Handbook No. 7460.8 REV 2
CHAPTER 16. PUBLIC/PRIVATE PARTNERSHIPS, HOPE VI,
AND MIXED-FINANCE DEVELOPMENT
16.1 General
This chapter discusses the special provisions associated with selecting HOPE VI and
Mixed-Financed partners and, once selected, the procurement rules that apply to
these different partners, including the PHA.
16.2 Application
A. Unless otherwise indicated in this Chapter, 24 CFR 85.36 applies to
HOPE VI and Mixed-Finance procurement activity whenever HUD or
other Federal funds are used in either the development or
operations of the public housing project.
B. If public and private funds are co-mingled, 24 CFR 85.36 applies.
C. 24 CFR 85.36 does not apply when the PHA is not spending HUD or
other Federal funds.
16.3 Definitions
The following terms, as used in this chapter, have the following definitions:
A. Community and Supportive Services (CSS). That portion of a HOPE VI
revitalization plan that addresses the service needs of residents of
the severely distressed public housing including activities
undertaken by the PHA, community partners, and sub-grantees. Under
the terms and conditions of a HOPE VI grant, PHAs are obligated to
provide (either directly or through partnership and/or contractors)
a range of services designed to help HOPE VI residents and residents
relocated from the distressed site make effective progress toward
self-sufficiency.
B. CSS Partner. A community entity or social service provider offering
supportive services to residents of a HOPE VI site or relocated
residents as part of the overall implementation of the HOPE VI
grant. PHAs are encouraged to form CSS partnerships during the grant
application development process. When specific nonprofit service
providers are named as CSS partners in the grant application, they
may qualify as sub-grantees rather than contractors. For-profit
providers or entities selected for CSS roles after grant award must
generally be competitively procured.
C. Development Partner. A for-profit or nonprofit partner of the PHA
or a development affiliate of the PHA, carrying out the physical
revitalization of a mixed-finance project site, bearing financial
risk. A Development Partner is an entity with whom the PHA enters
into a partnership or other contractual arrangement in order to
provide for the mixed-finance development of public housing units.
The Development Partner has primary responsibility with the PHA
for the development of the housing units and/or non-residential
structures under the terms of the approved mixed-finance proposal.
The Development Partner other than a PHA Instrumentality must also
be procured in accordance with 24 CFR 85.36.
D. Instrumentality. An entity formed in accordance with applicable
law, and whose assets, operations and management are legally and
effectively controlled by the PHA, and that utilizes Public Housing
Funds and assets for the purpose of creating public and affordable
housing.
16-1
2/2007
_____________________________________________________________________________________
Handbook No. 7460.8 REV 2
E. Mixed-Finance. The combined use of Federal public housing funds
and privately financed sources of funds for the development of
public housing units under 24 CFR Part 941 Subpart F.
F. NOFA. The notification of funding availability that invites
applications from PHAs for a HOPE VI grant and describes the
conditions for grant award in any given grant cycle.
G. Owner Entity. This is the entity that will own the public housing
units in a mixed-finance development. The owner entity may be a
partnership that includes a PHA affiliate. It may also be a
separate entity altogether, i.e., one not owned by the PHA or a
PHA affiliate.
H. Operating Subsidy-Only Projects. The term “Operating Subsidy-Only
Project” refers to the development of public housing replacement
units financed without the use of HUD public housing capital
assistance or HOPE VI funds, but for which HUD agrees to provide
operating subsidies under Section 9(e) of the U.S. Housing Act of
1937 (the “Housing Act”). The PHA must procure developers and/or
owners of an Operating Subsidy-Only Project using the competitive
procurement process required by 24 CFR 941.606(n)(1)(ii) and 24
CFR 85.36. For additional information, refer to PIH Notice
2004-5.
I. Program Manager. An entity a PHA procures in accordance with 24
CFR 85.36 to represent its interests and to assume responsibility
for coordinating all participants including the PHA, HUD, third
party consultants and financing sources. A program manager may
also assist the PHA in its negotiations with a developer.
J. Sub-grantee. A nonprofit entity, commonly a service provider named
in a HOPE VI grant application, playing an integral role in grant
implementation, and not procured. A sub-grantee may also be a
governmental entity that does development work on behalf of the
PHA.
