Handbook No. 7460.8 REV 2
CHAPTER 15. EMPLOYMENT & TRAINING OPPORTUNITIES AND
CONTRACTING WITH RESIDENTS, RESIDENT-OWNED, SMALL,
MINORITY, AND OTHER DISADVANTAGED BUSINESSES
15.1 General
HUD strongly supports a policy of providing training and employment opportunities to
residents and contracting with residents and resident-owned businesses, including
RMCs, whenever possible. In addition, HUD encourages PHAs to establish goals for
contract awards to small and minority-owned businesses and minority business
enterprises (MBEs), women’s business enterprises (WBEs), and businesses in labor
surplus areas.
15.2 Section 3 of the Housing and Urban Development Act of 1968 (24 CFR 135)
A. Overview. The purpose of Section 3 is to ensure that, to the
greatest extent feasible, employment, training, and business
opportunities created by HUD financial assistance be directed to
low and very-low income persons. Efforts to promote Section 3
objectives must be consistent with existing Federal, State and
local laws and regulations.
B. Covered Programs. Section 3 requirements apply to:
1. PHA utilization of funds for public housing development,
operations, and capital fund programs; these requirements
do not apply to Section 8; and
2. In addition, certain Notification of Funding Availability
(NOFA) and grant agreements governing assistance to PHAs
may contain Section 3 requirements.
C. Covered Work. Section 3 covers contracts for work and does not
apply to contracts for the purchase of supplies and materials.
However, contracting with PHA resident-owned businesses for the
purchase of supplies and materials is considered providing an
“other business related economic opportunity” under 24 CFR 135.40,
which can be used to satisfy a PHA’s overall Section 3 obligations.
Additionally, if the contract includes installation of purchased
equipment, the contract would be covered by Section 3.
D. Mandatory Section 3 Contract Clause. The mandatory Section 3
contract clause can be found at 24 CFR 135.38, which applies to all
contracts covered by Section 3. Covered contracts described at 24
CFR135.3(a) include developments, operating and modernization
assistance. This clause is included in forms HUD-5370, HUD-5370-C,
and HUD-5370-EZ
E. Annual Report. Pursuant to 24 CFR 135.90, PHAs must submit to, the
Assistant Secretary for Fair Housing and Equal Opportunity, an
annual report using the Section 3 Data Reporting System on form
HUD-60002- Economic Opportunities for Low- and Very Low-Income
persons.
15.3 Resident-Owned Businesses
A. A resident-owned business is any business concern that is owned and
controlled by public housing residents.
B. HUD strongly encourages PHAs to contract with resident-owned
businesses to the maximum extent feasible.
C. The regulation at 24 CFR Part 963 allows PHAs to use an alternative
procurement process when contracting with businesses owned in
substantial part by PHA residents (resident-owned businesses) for
public housing services, supplies, or
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construction. The alternative procurement process must comply with
procedures and requirements as set forth in HUD’s procurement
regulations at 24 CFR 85.36, except that solicitations are limited
to resident-owned businesses. Use of this alternative procurement
process is not a requirement.
D. The alternative procurement process under 24 CFR Part 963 is as
follows:
1. The PHA prepares an ICE for the procurement.
2. The PHA selects the appropriate method of procurement
(small purchase, sealed bidding, competitive proposals,
or noncompetitive proposals).
3. The PHA solicits a bid, proposal, or offer from one or
more resident-owned businesses.
4. The PHA receives offer(s) from one or more resident-owned
businesses and ensures that:
a. The offeror has submitted the required certification
described in 24 CFR Part 963 regarding previous
contracts received under the alternative procurement
process and the total amount of such previous
contracts is less than $1,000,000;
b. The PHA performs a cost or price analysis of the
offer(s) received and determines that the price is
reasonable, i.e., the price that normally would be
paid for comparable supplies, services, or
construction in the project area;
c. The PHA makes an award to the responsive and
responsible bidder/offeror/respondent whose
bid/offer/proposal is most advantageous overall to
the PHA, consistent with the evaluation factors
stated in the solicitation. The resident-owned
business must be capable of performing
satisfactorily; and
d. The PHA documents the procurement file and complies
with all other procurement requirements of 24
CFR 85.36, including the requirement for economy
and efficiency.
15.4 Contracting with an Resident Management Corporation (RMC)
A. A PHA may enter into a contract with an RMC to provide property
management under 24 CFR Part 964, Tenant Participation and Tenant
Opportunities in Public Housing. As with any other property
management contract, the management agreement must specify the
functions for which the RMC will be responsible.
