7460.8 REV 2
CHAPTER 7. COMPETITIVE PROPOSALS
The competitive proposal method (also commonly referred to as “negotiated
procurement”) is the primary alternative to sealed bidding for contract
requirements that exceed a PHA’s small purchase threshold. While the
instructions in this chapter apply only to contracts above a PHA’s small
purchase threshold, PHAs may adopt and adapt any of these procedures for small
purchases if they choose. However, they should not overly complicate the small
purchasing process with laborious and unnecessary processes.
A. Sealed Bidding vs. Competitive Proposals. Unlike sealed bidding, the
competitive proposal method permits: consideration of technical factors
other than price; discussion with offerors concerning offers submitted;
negotiation of contract price or estimated cost and other contract terms
and conditions; revision of proposals before the final contractor selection;
and the withdrawal of an offer at any time up until the point of award. Award
is normally made on the basis of the proposal that represents the best
overall value to the PHA, considering price and other factors, e.g.,
technical expertise, past experience, quality of proposed staffing, etc.,
set forth in the solicitation and not solely the lowest price. (See
Chapter 6, Section 6.3 for additional guidance on when to use sealed
B. Conditions For Use (24 CFR 85.36(d)(3). The conditions for using competitive
proposals rather than sealed bidding should be established in the PHA’s
Procurement Policy. Generally, the competitive proposals method should be
used whenever any of the following conditions exist:
1. The requirement cannot be described specifically enough to permit
the use of sealed bidding. In other words, the work is not definite
enough to accurately estimate the total cost of the contract.
Therefore, the contractor would have to build monetary contingencies
into his/her price to ensure that his/her costs were covered. The
PHA, in turn, would end up paying for the increase in price due to
the contingency costs.
2. The nature of the requirement is such that the PHA needs to evaluate
more than just price to be sure that the prospective contractor
understands the PHA’s needs and can successfully complete the
contract, especially when contracting for professional services
(e.g., legal, architect-engineer, accounting, etc.) where the PHA
needs specific expertise and experience.
3. The requested work lends itself to different approaches, e.g.,
C. Justification. If not self-evident, the rationale for choosing competitive
proposals rather than sealed bidding procedures should be documented in the
D. Bonding. PHAs will generally need to require bid or performance bonds for
competitive proposals for construction or facility improvements.
E. Types of Competitive Proposals. There are two types of competitive proposals:
Request for Proposals (RFPs) and Requests for Qualifications (RFQs). The
latter may only be used in more limited circumstances, as described in
paragraph 7.3 of this chapter.
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F. Method of Solicitation. While any of the following methods can be employed,
the Contracting Officer should choose the method, which, considering matters
of economy, provides for full and open competition.
1. Advertising in newspapers or other print mediums of local or general
circulations. A sample advertisement is provided in Appendix 3.
2. Advertising in various trade journals or publications.
3. E-Procurement. PHAs may conduct their public procurements through
the internet using e-procurement systems. However, all
e-procurements must otherwise be in compliance with 24 CFR 85.36,
State and local requirements, and the PHA’s own procurement policy.
Steps must be taken to meet the requirements for full and open
competition to avoid potential protests.
G. Time Period for Solicitation. The solicitation must be run for a period
sufficient to achieve effective competition, which, in the case of paid
advertisements, should generally be run not less than once each week for
two consecutive weeks. State or local law may impose additional
7.2 Competitive Proposal Process (24 CFR 85.36(d)(3) (i-iv))
A. Format. Provided below is a suggested format for RFPs.
1. Cover Page;
2. Table of Contents;
3. Statement of Work (SOW);
4. Submission Requirements, along with pricing instructions;
5. Evaluation Factors; and
6. Attachments (including mandatory forms – see paragraph 7.2.B below).
B. Mandatory Forms/Contract Provisions. The PHA must include with the
solicitation/bid package the following mandatory forms, which contain all
mandatory contract provisions. (Note: the forms listed below assume that
competitive proposals are used for procuring non-construction services.
Only under limited circumstances would construction services be procured
by competitive proposals.)
1. Form HUD-5369-B, Instructions to Offerors – Non-Construction.
2. Form HUD-5369-C, Certifications and Representations of Offerors –
3. In addition, the PHA may want to include with the solitication Form
HUD-5370-C, General Conditions for Non-Construction Contracts.
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C. Submission Requirements. The PHA should make sure that the submission
requirements (1) include all HUD-required forms and certifications and
(2) are consistent with the factors used for evaluation. For example, if
the RFP indicates that proposals will be evaluated based on similar
experience in the particular activity, the PHA should make sure that it
requests respondents to include information on relevant past experience.
