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CHAPTER 14. COOPERATIVE BUSINESS RELATIONSHIPS
14.1 General
PHAs can choose to coordinate, collaborate, partner, or contract with various types of
public or private entities to administer or manage any or all of their programs or to
handle procurement matters. This chapter assists PHAs in recognizing the benefits of
these relationships and explains how the Federal procurement regulations apply. Please
note that, for PHAs to access various interagency purchasing agreements, the
underlying contract(s) must have been procured in accordance with 24 CFR 85.36.
Use of cooperative and interagency agreements can often greatly simplify and expedite
the procurement process by relieving the PHA of developing specifications or issuing
solicitations. These cooperative arrangements can also offer substantial discounts
over what a PHA might be required to pay if it purchased the items on its own.
Please note that requirements of a PHA associated with a mixed-finance development
process are addressed separately in Chapter 16 of this Handbook.
14.2 Intergovernmental Agreements for Procurement Activity
A. Requirements. A PHA may enter into intergovernmental or interagency
purchasing agreements without competitive procurement provided the
following conditions are met:
1. The agreement provides for greater economy and efficiency
and results in cost savings to the PHA. Before utilizing
an interagency agreement for procurement, the PHA should
compare the cost and availability of the identified
supplies or services on the open market with the cost of
purchasing them through another unit of government to
determine if it is the most economical and efficient
method;
2. The agreement is used for common supplies and services that
are of a routine nature only. In deciding whether it is
appropriate for the PHA to obtain supplies or services
through an intergovernmental agreement rather than through
a competitive procurement, the nature of the required
supplies or services will be a determining factor.
Intergovernmental agreements may be used only for the
procurement and use of common supplies and services. If
services, required by the PHA, are provided by the State or
locality and are part of that government’s normal duties
and responsibilities, it is permissible for the PHA to
share the services and cost of staff under an agreement.
For example, a PHA could enter into an intergovernmental
agreement, without competitive procurement, to use the
services of a local government’s accounting office to
conduct an annual audit of its books or to use the services
of a city health agency to provide advice about drug abuse
prevention strategies. A PHA could not, however, without
competitive procurement, enter into an intergovernmental
agreement with a local police department to purchase
cabinets manufactured by the police department (the
manufacturing of cabinets is not a normal function of a law
enforcement agency);
3. PHAs must take steps to ensure that any supplies or
services obtained using another agency’s contract are
purchased in compliance with 24 CFR 85.36;
4. A PHA’s procurement files should contain a copy of the
Intergovernmental Agreement and documentation showing that
cost and availability were evaluated
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before the agreement was executed, and these factors are
reviewed and compared at least annually with those
contained in the agreement; and
5. The agreement must be between the PHA and a state or local
governmental agency, which may be another PHA.
B. Examples. Types of intergovernmental agreements may include, but are
not limited to:
1. Paying a city for the cost of additional police patrols
(i.e., for special “community policing” efforts) so long
as those patrols are above and beyond those that the
police department would provide under the PHA’s
Cooperation Agreement with the city (see Appendix 16 for
sample intergovernmental agreement);
2. Using the city’s Recreation Department to operate an
after-school sports program for residents of public
housing;
3. Using the services of the city’s accounting office to
conduct an internal audit;
4. Sharing warehouse space with the city;
5. Purchasing supplies and services through a local, county,
or State government’s supply, service, or equipment
contractor;
6. Using a local, county, or State governmental unit,
including another PHA, to perform procurement activities
for the PHA; or
7. Using bonding services from a state Housing Finance Agency.
C. Process for Using Intergovernmental Agreements. Typically, the
process for entering into intergovernmental agreements is as
follows:
1. The government agency solicits bids or proposals, then
enters into contracts with vendors for a variety of
supplies or services;
2. The PHA enters into an agreement with the government
agency whereby the PHA is able to order supplies and
services from the vendors who have a contractual
agreement to furnish the supplies and services to the
government agency (note, however, that some
states/localities allow for PHAs to access state/local
contracts directly without any formal agreement between
the PHA and the lead agency);
3. The PHA orders the supplies or services covered by the
government contract at the prices specified;
4. Depending on the agreement structure, PHAs may order the
supplies or services either directly from the vendor or
indirectly from the government agency; and
5. Again, depending on the agreement structure, the vendor
will bill the PHA directly and payment will be made to
the vendor or, if ordered through the sponsoring agency,
the PHA will reimburse the agency directly.