B. The property management contract between the PHA and the RMC is
administered as any other contract for services, and is subject to
any collective bargaining agreement provisions. However, the
requirements for competitive procurement and prior written contract
approval by HUD, where applicable (see Chapter 12), do not apply to
the decision of a PHA to contract with an RMC for property
management.
C. In order for the PHA to make a sole source award to an RMC, certain
conditions must be met that differentiate an RMC from a
resident-owned business. They are:
1. The duly elected resident council or councils of the
development(s) and a majority of the residents must
officially approve the RMC;
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2. If no resident council exists, a majority of the
residents of the development must approve the RMC;
3. The RMC’s voting members must be 18 years of age, or heads
of households (of any age) whose name appears on the lease
of the development to be represented by the RMC;
4. The RMC must be a validly incorporated nonprofit
organization; and
5. The RMC must be governed by an elected Board of Directors
and include representatives from each participating
Resident Council. It must have by-laws stating
qualification of officers, frequency of elections, and
procedures for recall. Elections must be held at least
every three years.
D. Before making a sole source award, the PHA must ensure that the
organization meets all criteria to qualify as an RMC, that the RMC
can demonstrate that it is capable of performing the proposed work,
and that the price is reasonable.
E. The RMC is obligated to provide fidelity bond coverage and insurance
or equal protection to the PHA and HUD against loss, theft,
embezzlement or fraudulent acts by the RMC or its employees.
F. In performing services, the RMC must comply with the requirements of
24 CFR Part 84. The RMC must also be audited each year by a licensed
CPA and submit the audit report to HUD and the PHA within 30 days of
issuance.
15.5 Assistance to Small and Other Disadvantaged Businesses
A. Required Efforts. Consistent with Presidential Orders 11625, 12138,
and 12432, the PHA shall make every feasible effort to ensure that
small businesses MBEs, WBEs, and labor surplus area businesses
participate in PHA contracting. Suggested steps are included in the
sample Procurement Policy in Appendix 1.
B. Goals. PHAs are encouraged to establish goals by which they can
measure the effectiveness of their efforts in implementing programs
in support of Section 3 and contracting with disadvantaged firms.
It is important to ensure that the means used to establish these
goals do not have the effect of limiting competition and should not
be used as mandatory set-aside or quota, except as may otherwise
be expressly authorized in regulation or statute. Some localities
have adopted minority contracting set-aside policies or geographic
limitations, which may be in conflict with Federal requirements for
full and open competition.
C. Form HUD-2516, Contract and Subcontract Activity Report. PHAs are
required to report MBE progress on this form semi-annually. Where
the prime contract is awarded to a MBE, the PHA counts the entire
dollar amount of the contract toward the MBE goal. Where the prime
contract is not awarded to a MBE, but one or more of the
subcontracts are awarded to a MBE, the PHA counts the dollar value
of such subcontract(s) toward the MBE goal. The dollar value of
the prime contract and each of its subcontracts are not to be
double counted.
When developing an outreach program for small, WBE, MBE, or labor
surplus area, or Section 3 businesses, consider how to ensure that
the program has the effect of enhancing competition by increasing
the number of potential bidders and contractors capable of competing
effectively for work generated by the PHA. Among the steps that have
proved effective in some PHAs are:
1. Study the existing barriers facing low-income persons and
disadvantaged businesses;
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2. Examine PHA policies and procedures that may contribute to
these barriers and determine how to improve those policies
and procedures;
3. Communicate directly with disadvantaged firms and
resident-owned businesses about contracting opportunities,
the standards the PHA requires for quality work at a
reasonable cost, and how to succeed in bidding for PHA
work;
4. Maintain a list of disadvantaged and resident-owned firms
and notify them of planned procurement activities;
5. Establish partnerships with other community agencies,
Federal, State and local agencies, and educational
institutions. Many have as their mission the fostering of
job creation, training, and business development; and
6. Consider partnering in a consortium or interagency
agreement with other PHAs or units of local government to
enhance capacity to achieve Section 3 and disadvantaged
contracting goals.
Remember that the best programs will serve the needs of the PHA, assist resident-owned
businesses and low-income persons, and promote a more competitive environment.
A list is provided in Appendix 16 that includes sources of information on working with
resident-owned businesses.
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