D. Evaluation Factors, Non-Price (24 CFR 85.36(d)(3)(iii))
1. The RFP must contain a clear statement of the evaluation factors to
guide the offerors in structuring their proposal. Non-price factors
are also called “technical factors.”
2. The written statement of evaluation factors and their relative
values clarifies each important factor to the offerors and
ensures a fair selection process.
3. The evaluation criteria should be tailored to fit each procurement.
4. Typical evaluation criteria include the following:
a. Demonstrated understanding of the requirement
b. Appropriateness of the technical approach in the proposal
(including labor categories, estimated hours, and skill
c. Quality of the work plan.
d. Technical capabilities (in terms of personnel, equipment,
and materials) and management plan (including staffing of
key positions, method of assigning work, and procedures
for maintaining level of service, etc.);
e. Demonstrated experience in performing similar work; and
f. Demonstrated successful past performance (including
meeting costs, schedules, and performance requirements) of
contract work substantially similar to that required by
the solicitation as verified by reference checks or other
E. Evaluation Factors, Price (24 CFR 85.36(d)(3)(iii), 24 CFR 85.36(f)). Price
must be a factor in making awards. In terms of evaluating price, a PHA has
two options, which must be indicated in the RFP:
1. Where Price is Assigned an Explicit Point(s). Under this method,
the PHA may award price a specific number of points. For example,
the PHA may rank proposals on a 100-point scale. Of the total
points, the PHA may award, for example, 80 points for technical
merit and 20 points for price. In using this method, the PHA will
need to determine the weight given to price versus technical
factors and how to convert price into a point scale.
2. Where Price and Other Technical Factors are Considered. Under this
method, technical factors are first determined and offerors are
ranked. Then, prices are evaluated. The PHA can award to the offeror
whose price and technical factors are the most advantageous to the
PHA. This method is also known as the “trade-off” method in that the
PHA trades-off, or weighs the importance of, price versus technical
factors. All amendments must be in writing.
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F. Amending and Canceling the RFP. PHAs may amend or cancel RFPs when
necessary or when otherwise considered to be in the best interest
of the PHA.
1. Amendments Before the Proposal Due Date. If changes to the RFP are
needed after it has been issued but before proposals are due, the
Contracting Officer should issue a written amendment to all
potential offerors who were furnished a copy of the original
solicitation. The amendment should then be provided with the
original RFP to those who request the RFP after the amendment is
2. Amendments After the Proposal Due Date. If changes to the RFP are
needed after the due date for receipt of proposals, the Contracting
Officer should provide a written amendment to all offerors who
submitted a proposal. If, however, the changes are significant
enough that potential offerors who did not submit offers might have
if the changes had been made before the proposal due date, the PHA
should consider extending the proposal due date.
3. Amendments After Determination of the Competitive Range. If the
need for changes is discovered after the Contracting Officer has
determined the competitive range (see paragraph 7.2.N), the
Contracting Officer should provide the amendment to all offerors
determined to be within the competitive range. If the changes may
have had an impact on the acceptability of any offeror who was not
included in the competitive range, the Contracting Officer should
consider re-determining the range to include such offerors and
provide them with the amendment.
4. Changes Requiring Cancellation of the RFP. If at any time in the
process any needed changes are substantial enough to constitute an
essentially new requirement, the Contracting Officer should cancel
the RFP, make the needed changes, and issue a new RFP with a new
proposal due date. This will be a judgment call on the part of the
5. Canceling an RFP. Cancellations must be done in accordance with the
PHA’s written procurement policy and procedures. While it is not
prohibited, the repeated cancellation of a single RFP or frequent
cancellation of RFPs serves to create a lack of confidence in the
PHA’s contracting process. Such actions may create the appearance
that either the PHA does not really know what it wants, or the PHA
may be seeking the participation of a particular contractor.
6. Documenting Amendments and Cancellations. The Contracting Officer
shall document the procurement file providing the rationale and
supporting facts for amendments and cancellations, where necessary.
G. Pre-proposal conferences. See Chapter 6, section 6.7 for instruction on
pre-proposal conferences. Please note that for the purposes of this
paragraph, “pre-bid” means “pre-proposal,” and “IFB” means “RFP.”