D. Terms of Agreement. Most government agencies will have their own
intergovernmental agreement forms. However, the PHA should
review any standard agreements to make sure that all applicable
procurement regulations are met and that the PHA’s interests are
protected. PHAs should consider inclusion of the following
provisions in their intergovernmental agreements
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1. Identification of the parties;
2. Effective date;
3. Basic purpose of the agreement;
4. Procedures for providing lists of needed items;
5. Description of items to be purchased;
6. Identification of lead party in the procurement;
7. Rules or codes that should be followed in the procurement
(PHA procurement policy, State procurement code, Federal
Regulations, etc.);
8. Delivery terms;
9. Types of contract (indefinite quantity, etc.);
10. Warranty terms;
11. Any fees to be paid to the lead agency;
12. Procedures for resolving disputes with contractors;
13. Procedures for resolving disputes between the parties;
14. Procedures for bilateral modification or early termination
of the agreement.
15. Any provisions for meetings on specification issues;
16. Non-exclusivity clause (right to conduct separate
procurements, notwithstanding the existence of a
cooperative purchasing agreement); and
17. Authorized signatures and titles.
E. Evaluating the Use of Intergovernmental Agreements. After entering
into an agreement, PHAs should compare cost and availability
annually to determine if the terms of the agreement continue to
pass the tests of economy and efficiency.
F. Federal Supply Schedule Contracts. The General Services
Administration (GSA) within the Federal government awards a wide
variety of contracts under which Federal agencies may purchase
supplies and services from pre-priced schedules. (Note: These
contracts may provide supplies or services despite the name
Federal Supply Schedule.) Section 211 of the E-Government Act of
2002 only allows for state and local government entities (including
PHAs) to purchase from GSA Schedule 70, Information Technology, and
Consolidated (formerly Corporate Contracts) Schedule contracts
containing IT SINs. State and local government entities may not
purchase information technology from any other GSA Schedules. No
other schedule contracts are available to PHAs. In addition, PHAs
may not purchase items from GSA schedule contractors on a
noncompetitive basis. PHAs may solicit GSA contractors for prices
for supplies and services when conducting competitive procurements,
but they shall be considered only another potential source.
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14.3 Selecting Joint Venture Partners
In connection with the provision of PHA administrative or management functions of
public housing, or the provision of supportive and social services, PHAs may use
one of the following options for the selection of joint venture partners:
A. The QBS method, using a RFQ, subject to the negotiation of a fair
and reasonable price; or
B. The solicitation of a sole source proposal, under the following
conditions:
1. The proposed joint venture partner has under its control
and will make available to the partnership substantial,
unique, and tangible resources or other benefits that
would not otherwise be available to the PHA on the open
market (such as planning expertise, program experience,
or financial or other resources).
In this case, the PHA must carefully and thoroughly
document both the cost reasonableness and the unique
qualifications offered by its proposed partner; or
2. A resident group or a PHA subsidiary is willing and able
to act as the partner in performing the administrative
or management function or to provide supportive or
social services. A resident group or a PHA subsidiary
must comply with the requirements of 24 CFR Part 84 (if
the entity is a nonprofit) or 24 CFR Part 85 (if it is a
State or local government) in selecting members of the
team. Team members must be paid on a cost reimbursement
basis only. The PHA must document the cost reasonableness
of its selection of a resident group or subsidiary and the
group’s ability to act as a PHA partner
14.4 Conflict of Interest Considerations for Joint Ventures, Subsidiaries and Affiliates
Federal, and often State and local procurement laws, contain various conflict of
interest provisions barring PHAs from obtaining supplies and services from persons
or entities with certain conflicts.
A. Section 515 of the old ACC (53010 and 53011) specifies that
transactions between PHAs and any joint venture, subsidiary,
affiliate, or other identity-of-interest entity must comply
with the conflict of interest provisions.
