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Housing Agency Marketplace - Housing Agency Marketplace
Customer Support: 866-526-9266

Thu. Nov 30, 2023
09:44 PM UTC

HUD Procurement Handbook 7460.8 REV 2
This handbook is originally from the U.S. Department of Housing and Urban Development (HUD)

                                                          Handbook No. 7460.8 REV 2


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 

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 


                                                          Handbook No. 7460.8 REV 2
		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 

		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 

	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;


                                                          Handbook No. 7460.8 REV 2
		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 
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;


                                                          Handbook No. 7460.8 REV 2
		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 

		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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