Handbook No. 7460.8 REV 2
CHAPTER 3. GENERAL REQUIREMENTS
3.1 Procurement Planning (24 CFR 85.36 (b)(4))
A. General. Planning is essential to managing the procurement function
properly; however, the type and extent of planning will depend on, among
other factors, the method and size of the procurement, with larger and
more complex procurements requiring more planning.
1. Careful advance planning provides the PHA with adequate time to
accomplish its procurement actions. Advance planning helps to:
maximize competition and competitive pricing among contracts and
decrease the PHA’s procurement costs; reduce PHA administrative
costs; ensure that supplies and services are obtained without any
need for re-procurement, e.g., resolving bid protests; and minimize
errors that occur when there is inadequate lead-time.
2. PHAs should periodically review their record of prior purchases, as
well as future needs, to find patterns of procurement actions that
could be performed more efficiently or economically. Items purchased
repetitively might be obtained more economically through various
master contracts. However, consideration should be given to storage,
security, and handling requirements when planning these types of
purchasing actions. For example, it may not be economical or prudent
to buy truckloads of salt in summer months for deep discounts if
there is no appropriate storage space or if the cost of handling
would exceed the savings in price.
3. PHAs may enter into intergovernmental agreements with State or local
government agencies (including other PHAs) to obtain needed supplies
or services if such agreements will foster economy and efficiency.
The use of intergovernmental agreements can significantly reduce the
amount of time required to contract for supplies or services, while
allowing PHAs to take advantage of prices obtained through volume
purchasing by State or local agencies. (See Chapter 14.)
B. Individual Procurement Plans (IPPs). For larger, more complex procurements,
such as major computer purchases or construction projects, PHAs should
establish IPPs. IPPs establish deadlines or milestones for completion of the
steps necessary to assure timely delivery or performance and may also include
staffing assignments. The scope of the IPP should be determined by the
C. Equipment Lease or Purchase. Based on a case-by-case evaluation of costs and
other factors, PHAs should consider the leasing of equipment. Those factors
would include: length of period the equipment is to be used and the extent
of use within that period; financial and operating advantages of alternative
types and makes of equipment; cumulative rental payments for the estimated
period of use; net purchase price; transportation and installation;
maintenance and other service costs; potential obsolescence of the equipment
because of imminent technological improvements; availability of the purchase
items; trade-in or salvage value; imputed interest; and availability of
servicing capability (for example, whether the equipment can be serviced by
3.2 Independent Cost Estimate (ICE) (24 CFR 85.36(f))
A. The ICE is the PHA’s estimate of the costs of the goods or services to be
acquired under a contract or a modification. It serves as the PHA’s
yardstick for evaluating the reasonableness of the contractor’s proposed
costs or prices.
Handbook No. 7460.8 REV 2
B. The ICE also helps the Contracting Officer determine the contracting method
to be used. For example, if the costs can be estimated with a high degree of
confidence in their accuracy, sealed bidding may be possible.
C. While the Contracting Officer is responsible for the preparation of the ICE,
other personnel (e.g., the end user, or budget and finance) are usually
involved and may actually do most of the preparation. The PHA may develop
the ICE using its own employees, outside parties (e.g., consultants), or a
combination of the two. If any outside party (whether compensated or not)
assists in developing the ICE, the PHA must take appropriate steps to
ensure that organizational conflicts of interest are avoided and that
the outside party does not obtain any competitive advantage from its
advance knowledge of the PHA’s cost estimate (see also Chapter 4, Ethics
in Public Contracting).
D. The Contracting Officer shall prepare, or have prepared, an ICE commensurate
with the purchase requirement. The level of detail will depend upon the
dollar value of the proposed contract and the nature of the goods or
services to be acquired. The ICE must be prepared prior to the
solicitation of offers. The requirements for ICEs are:
1. For Micro Purchases (below $2,000), the Contracting Officer
generally does not need to prepare an ICE. Price reasonableness
normally will be based on a comparison with historical prices paid
for the item, commercial catalog prices, or other offers.
2. For purchases above $2,000 but less than the PHA’s small purchase
threshold, documentation should be kept to a minimum. The ICE may
be based on prior purchases, commercial catalogs, or detailed
analyses (e.g., purchases for services).
3. For purchases above the PHA’s small purchase threshold, the level of
detail will vary but should be commensurate with the size (i.e.,
dollar value), complexity, and commercial nature of the requirement.
ICEs are normally broken out into major categories of cost (e.g.,
labor, materials, and other direct costs such as travel, overhead,
and profit). Commercially available products and services may
require less detail as the marketplace tends to provide current
reliable pricing information for commercially available products; a
PHA may also not need to break out components. Non-commercial type
requirements, and work designed specifically for the PHA, will
require much more extensive estimation and a detailed ICE.