B. Section 19 of the new ACC (HUD 53012-A, 7/95) similarly
specifies that PHA transactions must comply with the conflict
of interest provisions. In addition, the conflict of interest
provisions of 24 CFR 85.36 must also be followed if Federal
grant funds are involved.
C. In addition to Federal conflict of interest provisions in the
ACC and in 24 CFR 85.36, all joint venture partners and the
joint venture as a whole must comply with State and local
procurement and conflict of interest requirements in conducting
activities to acquire supplies and services. A person who is a
member of both a PHA’s Board of Commissioners and another
entity’s governing board may not participate in actions by the
PHA Board that are incidental agreements with the entity and may
present a conflict of interest, real or apparent.
D. Disclosures of conflict must be made to HUD and waivers of conflict
under the ACC and exceptions under 24 CFR 85.36 must be submitted to
the HUD Field Offices for approval by HUD Headquarters if the HUD
Field Office recommends approval. HUD Headquarters will determine if
good cause exists for approving a waiver under the ACC or an
exception under 24 CFR 85.36.
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E. The ability of a PHA Board to act at all in these cases will be
determined by whether a quorum of Board members is left after the
abstentions of common board members who have conflicts.
14.5 Procurement Requirements of Joint Venture Partners (24 CFR Part 943, Subpart C)
A. A joint venture partner is generally not a grantee or subgrantee
and, accordingly, is not required to follow 24 CFR Parts 84 or 85
in procuring supplies or services. The exception to this general
rule applies if the joint venture partner is a subsidiary,
affiliate or identity-of- interest party of the PHA. (See Section
14.6.B below.)
B. If the joint venture partner is a resident group, subsidiary,
affiliate, or identity-of-interest party of the PHA, it must comply
with 24 CFR Parts 84 or 85, as applicable. HUD may, on a
case-by-case basis, grant an exemption to the joint venture partner
from the need to comply with the requirements under 24 CFR 85.36 if
HUD determines there is good cause and that the joint venture
partner has developed an acceptable alternative procurement plan.
C. A selected joint venture partner may contract with an
identity-of-interest party for goods or services or a party
specified in the selected bidder’s response to an RFP or RFQ
(as applicable) without further procurement if:
1. The PHA can demonstrate that its original competitive
selection of the partner clearly anticipated the later
provision of such goods and services;
2. Compensation of all identity-of-interest parties is
structured to ensure that there is no duplication of
profit or expenses; and
3. The PHA can demonstrate that its selection is reasonable
based on prevailing market costs and standards, and the
quality and timeliness of the goods and services is
comparable to that available in the open market.
14.6 Contracting with PHA Subsidiaries, Affiliates, and Joint Venture Partners
A PHA may, in connection with public housing, contract with a joint venture partner,
subsidiary, or affiliate to perform (1) administrative or maintenance services, (2)
the provision of social and supportive services, or (3) other services only after
compliance with 24 CFR 85.36, i.e., full and open competition.
14.7 Consortia
The 1998 Quality Housing and Work Responsibility Act (QHWRA) created a new Section 13
of the Housing Act of 1937 that authorizes PHAs to form a special type of consortium,
called a Section 13 Consortium. Regulations on Consortia can be found at 24 CFR Part
943.
A. Under a Section 13 Consortium, participating PHAs enter into a
consortium agreement, submit joint PHA Plans to HUD, and may
combine all or part of their funding and program administration.
B. Although PHAs do not need to comply with 24 CFR 85.36 to enter
into Consortia, the consortium itself must comply.
14.8 Considerations
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A PHA should consider several factors before deciding to participate in a particular
type of operating organization, including:
• The complexity of the program(s) to be managed and administered;
• Technical capability of staff;
• PHA financial strength;
• PHA willingness to assume financial risk;
• PHA statutory and contractual powers;
• Identity-of-interest and conflict of interest issues; and
• State Law. PHAs are typically created through State-enabling legislation and
governed by State statutes. As a result, contractual powers may vary
significantly. For this reason, PHAs should have legal counsel investigate
the specific limitations, liabilities, and authority available under State
law before entering into any cooperative business relationship.
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