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CHAPTER 10. MISCELLANEOUS REQUIREMENTS
10.1 Contract Pricing and Types
This chapter includes miscellaneous procurement requirements.
A. General Guidance. A wide selection of contract types is available
to PHAs to provide needed flexibility in acquiring supplies and services.
1. Contract types vary according to: (a) the degree and
timing of the responsibility assumed by the contractor
for the costs of performance; and (b) the amount and
nature of the profit incentive offered to the
contractor for achieving or exceeding specified
standards or goals.
2. The contract types are grouped into two broad
categories: fixed-price contracts and
cost-reimbursement contracts. The specific contract
types range from firm-fixed-price, in which the
contractor has full responsibility for the
performance costs and resulting profit (or loss), to
cost-plus-fixed-fee, in which the contractor has
minimal responsibility for the performance costs and
the negotiated fee (profit) is fixed. In between are
the various incentive contracts, in which the
contractor’s responsibility for the performance costs
and the profit or fee incentives offered are tailored
to the uncertainties involved in contract performance.
3. Contracts resulting from sealed bidding shall be
firm-fixed-price contracts or fixed-price contracts
with economic price adjustment.
4. Contracts resulting from competitive proposals may be
of any type or combination of types.
5. In accordance with 24 CFR 85.36(f)(4), the use of the
following types of contracts is prohibited:
a. Cost-plus-percentage-of-cost. This type of
contract is prohibited because it obligates the
PHA to pay all costs incurred throughout the
contract, plus a commission based on the
percentage of future costs. In this type of
pricing arrangement, the contractor’s profit
increases in proportion to its costs incurred in
the performance of the contract. The contractor
has a clear incentive to increase costs.
b. Cost-plus-percentage-of-construction-cost. The
cost for individual construction-related services is
determined by applying a percentage of actual
construction costs as a fee, such as an A/E contract
in which the fee is determined based on the total
construction cost. Such an arrangement allows the
possibility of the contractor designing an overly
expensive construction project in order to increase
profits.
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B. Selecting Contract Type. There are many factors that the
Contracting Officer should consider in selecting and when
appropriate (e.g., using competitive proposals),
negotiating the contract type. They include:
1. Price competition. Normally, effective price competition
results in realistic pricing, and a fixed-price contract
is ordinarily in the PHA’s interest.
2. Price analysis. Price analysis, with or without
competition, may provide a basis for selecting the
contract type. The degree to which price analysis can
provide a realistic pricing standard should be carefully
considered.
3. Cost analysis. In the absence of effective price
competition and if price analysis is not sufficient, the
cost estimates of the offeror and the PHA provide the
bases for negotiating contract pricing arrangements. It
is essential that the uncertainties involved in performance
and their possible impact upon costs be identified and
evaluated, so that a contract type that places a reasonable
degree of cost responsibility upon the contractor can be
negotiated.
4. Type and complexity of the requirement. Complex
requirements, particularly those unique to the PHA, usually
result in greater risk assumption by the PHA. This
situation is especially true for complex development
contracts, when performance uncertainties or the likelihood
of changes makes it difficult to estimate performance costs
in advance. As a requirement recurs or as quantity
production begins, the cost risk should shift to the
contractor, and a fixed-price contract should be
considered.
5. Urgency of the requirement. If urgency is a primary factor,
the PHA may choose to assume a greater proportion of risk
or it may offer incentives to ensure timely contract
performance.
6. Period of performance. In times of economic uncertainty,
contracts extending over a relatively long period may
require economic price adjustment terms.
7. Contractor’s technical capability and financial
responsibility.
8. Adequacy of the contractor’s accounting system. Before
agreeing on a contract type other than firm-fixed-price,
the Contracting Officer should ensure that the contractor’s
accounting system will permit timely development of all
necessary cost data in the form required by the proposed
contract type. This factor may be critical when the
contract type requires price revision while performance
is in progress, or when a cost-reimbursement contract is
being considered and all current or past experience with
the contractor has been on a fixed-price basis.
9. Concurrent contracts. If performance under the proposed
contract involves concurrent operations under other
contracts, the impact of
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those contracts, including their pricing arrangements,
should be considered.
10. Extent and nature of proposed subcontracting. If the
contractor proposes extensive subcontracting, a contract
type reflecting the actual risks to the prime contractor
should be selected.
11. Procurement history. Contractor risk usually decreases as
the requirement is repetitively acquired. Also, product
descriptions or descriptions of services to be performed
can be defined more clearly.
C. Contract Types
The following types are the most commonly used by PHAs. They are
ranked in order of risk to the PHA, from lowest to highest. Other
types and variations on these types may be used as appropriate in
accordance with the limitations set forth in this section 10.3.
1. Fixed-Price. Fixed-price types of contracts provide for a
firm price or, in appropriate cases, an adjustable price.
Fixed-price contracts providing for an adjustable price may
include a ceiling price, a target price (including target
cost), or both. Unless otherwise specified in the contract,
the ceiling price or target price is subject to adjustment
only by operation of contract clauses providing for
equitable adjustment or other revision of the contract
price under stated circumstances.
a. Firm fixed-price. This contract type requires the
delivery of products or services at a specified
price, fixed at the time of contract award and not
subject to any adjustment on the basis of the
contractor’s cost experience in performing the
contract. It is appropriate for use when fair and
reasonable prices can be established at time of
award, definite design or performance specifications
are available, products are off-the-shelf or
modified commercial products or services for which
realistic prices can be offered, and any performance
uncertainties can be identified and reasonable cost
estimated in advance. Its advantages are that it
encourages contractor efficiency and places total
responsibility and risk on the contractor. Its
disadvantages are that it lacks flexibility in
pricing and performance. It is the most preferred
type of contract and the most commonly used,
requiring the least amount of contract
administration. However, as discussed below under
other types, it is not always possible to use firm
fixed-price contracts.
b. Fixed-price with economic price adjustment. In
cases where the market for a particular supply or
service is especially volatile, and the PHA needs a
contract for a term greater than just an initial
quantity, this contract type allows for adjustment in
the contract price based upon the occurrence of
specified
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contingencies stated in the contract (e.g., changes
in market conditions, the Consumer Price Index, or
other commodity price indices that are not
controlled by the contractor). The contract
contains initial firm fixed prices that may be
adjusted upward or downward during the performance
period. The contract must contain a clause
explaining how the price adjustment will be made,
identifying the price index to be used, the
frequency of adjustment, and any overall ceiling
price. A fixed-price contract with economic price
adjustment may be used when:
i. There is serious doubt concerning the
stability of market or labor conditions
that will exist during an extended period
of contract performance; and,
ii. Contingencies that would otherwise be
included in the contract price can be
identified and covered separately in the
contract. Price adjustments based on
established prices should normally be
restricted to industry-wide contingencies.
Price adjustments based on labor and
material costs should be limited to
contingencies beyond the contractor’s
control.
2. Cost-reimbursement. Cost-reimbursement types of contracts
provide for payment of allowable incurred costs, to the
extent prescribed in the contract. These contracts
establish an estimate of total cost for the purpose of
obligating funds and establishing a ceiling that the
contractor may not exceed (except at its own risk) without
the approval of the contracting officer.