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H. Receiving Proposals. Proposals are to be date-time stamped when
they are received and held unopened in a secure place until the
established date for receipt of proposals has passed. Since
proposals are submitted in confidence and may contain proprietary
information (such as trade secrets or other confidential business
information regarding the offeror’s approach to the work), they
are not opened publicly. After the closing date, all proposals
received are opened and evaluated in confidence. Proposals and
any changes to those proposals are shown only to PHA personnel
who have been authorized by the Contracting Officer as having a
legitimate interest in them on the condition that information in
the proposals will not be released to anyone who has not been so
I. Late Submissions. Any offer received at the designated place after
the specified time should not be considered unless it is the only
J. Confidentiality. No information regarding any of the proposals,
including the names of the offerors or the number of proposals
received, should be provided to anyone without the Contracting
Officer’s permission. Offerors submit proposals in confidence and
expect their proposals to be protected from disclosure to other
offerors or individuals. The PHA could be subject to liability if
proprietary information is disclosed. Each member of the evaluation
committee (see below) and any advisors to the evaluation committee
should be required to sign a certification of nondisclosure. A
sample is provided as Appendix 9.
K. Evaluation Process (24 CFR 85.36(d)(3))
1. The evaluation shall be based on the evaluation factors set forth
in the RFP. Factors not specified in the RFP shall not be
considered. Initially, proposals should be evaluated on an
individual basis against the requirements stated in the RFP; at this
point proposals are not analyzed in comparison with each other.
Also during the initial evaluation, the committee evaluates only the
content of the proposals. No personal knowledge of the offeror not
based on the contractor’s written submission is or should be part of
the written proposals’ initial evaluation; however, the contractor’s
prior performance with the PHA should be included as part of the
standard review of offeror responsibility.
2. Unlike sealed bids, which are opened publicly, the results of
proposal evaluation may or may not be disclosed; either before or
after the contract is awarded. Disclosure will depend on State or
local law. In the case of protests or litigation, evaluation
documentation will almost certainly be made available to the
protestor or litigant and their legal counsels. Therefore,
evaluators should be especially careful to make the evaluations
as thorough, objective, and well documented (e.g., citing the
specific areas of the proposal that led to the particular portion
of the evaluation) as possible. The Contracting Officer is
responsible for ensuring that the evaluation results are
sufficiently documented and included in the contract file. To be
safe, the Contracting Officer should always assume that an award
will be protested.
3. Contracting Officers must be alert to attempts by offerors to
change the requirements of an RFP by inserting conditions in
their offers or otherwise altering the contract’s requirements.
While proposals are not required to be “responsive,” as that term
is used in sealed bidding (see Chapter 6), offerors may not
impose conditions or change requirements to suit their own needs
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Examples of conditioning offers include:
a. Adding special terms or clauses to impose State or local
laws not applicable to the PHA’s contracts;
b. Inserting “hold harmless” clauses to avoid certain
c. Making provision for attorney’s fees (to attempt to make
the PHA pay the contractor’s legal costs if the PHA sues
the contractor); or,
d. Taking exception to clauses, in whole or in part.
4. When possible, Contracting Officers should be willing to negotiate
changes unless the changes violate Federal, State or local law or
regulation, are required by HUD policy, or prejudice the other
offerors (e.g., making a change that benefits a single offeror).
L. Evaluation Report (24 CFR 85.36 (b)(9)). The PHA shall prepare an
evaluation report to document the ranking of the proposals by
technical merit, using point scores, or similar methodology.
(If price is included in the point scoring, the evaluation report
will also include the price or cost analysis, as appropriate.) In
addition, a narrative should accompany the scores to explain how
the scores were derived, detailing the significant strengths,
weaknesses, and deficiencies in the proposal. The level of detail
for the evaluation report will be influenced by the complexity of
the procurement, with more complex procurements likely requiring
more detailed reports.
M. Evaluation of Price (24 CFR 85.36(f)). The evaluation of price is made
using the cost and price analysis techniques in Chapter 10 and other
evaluation processes described in the RFP.
N. Competitive Range (24 CFR 85.36(f))
1. After the evaluation committee has evaluated all proposals, the
Contracting Officer should determine a competitive range. The
competitive range includes the proposals that have a reasonable
chance of being selected for award considering their technical
evaluation results and their proposed costs or prices.
