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 Contact  Customer Support: 866-526-9266 © Copyright 2023, International eProcurement   
Housing Agency Marketplace - Housing Agency Marketplace
Customer Support: 866-526-9266

Thu. Nov 30, 2023
08:13 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

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 

	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 



                                                          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 

	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 
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.                                                


                                                          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 

		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 

		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. 


                                                          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 

		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 

		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                                                        


                                                          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 

		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.



                                                          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 

	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 

	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 

	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                                                          



                                                          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.	 




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