Cost-reimbursement contracts are suitable for use only when
uncertainties involved in contract performance do not
permit costs to be estimated with sufficient accuracy to
use any type of fixed-price contract. A cost-reimbursement
contract may be used only when: the contractor’s accounting
system is adequate for determining costs applicable to the
contract; and, appropriate surveillance during performance
will provide reasonable assurance that efficient methods
and effective cost controls are used.
a. Cost contract (no fee). This is a
cost-reimbursement contract under which the
contractor receives no fee. This type is often
used when contracting with nonprofit
organizations that may not receive any fee or
profit.
b. Cost-plus-fixed-fee. This is a type of
cost-reimbursement contract that provides for payment
to the contractor of a negotiated fee (profit) that
is fixed at the time of contract award. The fixed
fee does not vary with the contract’s actual costs
(e.g., the contractor will not receive a greater fee
for incurring less
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cost), but may be adjusted as a result of changes in
the work to be performed under the contract (e.g., as
a result of a change order). This contract type
permits contracting for efforts that might otherwise
present too great a risk to contractors (e.g., there
is a high degree of uncertainty in, or the ultimate
costs of, accomplishing the contract’s requirements).
A cost-plus-fixed-fee contract presents the greatest
risk to the PHA because it provides the contractor
only a minimum incentive to control the costs of
contract performance. Therefore, it should be used
only when no other type is feasible. Like all
cost-reimbursement contracts it requires a
significant amount of monitoring by the PHA to ensure
contractor compliance.
i. There are two forms of cost-plus-fixed-fee
contracts:
(A) The completion form describes the scope
of work by stating a definite goal or
target and specifying an end product.
This form of contract normally requires
the contractor to complete and deliver
the specified end product (e.g., a final
report of research accomplishing the
goal or target) within the estimated
cost, if possible, as a condition for
payment of the entire fixed fee.
(B) The term form describes the scope of work in
general terms and obligates the contractor to
devote a specified level of effort for a stated
time period. Under this form, if the
Contracting Officer considers the contractor’s
performance to be satisfactory, the fixed fee
is payable at the expiration of the agreed-upon
period.
ii. Because of the differences in obligation assumed
by the contractor, the completion form is
preferred over the term form whenever the work,
or specific milestones for the work, can be
defined well enough to permit development of
estimates within which the contractor can be
expected to complete the work. The term form
should not be used unless the contractor is
obligated by the contract to provide a specific
level of effort within a definite time period.
3. Indefinite-delivery contracts
a. There are three types of indefinite-delivery
contracts: definite-quantity contracts,
requirements contracts, and indefinite-quantity
contracts. The appropriate type of
indefinite-delivery contract may be used to
acquire supplies and/or services when the exact
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times and/or exact quantities of future deliveries
are not known at the time of contract award.
i. Definite-quantity contracts provide for
delivery of a definite quantity of specific
supplies or services for a fixed period of
time (e.g., one year), with deliveries or
performance to be scheduled at designated
locations upon order. A definite-quantity
contract may be used when it can be
determined in advance that:
(A) A definite quantity of supplies or services
will be required during the contract period;
and,
(B) The supplies or services are regularly
available or will be available after a short
lead time.
ii. Requirements contracts provide for filling
all of the PHA’s purchase requirements for the
supplies or services specified in the contract
during a fixed period of time. The PHA may
not buy the supplies or services from another
source during the period of the contract. A
requirements contract may be appropriate for
acquiring any supplies or services when the
PHA anticipates recurring requirements but
cannot predetermine the precise quantities of
supplies or services that it will need during
a definite period.
iii. Indefinite-quantity contracts provide for
delivery of an indefinite quantity, within
stated limits (a minimum and maximum quantity),
of supplies or services during a fixed period.
Quantity limits may be stated in the contract
as number of units or as dollar values. PHAs
may use an indefinite-quantity contract when
they cannot predetermine, above a specified
minimum, the precise quantities of supplies or
services that they will require during the
contract period, and it is inadvisable to
commit itself for more than a minimum quantity.
PHAs should use an indefinite-quantity contract
only when a recurring need is anticipated.
(A) The contract must require the PHA to order and
the contractor to furnish at least a stated
minimum quantity of supplies or services. In
addition, if ordered, the contractor must
furnish any additional quantities, not to
exceed the stated maximum. The Contracting
Officer should establish a reasonable maximum
quantity based on market research, trends on
recent contracts for similar supplies or
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services, survey of potential users, or any
other rational basis.
(B) To ensure that the contract is binding, the
minimum quantity must be more than a nominal
quantity, but it should not exceed the amount
that the PHA is fairly certain to order.
(C) The contract may also specify maximum or
minimum quantities that the PHA may order under
each task or delivery order and the maximum
that it may order during a specific period of
time. This ensures that the contractor knows
what the potential maximum number of deliveries
he/she may have to make and allows him/her to
adequately prepare.
(D) The solicitation and resulting contract for an
indefinite-quantity contract should:
(1) Specify the period of the contract, including
the number of options and the period for
which the PHA may extend the contract under
each option;
(2) Specify the total minimum and maximum
quantity of supplies or services the PHA will
acquire under the contract. This may be
expressed in units (e.g., number of items)
or total dollar amount;
(3) Include a statement of work, specifications,
or other description, that reasonably
describes the general scope, nature,
complexity, and purpose of the supplies or
services the PHA will acquire under the
contract in a manner that will enable a
prospective offeror to decide whether to
submit an offer;
(4) State the procedures that the PHA will use in
issuing orders, including the ordering media
(fax, email, etc.) and whether oral orders
may be placed; and,
(5) Identify the PHA personnel who are authorized
to issue orders.
b. Indefinite-delivery contracts:
i. Specify the prices for the supplies or services,
the period under which the PHA may place orders
with
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the contractor, the ordering procedures, and the
contract terms and conditions that govern the
orders;
ii. Provide for obtaining the supplies or services
when needed by placing orders with the
contractor within the time period stated in the
contract (e.g., one year);
iii. May be awarded using sealed bidding or
competitive proposals as appropriate.
Indefinite-delivery purchase orders should not
be used unless the PHA knows that multiple
orders for items or services will be needed,
and the total amount of all orders will not
exceed the PHA’s small purchase threshold;
and,
iv. May use any type of pricing arrangement
(e.g., fixed-price) as appropriate to the
supplies and/or services being purchased.
c. Orders placed under indefinite-delivery contracts
are not considered purchase orders. Since the
indefinite-delivery contracts are awarded
competitively, no further competition is required
for individual orders placed under it.
4. Time and materials and labor-hour.
a. A time-and-materials contract provides for acquiring
supplies or services on the basis of:
i. Direct labor hours at specified fixed
hourly rates that include wages, overhead,
general and administrative expenses, and
profit; and,
ii. Materials at cost, including, if appropriate,
material handling costs as part of material
costs.
b. In accordance with 24 CFR 85.36(b)(10) a
time-and-materials contract may be used only when the
Contracting Officer has determined that no other type
of contract is suitable (i.e., it is not possible at
the time of placing the contract to estimate
accurately the extent or duration of the work or to
anticipate costs with any reasonable degree of
confidence), and the contract includes a ceiling
price that the contractor exceeds at his/her own
risk. The contracting officer shall document the
contract file to justify the reasons for and amount
of any subsequent change in the ceiling price.
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c. A time-and-materials contract provides no positive
profit incentive to the contractor to control cost
or labor use. The more the contractor’s labor force
works, the more profit the contractor realizes.
Therefore, appropriate PHA surveillance of contractor
performance is required to ensure that efficient
methods and effective cost controls are being used.
d. A labor-hour contract is a variation of the
time-and-materials contract. The only difference is
that the contractor provides only labor and no
materials.