2. The Contracting Officer examines the evaluation results contained
in the evaluation report to decide if each offer is technically
acceptable (i.e., appears to be able to perform the technical
requirements of the contract). The Contracting Officer analyzes
the proposed cost or pricing information (see Chapter10, section
10.2) to decide if the offers propose a reasonable total cost or
price. The Contracting Officer then considers the combination of
technical and cost (the “total package”) presented by each proposal
to decide if it should be kept in the running for negotiations and
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Example: A high scoring, technically acceptable offeror proposes a
price that far exceeds all the competition and the PHA’s ICE. The
Contracting Officer would be justified in not including it in the
competitive range. It would be highly likely that once the costs
were negotiated down to a reasonable level, the technical quality
would be much lower, too. Therefore, the offer does not truly
stand a reasonable chance of award.
3. Before conducting negotiations, technical proposals included in the
competitive range should be classified as:
a. “Acceptable.” This means that based upon the proposal as
submitted, the PHA could contract with the offeror and
expect that the work would be completed. The proposal is
not perfect, but it contains no significant weaknesses.
b. “Potentially acceptable.” This means that the technical
part of the proposal contains weaknesses that keep it from
being acceptable, but with relatively minor changes or
additional information from the offeror, it might be made
acceptable. Once additional information is obtained via
initial negotiations, this type of proposal must become
either acceptable or unacceptable.
c. “Unacceptable.” This means that the proposal is seriously
flawed to the point that no amount of negotiation would
lead to improve it, or the offer would have to be
substantially rewritten to be found acceptable. Either
the offeror simply did not understand the PHA’s requirement
or did not elect to prepare a sufficient proposal.
Technically unacceptable proposals should never be included
in a competitive range.
4. The competitive range, including the Contracting Officer’s rationale
for it, must be documented in the contract file.
5. The Contracting Officer may redetermine the competitive range after
the initial round of negotiations. For example, a potentially
acceptable offer becomes unacceptable. In that case, the
Contracting Officer should not ask the offeror for a Best and Final
offer (see paragraph Q, below). Instead, the Contracting Officer
should redetermine the range and remove that proposal. This may be
done after successive rounds of negotiation, if more than one is
O. Pre-negotiation Objectives
1. Pre-negotiations objectives are the Contracting Officer’s
negotiating positions. Normally, the Contracting Officer
should develop target objectives (e.g., best case, expected,
highest acceptable price, etc.) for the contract price.
Objectives may also be established for technical aspects of
proposals. For example, the Contracting Officer may have
included a “potentially acceptable” offer in the competitive
range (see paragraph 7.2N). The technical pre-negotiation
objectives would then include obtaining answers or clarification
relative to the areas of the proposal that made it potentially
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2. The Contracting Officer should establish specific pre-negotiation
objectives for each offer in the competitive range.
P. Negotiations with Offerors
1. Negotiations are exchanges (in either competitive or sole source
environment) between the PHA and offerors that are undertaken with
the intent of allowing the offeror to revise its proposal. These
negotiations may include bargaining.
2. Bargaining includes persuasion, alteration of assumptions and
positions, give-and-take, and may apply to price, schedule,
technical requirements, type of contract or other terms of a
3. When negotiations are conducted in a competitive acquisition, they
take place after establishment of the competitive range and are
4. Discussions are tailored to each offeror’s proposal, and shall be
conducted by the contracting officer with each offeror within the
5. The primary object of discussions is to maximize the PHA’s ability
to obtain best value, based on the requirements and the evaluation
factors set forth in the solicitation. The Contracting Officer shall
indicate to, or discuss with, each offeror still be considered for
award, significant weaknesses, deficiencies, and other aspects of
its proposal (such as cost, price, technical approach, past
performance, and terms and conditions) that could, in the opinion
of the contracting officer, be altered or explained to enhance
materially the proposer’s potential for award.
6. The scope and extent of discussions are a matter of the Contracting
Officer’s judgment. The Contracting Officer may inform an offeror
that its price is considered by the PHA to be too high, or too low,
and reveal the results of the analysis supporting that conclusion.
It is also permissible to indicate to all offerors the cost or price
that the PHA’s price analysis, market research, and other reviews
have identified as reasonable. “Auctioning” (revealing one
offeror’s price in an attempt to get another offeror to lower their
price) is prohibited.
Q. Best and Final Offers
1. After initial negotiations are complete, the Contracting Officer
shall invite the offerors in the competitive range to submit their
best and final offers, making any changes they wish in their
technical proposal and the price. All offerors in the competitive
range should be provided an opportunity to present best and final
2. The best and final offers shall be evaluated in essentially the
same manner as the initial offers. At his/her discretion, the
Contracting Officer may have the entire evaluation committee or
only a subset of the committee evaluate the best and final offers.
In either case, the Contracting Officer shall ensure that a full
evaluation is conducted sufficient to support the award decision.
