness of the delivered product or service while complying
with applicable laws, rules (e.g., HUD regulations and notices), and the PHA’s own
policies. Further, those involved in the procurement function should exercise personal
initiative and sound business judgment in providing the best value product or service in
meeting the agency’s needs. Consistent with that goal, Contracting Officers may assume
that, if a specific strategy, practice, policy or product is in the best interests of the PHA and
is not addressed in this handbook, nor prohibited by law, executive order, regulation, or
other directive including the PHA’s own policy, the strategy, practice, policy or procedure
may be a permissible exercise of authority. Contracting Officers are advised to seek advice
whenever they have doubts about an intended strategy, practice, policy or procedure.
1-5 State and Local Law.
Each PHA operates under a different set of State and/or local laws. In some cases, the
Federal standards may be more stringent than the State or local law/regulation. In general,
the PHA must comply with whichever is more stringent. It would be impossible for the
Department to provide guidance on each and every State/local requirement affecting
procurement. A more complete discussion of the relationships between Federal, State, and
local laws is found in Chapter 13.
1-6 Public Access to Procurement Information
Certain information about PHA procurements is normally considered public (e.g., name of
the winning contractor and total contract price) and should be released to the public in
accordance with the PHA’s procurement policy and applicable State laws and regulations
governing freedom of information. Other information related to procurement is often
protected from disclosure (e.g., proprietary business information such as technical methods
or processes, detailed pricing information, personal information, or the PHA’s pre-decided
information such as internal proposal evaluations). PHAs must exercise caution to ensure
that protected information is not made public. Contracting personnel should consult the
PHA’s legal counsel whenever there is any question regarding the release of information.
In addition to laws requiring the publication of procurement opportunities, many State
governments have enacted Freedom of Information or similar laws designed to further the
goal of open government by providing public access to procurement information. These
laws are not uniform as each State has a different set of rules defining what type of
information is considered public as well as how and when it may be released. The State law
on public records may or may not apply to the PHA’s procurement actions. Each PHA must
incorporate applicable State laws into its procurement policy and ensure that procurement
actions are conducted in accordance with such laws.
1.7 Availability of HUD Forms and Documents
All required forms listed in this document, as well as relevant HUD notices, handbooks, and
regulations, can be found online through one or more of the following:
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• Information related to the public housing programs and their requirements is
available at HUD’s Office of Public and Indian Housing web site:
http://www.hud.gov/offices/pih/index.cfm
• Valuable procurement-related information and contacts to HUD personnel who can
provide procurement-related technical assistance are available at HUD’s OCPO’s
web site:
http://www.hud.gov/offices/cpo/index.cfm
• HUD forms may be found through:
http://www.hudclips.org.
Please note that any mandatory forms or clauses discussed in this handbook must not be
modified without written HUD approval. HUD field offices may approve changes to forms
necessary to conform to State and local laws, subject to concurrence by HUD field office
counsel. Other changes to these forms shall only be made with the written authorization of
the Assistant Secretary for Public and Indian Housing.
1.8 Paperwork Reduction Information
The information collection requirements contained in this handbook has been approved by
the Office of Management and Budget (OMB) under the Paperwork Reduction Act of 1995
(44 U.S.C. 3501-3520) and assigned OMB control number(s) 2535-0117; 2577-0157; 2577-
0039; 2577-0025; 2577-0155; and 2577-0015. In accordance with the Paperwork Reduction
Act, HUD may not conduct or sponsor, and a person is not required to respond to, a
collection of information unless the collection displays a currently valid OMB control
number.
Any new information collection and reporting requirements not covered under previous
approvals will require a new package to be prepared and submitted to OMB for review.
1.9 Glossary
The following is a list of key procurement and contracting terms and definitions used
throughout this handbook.
Acceptance – The act of an authorized representative of the PHA acknowledging that the
supplies or services delivered to or received by the PHA conform to contract requirements.
Annual Contributions Contract (ACC) – Entered into between HUD and the PHA,
setting forth terms and conditions for the operation, modernization, and development of
public housing. The current version of the ACC (form HUD-53012-A, 7/95) does not
actually contain any specific language governing PHA procurement activity, but
incorporates by reference regulations promulgated by HUD at Title 24 of the Code of
Federal Regulations, as well as all applicable laws and executive orders, and
regulations.
Amendment – Written revision or clarification made to a solicitation.
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Anti-competitive Practices – Actions by potential contractors that improperly reduce or
eliminate competition or restrain trade. Examples are: an agreement or understanding
among competitors to restrain trade, such as submitting collusive bids or proposals, rotating
low bids, follow-the-leader pricing, or sharing of the business. Competition may also be
wrongfully discouraged by illicit business actions that have the effect of restraining trade,
such as controlling the resale price of products or an improper collective refusal to bid (24
CFR 85.36(c)(1)).