5. Letter contract. A letter contract is a written
preliminary contractual instrument that authorizes
the contractor to begin immediately performing
services or delivering supplies while the contract
terms are negotiated. A letter contract is a form of
negotiated contract (i.e., not sealed bidding) and
may result in any contract type (e.g., fixed-price,
cost-reimbursement, etc.). It should be used only in
exceptional circumstances, and is most appropriate
for emergency work, or other urgent and compelling
needs. The single advantage of this method is that
it expedites the procurement process. The contractor
may begin performance on urgent requirements before the
full requirements of the contract are made final, or
“definitized.” The disadvantage is that it provides no
incentive for cost control by the contractor, and the
PHA is in a very weak bargaining position at the time
the final contract is negotiated. The contractor is
already performing the work, and the work is usually
critical.
a. A letter contract may be used when:
i. The PHA’s interests demand that the contractor
be given a binding commitment so that work can
start immediately; and,
ii. Negotiating a definitive contract is not
possible in sufficient time to meet the
requirement. However, a letter contract should
be as complete and definite as feasible under
the circumstances. Letter contracts that are
subject Davis-Bacon or HUD-determined wage
rate requirements shall so state, and where
feasible, the applicable wage determination
shall be attached.
b. When a letter contract award is based on price
competition, the contracting officer should include
an overall price ceiling in the letter contract.
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c. Each letter contract should contain a negotiated
definitization schedule including:
i. Dates for submission of the contractor’s price
proposal;
ii. A date for the start of negotiations; and,
iii. A target date for definitization. PHA’s may
establish maximum periods for negotiating final
contracts (e.g., no more than 30 days after the
issuance of the letter contract) in their
Procurement Policies.
d. The maximum liability of the PHA under a letter
contract should be the estimated amount necessary
to cover the contractor’s requirements for funds
before definitization. PHAs should establish
limits on letter contract liability in their
Procurement Policies (e.g., no more than 50% of the
total estimated contract price).
e. A letter contract should be used only after the
Contracting Officer, or another official as
designated in the PHA’s Procurement Policy,
determines in writing that no other contract is
suitable. Letter contracts should not:
i. Commit the PHA to a definitive contract in
excess of the funds available at the time the
letter contract is executed;
ii. Be entered into without competition unless
infeasible (see 24 CFR 85.36(c)); or,
iii. Be amended to satisfy a new requirement unless
that requirement is inseparable from the
existing letter contract. Any such amendment
should be subject to the same requirements
and limitations as a new letter contract.
f. A letter contract is not a letter of intent. A
letter contract is a bona fide obligation on the part
of the PHA. A letter of intent is a non-binding
statement to a contractor about an intended future
contract. Since a letter of intent has no legal
effect, it should not be used as a form of contract.
10.2 Contractor Responsibility
A. General Requirements and Definition. PHAs shall not award any
contract until the prospective contractor, i.e., low responsive
bidder or successful
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offeror, has been determined to be responsible. A responsible
bidder/offeror must:
1. Have adequate financial resources to perform the contract,
or the ability to obtain them;
2. Have the necessary organization, experience, accounting and
operational controls, and technical skills, or the ability
to obtain them;
3. Have the necessary production, construction, and technical
equipment and facilities, or the ability to obtain them;
4. Be able to comply with the required or proposed delivery or
performance schedule, taking into consideration all the
bidder’s/offeror’s existing commercial and governmental
business commitments;
5. Have a satisfactory performance record;
6. Have a satisfactory record of integrity and business
ethics; and
7. Be otherwise qualified and eligible to receive an award
under applicable laws and regulations, including not be
suspended, debarred or under a HUD-imposed LDP.
B. Acceptable Evidence of Responsibility
It is incumbent upon bidders/offerors to provide acceptable evidence of
their ability to meet the requirements in paragraph 10.2.A(1) through
10.2(A)(3). Acceptable evidence normally consists of a commitment or
explicit arrangement that will be in existence at the time of contract
award to rent, purchase, or otherwise acquire the needed facilities,
equipment, financing, personnel, or other resources.
C. Researching Responsibility. The Contracting Officer will need to
conduct research to determine that a prospective contractor is responsible.
The size and complexity of the contract, the degree of prior experience of
the PHA or the Contracting Officer with the offeror, and the extent to
which the PHA can cancel the contract and install a replacement vendor will
all influence the extent of research required. For example, a $150,000
requirements contract for supplying appliances may require minimal research
in that the vendor may be well-known. It is also the case that there are
multiple alternate vendors in the event that the initial supplier were to
be replaced due to non-performance. On the other hand, more research would
be required of a vendor to design a new accounting software program for the
agency. Only that information deemed necessary to determine the offeror’s
responsibility should be requested, obtained, and reviewed. Some methods
include:
1. Financial Capability. Obtain financial information and
credit bureau reports; require the offeror to provide
information on and then verify their lines of credit
and account balances with the financial institution
officer servicing their account;
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2. Compliance with Delivery and Performance Schedules.
Request information on all other active contracts the
offeror is performing and verify their status with
those buyers;
3. Performance Record. Require offerors to submit contact
information for recent contracts they have performed for
other customers and contact them to ascertain the
offeror’s quality of performance, including timeliness of
delivery/completion, quality of work, compliance with
terms and conditions of the contract, and cost control,
if applicable. Inquire of past customers whether or not
they would contract with the offeror again and why.
Research the offeror’s performance history with the PHA;
4. Integrity and Business Ethics. Contact the offeror’s
previous and current customers to verify their dealings
with the offeror. Check with the local Better Business
Bureau, local offices of Code Compliance and Business
Licenses, or other regulatory agencies for business ethics
record and compliance with public policy. Verify the
offeror’s compliance with payments, wage rates, and
affirmative action requirements with other customers and
with applicable State and Federal Government offices,
e.g., DOL Wage and Hour Division;
5. Necessary Organization, Experience, Accounting and
Operational Controls, and Technical Skills. Verify
experience with other customers. Request copies of any
audits. Verify that necessary personnel will be available
to work on the PHA’s contract;
6. Necessary Production, Construction, and Technical Equipment
and Facilities. Request evidence that the offeror has all
the equipment and facilities he/she will need or the
capability to obtain them. Visit the offeror’s place of
business or other job sites to verify equipment and
facilities. Contact equipment dealers and/or facility
owners from whom the offeror indicates that he/she will
rent or lease equipment or space; and
7. Eligible to Receive a PHA Contract. Verify that the offeror
has not been suspended, debarred or is under a HUD LDP (see
paragraph H below).
D. Responsible at Time of Award. Bidders/offerors must be determined
to be responsible at the time of award. For sealed bidding this means
at the point where the low, responsive bidder has been determined. For
the competitive proposal method, this means after the successful
offeror has been selected for award. Bidders/offerors may be afforded
the opportunity to provide acceptable evidence of their ability to meet
the stated requirements after bid opening (sealed bidding) or
contractor selection (competitive proposal method) in accordance with
the PHA’s written procurement policy and procedures and applicable
State or local law or regulation. The Contracting Officer must clearly
indicate to potential bidders/offerors the time frame in which they are
required to submit evidence that they meet the above requirements.
E. Determination of Non-Responsibility. With the exception of a
finding that a bidder/offeror is suspended, debarred or under a HUD
LDP, a determination of non-responsibility will be a matter of
judgment on the part of the PHA, given the preponderance of the
evidence. If the facts indicate that the bidder/offeror fails to
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meet the requirements for responsibility, the Contracting Officer shall
document the findings of fact that led him/her to make the determination
(see paragraph G below).