16.4 Selection of Developer/Development Partner
A. HUD permits the QBS method of procurement to select a development
partner, under an exception that parallels the selection of an A/E
and where price is negotiated with the highest-ranked offeror based
on responses to an RFQ. Requirements and guidance governing the
selection of a development partner (or master developer) can be
found in 24 CFR 941.602(d)(1) of the Mixed-Finance Interim Rule.
B. All procurement transactions must be conducted in a manner that
provides full and open competition.
C. A cost or price analysis must be completed for all procurements,
prior to the submission of proposals to determine an estimated
value for the requested services. An explanation of Cost and Price
analysis is found in Chapter 10.
D. The QBS method is not permitted for the procurement of HOPE VI,
Mixed-Finance Program Managers, and legal services.
16.5 HUD Review of Hope VI Procurement Actions
Except where old grant agreements specifically require HUD approval, HUD does not
approve procurement actions for the HOPE VI program. Each grantee should consult
their individual grant agreement.
16-2
2/2007
_____________________________________________________________________________________
Handbook No. 7460.8 REV 2
16.6 Procurement Requirements of Developer
Once the developer has been selected in accordance with Part 85, the selected
development partner is not subject to 24 CFR 85.36 except where the PHA or its
PHA instrumentality “exercises significant functions within the owner entity
with respect to managing the development of the proposed units.”
A. Actions that are considered to be exercising significant functions
are:
1. When a PHA or its PHA instrumentality is acting as the
sole or managing general partner in the owner entity.
2. When a PHA or PHA instrumentality is acting as developer.
B. The following are examples of actions taken by a PHA or its PHA
instrumentality that are not considered significant functions:
1. Monitoring units receiving operating subsidy to ensure
compliance with various regulations.
2. Coordinating communications with agencies regarding
project financing and operations.
3. Providing Community and Supportive Services (CSS) services.
4. Attending construction meetings, reviewing and approving
draws.
5. Maintaining the waiting list.
6. Reviewing and approving operating and capital budgets.
C. 24 CFR 85.36 applies to the developer when a city agency is acting
as a developer through a sub-grantee agreement with the PHA.
D. As private entities, developers, procured by a PHA in accordance
with 24 CFR 85.36 and 941.602(d), are not required to comply with
24 CFR 85.36 in selecting their subcontractors (see also paragraph
16.7.B.2 and 24 CFR 941.606(n)(1)(ii)).
16.7 Other Required Efforts
The complex nature of public/private partnerships and Mixed-Finance development
require that the PHA and its partners adhere to certain provisions to avoid even
the appearance of impropriety. Important provisions include, but are not limited
to, the following:
A. Conflict of Interest Provisions. Federal and often State and local
statutes and regulations contain conflict of interest provisions
that prohibit the PHA from obtaining supplies and services from
persons or entities with certain conflicts. These prohibitions are
included in NOFAs, ACCs, the HOPE VI Grant Agreement, 24 CFR Part
85, 24 CFR 941.606, as well as at the State and local level.
The HOPE VI Grant Agreement includes requirements for identifying
conflicts of interest. The following is a list of general
requirements. The HOPE VI Grant Agreement is modified each year, and
PHAs should consult the applicable Grant Agreement for specific
language relating to conflicts of interest.
16-3
2/2007
_____________________________________________________________________________________
Handbook No. 7460.8 REV 2
1. In addition to the conflict of interest requirements in 24
CFR Part 85, no person who is an employee, agent,
consultant (excluding an independent contractor), officer,
or elected or appointed official of the Grantee who
participates in any facet of the decision-making process
may obtain a financial interest or benefit from the
procurement. This limitation continues for one year after
the procurement. Relatives and family members of the
decision-makers are also excluded from benefiting from the
procurement.
2. In addition to the conflict of interest requirements in 24
CFR Part 85, no person who is an employee, agent, officer,
or elected or appointed official of the Grantee and who
exercises or has exercised any functions or
responsibilities with respect to activities assisted under
this HOPE VI Grant, or who is in a position to participate
in a decision-making process or gain inside information
with regard to such activities, may obtain a financial
interest or benefit from the activity, or have an interest
in any contract, subcontract, or agreement with respect
thereto, or the proceeds thereunder, either for himself or
herself or for those with whom he or she has family or
business ties, during his or her tenure or for one year
thereafter.
3. The Department may grant an exception to the exclusion in
paragraph 16.7A.1, above, on a case-by-case basis.