Architect/Engineer (A/E) – Person (or company) usually responsible for developing the
plans and specifications of a building or development and, in some cases, supervising the
construction effort.
Bid – The price submitted by a bidder in the sealed bidding method of procurement.
Bidder’s List – General list of persons or firms who may be interested in contracting
opportunities with the PHA, and in submitting bids in response to an Invitation for Bid.
Change Order – A unilateral modification made to the contract by the Contracting Officer
under the authority of the contract’s Changes clause. Only the specific changes permitted
by the particular Changes clause may be made under a change order (e.g., modify the
drawings, design, specifications, method of shipping or packaging, place of inspection,
delivery, acceptance, or other such contractual requirement; see form HUD-5370). All
change orders must be within the scope of the contract.
Changed Conditions – Construction site or repair conditions that differ significantly from
those indicated in the contract or from those ordinarily encountered in the performance of
the specific type of work required by the contract.
Competitive Proposals – Also called contracting by negotiation, a method of procurement
using the solicitation, evaluation, and negotiation of proposals instead of sealed bids (see
Chapter 7 for guidance on their use). The competitive proposal method is used for
requirements exceeding the PHA’s small purchase threshold when conditions are not
appropriate for sealed bidding. (Note: Under the Qualifications-Based Selection method
only, a Request for Qualifications (RFQ) is used in place of the RFP.)
Competitive Range – Those proposals submitted in response to a RFP that, after technical
evaluation by the PHA’s selection panel and considering the proposed costs/prices, have a
reasonable chance of being awarded the contract (see Chapter 7, paragraph 7.2.N for
detailed guidance).
Consortia – These are a special kind of PHA consortium where two or more agencies join
together to perform planning, reporting and other administrative functions, including,
importantly, the joint preparation of a PHA Plan. Consortia are addressed separately in
paragraph 14.7.
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Contract – A mutually binding legal relationship obligating the seller to furnish
the supplies or services (including construction) and the PHA to pay for them. It includes all
types of commitments that obligate an agency to an expenditure of funds and that, except as
otherwise authorized, are in writing. In addition to bilateral instruments, contracts include:
contract awards and notices of awards; job orders or task letters issued under basic ordering
agreements, requirement contracts, or definite- or indefinite-quantity contracts; letter
contracts; orders, such as purchase orders, under which the contract becomes effective by
written acceptance or performance; bilateral (two-party) contract modifications; and various
cooperative and interagency agreements (as described elsewhere in this Handbook).
Contracts do not include grants and cooperative agreements covered by 31 U.S.C. 6301, et
seq.
Contracting Officer – The Executive Director or an official authorized by the Executive
Director to enter into and/or administer contracts and make related determinations and
findings. For the purpose of this handbook, the term includes any PHA employee
designated and authorized to perform the duties of a Contracting Officer.
Contract Administration – All the actions taken with regard to a contract after its award.
Administration includes monitoring the contractor’s performance to ensure compliance with
the contract requirements, and terms and conditions.
Contract Modification – Any written alteration to a contract executed by an authorized
contracting officer (see Chapter 11, paragraph 11.4.A).
Contractor – An Offeror who is awarded a contract.
Contract Pricing Arrangements – The arrangement, as reflected in the contract, for how
the vendor will be paid for services. While there are two basic contract pricing
arrangements – firm fixed-price and cost-reimbursement – there are multiple variations on
these models, from indefinite quantity contracts (where the exact number of deliverable
items is not known at the time of contract award but where minimum and maximum
quantities are stated) to cost-plus fixed-fee (where costs are reimbursed, up to an estimated
amount, plus a specified fee). (See Chapter 11 for more detail.)
Cost-Reimbursement Contract – The contractor is reimbursed for his/her allowable costs
of performance up to a total estimated amount specified in the contract (see Chapter 10,
section 10.1, for detailed guidance on cost-reimbursement contracts). The contract may
provide for the payment of a fee (i.e., a type of profit) in addition to costs.
Cure Notice – A document originated by the Contracting Officer and sent to notify the
contractor that the contract may be terminated for default unless performance is corrected
within a specified number of days.
Excusable Delay – A failure to perform within the contract period that is beyond the
control and without fault or negligence of the contractor, as determined by the Contracting
Officer.
Federal Small Purchase Threshold – The maximum dollar amount for individual small
purchases (see Chapter 5). The threshold is currently set at $100,000 (41 U.S.C. 403(11)).
PHAs may establish lower thresholds.
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Firm Fixed Price Contract – The contractor is paid a firm fixed-price for all required work
regardless of the contractor’s actual costs of performance (see Chapter 10, section 10.1, for
detailed guidance on fixed-price contracts).
Independent Cost Estimate (ICE) – An estimate prepared by the PHA prior to obtaining
offers. The degree of analysis will depend on the size and complexity of the purchase.