F. Notifying Bidders/Offerors of Non-Responsibility. The Contracting
Officer should notify low bidders or otherwise successful offerors who
are determined to be non-responsible. Some States require a hearing
before a bidder or offeror may be determined to be non-responsible. The
PHA should include guidance on any applicable hearing procedures in its
solicitations.
G. Documenting the Responsibility Determination. After all research
is completed, the Contracting Officer shall document the results in the
procurement file. Any determination of non-responsibility must be
signed by the authorized official (if not the Contracting Officer)
designated in the PHA’s written procurement policy and procedures. A
sample checklist format is provided in Appendix 10.
H. Limited Denials of Participation and Debarments and Suspensions.
PHAs should determine whether contractors have been restricted from
participation in HUD or Government Services Administration (GSA) contracts.
1. LDP. HUD may impose an administrative sanction against a
contractor known as a LDP. It is a temporary restriction
on a contractor and is narrower in scope and effect than
either suspension or debarment as prescribed in 24 CFR
24.700 - 24.713 and discussed below.
Reasons that HUD may impose an LDP include irregularities
in a contractor’s past performance, failure to honor
contractual obligations, deficiencies in ongoing
construction projects, false certifications or statements,
or any other cause prescribed in 24 CFR 24.305.
When HUD has issued an LDP, the contractor or firm becomes
ineligible for participation in HUD programs (Multifamily
or Public Housing) in which the violation occurred. The
LDP is limited to the geographic jurisdiction of the
office that imposed it. An LDP remains in effect until the
causes for which it was imposed are eliminated and the
action is withdrawn, or until the life of the sanction has
lapsed (up to 12 months).
2. Suspensions and Debarment. The PHA shall not make an award
to any contractor or individual who has been suspended or
debarred and whose name appears on the GSA List of Parties
Excluded from Procurement and Non-procurement Programs,
i.e., debarred and suspended.
Debarment is an exclusion from participation in all
Federal programs for a reasonable and specified
time-period commensurate with the seriousness of the
violation or failure to perform on other contracts.
Debarment may be imposed for violation of contract
clauses, including equal employment opportunity
provisions, acceptance of contingent fees, or other
serious contract violations. The Secretary of Labor
may also debar a contractor based on violation of the
labor standards regulations.
Suspension means a disqualification from all Federal
programs for a temporary time-period because of
adequate evidence that the contractor engaged in
criminal, fraudulent, or other very serious misconduct.
A contractor is suspended pending investigation and
appropriate action. All
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suspensions are temporary, pending the completion of an
investigation and such legal proceedings as may ensue.
3. PHA Responsibility in LDPs, Debarment, and Suspension.
Before a contact is awarded, the PHA shall check to
determine if HUD has issued an LDP or if a contractor has
been debarred or suspended. A list of persons and
contractors for which LDPs have been issued may be found
on the Internet at: www.hud.gov/enforce. All persons or
contractors that have been suspended or debarred from
Federal programs will show up on the GSA website:
http://epls.arnet.gov. It is recommended that PHAs also
check with their State agencies regarding debarred or
suspended contractors.
Prime contractors are responsible for determining that
potential subcontractors are not on any of the above lists
precluding participation in a PHA project. The PHA should
advise potential contractors of their responsibility to
confirm in their proposals the acceptability of their
subcontractors. The PHA should also advise potential
contractors of their responsibility to provide evidence
that a check has occurred on each proposed subcontractor
before the award is made or before new subcontractors will
be allowed to participate in the contract. The PHA may
check the subcontractor references if they so desire. If a
subcontractor is found to be under sanctions, the prime
contractor must be notified that the subcontractor may not
participate in the work.
4. Enforcement. If a PHA materially fails to comply with any
term of an award whether stated in a Federal statute or
regulation, an assurance, in a State plan or application,
a notice of award, or elsewhere, there are a number of
enforcement actions that HUD may exercise, including those
listed at 24 CFR 85.43(a).
10.3 Evaluating Cost and Price (For Purchases above the Federal Small Purchase Threshold)
A. General. For every procurement, PHAs are required to perform a cost
or price analysis to determine that the price is reasonable. In
competitive procurements, the force of competition is usually
adequate to allow the PHA to make a price reasonableness
determination based simply on a comparison of the offered prices.
1. PHAs should always compare the prices offered with the ICE.
While this initial cost estimate may not be sufficient for
price reasonableness, it can assist the Contracting Officer
in determining the extent to which the offerors understand
the PHA’s requirements. Sometimes, the comparison of prices
may point out the need for verification of bids (in sealed
bid procurements) or negotiations (in the competitive
proposals methods) if prices of the different offerors vary
widely or seem unusually high (or low) compared to the ICE.
2. If adequate competition does not exist, including sole
source procurements or noncompetitive proposals, the PHA
must perform a cost analysis, except as provided in 10.3.B.
A cost analysis is an evaluation of the separate elements
that make up a contractor’s total cost proposal or price to
determine if they are allowable, directly related to the
requirement, and reasonable.
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3. The number of times that a PHA will need to conduct a cost
analysis will be limited given that most purchases will be
of a commercial nature and based on adequate competition.
B. Alternative Methods of Determining that a Price is Reasonable (Other
than Cost Analysis). A comparison of proposed prices received in
response to the solicitation to each other is generally sufficient
to establish price reasonableness, assuming a sufficient number of
competitive offers are received to constitute competitive pricing
from the marketplace. If, after appropriate solicitation efforts,
the PHA does not receive an adequate number of responses, the PHA
may use one of the following alternative methods of establishing
price reasonableness without having to conduct a formal cost
analysis. In all such cases, the PHA should appropriately support
and document its actions in the procurement file.
1. Comparison to prior proposed prices and contract prices
with current proposed prices for the same or similar
items/services. The PHA should factor in any market
changes, e.g., commodity price changes or inflation,
since the last time the item or service was purchased.
2. In comparison to competitive price lists, published
catalog or market prices of commodities and products,
similar indices and discount or rebate arrangements.
The Contracting Officer should analyze the offered
price in terms of its commerciality. This involves
examining any catalog used by the contractor to
ensure that catalog prices are bona fide prices
charged to commercial customers. Any discounts
offered to commercial customers should be offered to
the PHA; however, consideration must be given to
differing terms and conditions of commercial
contracts as compared with public contracts. There
may be justification for paying more than the catalog
or market price if the PHA’s contracts demand more of
the contractor (such as services, warranties, etc.)
than do those of commercial customers.
In some cases, there may be no catalog prices, but the
offered price may qualify as a market price, meaning a
price paid by buyers and sellers free to bargain. As
with a catalog price, a market price should be verified
independently before it is accepted as reasonable. The
bidder should be asked to provide evidence of recent
sales at the market price to the general public or
provide a justification for not charging the PHA the
same price or better. The volume of sales should be
significant compared to the PHA’s procurement to ensure
that commercial sales are sufficient to establish a bona
fide catalog or market price. The goal should be to
ensure that the PHA does not pay more than other buyers,
particularly commercial customers, normally pay for the
same item.
3. Professional estimate, either one prepared by the PHA or
outside party. The level of analysis should be commensurate
with the extent and complexity of the procurement.
C. Situations Requiring a Cost Analysis. A cost analysis must be
conducted if one or more of the following conditions apply:
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1. All sole source and non competitive proposals. In
noncompetitive situations, no incentive exists for an
offeror to submit a low price, and no price
competition exists for determining the reasonableness
of the price.
2. If, after soliciting bids/proposals, the PHA receives only
one bid/proposal that it finds unreasonable and decides to
cancel the solicitation and negotiate a contract price with
the sole bidder.