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3. Best and final offers are usually requested only once in a
competition. However, in exceptional circumstances, the
Contracting Officer may determine that it is in the PHA’s best
interest to conduct another round of negotiations and request a
second best and final offer. (Note: The Contracting Officer
may also redetermine the competitive range based upon the best
and final offers. In that case, only those offerors still in
the competitive range – but all of them - are asked to submit
another revised best and final offer; see also paragraph N,
above.) The Contracting Officer should document in the
contract file his/her rationale for re-opening negotiations and
requesting any additional best and final offers.
4. The Contracting Officer shall establish a common date and time for
submission of offers. Late responses should be treated the same as
late initial offers. When requesting best and final offers, the
Contracting Officer shall clearly inform offerors that should they
fail to submit a best and final offer, or fail to submit one by the
due date, their initial offer will be deemed to be their best and
R. Award without Negotiations. If, after the initial evaluation of proposals,
there is a clear winner, and there is no need to negotiate or obtain further
clarification or information from that offeror (e.g., the price is
reasonable), the Contracting Officer may proceed directly to award, provided
that the RFP clearly stated that award could be made without negotiations
(see paragraph 7 of form HUD-5369-B).
S. Contract Award (24 CFR 85.36(b)(8))
1. General. Contracts shall be awarded only in accordance with the
terms of the solicitation. Contracts awarded using the competitive
proposals method are based on both price and technical merit of the
proposal. Awards shall be made only to offerors who have been
determined to be responsible contractors. Procedures for
determining contractor responsibility are included in Chapter 10,
and a sample Responsibility Determination form is included in
2. Notice to Unsuccessful Offerors. The Contracting Officer should
notify each unsuccessful offeror and the awardee price in writing.
In accordance with any applicable State or local law, the notice
should identify the successful offeror and the contract price, and
the basis for the offeror not being selected for contract award.
The basis should clearly describe the offer’s salient weaknesses
and deficiencies that resulted in it not being considered for award
(e.g., not simply state that the offeror’s proposal did not receive
a high enough score).
3. Debriefing Unsuccessful Offerors. The notice to unsuccessful
offerors should also provide them with the opportunity to request
a debriefing by the Contracting Officer. The notice should state
any time frame during which the request must be made (e.g.,
within 10 business days after receipt of notice). The debriefing
should explain how the offer was unsuccessful (e.g., by comparing
it to the requirements of the RFP). The debriefing should not
include a detailed point-by-point comparison with the successful
offer or any other offer, and may not reveal any information about
another offer that is protected from disclosure (e.g., personal
information, proprietary business information; see Chapter 1,
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T. Protests. Protests against the award of contracts shall be handled as
described in Chapter 10, Section 10.4.
7.3 Requests for Qualifications
A. General. The Qualifications-Based Selection (QBS) method is conducted using
an RFQ. Use of the QBS is limited and is different, primarily, from the RFP
method in that the PHA first selects the highest-ranked respondent on
technical factors and then negotiates price. The most common use of RFQs is
for Architect/Engineer (A/E) contracts. RFQs can also be used to select
development partners for mixed-financed projects (Chapter 16). The
discussion in this section references those special requirements/conditions
in using RFQs.
B. Procedure. Unlike other methods, the QBS method does not use price as an
evaluation factor. The PHA requests technical qualifications statements from
prospective firms and then ranks the statements according to their
qualifications as related to the project. The PHA then opens negotiations
with the top-ranked firm with intentions to reach agreement on a fair and
reasonable price. If agreement cannot be reached, the PHA terminates
negotiations with this firm and proceeds to the next-highest rated firm until
a price determined to be fair and reasonable to both parties is obtained.
Once negotiations have been terminated with a firm, the PHA may not go back
to that firm for additional negotiations – even if the next lower ranked
respondent is higher in price.
C. Eligible Uses. The QBS method can only be used for A/E services, or
Developer’s related contracts, or when specifically authorized by HUD.
Further, in accordance with 24 CFR 85.36(d)(3)(v), the QBS method cannot be
used to contract for other types of services provided by A/E firms, even
though A/E firms are a potential source for performing the proposed effort.