Inspection – The examination and/or testing of supplies and services to determine
conformance with the contract requirements.
Instrumentality- Shall mean a subsidiary branch of the PHA through which functions or
policies are implemented.
Intergovernmental or Interagency Agreement – An agreement between a PHA and a
Federal, State, or local government agency (including other PHAs) for the provision of
supplies or services. In recent years, the terms Cooperative Agreement, Intergovernmental
Agreement, Consortium Agreement, or Memorandum of Agreement have been used
interchangeably and are treated the same for the purposes of this handbook.
Internal Controls – Safeguards that ensure contracting actions will be conducted in
conformity with applicable Federal and State regulations and PHA policy.
Invitation for Bids (IFB) – Solicitation type used under the sealed bidding method of
procurement. This document explains the intended purchase and invites bids from potential
contractors.
Joint Venture Partner – This is a participant, other than a PHA, in a joint venture,
partnership, or other business arrangement or contract for services with a PHA.
Level-of-Effort Contract – Contract (usually cost-reimbursement) that specifies the
number and type of person-hours that the contractor will use in performance of the contract
requirements.
Major Change – Modification to an existing contract that is beyond the general scope of
the contract or a change to a substantive element of the contract that is so extensive that a
new procurement should be used.
Micro Purchases – Small purchases under $2,000 (or lower threshold established by the
PHA; see paragraph 5.2.B).
Negotiation – Discussions with offerors in the competitive range regarding technical and/or
price proposals when awarding a contract using the competitive proposals method of
procurement or when issuing modifications to existing contracts or other required
discussion with offerors for the other methods of procurement.
Noncompetitive Proposals – Procurement through solicitation of a proposal from only one
source, or after solicitation of a number of sources, competition is determined inadequate.
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Offer – A response to a solicitation (IFB or RFP) that, if accepted, would bind the offeror to
perform the resultant contract. Responses to invitations for bids (sealed bidding) are offers
called “bids” or “sealed bids”, responses to requests for proposals (negotiation) are offers
called “proposals”; however, responses to requests for quotations (small purchases) are
“quotations,” not offers. Small purchases become binding contracts once the vendor
accepts the order (e.g., by signature or substantial performance of the order). Offers
submitted under the Qualifications-Based Selection (QBS) method are called
“qualifications” (see paragraph 7.3.A).
Offeror - The general term for the entity that submits a response to a solicitation. For the
purposes of this handbook, offeror may be used interchangeably with bidder, proposer, or
respondent.
Procurement – The acquiring by contract of supplies and services (including construction)
with the PHA’s Federal program grant funds through purchase, lease, or other means.
Procurement begins at the point when agency needs are established and includes the
description of requirements to satisfy agency needs, solicitation and selection of sources,
award of contracts, contract financing, contract performance, contract administration, and
those technical and management functions directly related to the process of fulfilling agency
needs by contract.
Proposal – The offer submitted by a potential contractor in the competitive or
noncompetitive proposals method of procurement.
Qualification Based Selection (QBS) – A form of procurement of architect-engineering
(A/E) or development services by competitive proposals in which price is not requested in
the Request for Qualifications (RFQ) or used as an evaluation factor. Instead, technical
qualifications only are reviewed negotiations are conducted with the best-qualified firm.
Only A/E services and development partners may be procured by this method.
Quotation – The price or cost submitted by a vendor in the small purchase procedures
method.
Request for Proposals (RFP) – Solicitation method used under both the competitive or
non-competitive methods of procurement. Proposal evaluation and contractor selection are
based on the evaluation criteria and factors for award as stated in the RFP. Contract award
is based on the best proposal responsive to the requirements of the statement of work
resulting in the greatest benefit and best value to the PHA, which may not necessarily be
primarily determined based on price.
Responsible Bidder – A bidder who is able to comply with the required or proposed
delivery or performance schedule; has a satisfactory performance record; has a satisfactory
record of integrity and business ethics; has the necessary organization, experience,
accounting and operational controls, and technical skills, or the ability to obtain them;
has the necessary production, construction, and technical equipment and facilities, or the ability
to obtain them; and is otherwise qualified and eligible to receive an award under applicable
laws and regulations, including the fact that the bidder is not suspended, debarred or under a
HUD-imposed Limited Denial of Participation.
Responsive Bid – A bid that conforms exactly to the requirements in the Invitation for Bids
(IFB).
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Sanctions – Measures that may be invoked by HUD to exclude or disqualify contractors,
PHA staff or agents acting on behalf of a PHA from participation in HUD programs (such
as limited denial of participation or debarment), or measures the PHA may take regarding
employees, officers, agents, or others who violate the ethical standards of the policies of the
PHA (such as dismissal, reassignment, removal from position, etc.). In the case of
violations, HUD would exercise any available remedy under the ACC, federal regulations
and statutes, and grant agreements, including the U.S. Housing Act of 1937 as amended, 24
CFR Parts 84 and 85, and sections 17 and 19 of the ACC.