3. If, under sealed bidding or competitive proposals, a
sufficient number of bids were not received and the PHA
cannot establish price reasonableness through alternative
means.
4. If, under competitive proposals, the PHA requested that
bidders provide separate elements of their costs, e.g.,
labor, materials, overhead, profit, etc. (Note: it will
not be necessary in most competitive procurements to ask
for bidders to submit separate elements of their costs.
For example, if a PHA is soliciting Property management
services, the PHA should not need to request a break-out
of costs since one can generally evaluate the
reasonableness of management fees without such break-down.)
5. When there is a contract modification. When negotiating a
modification to any contract (even if the basic contract
was awarded competitively through sealed bidding) that
changes the scope of work previously authorized and
impacts the price or estimated cost, the PHA must use
cost analysis to arrive at a reasonable cost. The only
exception to this rule is a contract modification based on
pricing terms already established in the contract
document, e.g., exercising an option to buy additional
items at preset prices. It is important to note that
changes in a contract’s scope do not always result in
increased costs. Elimination or reduction of contract work
may result in a decrease in the contract price. Regardless
of the direction of the price change, these modifications
require cost analysis using the cost principles to
determine that the price change is fair and reasonable.
6. When making contract termination payments. When
terminating a contract of any type (fixed-price or
cost-reimbursement) for convenience, or terminating a
cost-reimbursement contract for cause, the PHA must use
cost analysis - and the appropriate cost principles - to
negotiate the final amount of the termination settlement.
7. When awarding any construction contracts that were obtained
through means other than sealed bidding. Construction
contracts awarded using any method other than sealed
bidding and modifications to construction contracts require
cost analysis.
D. Cost Analysis Technologies. Where a formal cost analysis is
required, PHAs should follow the instructions in this section. As
indicated, the number of instances where a PHA will be required
to conduct a formal cost analysis will be limited.
1. Commercial Yardsticks. Where available, a PHA may use
commercial yardsticks in lieu of a formal cost analysis.
Since the overall purpose of a cost analysis is to settle
on total prices that are fair and reasonable, these
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yardsticks provide a measure of that overall price
reasonableness. The following examples illustrate this
point.
a. A PHA is negotiating A/E fees with the architect
for additional work pursuant to the changes clause in
the contract. The PHA would not need to request that
the A/E firm break out its hourly fees in terms of
profit, overhead, etc., provided that the overall
hourly fee was reasonable; vis-à-vis fees normally
charged in that community.
b. A PHA has a 6-unit scattered site project that is
adjacent to its HOPE VI development. The HOPE VI
development is operated by a private management
company. The PHA determines that it is in the best
interest of the PHA that the HOPE VI development and
the scattered site project be managed jointly and is
negotiating a sole source procurement with the HOPE VI
management company. The PHA would not need to request
that the management company break out its proposed
management fee in terms of profit, overhead, etc.,
provided that the overall management fee was reasonable
vis-à-vis fees normally charged in that community.
c. The PHA has a security guard contract for its
high-rise properties. The rates charged are $14/hour
for non-armed guards. Because of a recent rise in
security incidents, the agency is negotiating a change
order to increase the coverage under the contract. The
PHA would not need to request that the security company
break out its proposed cost fee in terms of profit,
overhead, etc., provided that the overall hourly rate was
reasonable vis-à-vis rates normally charged in that
community.
2. Level of Detail and Analysis. The level of detail and
complexity of the cost analysis should be commensurate
with the dollar value and complexity of the contract.
For example, in a construction change order proposal
for $30,000, where the PHA’s changes to the
specifications only result in added labor hours for
three skill categories, and the wage rates are at the
Davis-Bacon wages, the PHA’s cost analysis may be
limited to determining the reasonableness of the number
of hours proposed. If, however, the change order
proposal was for $250,000 and included added material,
new subcontracts, and other items, the PHA should
evaluate whether the costs proposed are allowable,
allocable, and reasonable, using the more detailed
techniques described below.
3. Conducting a Cost Analysis. When conducting a cost
analysis, PHAs should generally proceed in accordance
with the following (see also Appendix 12 for a
guideline).
a. Verify the cost and pricing information submitted
and evaluate the following:
i. The necessity for, and reasonableness of,
proposed costs, including allowances for
contingencies. Proposed costs must meet three
critical tests. The costs must be:
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• Allowable. The applicable cost principles
(see discussion below) will usually state whether
a type of cost is allowable or not.
• Allocable. This means that the costs are
logically related to or required in the
performance of the contract. Many costs may be
allowable but not related to the work required
under the contract.
• Reasonable. This term is generally defined as
what a prudent business would pay in a competitive
marketplace. A cost can be allowable, allocable and
still not be what a prudent businessperson would
pay.
ii. The projection of the contractor’s cost trends.
Are his/her costs likely to increase or decrease?
iii. The assessment of proposed direct cost
elements by a technical expert, e.g., engineer,
architect, etc., to determine their necessity to
perform the contract and reasonableness, e.g., in
comparison to market rates.
iv. The application of audited or pre-negotiated,
e.g., by the Federal Government, indirect cost, e.g.,
overhead rates, labor and fringe benefit rates, or
other factors.
v. The effect of the contractor’s current practices
on future costs. Does the contractor have a track
record of containing costs (completing contracts at or
“under cost”)? Does he/she overrun costs?
b. Compare costs proposed by the offeror with:
i. Actual costs previously incurred by the same
offeror. If it is a repetitive type of work or s
ervice, how much has it cost in the past? Apply any
appropriate inflation factors for past work.
ii. Costs proposed by other offerors. This
comparison may point out the need for negotiations if
prices of the different offerors vary widely or seem
unusually high (or low) compared to the ICE.
iii. Previous cost estimates from the offeror or
other offerors for the same or similar items.
iv. The methods proposed by the offeror with the
requirements of the solicitation (i.e., do the costs
reflect the technical approach proposed and the work
required, and are they cost efficient?).
v. The PHA’s ICE.
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c. Verify that the offeror’s cost submissions comply
with the appropriate set of cost principles.
i. When performing a cost analysis, PHAs shall use
the applicable set of cost principles, which have been
issued by the Federal Government, to determine the
allowability of proposed costs. (Note that cost
principles are not used when performing a price
analysis.) These cost principles set the standards
for the allowability of a wide range of costs (e.g.,
salaries, travel, advertising, etc.). Each set applies
to contracts with a specific group or type of
organizations, so one set will not work for all
contracts.
ii. The cost principles and the type of contractor
entity to which they apply are as follows:
• OMB Circular A-87, for contracts with State,
local or Indian tribal governments.
• OMB Circular A-122 for contracts with most
non-profit organizations.
• OMB Circular A-21 for educational
institutions.
• FAR 48 CFR Chapter 1, Subpart 31.2 for
profit-making entities (e.g., commercial business
concerns) and certain nonprofit organizations
listed in Attachment C of OMB Circular A-122.
E. Documentation. With respect to price reasonableness, the
procurement file should be documented to support the actions
taken. In the case of sealed bids where there was adequate
competition, no additional documentation is required in that
the bid tabulation sheet, or equivalent, will serve as the
test of price reasonableness. Similarly, in the case of
competitive proposals where (1) there was adequate
competition, (2) the scope of work was not complex (easy to
evaluate competing bids), and (3) the PHA did not ask the
vendor to break out elements of costs separately, no
additional documentation is required for price
reasonableness other than the comparison of prices offered.