E. The ICE serves as the primary in-house gauge of cost and price
reasonableness, but it should not be relied upon to the exclusion of
other sources of pricing information. Market conditions may fluctuate
between the time the ICE is prepared and the receipt of offers. For
example, materials or labor costs may have increased or decreased. If
a significant period of time has elapsed, or the PHA knows that certain
market conditions have changed, the Contracting Officer should request
that an updated ICE be prepared to use in evaluating offers.
Handbook No. 7460.8 REV 2
A. General 24 (CFR 85.36(b)(9)). The PHA must maintain records sufficient to
detail the significant history of each procurement action. Such documentation
is particularly important in the event a protest is lodged against the PHA.
It will also facilitate future purchases of similar supplies or services
since it will not be necessary to recreate solicitation documents.
Supporting documentation shall be in writing and placed in the procurement
file. These records shall include, but shall not necessarily be limited to,
1. Rationale for the method of procurement selected. For example, the
contract file would not need to state why the Contracting Officer
chose small purchase procedures to order a desk but would want to
note why non competitive proposals was used for a roofing contract.
2. The solicitation.
3. Selection of contract pricing arrangement, but only if not apparent.
For example, the contract file would not need to document why a firm
fixed-price was used to obtain building materials.
4. Information regarding contractor selection or rejection, including,
where applicable, the negotiation memo, the source selection panel,
evaluation report, cost and price analysis, email correspondence
(including offers, selections, pertinent pre- and post-award
discussions and negotiations, etc.)
5. Basis for the contract price (as prescribed in this handbook), and
6. Contract administration issues/actions.
The level of documentation should be commensurate with the value of
the procurement. A sample contract file checklist is included in
B. Record Retention (24 CFR 85.42(a)&(b). PHAs shall retain all significant
and material documentation and records concerning all procurements they
conduct. These records must be retained for a period of three years after
final payment and all matters pertaining to the contact are closed. If any
claims or litigation are involved, the records shall be retained until all
issues are satisfactorily resolved.
C. Audits. HUD and the Comptroller General of the United States have the right
to audit all books, documents, papers, and records of the PHA that are
pertinent to financial assistance provided by HUD (see section 15 of the
Annual Contributions Contract, or ACC). HUD will periodically perform audits
and management review of the PHA procurement function to determine whether
the PHA’s procurement actions meet the requirements set forth in 24 CFR
85.36 and this handbook. Additionally, 24 CFR 85.36(i)(11) requires PHAs to
include in their contracts a clause requiring retention by the contractor of
all required records pertaining to the contract. (This clause is discussed
in more detail, along with other mandatory contract provisions, in
Chapter 10.) These records must be retained for a period of three years after
final payment and all others matters pertaining to the contract are closed.
3.4 Funding and Payment
Regardless of the system used (centralized or decentralized purchasing), the PHA must
make sure that funds are available for any purchases made and that there is an orderly
process to pay contractors promptly.
Handbook No. 7460.8 REV 2
• Under centralized purchasing arrangements, the Contracting Officer (often a
“buyer” in the Purchasing Department) typically must receive approval from
the Budget or Finance Department that funds are, indeed, available before
making the purchase.
• Under a decentralized system, the Housing Manager is generally the
Contracting Officer, who should make sure that funds are available in the
property’s approved budget before making a purchase.
To maintain good relations with contractors, a PHA should ensure that work
performed is inspected in a timely manner and that contractor invoices for work
accepted by the PHA are paid promptly. Unnecessary delays in either inspection or
payment can discourage contractors from participating in future PHA procurements
or cause them to increase their bid price to account for expected delays in
payment. In addition, some States and local governments have passed “Prompt
Payment” laws that establish specific time standards for payment of contractor
invoices, along with interest penalties for unjustified late payments. Further,
in accordance with Office of Management and Budget (OMB) Circular A-87, Cost
Principles for State, Local, and Indian Tribal Governments, and cross-referenced in
24 CFR 85.22, certain penalties and interest cannot be paid with HUD program funds
without written advance permission of HUD. The PHA should become familiar with any
applicable State or local laws of this nature and incorporate their substance into
the PHA’s own operational procurement procedures.
3.5 Internal Controls
PHAs must establish appropriate internal controls to assure the proper expenditure
of funds. In centralized purchasing arrangements, these controls often result in the
separation of duties between those ordering, those receiving, and those paying for
goods and services. In decentralized purchasing arrangements, the Housing Manager is
often the person both ordering and receiving the goods/supplies as well as the person
authorizing payment. In these latter arrangements, the PHA must establish other means
of internal controls, such as site-based budgets and appropriate purchasing
thresholds. Additional information regarding conflicts of interest and other ethical
considerations is found in Chapter 4, Ethics in Public Contracting.
Handbook No. 7460.8 REV 2