D. Alternative Methods of Selecting A/E Firms (24 CFR 85.36(d)(3)(v)). There
are several alternatives available to PHAs in contracting for the full range
of services offered by A/E firms:
1. A “full-service” approach may be used if the PHA solicits offers
using competitive proposal procedures or QBS for assistance in
preparing modernization plans, with options for the follow-on
design and construction phases for a specific contract. The
evaluation criteria in the solicitation should address the
qualifications and experience of prospective A/E firms for all
tasks. If QBS is used, the PHA evaluates the qualification
statements for technical competence, selects the best-qualified
A/E, and negotiates a fair and reasonable price for the initial
task. (If agreed by the A/E and the PHA, the contract may
stipulate that in the event that Phase I is not approved, the A/E
is not entitled to any payment.) If QBS is not used, price is
considered along with technical qualifications and experience in
the initial evaluation.
The PHA specifies the optional task (design/construction) in the
contract without a price because the full scope of the A/E services
is not yet known.
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If the PHA then wishes to exercise its option for the additional
services, the PHA notifies the A/E accordingly and requests a design
proposal. The PHA conducts a cost/price analysis, enters into
negotiations, and establishes a mutually acceptable price for the
design and construction phases. The PHA prepares a contract
modification (supplemental agreement), executed and signed by both
parties authorizing the A/E to begin the design/construction phase,
or the PHA has no further obligation to the A/E and may issue a new
competitive solicitation for the follow-on work.
With the exception of the full-service approach, described in
paragraph 7.3.D.2 below, the PHA should determine whether or not
there is an actual or potential conflict of interest resulting
from the same A/E who was involved in the Phase I being
subsequently involved in the related design/construction phase
If the PHA wishes to separate Phase I from the design/ construction
phase, the PHA first solicits and contracts for Phase I. Then, after
Phase I approval, the PHA solicits and contracts for the
design/construction phase. The A/E who was awarded Phase I may
compete for the design/construction phase, provided that the PHA
makes all application-related information available to all competing
A/E firms and that there is no organizational conflict of interest.
(For example, award of the contract to the A/E who developed the
plan would result in an unfair competitive advantage because, by
virtue of doing Phase I work, an unfair advantage exists through
information which might not be available to others).
The PHA is not to allow an A/E contractor, on a sole-source basis,
to prepare a grant (or development application) on a “no fee”
basis and then compensate that A/E by paying a contingent fee (or
contracting on a sole-source basis to do the design and
2. If the PHA wishes to procure A/E services for more than one
specific project, the PHA may solicit for an indefinite-quantity
of A/E services, e.g., design of various administrative or
maintenance buildings, where separate orders would be placed for
each building as the need arises. Because this approach may
provide the successful A/E with a substantial level of business
and basically confers status as the “resident A/E,” the contract
should contain a clause precluding the successful A/E from
competing on related A/E work solicited by the PHA during the
term of the contract if the other A/E work would result in an
organizational conflict of interest (such as unfair competitive
advantage or impairment of contractor objectivity).
E. A/E Evaluation Factors. The following evaluation factors are recommended for
use for modernization and development A/E contracts:
1. Evidence of the A/E’s or firm’s ability to perform the work as
indicated by profiles of the principals’ and staffs’ professional
and technical competence/experience, and their facilities;
2. Capability to provide professional services in a timely manner;
3. If design work is involved, evidence that the A/E is currently
registered in the State of the project’s location and carries
Errors and Omissions insurance (Note that this is a yes or no
criterion: if the answer is no, the firm is disqualified, not
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4. Past performance in terms of cost control, quality of work,
and compliance with performance schedules;
5. Demonstrated knowledge of local building codes and Federal
building alterations requirements; and
6. Other factors determined to be appropriate by the PHA.
F. Forms for A/E Contracts. The form HUD-51915, Model Form of Agreement Between
Owner and Design Professional, is required for use by PHAs for A/E contracts
that exceed the Federal small purchase threshold. In preparing the
solicitation, it should be noted that in States that mandate QBS, a price
shall not be solicited for the initial competition, but shall be requested
from the best-qualified A/E firm after the evaluation of qualifications and
ranking the firms (24 CFR 85.36(d)(3)(v)).
G. Inadequate Response to A/E Solicitation. If the PHA receives fewer than three
proposals, the PHA should analyze and document the reasons for the inadequate
response (such as if public notice advertising and outreach to potential
offerors were insufficient, or if the solicitation was unduly restrictive or
vague). Depending on the results of the analysis, the PHA may either reject
the proposals and issue a revised solicitation, or the PHA may proceed to
evaluate the proposals as deemed appropriate. If only one responsive proposal
was received, the PHA should follow the procedures described in Chapter 10.