However, documentation is required to demonstrate price
reasonableness, including any cost analyses, whenever (1)
adequate competition did not exist, (2) adequate competition
existed but the PHA received only one bid/proposal, or (3)
the price obtained varied significantly from the ICE, in
which case the Contracting Officer should notate/explain the
reasons for the difference, e.g., poor estimate, etc.
F. Audit.
1. When cost analysis is required, and the usual means of
analysis (e.g., comparison historical cost data) are
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insufficient, the PHA may need to audit or review the
contractor’s/offeror’s financial records. Such a review
should be limited to the needs of the immediate
procurement action (new contract award, modification,
etc.) and not be overly broad in scope or intrusive.
The audit should provide an independent verification
that the costs proposed by the contractor are legitimate.
The PHA may conduct the audit using its own employees,
obtain the services of other governmental agencies to
perform the audit, or contract with a private firm for
audit services.
2. The audit should examine each element of cost relevant to
the procurement action, indicating whether it should be
accepted, questioned, or further documented. The audit
should also analyze the contractor’s accounting system to
ensure that it is adequate to properly allocate costs in
accordance with the applicable cost principles, and in the
case of new contract awards or significant modifications,
will permit timely development of all necessary cost data
in the form required by the contract type contemplated.
3. Audit reports should always be written and maintained in
the contract file.
4. The Contracting Officer’s cost analysis shall document how
and the degree to which the audit results were relied upon.
5. In accordance with 24 CFR 85.36(i)(10), contractors (i.e.,
firms under contract to the PHA) may not deny access to
their records for the purpose of audits. A competing
offeror’s denial of access may disqualify it from contract
award. In the case of competitive proposals, offerors may
withdraw their offer, unless they have been notified that
they have been selected for award. Then it is up to the
PHA’s discretion to permit the withdrawal. In the case of
a single bid received under the sealed bidding method (the
most likely scenario under which cost analysis would be
needed), the bidder may not withdraw his/her bid once it
has been opened. The Contracting Officer s should seek
advice from legal counsel when a contractor or offeror
denies access to records.
10.4 Protests (24 CFR 85.36(b)(12))
Disagreements over the award of a PHA contract, referred to as protests, may
occasionally arise between the PHA and an offeror. Usually, the protestor asserts
that he/she should have received the contract award and alleges that the PHA did
not conduct the competition appropriately. (Note: While protests are commonly
referred to as “bid protests,” any type of contract award, including small
purchase, competitive proposal, or sealed bid, may be protested by an unsuccessful
offeror.) For small purchase procedures see Chapter 5.
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A. Responsibility. PHAs, in accordance with sound business judgment,
are responsible for the settlement of protests arising from the
procurement Process.
B. Written Protest Procedures. Providing a formal, objective means
for offerors to receive an unbiased hearing of their concerns is
critical to preserving the integrity and confidence in the PHA’s
procurement operations. Therefore, PHAs shall have written
procedures for handling and resolving protests against their
contract awards. These may be included in the PHA’s procurement
policy. The procedures should include:
1. Designation of Protest Officials. The procedure should
identify:
a. The PHA employee responsible for receipt of
protests (e.g. Contracting Officer), This
information should be included in written
solicitations;
b. The PHA employee or a designee (e.g., an
independent third party who can render an
impartial opinion) who will decide the
protest; and
c. The official or third party who will hear any
appeal of the initial protest decision.
2. Requirement for written protests. Protestors should be
required to submit protests in writing, clearly stating
the basis for their protest. Protests should include,
at a minimum, the following information:
a. Name, address, and phone number(s) of the
protestor;
b. Solicitation number and project title;
c. A detailed statement of the basis for the protest;
d. Supporting evidence or documents to substantiate
any arguments; and
e. The form of relief requested (e.g.,
reconsideration of their offer).
3. Submission Time Period. The procedure shall state the time
period during which a protest must be submitted.
Generally, the time period should begin on the date that
the protestor has knowledge, or may be presumed to have
knowledge, of the basis for his/her protest (e.g., the date
the solicitation was issued, or the date he/she receives
notification from the PHA that his/her proposal did not
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win). The protest submission period must be stated in
solicitations. Protests against the terms of a
solicitation should be considered late if submitted after
the due date for offers.
4. Remedial Action. The PHA’s procedures shall provide
remedies when a protest is decided in favor of the
protestor, and the PHA must take appropriate action
in accordance with those procedures.
For example, if the contract has not been awarded,
the PHA may cancel or revised the solicitation or
proposed contract award, or if the contract has
been awarded, the contract may be terminated for
convenience and awarded to the protestor, or the
procurement may be canceled and offers
resolicited.
5. Emergencies or Unusual and Compelling Circumstances.
PHA protest procedures should provide for allowing
contracts to remain in place despite a successful
protest in cases of emergency or unusual and
compelling need for the supplies or services.
However, if the PHA determines, based on compelling
circumstances such as an emergency or serious
disruption of the PHA’s operations, that termination
or re-solicitation would not be in the best interest
of the PHA, the PHA may allow the award to stand and
pay the successful protestor costs associated with
preparing the bid along with the cost of filing and
pursuing the protest and other damages determined.
6. Denials. The PHA’s protest procedures shall require
the Contracting Officer to notify the protestor in
writing of the PHA’s decision and state the basis for
the denial. The notification shall apprise the
protestor of any appeal rights in accordance with the
PHA’s protest procedures.
7. Appeal Procedures. The PHA’s protest procedures shall
provide for hearing appeals by unsuccessful protestors
including, but not limited to: requirements for written
appeals, designation of appeal official(s) and
timeframes for submitting and resolving appeals.
Appeals should contain a statement of the factual and
legal grounds on which reversal or modification of the
decision is deemed warranted, specifying any errors of
law made or information not previously considered.
C. Documentation. The Contracting Officer shall fully document the
protest decision in writing in the contract file. The PHAs protest
procedures should describe the requirements for such documentation.
D. Informal Resolution Processes. PHAs are encouraged to resolve
potential and actual protests outside of the formal protest process
or litigation (e.g., through mediation).
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E. HUD Review 24 CFR 85.36(b)(12)(i) & (ii). Review by HUD of a
protest will be limited to:
1. Violations of Federal law or regulations. The protest
should cite the specific Federal or HUD regulation that
has been violated. Violations of State or local laws
should be referred to the State or local entity having
jurisdiction over such matters.
2. Violation of the PHA’s protest procedures for failure to
review a complaint or protest. The PHA shall submit a
copy of the protest to the HUD Field Office having
jurisdiction over the PHA.
HUD will refer any protests other than those specified above
back to the PHA for action.
10.5 Mandatory Contract Clauses (For purchases above the Federal Small Purchase Threshold)
A. Mandatory Requirements for Construction/Development Contracts
greater than $100,000. PHAs must incorporate the clauses
contained in form HUD-5370, General Conditions of the Contract
for Construction, and the applicable Davis-Bacon wage decision.
B. Mandatory Requirements for Non-Construction Contracts (without
maintenance work) greater than $100,000. PHAs must incorporate
the clauses contained in Section I of form HUD-5370-C, General
Conditions for Non-Construction Contracts.
C. Mandatory Requirements for Maintenance Contracts (including
non-routine maintenance work) greater than $100,000. PHAs must
incorporate the clauses contained in Sections I and II of
form HUD-5370-C, General Conditions for Non-Construction Contracts.
D. Acceptable Methods of Incorporation. PHAs may utilize any one or
any combination of the following methods to incorporate mandatory
clauses and applicable wage decisions into bid specifications and
contracts. PHAs may:
1. Attach the HUD form(s), and/or wage decisions, as printed;
2. Incorporate the clauses/text of the applicable HUD form
and wage decision into other documents (e.g., into the
PHA’s own forms) that are bound/attached to the contract
(and bid specifications, if applicable) or incorporated
by reference (see paragraph 3, below).