However the PHA must provide a disclosure of the nature
of the conflict, accompanied by 1) an assurance that
there has been public disclosure of the conflict, 2) a
description of how the public disclosure was made and 3)
an opinion of the Grantee’s attorney that the interest
for which the exception is sought does not violate State
or local laws.
B. Identity of Interest.
1. PHAs must ensure that all partners participating in the
development, regardless of any identity of interest, have
no conflict of interest.24 CFR 941.606(n)(I)(ii).
2. If a partner and/or owner entity (entity in which it has
an Identity of interest) wants to serve as the General
Contractor, it may award itself the construction contract
only if it can demonstrate that its bid is the lowest bid
submitted in response to a public request for bids or the
PHA may seek a waiver.
C. Required Contract Clauses. 24 CFR 85.36(i) lists 13 required
clauses in a contract. As some of these clauses may directly
affect negotiations with partners, these clauses must be
included in the solicitation documents so that all potential
offerors are aware of them.
16.8 Procurement by Parties Other Than the PHA or the Developer
A HOPE VI or Mixed-Finance project typically involves many parties other than the PHA,
some of whom will be procuring supplies and services in connection with grant
implementation. The following guidelines apply to such PHA partners:
A. Private Property Managers. If a PHA has procured a developer in
accordance with 24 CFR 85.36, the developer does not need to
comply with 24 CFR 85.36 in selecting a private property manager.
Further, in this case, the private property manager does not need
to comply with 24 CFR 85.36 when selecting subcontractors or
procuring supplies and services. However, if the PHA is the
developer, it must
16-4
2/2007
_____________________________________________________________________________________
Handbook No. 7460.8 REV 2
comply with 24 CFR 85.36 in selecting private property managers,
unless the property manager is the PHA or its instrumentality;
B. Program Managers. Although Program Managers are private
entities, their role in a HOPE VI or a Mixed-Finance
development places them in the role of agent for or adjunct
staff to the PHA. If the Program Manager is subcontracting out
a portion of its duties, or entering into direct contracts to
accomplish tasks it is required to perform under its contract
with the PHA (and provided such duties and tasks are within the
scope of tasks the Program Manager was procured to perform), the
PM is not bound by the procurement requirements of 24 CFR 85.36.
However, when the Program Manager is procuring a provider for the
PHA, i.e., by developing an RFP for supplies or services that the
PHA will purchase, then 24 CFR 85.36 applies. Even if the Program
Manager enters into such a contract, but the PHA retains
involvement and control over all the decisions and other aspects
of the contract (beyond approval or veto over the actions of the
PM), HUD will most likely consider such a procurement to be
subject to 24 CFR 85.36;
C. Resident Groups. Resident groups acting as “sub-grantees” are
subject to 24 CFR Part 84. See Section 37 for further guidance on
working with sub-grantees; and
D. Resident-Owned Businesses. Resident-owned businesses are governed
by 24 CFR Part 963 Subpart B, which allows the PHA to limit
competition on certain procurement actions to resident owned
businesses. Additional guidance on contracting with resident-owned
businesses may be found in Chapter 15 of this Handbook, unless the
property manager is the PHA or its instrumentality.
16.9 Resident Involvement
A. RMCs, as distinguished from Resident-Owned Businesses, may qualify
for a sole-source award for property management contracts only,
provided that the RMC is duly constituted and qualified as such.
See Chapter 15 for guidance.
B. As part of HUD’s guidance on resident and community involvement in
HOPE VI redevelopment projects and Mixed-Finance Developments, HUD
has encouraged the inclusion of residents on selection panels
provided that the PHA constitutes the majority membership on the
panels and the residents have been trained in the procurement
process.
1. Resident members of, or advisors to, selection panels are
acting as agents of the PHA and therefore are subject to
the conflict of interest provisions of 24 CFR 85.36(b)(3).
PHAs are advised to seek HUD guidance on this issue before
constituting the make-up of a selection panel.
2. Localities are frequently involved as key community
partners with PHAs in carrying out HOPE VI and
Mixed-Finance projects, particularly when the local
planning or redevelopment agency has experience in the
management of public-private ventures, negotiating with
developers, and managing large scale development projects.
PHAs often include local government staff on selection
panels. In these cases, care should be taken to ensure that
PHA representation constitutes the majority of the panel
membership and all panel members must comply with conflict
of interest requirements.