7.4 Procurement of Legal Services by PHAs (24 CFR 85.36(b)(1))
A. Purpose and Applicability. The following information sets forth procedures
for the procurement of legal services by PHAs. This guidance provides
similar guidance to HUD staff and PHAs included in PIH Notice 2006-9,
Procurement of Legal Services by PHAs or its successor guidance. The
following information is not intended as the primary source of guidance
in this area but is provided to remind all HUD Offices and PHAs of the
proper procedures for procuring legal services and to briefly review areas
of common interest and concern. This information applies to all PHA
procurements of legal services that are funded with HUD grant funds subject
to 24 CFR Part 85, e.g., Operating Fund subsidies and Capital Fund.
B. Background. PHAs obtain required outside legal services through procurement
contracts. Such procurement is subject to the requirements set forth in 24
CFR Part 85, “Uniform Administrative Requirements for Grants and Cooperative
Agreements to State and Local Governments,” in particular, 24 CFR 85.36. In
accordance with 24 CFR 85.22, the costs of legal services incurred under HUD
grants (including those obtained under contract) must be reasonable and
necessary. Section 85.22(b) incorporates the OMB Circular A-87, which
contains a set of cost principles that PHAs must use for determining the
allowability of costs they incur under Federal grants and provides guidance
in their use. Contracts for litigation services are also to meet the
requirements of the HUD Litigation Handbook 1530.1 REV-5 dated May 2004
(the “Litigation Handbook”).
Handbook No. 7460.8 REV 2
C. Methods of Procurement. 24 CFR 85.36(d) permits PHAs to use all of the
contracting methods listed below. PHAs are expected to choose the method
of procurement that is reasonable based on the facts surrounding the
particular situation. The methods of procurement outlined in 24 CFR
1. Small Purchase Procedures. If the relatively simple and informal
small purchase methods are used, price or rate quotations will be
obtained from an adequate number of qualified sources.
2. Sealed Bids. This method is normally not appropriate for securing
legal services. Sealed bidding may only be used when it is possible
to quantify the costs of the required services (e.g., number of
hours) to permit the submission of firm bids and award a firm
fixed-price contract to the lowest responsive and responsible
bidder considering only price and price-related factors. In
addition, it is often critical to consider other factors besides
price (e.g., experience) when selecting a legal services
contractor. Sealed bidding does not permit the use of other
3. Competitive Proposals. This method is generally preferred when
procuring professional services because it allows for the
consideration of technical quality or other factors (in addition
to price) for securing services estimated to cost more than the
Federal small purchase threshold or a lower threshold as established
by the PHA ( e.g., to conform to State law). Competitive offers are
solicited, proposals are evaluated, and award is made to the offeror
whose proposal is most advantageous to the PHA, with price and other
factors (as specified in the solicitation) considered. Either a
fixed-price or cost reimbursement type contract may be awarded. This
method is generally used when conditions are not appropriate for the
use of sealed bids. If this method is used, the conditions in 24 CFR
85.36(d)(3) must be followed.
4. Noncompetitive Proposals. This method may only be used when the
other methods of procurement are infeasible and the circumstances
described in 24 CFR 85.36(d)(4) are applicable (e.g., legal
services are available from only a single source; public exigency
or emergency for the requirements will not permit a delay resulting
from competitive solicitation; after solicitation of a number of
sources, competition is determined inadequate; or HUD authorizes
the use of noncompetitive proposals. An example of a situation
considered to violate the requirements of full and open competition
in 24 CFR 85.36 would be noncompetitive award to an attorney for
legal services on a retainer basis.
D. Time and Materials Contracts. Legal services can be procured on an hourly
basis using a type of contract known as time-and-materials (or sometimes,
“labor-hour”) contracts. Under these contracts, the contractor’s services
are pre-priced (usually, in terms of hours) in the contract, and the PHA
orders services in unit amounts (e.g., hours) as needed until the funds in
the contract are exhausted. PHAs may use this type of contract only after
the PHA determines that no other contract is suitable and if the contract
includes a ceiling price that the contractor exceeds at its own risk.
E. Obtaining Legal Services by Procurement or Employment Methods. PHAs may
employ an attorney directly (house counsel), or the PHA may enter into a
procurement contract with an attorney or firm. The procurement of legal
services shall follow the procedures outlined in paragraph C above. The
employment of house counsel is not covered by 24 CFR 85.36. PHA house
counsel is ineligible to receive procurement contracts for legal services.
All services of a PHA house counsel would be part of his/her employment
contract and are not to be procured separately. Where legal services are
desired outside of the scope of services provided by the PHA house
counsel, PHAs may use one of the procurement procedures described in
paragraph C above.