3. Incorporate the clauses or HUD forms and/or any applicable
Davis-Bacon or HUD wage decision by reference. The
reference must be specific as to the exact clauses or
form(s) that are incorporated, and where the clauses or
forms(s) may be accessed or obtained (e.g., HUDClips, PHA
web site). A Davis-Bacon wage decision (applicable to
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construction/development work) may be incorporated by
reference to www.wdol.gov and to the specific number,
modification number, and date of the wage decision. HUD
wage decisions (applicable to maintenance work) are not
available at HUD’s web site; however, a PHA may post any
applicable HUD wage decision to its own web site and
reference that site. PHAs must provide hard-copies of any
referenced clauses, forms, and/or wage decisions on
request.
10.6 Prohibited Clauses-Project Labor Agreements.
HUD regulations at 24 CFR 5.108 implement Executive Order 13202, Preservation of
Open Competition and Government Neutrality Towards Government Contractors’ Labor
Relations on Federal and Federally Funded Construction Projects. Under this
regulation, to the extent permitted by law, the bid specifications, project
agreements, or other controlling documents for a constructions contract awarded
by a HUD grantee or recipient of financial assistance for a construction project
(or a construction manager acting on their behalf) shall not:
(1) Require or prohibit bidders, offerors, contractors, or
subcontractors to enter into or adhere to agreements with
one or more labor organizations on the same or other
related federally funded construction project; or
(2) Otherwise discriminate against bidders, offerors,
contractors, or subcontractors, for becoming or refusing
to become or remain signatories, or otherwise adhere to
agreements with one or more labor organizations, on the
same or other related federally funded construction project.
Accordingly, documents pertaining to a construction contract awarded by a PHA or
other recipient of HUD financial assistance shall not contain the
above-prohibited provisions. HUD may exempt a particular construction project or
contract from these requirements in special circumstances specified in Section
5.108. Contractors and subcontractors are not prohibited from voluntarily
entering into project labor agreements.
10.7 Performance Standards
It is possible to use performance, delivery, or cost incentives to motivate the
contractor to achieve realistic, measurable targets set forth in the specification,
purchase description, or statement of work. Performance standards may be used to
determine the degree to which the desired results are achieved. Performance
incentives increase the efficiency of contractor performance. For example, there
could be a monetary bonus for early delivery. Cost incentives are used to motivate
the contractor to manage costs effectively, but cost incentives should not be used
if a large number of technical changes in the project are expected. As for all
contracts, PHA personnel should closely monitor contractor performance.
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10.8 Use of Options
A. General. In many cases, the PHA may have a recurring need for
specific supplies or services. One method of obtaining firm
commitments from contractors for additional quantities or longer
time-periods is to include an option clause in the contract.
The advantage of awarding a contract with options is that it
gives the PHA a continued source of supply or services under
contract at known prices.
B. Definition. The option to extend the term of the contract or to
order additional supplies or services is the unilateral right of
the PHA. The additional supplies or services are ordered at the
prices specified in the original contract. A clause that allows
an option to be exercised by the contractor is not a legitimate
option clause.
C. Limitations.
1. Price. The option to extend the term of the contract or to
order additional quantities may only be exercised if the
contract contained an options clause and if a price for
the additional supplies or services was included. An
unpriced option is considered a new procurement and,
therefore, may not be used. In the case of a
cost-reimbursement contract, an estimated cost for the
option periods or additional quantities must be negotiated
and included in the contract award; otherwise, the option
will need to be treated either as a change order or a new
contract.
2. Time and Quantity. Contracts shall not exceed a period of
five years, including options for renewal or extension.
(For PHAs still operating under the “old” ACC – form
HUDs-53010 and 53011 – the maximum contract term is two
years.) Contracts, other than energy performance
contracts, with terms, plus extensions, that exceed a
total of five years are viewed as restrictive of
competition and in violation of 24 CFR 85.36(c). A Field
Office may approve contracts in excess of five years if it
determines there is no practical alternative. Energy
performance contracts may be for a period not to exceed 20
years in accordance with 24 CFR Part 990 and PIH Notice
2006-6. A PHA must also follow its own procurement policy
and any applicable local or State laws and regulations.
There must be a finite period for a contract, including all
options, and a specific limit on the total quantity or
maximum value of items to be purchased under an option.
3. Option to Extend.
a. Any contract containing options must specify the
timeframe within which the option to extend the
term of the contract must be exercised.
b. If the PHA decides to include options in a
solicitation, the pricing of the options should
be evaluated as part of the overall contract
award.
c. Contractors should be notified of the PHA’s
likely intention to exercise the option to extend
the term of the contract approximately 30 days
before the expiration date of the contract. This
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notice does not obligate the PHA to extend the
contract; however, it allows PHA staff time to
assess the need for and advisability of extending
the contract. It also makes the contractor aware
of the potential extension.
d. The Contracting Officer should notify the
contractor at least 30 days before the contract
expiration date of the specific intention to
exercise the option, and then issue a formal
modification extending the contract.
e. Options may not be exercised after the term of
the contract has expired; technically, there is no
longer a legal and binding contract to extend.
D. Exercising Options. Before exercising an option, the PHA should
document the contract file with a written determination. At least
the following items should be included:
1. Fund availability;
2. Statement that the option was included in and evaluated
as part of the basic contract;
3. A brief review of market prices to justify price
reasonableness, indicating whether the option is still
economical for the PHA; and
4. Any other factors that support the PHA’s decision to
exercise the option. For example, the PHA avoids the
cost of a new procurement and ensures continuity in
service.
10.9 Federal Labor Standards and Wage Rates - Construction
A. General. All laborers and mechanics (including apprentices and
other workers trained by PHAs, Resident Management Corporations
(RMCs), or other contractors under HUD’s “Step-Up” or similarly
approved training initiatives) involved in construction contracts
in excess of $2,000 must be paid wages in accordance with Federal
labor standards issued pursuant to the Davis-Bacon Act by the
Department of Labor (DOL). In addition, the overtime requirements
of the Contract Work Hours and Safety Standards Act are applicable
to construction contracts in excess of $100,000. See, also, DOL
regulations at 29 CFR Parts 1, 3 and 5. Additional information
about labor standards administration and enforcement is contained
in HUD Handbook 1344.1, REV 1, Chg 1.
B. Solicitations and Contracts. Solicitations (e.g., Invitations for
Bids) and contracts subject to Davis-Bacon wage requirements must
contain the applicable wage decision and labor standards provisions.
Davis-Bacon Wage Decisions can be obtained at no charge from a
DOL-approved web site at: www.wdol.gov
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C. Reporting. As provided by DOL regulations (29 CFR Parts 3 and 5),
each construction employer (the contractor and any/all
subcontractors) shall submit a payroll report and statement of
compliance to the PHA for each week during which work is performed
under the contract. Such reports may be submitted on the DOL
Payroll Form (WH-347), which includes on its reverse side the
required Statement of Compliance. These forms, WH-347 and
instructions, may be obtained from HUD’s Labor Relations field
staff and are also available in “fillable” Portable Document Format
(PDF) on-line through HUDClips or directory at the DOL web site at
this address: www.dol.gov/esa/programs/dbra/forms.htm
Employers are not required to use the form WH-347 and may
substitute other payroll formats, including computer-generated
forms, provided that all of the required information and the exact
language of the Statement of Compliance (reverse side of the
WH-347) is included.
