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



                                                        7460.8 REV 2

                    CHAPTER 7.  COMPETITIVE PROPOSALS

7.1 General

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 
    	bidding.)
	
    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., 
    		proposals.
	
    C.	Justification. If not self-evident, the rationale for choosing competitive 
    	proposals rather than sealed bidding procedures should be documented in the 
    	procurement file. 
	
    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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                                                          Handbook No. 7460.8 REV 2


                                                          
    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 
    	advertising requirements. 
                                                  
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 – 
    		Non-Construction Contract.
	
    	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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                                                          Handbook No. 7460.8 REV 2                                                          

    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 
    			mix); and
	
    		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 
    			means.
	
    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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                                                          Handbook No. 7460.8 REV 2
    
                                                  
    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 
    		made.
	
    	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 
    		Contracting Officer.
	
    	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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                                                          Handbook No. 7460.8 REV 2 
		
                  
    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 
    	authorized.

    I.	Late Submissions. Any offer received at the designated place after 
    	the specified time should not be considered unless it is the only 
    	proposal received. 

    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 
    		or desires. 
                                                                                                                   

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                                                          Handbook No. 7460.8 REV 2
                                                          
    		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 
    			liabilities;  

    		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 
    		possibly award.  
                                                          
                                                          

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                                                          Handbook No. 7460.8 REV 2
                                                          
	
    		
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 
    		used.
		 
 
    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 
    		acceptable.
                                                                                                                    

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                                                          Handbook No. 7460.8 REV 2
                                                          
        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 
    		proposed contract.
	
        3.	When negotiations are conducted in a competitive acquisition, they 
    		take place after establishment of the competitive range and are 
    		called discussions.
	
        4.	Discussions are tailored to each offeror’s proposal, and shall be 
    		conducted by the contracting officer with each offeror within the 
    		competitive range.
	
        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 
    		offers.

        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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                                                          Handbook No. 7460.8 REV 2                                                          

        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 
    		final offer.
		 
 
    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 
    		Appendix 10.

        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, 
    		section 1.7).



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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 
    		work.
			
    		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 
    		construction phases). 
		
        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 
    		point-scored);
                                                                                                             

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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”). 
                                             
                                                          

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    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 
        85.36(d) are: 
    
        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  
    		factors.
    
        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. 
                                                         
                                                          
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