Sealed Bidding – A method of procurement inviting sealed bids. This method requires:
specifications that are clear, accurate, and complete; a public bid opening; and evaluation of
bids and award of the contract based on the lowest price submitted by a responsive and
responsible contractor. Sealed bidding is the preferred method for construction (24 CFR
85.36(d)(2)).
Show Cause Letter – A document sent by the Contracting Officer notifying a defaulting
contractor that the contract may be terminated for default unless the contractor can provide
adequate justification for not terminating within a specified time period (usually 10 days).
Small Purchase Procedures – Small Purchase Procedure – A simplified method for
acquiring supplies, materials, and services (including construction) that do not exceed the
PHA’s small purchase threshold. (The Federal threshold is $100,000; PHAs are limited to
this or a lower amount as specified in applicable State or local law or dictated by the PHA’s
Procurement Policy or imposed by HUD due to PHA’s procurement performance.) (24 CFR
85.36(d)(1)).
Small Purchase Threshold – The per purchase dollar limit established by a PHA for small
purchases. The threshold is set in the PHA’s procurement policy. The threshold may not
exceed the Federal small purchase threshold (see Chapter 5, section 5.2).
Solicitation – The general term for the agency’s request for offers from potential offerors.
A solicitation package generally contains the proposed contract, including contract terms
and conditions, instructions to potential offerors regarding the submission of an offer, and
any other information needed to prepare an offer.
Solicitation Provisions – The instructions provided to bidders/offerors included in
solicitations. The provisions include such information as how to prepare an offer, bonding
requirements, date and time for submission of offers, etc. Provisions required by HUD, as
applicable, are included on forms HUD-5369, Instructions for Bidders and HUD-5369-A, B
and C, Representations, Certifications, etc., and HUD-5369-B for solicitations above the
federal small purchase threshold.
Specifications or Scope – Description of the technical requirements of a contract.
Statement of Work (SOW) – Written description of work to be performed that establishes
the standards sought for the supplies or services furnished under the contract; typically used
for service contracts.
Subsidiary – A type of operating entity created and operated by a PHA over which it has a
controlling interest. It may be wholly owned or controlled by the PHA and may be a non-
profit organization.
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Supplemental Agreement – A type of contract modification to which both parties agree.
Termination for Cause – Termination of a contract on a unilateral basis when the
contractor fails to perform, fails to make progress so as to endanger performance, or
commits a default as specified in the contract.
Termination for Convenience – Termination of a contract by the PHA on a unilateral basis
when the product or service is no longer needed or when it is in the best interest of the PHA.
Time Delay – An interruption during which supplies are not delivered or services or work
are not completed in accordance with the performance schedule stated in the contract.
Vendor – The term often used for an offeror or contractor when talking about small
purchasing.
Vendor List – List of persons or firms qualified to do business with the PHA.
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1.11 ACRONYM GUIDE
A/E – Architect/Engineer
ABA – American Bar Association
ACC – Annual Contributions Contract
BAT – Bureau of Apprenticeship and Training
BTU – British Thermal Unit
CEA – Comprehensive Energy Analysis
CFR – Code of Federal Regulation
CSS – Community and Supportive Services
DOE – U.S. Department of Energy
DOL – U.S. Department of Labor
EPC – Energy Performance Contracting
ESCO – Energy Service Company
FAR – Federal Acquisition Regulation
GAO – General Accounting Office
GSA – General Services Administration
HOPE VI – Homeownership and Opportunity for People Everywhere
HUD – U.S. Department of Housing and Urban Development
ICE – Independent Cost Estimate
IFB – Invitation for Bids
IPP – Individual Procurement Plan
LDP – Limited Denial of Participation
LGB- Local Governing Body
LSP – Legal Service Personnel
MBDC – Minority Business Development Center
MOC – Minority Owned Corporation
NAICS – North American Industry Classification System
NOFA/Super NOFA – Notice of Funding Availability
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OCPO – Office of the Chief Procurement Officer
OMB – Office of Management and Budget
PDF – Portable Document Format
PHA – Public Housing Agency
PHAS – Public Housing Assessment System
Pub.L. – Public Law
QBS – Qualifications-Based Selection
QHWRA – Quality Housing and Work Responsibility Act
RFP – Request for Proposals
RFQ – Request for Qualifications
RMC – Resident Management Corporation
SBDC – Small Business Development Center
SOW – Statement/Scope of Work
T-List – U.S. Treasury Circular 570
U.S.C. – United States Code
WBC – Women’s Business Centers
WBE – Women’s Business Enterprise
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