D. Compliance. The contractor and any/all subcontractors are
responsible, on no less than a weekly basis, for paying not
less than the applicable wage rates to all laborers and
mechanics in their employ and engaged in work under the
contract. The contractor is responsible for its own full
compliance, and for the full compliance of any/all
subcontractors, with all wage, overtime and reporting
requirements included in the contract.
E. Enforcement. The PHA is responsible for the administration and
enforcement of labor standards requirements as provided in HUD
Handbook 1344.1, REV 1, Chg 1 and as required by DOL regulations
applicable to Davis-Bacon covered work (29 CFR Part 5). These
activities include:
1. Posting Wage Rates. The PHA must ensure that a copy of the
applicable Davis-Bacon wage decision and the DOL poster
Notice to All Employees (WH-1321) are displayed at the job
site in a place accessible to all laborers and mechanics
and placed in an area that is protected from inclement
weather. The WH-1321 poster is available through HUDClips
or directory at DOL’s web site at:
www.dol.gov/esa/programs/dbra/forms.htm
2. On-site Interviews. The PHA is responsible for conducting
interviews with the laborers and mechanics on the jobsite
to determine if the work performed and wages received are
consistent with the job classifications and wage rates
contained in the applicable wage determination and the
classifications and wages reported by the employer on
certified payrolls. On-site interviews are documented on
form HUD-11, Record of Employee Interview, which can be
found at HUDClips.
3. Certified Payroll Review. The PHA must review the
certified payroll reports submitted by the contractor for
itself and any subcontractors to ensure that all
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laborers and mechanics are classified and paid in
accordance with the applicable wage determination and must
compare information collected during on-site interviews to
ensure consistency with such interview data. Any
discrepancies found must be corrected and wage restitution
must be required wherever underpayments are disclosed.
F. Recordkeeping. The PHA shall retain all payroll reports and
statements of compliance for three years from the date of
contract completion and acceptance by the PHA, or from the date
of resolution of any standards issues outstanding at contract
completion.
10.10 Federal Labor Standards and Wage Rates - Maintenance
A. General. All maintenance laborers and mechanics employed under
contracts in excess of $2,000 for the operation of public housing
must be paid no less than prevailing wages determined or adopted
by HUD. In addition, the overtime requirements of the Contract
Work Hours and Safety Standards Act are applicable to maintenance
contracts in excess of $100,000.
B. Employment of apprentices or trainees. PHAs, RMCs, or other
contractors on work subject to HUD-determined wage rates may
employ apprentices or trainees. Apprentices and trainees may be
compensated at less than the prevailing wage rate for their craft,
provided that they are individually registered in an
apprenticeship or trainee program that has been approved by HUD,
the DOL’s Bureau of Apprenticeship and Training (BAT), or a
BAT-recognized state apprenticeship agency. PHAs, RMCs, or other
contractors who wish to discuss the development of such training
programs may contact HUD Labor Relations Staff for assistance.
Unless otherwise directed, RMCs and other contractors should
submit all requests to develop approved training/apprenticeship
programs and proposed program descriptions to the HUD Labor
Relations field staff with jurisdiction over the PHA.
C. Exclusions for professional service contracts. Contracts for
certain professional services are excluded from coverage by
HUD-determined (or HUD-adopted) prevailing wage rates. These
exclusions include: Periodic inspections or testing of equipment
without repairs; testing for lead-based paint; warranty
inspections; installation, service or maintenance of leased
equipment, fixtures or appliances; and installation, inspections,
maintenance or service on equipment or fixtures which are owned by
a utility. Examples include, but are not limited to, local code or
performance inspections of elevators or escalators, gas lines or
equipment, or fire hydrants or water lines; inspections or routine
servicing of fire extinguishers, smoke detectors, security systems,
boilers, heating systems, water heaters, air conditioners, water
testing or treatment; soil testing or treatment; energy use or
conservation analyses; routine garbage removal; and pest control
(without attendant repairs).
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D. Solicitations and Contracts. Solicitations (e.g., Invitations for
Bids) and contracts for all maintenance services subject to HUD wage
rates must contain the applicable HUD wage decision and labor
standards provisions.
1. HUD wage decisions are obtained from the HUD Labor
Relations staff. A list of the Labor Relations staff,
their contact information, and the jurisdictions they
cover can also be found at the HUD web site:
www.hud.gov/offices/olr
2. For all maintenance contracts of more than $2,000, but
less than the Federal small purchase threshold, PHAs
should use the clauses found in Table 5.1 and the clauses
in Section II of form HUD-5370-C. For all maintenance
contracts of more than the Federal small purchase
threshold, PHAs should use the clauses in Sections I and
II of form HUD-5370-C.
E. Reporting. Unlike construction contracts subject to Davis-Bacon
wage provisions, maintenance contracts subject to HUD-determined
wage rates do not require the submission of payroll reports.
Contractors and subcontractors are still required to maintain
payroll records and must make such records available to the PHA
and/or to HUD, on request (see Labor Relations Letter No. LR
2004-01).
F. Compliance. The contractor and any/all subcontractors are
responsible, on no less than a semi-monthly basis, for paying
not less than the applicable wage rates to all maintenance
laborers and mechanics in their employ and engaged in work
under the contract. The contractor is responsible for its own
full compliance, and for the full compliance of any/all
subcontractors, with all wage, overtime and record keeping
requirements included in the contract.
G. Enforcement. The PHA is responsible for the administration and
enforcement of labor standards requirements as provided in
Labor Relations Letter LR-2004-01. These activities include:
1. Posting Wage Rates. The PHA must ensure that a copy of the
applicable HUD wage decision is displayed at the job site
in a place accessible to all laborers and mechanics and
placed in an area that is protected from inclement
weather.
2. On-site Interviews. The PHA is responsible for conducting
interviews with the laborers and mechanics on the jobsite
to determine if the work performed and wages received are
consistent with the job classifications and wage rates
contained in the applicable wage determination and the
classifications and wages reported by the employer on
certified payrolls. On-site interviews are documented on
form HUD-11, Record of Employee Interview, which can be
found at HUDClips.
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3. Enforcement. The PHA must perform contractor compliance
monitoring with such frequency and depth as appropriate
(based upon the scope and duration of the contract
involved) to ensure that all laborers and mechanics are
paid no less than the HUD prevailing wage rate for the
type of work they perform.
H. Recordkeeping. The PHA shall retain all compliance monitoring
records, including employee interview records, for three years
from the date of contract completion and acceptance by the PHA,
or from the date of resolution of any labor standards issues
outstanding at contract completion.
10.11 Guidance on Federal Labor Standards Requirements
Additional guidance on Federal labor standards is available on the Office of Labor
Relations web site at: www.hud.gov/offices/olr
This web site offers the latest in HUD policy guidance and instructional materials
regarding labor standards, including two guides concerning Davis-Bacon, Making
Davis-Bacon Work: A Practical Guide for States, Indian Tribes and Local Agencies
and A Contractor’s Guide to Prevailing Wage Requirements, and Labor Relations
Letters. The web site also includes HUD’s Regional and Field Office Labor Relations
Staff as well as links to other related web sites.
10.12 Procurement of Recovered Materials
PHAs must give preference to EPA-listed recovered materials in their own procurement
practices, in accordance with the provisions in Section 6002 of the Solid Waste
Disposal Act. See EPA regulations in 40 CFR Part 247. Required language relating to
procurement of recovered materials is included with the mandatory contract
clauses/forms.
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