C. Despite the relative experience or expertise of local government or
redevelopment agency staffs, the PHA, as the grantee, is obligated
to carry out its own procurement and must not delegate that
responsibility to another agency.
16-5
2/2007
_____________________________________________________________________________________
Handbook No. 7460.8 REV 2
16.10 Procurement by the PHA as Developer with Ownership Interest in the Development or
Ownership Entity
A. Generally, whenever the PHA or Instrumentality is acting as the
development entity or performs a significant role in the actions
and decision-making of such an entity (as through a partnership
with a private entity), the requirements of 24 CFR 85.36 apply to
procurement. HUD may make a case-by-case exception if such an
entity presents an acceptable alternative procurement plan that
adequately protects the public interest.
B. PHA Procurement of Instrumentalities - A PHA’s procurement with its
instrumentality is not subject to Part 85. However, the
instrumentality must procure other members of the operational or
development team subject to the same procurement rules as the PHA
(i.e. 24 CFR Part 85).
16.11 Issues Arising in CSS Procurement Activity
A. A PHA must comply with 24 CFR 85.36 when selecting an administrator
for its community supportive services program.
B. Social service providers that are nonprofit or governmental agencies
may be sub-grantees if included in the grant application. Such
sub-grantees do not have to be competitively procured. However,
pursuant to the HOPE VI Grant Agreement, a PHA must gain HUD
approval of the sub-grantee agreement with a social service
provider.
C. In each HOPE VI grant year, there have been changes in the CSS
portion of the HOPE VI program and applicable procurement
requirements. These changes appear in the NOFA and the HOPE VI
Grant Agreement for the applicable grant year. PHAs should consult
the NOFA and the HOPE VI Grant Agreement for requirements that may
pertain to that specific year’s grant awards.
16.12 Contracting with Sub-Grantees
A PHA may decide to use sub-grantees to complete elements of the project including
development and CSS.
A. The PHA is responsible for ensuring that sub-grantees are aware of
the requirements imposed on them by Federal statutes and
regulations as well as any requirements of Grant agreements.
B. The PHA must ensure that sub-grants include any clauses required
by Federal statutes and executive orders and their implementing
regulations.
C. Sub-grantees are considered to be acting as the PHA. Sub-grantees
who procure supplies or services paid for by HOPE VI or other grant
funds will be subject to 24 CFR Part 85 if the sub-grantee is a
governmental agency, or 24 CFR Part 84 if it is a non-profit
sub-grantee.
D. The PHA will monitor compliance by sub-grantees.
16.13 Mandatory Contract Clauses
Contracts with developers and others must contain the applicable requirements of 24
CFR 85.36(i), the HOPE VI Grant Agreement, the ACC, and other contract provisions
that may be applicable to the HOPE VI program. The mandatory Section 3 contract
clause can be
16-6
2/2007
_____________________________________________________________________________________
Handbook No. 7460.8 REV 2
found at 24 CFR 135.38, which applies to all contracts covered by Section 3. Forms
HUD-5370, HUD-5370-C and 5370-EZ must be used where applicable.
16.14 Fees and Guarantees
A. Guarantees. PHAs must not provide completion, operating deficit, or
other guarantees to investors from funds received by the PHA under
the public housing development program, the Capital Fund program,
the Operating Fund, operating receipts of the PHA derived from
public housing property (which means property which is owned by the
PHA and must be subject to a Declaration of Trust in favor of HUD),
or any operating reserve of the PHA funded from the operating Fund
or operating receipts, if any, derived from public housing property.
The PHA needs to have a non-HUD source to pay guarantees.
B. Developer Fees. HUD has developed cost control and safe harbor
guidelines for acceptable development fees in HOPE VI and mixed
finance projects. HUD reserves the right to review and reject a
negotiated fee if it does not meet the cost control guidelines.
C. Developer Fees to PHAs. A PHA acting as developer or co-developer of
a HOPE VI project may be entitled to a fee, provided the fee is
returned to the project. Only in cases where the project or
subsequent phases of the project cannot benefit from the reinvested
developer fee, may the PHA use the developer fee for other
low-income housing purposes. The PHA must disclose the fee and its
use in the Program Income Certification described in Exhibit H of
the Mixed-Finance ACC Amendment.
16-7
2/2007
_____________________________________________________________________________________
|