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F. Contracts for Litigation Services
1. General Requirements and Regional Counsel Approval. In addition to
the requirements described above in paragraph C, the Litigation
Handbook sets thresholds for Regional Counsel and Headquarters
Program Associate General Counsel approval of litigation service
contracts. With the exception of litigation involving a PHA acting
as a section 8 private developer, a PHA must submit to HUD Regional
Counsel for prior written concurrence any litigation service
contract where the fee is expected to exceed $100,000 with a private
attorney involving PHA program, project, or activity receiving loan,
grant, or other subsidy assistance from HUD. Such contracts shall
make provision for reasonable fees and reimbursement of necessary
expenses. If additional funding or budget revision will be required
to cover the cost of litigation services, the PHA shall consult
appropriate Field and Regional Offices staff.
Upon receiving a request for concurrence, if Regional Counsel is
satisfied that the PHA has not violated HUD requirements or is
otherwise not at fault, the Regional Counsel shall concur in a
request received from the PHA for approval of a contract for
litigation services if he/she is also satisfied that: the contract
contains adequate protection against fraud and abuse; the contract
contains all mandatory provisions for professional service contracts
for the program or activity giving rise to the litigation; and the
contract amount is reasonable. (Note: In cases where the PHA is at
fault, the Regional Counsel may authorize the limited use of program
funds for the PHA’s defense to facilitate settlement or obtain
judicial definition of the required relief.) The contract amount
will be considered reasonable if it does not exceed the rates
prevailing in the same or similar localities for the same or similar
services, or the PHA can demonstrate special circumstances that
require payment of a higher amount. Regional Counsel’s concurrence
signifies that the attorney’s fee (proposed contract price) under
the contract is an allowable project expense, but is not a
certification that there are sufficient project funds available to
cover the contract amount.
2. Headquarters Program Associate General Counsel Approval. No contract
for attorney’s fees for litigation services entered into by any PHA,
which calls for an estimated maximum price in excess of $300,000
may be approved by the Regional Counsel without the prior
concurrence of the Headquarters Program Associate General Counsel.
3. Use of Fixed-Price Contracts. Fixed-price proposals will be approved
only where the issues are uncomplicated, extensive preparation
probably is not required, and any trial that may ensue probably
will not be lengthy. Ordinarily, a fixed-price proposal in excess
of $100,000 shall not be approved but Regional Counsel may approve
a higher amount for a good cause. For additional information
regarding the above litigation services requirements, consult
paragraphs 2-3g(3), 3-3b(3) and 5-4 of the Litigation Handbook.
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G. Contract Addendum – Legal Services Protocol. As indicated above, recent
attention to the key role that attorneys play in PHA activities prompt
the following guidance to promote and improve the Department’s
partnership with PHAs. See Appendix 11 for a form of addendum to an
engagement letter, which the Department urges PHAs to follow in procuring
and utilizing legal services. The form of engagement letter is intended
to set a course that will be helpful to both PHA and HUD partners,
clarifying a method of operation for HUD’s statutory oversight
responsibilities while optimizing the statutory directive in section
2(a)(1)(C) of the United States Housing Act of 1937 “to vest in PHAs
that perform well, the maximum amount of responsibility and flexibility
in program administration, with appropriate accountability to public
housing residents, localities, and the general public.”
H. Legal Fee Management Service Contracts. PHAs may also find it helpful to
engage a legal fee management firm when heavy demand or high local
priorities or other conditions merit secure oversight of legal services.
7.5 Employment Contracts
A. Employment vs. Independent Contracts. There is a distinction between
employing an individual (employment contracts), such as an employment
contract for an executive director, and contracting for independent
services (independent service contract). The former is part of the
personnel process and is subject to those rules and regulations. The
latter is considered to be a procurement action, subject to the
standards in 24 CFR 85.36(d)(3). In an independent services contract
there is no employer-employee relationship. Employment contracts are
not subject to 24 CFR 85.36 and need not be competitively procured.
B. Executive Directors. Executive Directors may be hired as PHA employees
or may be retained under an independent services contract. A contract
with a term in excess of two years requires prior written approval by
the local HUD office if the PHA operates under the old ACC form
HUD-53011 (11/69). The new ACC form HUD-53012A (7/95), does not
specify a term; however, as with other contracts of this length, it is
recommended that the PHA issue the contract for two base years with
three one-year option periods. HUD can question and disallow fees or
salaries paid by PHAs that are determined to be in violation of the
ACC’s provisions for economy and efficiency.